The Albanese government has extended the fuel excise cut but halved it to 16 cents a litre. The real question isn’t what it saves us at the pump, but what it costs the budget, and whether a government trailing badly in the polls is making an economic decision or a political one.
There’s good and bad petrol price news with currently out-of-favour Prime Minister Anthony Albanese, who’s trailing Pauline Hanson in the preferred PM stakes. His government has announced that a reduced fuel excise will be extended for one month beyond the June 30 deadline. However, the discount will be only 16 cents. Then the tax will go back to 32 cents a litre.
But that’s not the bad news. I’ll look at that after appreciating this ‘gift’ from Albo.
You see, while the cut in the excise has been reduced by half to 16 cents a litre, because oil prices are falling and what oil companies will charge us at the bowser will also drop, we consumers will get effectively the same discount we’ve been enjoying since the Iran war escalated petrol prices.
The closure of the Strait of Hormuz robbed the world of about 15% of total oil supply and the PM yesterday said the fuel excise cut will deliver an $11 discount on a 65-litre tank of fuel. And the heavy vehicle road user charge which was 32 cents a litre and had been taken to zero, will come back at 16 cents a litre.
Let’s look at the pluses of this decision:
- It’s good for avoiding a spike to petrol prices.
- It stops inflation rising because of going back to the old fuel excise amount of 32 cents a litre.
- It reduces pressure on the RBA to raise interest rates again.
- It reduces the likelihood of panic buying.
- Service stations won’t run out of supply.
- It should be a plus for the government and the PM’s popularity, with the Resolve Political Monitorshowing33% of respondents want the One Nation leader to have the nation’s top job, which is 4% more than those who are Albo fans.
However, the good news comes with bad side effects. The cut in the fuel excise for three months during the war cost the Budget $3 billion. So, this extension will probably add another billion dollars to a projected budget deficit of $31.5 billion for the 2026-27 financial year.
Of course, you could say: “What’s a billion on 30 or so billion?” But the point is that it shows Albo and his Treasurer are more concerned with the politics of their leadership, rather than the economics.
The old saying “no pain, no gain” seems to have eluded these guys, so the plus of not seeing petrol prices rise has been offset by giving Aussies more money to spend when RBA Governor Michele Bullock has pointed to the big spending by the Government being behind some of our inflation.
Scoring the good against the bad news, I lean towards liking the lowering of the inflation effect of keeping the fuel discount, albeit it’s only half, but it does worry me that Albo and Jim never seem keen to hit the larger population with some tough medicine.
History has shown that highly regarded Treasurers such as Paul Keating and Peter Costello could make hard decisions that often created plenty of haters. In contrast, politically driven treasurers aren’t only seen as disappointing, but they have delivered big budget deficits, high public debt, above-average inflation and above-average interest rates that hit household budgets, as well as the growth rate of the economy.
It gets down to not just “no pain, no gain” but also “no guts, no glory!”
Hi Pete. Yes, as I always said, these guys are political animals and the long term consequences of all their silly ecisions will come to bare on us all.
Albanese is running scare because of the “Orange Wave”.
Cheers.