The government has underestimated the impact of carbon tax on the cost of living. Julia Gillard says it is less than 1%. The government estimates that the cost impact on electricity is $3.30 per week, and of gas is $1.50 per week. This amounts to about $250 per year.
The reality is that every business will be affected and every one of them will raise prices. House rentals will go up. Shop rentals will go up. Businesses will have to pass on the costs, and they won't be passing on 1%. They will probably raise prices by 5 to 10%. Hence, if a household expenditure is $25,000 per year (Julia Gillard's low, low estimate), one can safely expect an increase of $1,250 per year. At this rate, even the most generously compensated low income earner will find that the government's compensation is not enough to offset the loss.
The carbon tax is expected to raise $25bil for the government over the next three years. Half will be used to compensate individuals and industry. The other half is just pure additional revenue.