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Fiddling with excise as the world burns
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So, the world is facing the biggest oil price crisis since the 1970s, and possibly the beginning of the end of oil altogether. One of the critical parameters of our entire economy, a key factor in our lifestyle and a major contributor to global warming, is fundamentally changing. What’s the response of most of our political class? A debate about cutting the price of petrol by five cents a litre versus cutting it by two cents. And that’s before we started having the debate about the debate. As Christine Milne correctly observed last week in Crikey, this isn’t a problem that’s going to be solved by the same thinking that created it. There are alternative approaches. One of the key myths being peddled about petrol usage is that it’s price-inelastic. If it’s so inelastic, the NSW Government wouldn’t be looking to buy 150 new buses to meet growing demand for public transport use, which has grown by 74 services since January in Sydney. Tram, train and bus usage wouldn’t be up significantly in Melbourne. The rising price is forcing people who have access to public transport to switch to it. The emerging problem, and the inelasticity, is in communities that have no alternative to motor vehicles, particularly in urban fringe suburbs where commuting distances are massive, and which are likely to have lower incomes and are therefore have less discretionary expenditure to re-direct to petrol. Two or five cents a litre reduction in petrol prices is likely to provide about two days’ relief for such people at the moment. Yesterday, Crikey spoke with Senator Milne, who put forward a far more coherent proposal to address this than we’ve heard in this debate from either major party. “We’re facing a situation where people may reach the point where they can’t afford to go to work,” she said. “And the increase in petrol price is likely to swallow up all of the Liberals’ 5c and Kevin Rudd’s 2c reduction in a week. We need to identify spare bus capacity and get it into areas unserved or underserved by public transport as quickly as possible. Then we can focus on the longer-term task of switching the Government’s announced road funding away from more freeways and toward mass transit. There are also simple changes that can be made now to shift incentives, like removing the fringe benefits tax concession for motor vehicles and taking GST off public transport.” Not that we should hold out too much hope for long-term thinking from the Government or Opposition. At the moment, the Government’s longer-term focus probably extends to the end of next week’s sittings. Brendan Nelson is probably focussed all the way out to the Gippsland by-election in late June. The benefits of a reduction in the price of petrol from reducing excise or greater price monitoring will primarily flow to motorists other than low-income earners who need it most. This is one of the things that makes Brendan Nelson’s Emo Man act so absurd. If there are low-income families spending Tuesday nights lining up in massive queues while clutching their wheelchairs and processed sausages, it’s far better to target assistance to them through the welfare or tax system, rather than handing out a brief petrol price reduction to everyone. Not to mention that the previous Government had plenty of opportunities to address rising petrol prices itself. Two weeks ago, the Government committed in the Budget to $3.2b worth of transport infrastructure projects. Of that, $192m was going to rail - primarily rail freight. The rest was for roads. It did also announce $75m for a joint Commonwealth-State process to study projects to relieve urban congestion, although a number of those are roads projects. Talk about the same thinking that created the problem in the first place. If even the Iemma Government can start responding to this problem, surely the Rudd Government - and some smarter people in the Opposition than Brendan Nelson - can see where we are going wrong? |
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11 Comments
If you want to understand what’s driving the oil economy, and why Rudd, Nelson, Brown et al are hopelessly inept in their responses to it, take the time to wade through this. Once you start to try to understand what’s going on and, and why, it makes frightening sense. By the way, high prices are not the result of financial speculation in oil futures, as we keep being told by mainstream media.
http://europe.theoildrum.com/node/4007#more
Firstly, Bernard, man, you’ve been ON recently. Secondly, to the commenters, here’s the thing. I don’t doubt that Rudd would love to move on and I also think it’s sickening that Certain Media Outlets are pouring, er, fuel on the fire by covering fuel price rises as if they were, you know, Iraqi casualties of wa… I mean, gold medals won by an Australian swimmer. But you can’t put this all on the media, nor on the Opposition. Rudd campaigned on fuel prices; he never explicitly promised to lower them, because he’s not a frigging idiot, but he certainly did get plenty of mileage out of sharing Bruce-n-Bev-the-Tarago-drivers’ pain before the last election, so he can’t wriggle out of this one that easy. I would love to wake up tomorrow and see a RUDD TO DRIVERS: SUCK IT UP headline in the DT, but I’m not holding my breath.
I like the swipe card idea. could you make healthcare cards plastic and use them? i’m sure some tech people could work out how to split the bill. people that have health care cards usually need them cos they have a low income. and if someone happens to lend their’s to their sister say, even if she is not eligible, she probably needs it to help transport the cardholder cos they can’t walk or something. i think most people don’t like charity and don’t usualy advertise their poverty if they can help it, so we should trust them to act accordingly. there’s a cheat for every scheme, not just the ones that are designed to help people.
but then again, i’m just one vote, i already walk to work and i don’t own a car so why should i care?
Remember the opening editorial comment.
“Dear Sole Subscriber,
Prime Minister Kevin Rudd, February 3:
For too long Australian policymaking has been focused on short-term outcomes dictated by the electoral cycle … If Australia is to effectively confront the challenges of the future, we need to develop an agreed national direction that looks at the next 10 years and beyond.
Which, obviously, would exclude any discussion of the petrol price. “
Not quite. It should mean that the discussion of petrol price movements (and diesel price movements which are even more mystifying, with possibly greater potential impact on the economy consumers’ participation in it) are couched in the longer term. On balance, as some correspondents have noted, the price looks more likely to stay up the come down. But..
The political environment is not one in which long term thoughts are encouraged. Revvin Kevin 24/7 tries and should have the luxury of not having to place everything in re-election context but, as Crikey noted on the Henson brouhaha, his place is with the punters, if for no other reason than there are more of them than the artistic/working family/Mitsubishi types who are living in the here and now.
Brendan’s interests are all short term.
Most of the print media and almost all of the electronic media pander to the short term and then move on.
This might, however, be helpful, at least if no-one in government gets a further rush of blood to the head and tries to do something. While everyone is screaming, (and very few are listening) someone might actually be taking a bit of a long term view of the world, including oil product pricing, and cobbling together something that RK24/7 (and even a few of his Ministers) can consider in the relative peace of the Cabinet room - leaky as it appears to be. I think this might be what the taxation review committee might be up to.
Steve: I think the idea of a Government swipe card has been put out there before. It has had various names including Australia card but the noise of the anti big brother lot frightened the pollies. And you can bet Woollies think this is way to maximise profits, not improve service.
nic, apart from the fact you’re criticising Crikey for quoting somebody, which is a little weird - of course it’s a permanent change. No-one’s trying to play semantic games. But you cannot ignore it’d be a miniscule tax cut to begin with - that will ‘be swallowed up’ (become ever-increasingly miniscule) within weeks. If you truly believe a tax cut needs to be made in this area, request the Government/Opposition consider a reduction in the GST rate on fuel - which would at least remain proportionate to the ever-rising cost per litre…but no-one’s putting that idea forward are they. And since they’re not, look at what happens when fuel goes up - the (fixed) discount taken off the excise - and more - is returned straight back to government via higher GST (‘swallowed up’). It doesn’t matter a jot to the consumer’s wallet whether it’s goes to federal/state. The point is, by itself, and because fuel costs will continue to rise - it’s a futile policy which makes no sense – all you’ve done is stall the process by a week or two at most – meanwhile the GST revenue continues to increase in leaps and bounds (‘swallows it up’). Both sides of government need to be planning for/taking much more effective long-term action. As one of the other Crikey articles today points out, the Rudd government has managed to dangerously compromise its ‘governing for the future’ message (for the time being), by allowing itself to be drawn into this (very) short-term debate – the Opposition will drop it like a cold potato within months (or at least the instant they have a new leader, whoever it may be – can’t you see that?).
Politicians must know that petrol prices are high and rising all over the world - get used to it. The two most sensible solutions suggested to help the financially stressed are to increase availability of public transport, and take GST off the fares. I travel concession and buy multi-tickets, but a young couple travelling some 5 km from the city pay $4.10 EACH one way. They can return on the same tickets within two hours, which is small comfort if that doesn’t suit their plans.
Daphne
I cannot understand why people always expect a newly elected labor government to fix problems compounded by long term conservative governments in five minutes, can you visualize an economy under work choices, in a climate of rising petrol and food prices as well as interest rates, and wages being held down by draconian i.r. laws, thats what`s wrong with the U.S, dropping interest rates do not help people with none, or very low incomes, the end result is a major depression, a general, across the board wage increase is the only thing that can get the U.S out of the shit the neo cons have created, dropping fuel excise won`t work, people have to understand that oil is running out fast, so whats left must be conserved for the most important needs of society, and welfare should be for the needy, not the greedy.
It’s alarming to think Rudd would turn FuelWatch into a national policy. It’s one of a number of home-spun projects trumped up by the ALP more than a decade ago to foster the images of its MPs as doers in their communities. If Rudd’s dragged a flivver of these awkwardly simple and flawed notions into the national parliament he’s cementing that old adage that hayseeds and bumpkins are a dime a dozen in Queensland.
Maybe they should use the money to subsidise the use of electrical cars or, even better, electrical vespas. Lots of families could then get rid of their second car. Is (way) cheaper to run and a lot better for the environment and gets a lot of cars of the road. Everyone wins….
steve martin, it’s an interesting idea…but I’m wondering how the system could be delivered at ‘reasonable’ cost and effort. A few million swipe cards nationally is not going to be cheap or quick to implement - witness the Myki debacle in Victoria and this would necessarily be a much larger operation. Bringing in your ‘un-named’ fuel receipts to Centrelink is of course no good…and whatever solution chosen, who qualifies? Those who own/have registered a car? There’d be many who don’t own a car but regularly borrow one from parents/friends etc, do they still qualify? I’m not against it in principle, but just can’t see it being workable. Not to mention, the millions of Australians not on benefits, up in arms at being left out, would spell political suicide. I’d think it might have to be everyone or no-one.
The newly elected Rudd government has an opportunity to show some real leader ship during its first 18 months in office. They are squandering this opportunity by “me tooing” again on Nelson’s ridiculous petrol price cuts. And Rudd says “there is no silver bullet for petrol prices”. How about Federal funding for public transport and cycling infrastructure? (currently none is allocated) How about getting methane / CNG infrastructure out there - we have heaps more natural gas than we do oil.
How about INCREASING the price of fuel with a levy to fund sustainable post-oil transport R&D - or just spending the excise they currently rake in on this.
A race to the bottom on short term petrol prices is quite obviously absurd, yet this is the best they can do?