Dec 27, 2009

Big Green Slug

VICTORIANS are facing a year of costly bill increases, with new green targets and growing demand forcing up energy prices and a stronger economy adding thousands to yearly mortgage repayments.

Water, petrol, fresh food and airfares are also set to bore holes in the hip pockets of most Victorians as the year unfolds.

But a more robust dollar will bring some reprieve. Travellers will have greater spending power overseas and Victorian consumers will not have to pay so much for imported goods.

These benefits, however, will do little to numb the sting when energy companies increase standard prices by between 18 and 28 per cent on January 1, adding up to $400 a year to a typical household's electricity bill.

The price hike comes as energy providers work towards increasing the proportion of renewable energy on the grid from 10 per cent to 20 per cent by 2020.

Ben Freund, of energy price comparison website goswitch. com.au, said renewable energy was still more costly to produce and this, combined with mandatory green targets, higher demand and maintenance costs, and an absence of new power plants, was pushing up the price of electricity in Victoria.

Water bills will also rise, by about $100 for average users, following increases approved by the Essential Services Commission. And three more predicted interest rate rises could add about $2700 a year to the cost of servicing a $300,000 mortgage.

But extra lending costs won't dampen demand for housing, according to real estate profiler RP Data. Melbourne's booming population, combined with insufficient new building, will fuel demand and add about 10 per cent to prices in 2010.

Other forecasters tip rents to rise by about 5 per cent.

In a double-whammy, rising petrol prices, coupled with the drought, are likely to add to the cost of fresh food. But that impost could be tempered by the fortunes of the Australian dollar and its effect on lowering the price of imported goods, CommSec chief economist Craig James said.

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