Wednesday, 24 October 2012

Know your subject continued

At Catallaxy Sinclair Davidson here  and here makes a fool of himself.

First of all he really doesn't know how much of the CPI increase is due to the ETS.

Let us see what the CBA economics department say.

"The ABS has noted that it is not able to quantify the impact of carbon pricing.  But one back‑of‑the‑envelope calculation is to compare the contribution from higher utilities prices with the average or “normal” contribution.  Over the past two years higher utilities prices contributed an average 0.27ppts to QIII CPI growth.  The contribution in QIII 2012 was 0.48ppts.  The gap of 0.2ppts should represent the bulk of the carbon tax impact on consumer prices.  This outcome suggests that the price impact will fall short of earlier Treasury modelling work that put the CPI contribution in 2012/13 at 0.7ppts.
 QIII CPI growth.  The contribution in QIII 2012 was 0.48ppts.  The gap of 0.2ppts should represent the bulk of the carbon tax impact on consumer prices.  This outcome suggests that the price impact will fall short of earlier Treasury modelling work that put the CPI contribution in 2012/13 at 0.7ppts."

Well that is vastly different to what Davidson is alleging.

He then goers on to say this:

"15.3 percent increase in electricity prices? In one quarter? What did Treasury modelling say about that? Oh, yes:
The carbon price leads to an average increase in household electricity prices of 10 per cent over the first five years of the scheme."

Yikes.
 First of all he is comparing a Treasury forecast based on CONSTANT prices with the CPI which must be in current prices.
Secondly he is comparing the whole increase in electricity prices to Treasury's forecast which is based on the impact of the ETS.

Thus neither he nor any commenter has a clue of what they are talking about.

This man is an academic!

Somewhat on topic Ricardian Ambivalence has a great post on the CPI , measuring inflation and what the CPI means.