September 9th 2000

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Articles from this issue:

EDITORIAL: A way out of the debt trap

COVER STORY: Inside the World Economic Forum

CANBERRA OBSERVED: Petrol prices puncture GST optimism

NATIONAL AFFAIRS: Radical groups organised for Forum protests

Straws in the Wind

LABOR PARTY: New book, old view of ALP



DOCUMENTATION: “I’ve always felt like an IVF guinea pig”

MODERN ART: “Anything goes”: gallery

Milk: will wheat be next?

EAST TIMOR: Rebuilding East Timor

'Kursk' disaster timely reminder to next US President

As the World Turns

LITERATURE: The magic of Harry Potter

BOOKS: The triumph of spin over substance

Books promotion page

Petrol prices puncture GST optimism

by News Weekly

News Weekly, September 9, 2000
Just when John Howard thought he had the Opposition on the ropes, the problem of soaring petrol prices has suddenly emerged as a potentially serious electoral problem for the Government.

Petrol cannot be underestimated for its capacity to touch a raw nerve in Australian politics, and has been a contributing factor in the demise of at least two post-war Federal Governments: those led by Chifley and Whitlam.

Conventional wisdom says the Chifley Government was swept out of office in 1949 because he attempted to nationalise the banks, but the promise by Robert Menzies (or more precisely by the Country Party’s Arthur Fadden) to end stifling petrol rationing was a major factor in the Coalition’s victory.

Whitlam, was of course defeated by the excesses of his own unique administration, but it is possible to argue that his fate had been sealed anyway by the Arab-Israeli War which broke out in October 1973.

OPEC, the Organisation of the Petroleum Exporting Countries, the same band of brigands which has jacked up prices again this time, lifted the price of oil by 70 per cent sending inflation sky-high around the world causing unemployment and all shades of government no end of grief.

The same consternation is being felt by the Howard Government as city petrol prices have risen to around $1, while outback Australians are seeing prices as high as $1.60-$1.80.

It is hard to imagine what the price of fuel is doing to cash-strapped farming families who were already paying an enormous premium over their city cousins for a tank of fuel it took for the round trip to go to the supermarket to buy groceries, to play tennis or go to church.

The electorate won’t throw out the Howard Government because the price of petrol is suddenly above $1 litre, but it will cause widespread unrest just when the Government was finding success in exposing the Opposition’s opportunism on the introduction of the GST.

In fact, petrol pricing will actually cause people to take a more critical look at the GST. Reports from the office of Opposition Leader Kim Beazley say the phones have not stopped ringing from members of the public complaining about petrol. And Government backbenchers have grown decidedly twitchy over the issue.

The Coalition made a clear promise that the price of petrol would not go up as a result of the GST, and this was later watered down to a promise that there was “no need” for petrol to go up because of the GST.

The rebadging of the promise was designed to put the heat on to the oil companies who the Government could blame for not absorbing the ‘savings’ from the abolition of the wholesale sales tax.

But the huge leap in world oil prices to more than $US30 a barrel has blown away all the rhetoric and made any pledge on petrol prices redundant.

The problem for the Government is that, in the case of petrol, the GST is a tax on a tax. For every dollar of petrol, the Government takes about 38 cents in excise, and another 9 cents in GST, with the product and retailing accounting for the remaining 53 cents.

As the price of petrol rises so too does the excise, and the GST is charged on the total cost of petrol. The simple and unavoidable fact is — rising petrol prices are not only a boon for OPEC but for the Federal Government as well.

This year it could reap an extra $1 billion simply because of the rising international fuel prices. Mr Howard has drawn a line in the sand on the issue and says there is simply no way he will bow to pressure and slash the excise or the GST because such a move would blow a hole in the Budget surplus. Any thought of abolishing world parity pricing is of course a total anathema and not even a consideration.

Yet indexation is going to inevitably drive the petrol price up, further feeding into the inflation cycle. Already there must be huge inflationary pressures building into the economic system, with higher transport costs, farm production and mining costs sure to be passed on.

It would be a perfectly legitimate move for the government to freeze its excise take, say any time the price of petrol rose above $30 a barrel, to provide a modest price cut for ordinary customers, and so that at least the Government itself would not be a factor contributing to the vicious cycle of rising fuel costs.

It might also be worth considering using the international forums so admired by successive Australian Governments to challenge the OPEC cartel price fixing which has artificially caused the price of oil to go from $9 a barrel to $32 barrel for no apparent reason.

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