From JP Morgan:
"The economy – secondary price effects the key
The economy clearly will start to undergo a material change from 1 July 2012. Some industries will be forced to pay for pollution that previously was free, which will push up some prices, particularly for energy. Some “dirty” industries, like coal-fired-power generation, eventually will close, which has important implications for employment. There should, however, be new jobs created by additional government funding for, and private investment in, cleaner energy industries.
The government claims that annual growth in national income will be 0.1% lower per year as a result of the new tax, and that the CPI will be 0.7% higher in the first year of the scheme’s operation, the year ended 30 June 2013. For the average household, the price of electricity should rise by $3.30 per week (and the modeling suggests an average price rise of 10% over five years), the cost of gas will rise $1.50 per week, and the cost of food will rise 80 cents per week, as retailers are subject to higher transport costs. The cost of living for the average household probably should rise by $9.90 per week. The Treasury modeling indicates that the average assistance will amount to $10.10 per week.
RBA officials probably will be willing to look through the initial price impacts of the carbon pricing scheme, but will be alert for signs that there is a more lasting change in inflation expectations and/or wage setting behaviour. Evidence of persistently higher prices and wages could add to the medium term pressure for the RBA to lift the cash rate, in order to ensure inflation is consistent with target."
