Countdown to Australia’s economic bloodbath

The joy of the gas tax cut has well and truly dissipated as fuel prices rise despite the measure – and that’s just the beginning of our woes.

The joy of the gas tax cut has well and truly dissipated as the price of gasoline is rising as high as before, and even higher in places.

In the March budget, the treasurer gave us all a tax cut of 22 cents a litre. who saw drop in gasoline prices from about $2/litre to $1.78/litre within the next week or two. Gasoline prices continued to fall for some time, briefly bottoming out below $1.60/litre in April. This brief period was a welcome respite for many Australians who were hit by high inflation. I filled my tank.

Reducing excise duties on gasoline every time the price goes up is not a smart or sustainable policy. It’s expensive for the budget and bad for the environment. Also, that doesn’t stop what happened next: the gasoline started to come back up.

Prices returned to $2 a liter and didn’t stop there, instead breaking that barrier to challenge records. Today, my nearest gas station, here at melbourne, charges $2.29 per litre. The average in Melbourne is $2.10, according to Petrolspy.

Note that the tax reduction is still in place. He didn’t go anywhere. Which means gasoline will go up another 22 cents when the tax is reinstated. That would be over $2.50 a liter at the local servo. Remember the tax cut is only supposed to last six months – that was Josh Frydenberg’s attempt to sweeten the election. That 22 cents per liter should go straight back to your fuel bill at the end of September.

barrels of trouble

the oil price is near record highs now, over US$108 a barrel. As the following graph shows, this represents a whopping 75% increase over the past year in US dollar terms. Over the same period, our dollar has weakened by 10%, further increasing the amount of Australian dollars we need to pay for oil in international markets. All of this is reflected in gasoline prices.

High oil prices are due to the global energy supply crisis caused by the pandemic, supply chain problems and awkwardness of Russia war in ukraine. And when you’re standing there on the concrete forecourt of the servo with your hand clenched on the metal handle and the smell of diesel in your nose, those high world oil prices make the numbers on the bowser move so fast that they fade.

The terrifying question is: will the price of fuel still be so high when the excise duty reduction wears off? Will he fall back? Or could it go even higher?

Combining rising gas prices and rising interest rates

Even if oil prices fall, the return of the 22-cent excise could be the last straw for some families. Interest rate are expected to rise another 1.4% by September, which will add hundreds of dollars a month to average Australian mortgage repayments.

the RBA predicts inflation of 6% this year, which means groceries and other items should also cost hundreds of dollars more per month. A massive fuel price hike on top of all that is going to be very unwelcome.

The average couple with children consumes about 50 liters of fuel per week. It’s over $100 now. Sure, fuel is far from the biggest expense an average Australian household faces – rent, mortgages and food are far more important – but it hurts disproportionately because it’s a commodity. with few good substitutes.

Some people can afford to pay the premium for a new electric car. But the total number of electric car sales in Australia in history is similar to the number of new petrol cars sold each month. Gasoline still counts for the cost of living in this country

And yes, many people take public transport with delight. I am one of them. I like to use the train or the tram. But it doesn’t work for everyone. If you have young children to accompany, a lot of tools and equipment to transport, or if your workplace is not near a train station or bus stop, choose public transport. common will add unrealistic time or hassle.

When the beef goes up, you can eat chicken. When the fuel goes up, we usually pump it out and pay what they ask. This then eats away at our budgets, so high gas prices are kryptonite for consumer confidence.

As the following chart shows, consumer confidence is already in an alarming state. I’m terrified to think what it might look like after the fuel excise duty cut expires.

Whoever wins the election will struggle to manage a country full of people who have had a chasm of inflation, even before the 22-cent-a-litre fuel tax cut expires.

It will be a tense countdown to the end of September for politicians and citizens.

Jason Murphy is an economist | @jasemurphy. He is the author of the book Incentivology.

Read related topics:Cost of lifereserve bank

#Countdown #Australias #economic #bloodbath

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