Cheaper Petrol Party - Why do we want Cheaper Petrol?

Interest rate promise intact: Howard

03-05-2006 ABC News Online. Prime Minister Howard denies he has broken an election promise after the Reserve Bank increased interest rates for a second time since the last election. The Reserve Bank has lifted the cash rate by one-quarter of a percentage point to 5.75 per cent. After the increase in petrol prices, average mortgage repayments are now likely to go up by about $50 per month.
The Australian Industry Group (AIG) warns of more rate rises to follow. News Article

PM aware of petrol woes.

09-09-2005 The Age. Prime Minister Howard, who is driven in an official government car, today defended himself against suggestions he was unaware of how ordinary Australians were dealing with petrol prices now around the $1.40 a litre mark. -- "There's an unusually large margin between the crude oil price and the ex-refinery price." Mr Howard said the government was unable to do anything about the current high prices. -- Mr Howard said although GST revenue on fuel was likely to be up, people may be spending less on other goods that attract the tax... News Article

Just why do we want to fight for cheaper petrol?

The 'knock on' or multiplier effect of increased petrol prices.
Increasing the price of fuel results in an increase in inflation. Then the Reserve bank has to increase interest rates. Mortgages go up, standard of living goes down.
Almost everything you can think of has a component of transport in it. Therefore, when fuel increases, so do eggs, milk, fruit and vegetables, in short, just about everything. If we lower the cost of transport, most goods and services can be cheaper.
The fuel taxes are a tax on low income families and small business. Even if low and middle income families were to travel the same distances, the amount of tax they pay is a far greater proportion of their income compared to high income earners. It's a regressive tax.
Australia currently has a large budget surplus. In part due to an increase in crude oil prices. It's our money. We want it back.

Almost all the goods we buy have to be transported from somewhere. Some would argue that services, like banking or telephone don't, but banks use couriers and armoured vehicles and telephone companies have vans and trucks on the road all the time for installation and maintenance.

When the cost of fuel increases, so do the goods themselves. Last year when unleaded petrol was selling at 84 cents per litre, milk was selling at 99c per litre. Today it sells for $1.07. This leads to inflation, which in turn leads to increase in interest rates. (see side panel)

The government has a vested interest in keeping the cost of fuel high. The GST on petrol is fixed at 10% and can not be changed without changing the law. But 10% on 80 cents a litre is 8 cents. 10% on $1.30 is 13 cents. Presto: An increase in the GST of 5 cents per litre, without changing the law.

Based on (government figures(1), Australia received 7.410 Billion dollars in excise on petrol alone. Add to that the 6.420 Billion dollars for Diesel fuel. This equates to some 34 billion litres. At 5 cents GST per litre extra, that's a windfall for the government of more then 1.7 Billion dollars, on top of what they were collecting in the first place. Add to that the additional GST on the now increased price of goods like the milk and eggs, and you see why the government is laughing all the way to the bank.

An increase in fuel price is a tax on those people that can least afford it. Rich people can afford to buy a fuel efficient hybrid car. The fuel economy is certainly impressive. 4.4 litres per 100 km ( 22.7 km per litre). 50% more economical then an equivalent sized car. However at a RRP of $38,500 it's well out of the reach of the average person. In a few years time, when this car comes onto the 'more affordable' second hand market, the buyer may be up for new batteries, at a cost of up to $7000.

In the meantime, the young, the elderly, the unemployed, and those who can't afford it, drive in older cars and pay through the nose. On top of that they now pay more for their mortgages.

Politicians either just don't care, or just don't get it. They get a government car and/or a travel allowance. Which, I am sure, will be adjusted for the increase in the price of fuel. (see side panel)

The government counted on the Fuel Excise in their budget forecast. They counted on the GST, they did not count on the increase effect of the GST. If nothing else, this increase should be given back especially since we have a budget surplus.

Mr Rudd; It's our money - We want it back.

notes:

Table 7: Excise and customs revenue

Australia uses about 300 Million Barrels of crude oil each year. That's 47.7 Billion litres. Not all of this is turned into petrol, but almost all gets the GST..