Australia’s federal Budget is shaping up to deliver a pair of politically-calculated surprises: one aimed at the bowser, the other at the bottom line. Leaked plans suggest the Albanese government is preparing to spend big on domestic fuel reserves, reversing earlier claims the idea wasn’t feasible, while also offering businesses a Covid-era-style tax lifeline.
That climatically ‘despised’, yet very important product called petrol is becoming a new political battleground, with the Prime Minister promising to spend $10.7 billion to pump up the reserves we’ll hold in case another Iran-style supply shock happens again.
The Australian today says the plan to be spelled out in the Budget will involve government ownership and would mean we’d have 37 days of diesel stored, and 50 days of jet fuel in tanks in case geopolitical events, pandemics or whatever should potentially rock our economy’s lifeline, which is oil.
This will be a showpiece of next week’s budget and is bound to be better received than the expected changes to the capital gains discount and possibly negative gearing, both of which the PM said in 2024 wouldn’t be changed. It’s no surprise that a resumehelp.com survey in the US found that politicians have the lowest positive sentiment, even lower than insurance brokers, priests, influencers and guns/arms sellers!
Here’s what the PM is proposing:
- The Government spends $3.2 billion to acquire and store about a billion litres of diesel and jet fuel supply.
- The private sector will have to increase its minimum holdings of oil by 10 days.
- Australia would then have minimum petrol reserves of 37 days, while diesel and jet fuel will be 50 days.
- Export Finance Australia will be bolstered by $7.5 billion to provide low-interest financing for new storage to help the private sector play ball.
- $10 million will be provided for a study to see if oil refineries or expansions of existing ones, owned by Ampol and Viva Energy, are feasible.
All this comes despite The Australian reminding us that Climate Change and Energy Minister Chris Bowen last month told us that such a project wasn’t feasible.
By the way, the International Energy Agency requires member nations to hold the equivalent of 90 days of net imports of oil, while the Coalition has promised to increase minimum fuel reserves to 60 days if Angus Taylor wins the next election.
As you can see, necessity is the mother of invention and things that are said to be impossible can change overnight!
Business Tax relief
And the budget good news leaks continued, with the revelation that a boost to business, of a Covid-fix-kind, is expected to be outlined in Tuesday’s Budget.
The Australian’s Matt Cranston reports the following gift for businesses coming from Canberra:
Business tax relief is expected where the tax process is changed, and it can lead to refunds.
- To be precise, two years of losses carry back could be coming, where businesses can reduce previous years’ profits because of recent losses. This reduces the tax payable, leading to refunds from the Australian Taxation Office.
- The aim is to bolster productivity growth.
- Plus, it might stop business investment from crashing, which the Reserve Bank said on Tuesday is possible because of inflation, supply shortages and interest rate rises.
- During Covid, these carry back refunds were around $5 billion.
- There also could be Research and Development incentives for business as well.
While these are good ideas, the Budget will have to pass the test of whether it will increase demand and inflation. This means the Treasurer will have to take tax from some Australians (probably property investors) to give concessions to real businesses that create jobs and employ people.
This isn’t just an important budget for the economy and the population, it could make or break the electability of both Jim Chalmers and his boss, Anthony Albanese.
