Petrol pain to deliver GST windfall, inflation risk
For those who wondered about the high cost of diesel, note the last paragraph.
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Petrol pain to deliver GST windfall, inflation risk | The Australian
Samantha Maiden, Online political editor | May 22, 2008
SOARING petrol prices will reap an estimated $500 million GST windfall for the states and threaten to drive inflation even higher.
As the Rudd Government continues to reject the Opposition’s calls for a 5c-a-litre cut on fuel excise, this morning there are fresh calls for debate on fuel taxes in Australia.
Oil prices leapt past $US135 a barrel in Asian trade this morning, sparking fears of a further petrol price spike.
Australian drivers were confronted yesterday with petrol above $1.60 a litre for the first time in several capital cities.
"There's no reason to expect prices to fall away from these levels anytime soon," NAB economist Gerard Burg said.
But the strong Australian dollar, which rose to US96.54c in New York overnight - its highest level since it was floated in December 1983 - will also protect motorists from even higher prices at the bowser.
While the rising price of oil is expected to have little effect on the budget bottom line because of the Howard government’s decision to abandon the indexation of fuel excise, a sustained 20 per cent lift in the petrol price would add about $500 million to the GST revenues going to the states.
Rising prices threaten to fuel inflation and increase pressure on the Reserve Bank to raise interest rates again.
Fueltrac managing director Chris Kable told The Australian Online today that the Rudd Government was still applying a tax on a tax by collecting GST on top of excise.
“Excise is fixed at 38.14c in every litre of fuel. GST is calculated on the excise as well so it’s a tax on a tax that takes it up to 42c a litre,’’ he said.
“Obviously for every 11c a litre the price goes up 1c is GST. If the price of fuel is $1 the federal Government is getting 10c a litre. If it’s $1.50, it is getting 15c a litre in GST alone.
“(But) There’s two issues with the US barrel price. All oil is sold in $US so every time our dollar improves, that’s a benefit for us. Go back to 2001, we would have seen astronomical prices in the same circumstances today because the dollar was weaker.”
But HEH Australian Petroleum Consultancy chief Kevin Hughes said the Opposition’s promised 5c-a-litre cut to fuel excise was not the answer.
“The recent 5c-a-litre debacle by the Opposition represents about $2 billion in tax revenue that has to be funded from somewhere else,’’ he said.
“The real bite will start to happen now and prices will start to go into the $1.50s. You see the market has been distorted at the moment by price cycles, which is a local device. They are dominated and controlled by the supermarket alliances that hold 65 per cent of the retail petrol market.’’
He also questioned the Rudd Government’s move to introduce a nationwide Fuel Watch scheme forcing retailers to notify the ACCC of price movements overnight and lock them in for 24 hours.
“The Fuel Watch is a seriously flawed pricing proposal. There is no evidence of it being successful in terms of giving consumers benefits in WA compared to the eastern states,’’ he said. “There’s been no benefit it to WA motorists over time.’’
The Opposition spokesman on business development, independent contractors and consumer affairs, Luke Hartsuyker, said the Government should scrap an increase to the tax on diesel.
The price of diesel is tipped to reach $2 a litre by next year.
“Throughout the election campaign, Kevin Rudd led people to believe that he would reduce petrol and grocery prices, “ said Mr Hartsuyker, “But one of his first acts was to announce he was going increase tax on diesel from 19.7 cents per litre (cpl) to 21 cpl.”
