Next week’s federal budget will contain measures to deal directly with high petrol prices – either through a temporary reduction in the fuel excise or a freeze on its indexed increases.
Prime Minister Scott Morrison all but confirmed on Tuesday that help was on the way regarding prices at the bowser, not just because of their direct impact on household budgets but also because of the flow-on costs to businesses.
Sources told The Australian Financial Review the final decision on whether to cut the 44.2¢ tax per litre or freeze its twice-yearly indexation to inflation was yet to be made.
“We are extremely conscious of the impact, particularly of the rise in fuel prices on the cost of living and the cost of doing business because fuel prices flow right through,” Mr Morrison said.
“The terrible things we’re seeing in Ukraine … are having a big impact on the global economy and particularly on the price of oil by the barrel.
“And that is pushing these costs up. Australians understand. And so, the Treasurer and I have been working carefully to ensure we get our response right in addressing these cost of living pressures that Australians are facing right across the spectrum.”
The fuel excise relief will be part of a cost-of-living package in the budget, which will also include modest one-off cash payments to low and middle-income earners and possibly welfare recipients.
A source said that an excise cut, if it occurred, would be temporary.
Getting the balance right
Three months would be too short and regarded cynically as something just to get the government past the election in May. On the other hand, 12 months would be too long in terms of lost revenue, the source said.
In the run-up to the 2001 election, John Howard froze the indexation of the petrol excise. Although it had no immediate impact on prices, which had just broken the $1 per litre barrier, it sent voters a message that the government was listening.
It is understood the Morrison government’s research shows voters regard it as out of touch on cost-of-living pressures, and it needs to be seen to be responding in the budget, more so after the Prime Minister was unable to nominate the price of petrol or milk when put on the spot last month.
Pre-election consumer sentiment is at its lowest point since the run-up to the 1990 election.
The government is trying to calibrate the cost-of-living package, so it satisfies the political imperative without putting more pressure on inflation and interest rates.
On Tuesday, Mr Morrison and Finance Minister Simon Birmingham seized on a speech by shadow treasurer Jim Chalmers in which he confirmed that Labor would most likely promise to spend more than the Coalition during the election campaign.
Outlining his fiscal strategy, Mr Chalmers said the budget needed to look beyond the short-term electoral horizon and focus on the long road back to budget repair by spending on productivity-inducing measures. Labor has already made promises on childcare and TAFE, as well as a manufacturing and NBN policy.
Mr Chalmers said the quality of spending, not the quantity, would be Labor’s guiding light.
Mr Morrison said Mr Chalmers was asking voters for a blank cheque.
“We know when we need to go and spend, but we also know when we need to stop. And under the Labor Party’s financial management, yeah, they know how to start spending, but they never know how to stop,” he said.
“And that’s what Jim Chalmers has said today that he won’t be constrained and that his spending won’t stop. And that’s why you can’t trust Labor with Australia’s finances.”
Senator Birmingham said Labor should detail its plans before the election of what would be in the budget that Mr Chalmers said it would hand down later in the year if elected.
“What we’ve got at the Labor Party at present that is trying to escape scrutiny by not releasing details of policy, but by making vague promises and yet now this remarkable suggestion that there would be an alternate second budget handed down this year, should there be a change of government?”
Mr Chalmers said Labor would do another budget to pay for its own commitments.
“The idea that Simon Birmingham is making some stunning political point that things might change under a Labor government, that’s the whole point of our policy agenda,” he said.
“Yes, there will be a difference between a Labor budget and a Liberal budget.”
Extracted from AFR