ANALYSIS: Is It Time To For WA Government To Lower Power Bills?

ANALYSIS BY: Elson Goh, Curtin University instructor and certified financial planner.

We have all heard the good news that WA may be returning to budget surplus sooner than expected. This news is further enhanced by the announcement that the government will be spending some of the money on keeping power bills low.

It has been established both statistically and anecdotally that the cost of living has increased over the years. According to the last census data, the Australian Bureau of Statistics revealed that households today have less to spend towards discretionary spending (wants) due to the rising cost of basic goods and services.

However, cost increases in various areas have different levels of impact on a household. Here is a breakdown of average weekly spending for a typical household in Western Australian.

Housing, food and transport are the main areas of spending and they make up more than half of the household budget.

Domestic fuel and power which includes gas and electricity make up 2.7% of the household budget. While we can see that electricity prices have gone up, so has everything else. However, as a percentage of the household budget, it is relatively small compared to other areas. In fact, the percentage of fuel and power in a household budget has remain unchanged for the last three decades.

This is in contrast to education(+244%), housing(+53%), communication(+83%) and medical costs(+49%), which have increased significantly as a proportion of our household spending.

Understandably, it all depends on your stage in life and household composition. Increases in medical costs would have a higher impact on a household with elderly members than one with young working adults. Similarly, households with young children would be most affected by increases in education cost. However, regardless of household composition, electricity costs not a major areas of household spending.

In WA, we are very close to the national average in terms of our proportion of household budget devoted to power cost. Our Tasmanians and South Australian counterparts are probably feeling the most heat.

It does beg to question if electricity costs should be the focus in WA in terms of spending. Perhaps it does appeal to the general population and is not targeting at specific demographics. It is also an easy rationale to convey; as nobody would argue with lower electricity prices.

However, the Western Australian budget is only just improving. Let us not jump into increase spending just yet.

 

 

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