Petrol prices will tumble at midnight on Tuesday after Treasurer Josh Frydenberg green-lit a temporary cut to the 44-cent fuel excise in an effort to curb skyrocketing bowser charges.
The pressures come as the conflict between Russia and Ukraine has sent the world’s oil and gas costs into a tail spin — Russia is the world’s second-biggest crude oil supplier behind Saudi Arabia.
Across the ditch, New Zealand slashed their excise by more but for less time — PM Jacinda Ardern announced a 25-cent cut for the next three months, which is saving the average Kiwi up to $17 when they fill up a 60-litre tank.
Back home it’s not yet confirmed the cents-per-litre reduction we will get — News Corp reports this morning it will be somewhere between 10 and 20 cents a litre, though even a 5-cent cut will cost the budget an eye-watering $1 billion.
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Nevertheless, the government is expected to confirm it’s a six-month measure as petrol prices have surged to more than $2 a litre in several metro markets.
“Fuel prices have skyrocketed and of course for many families this is not a choice,” Frydenberg told ABC’s Insiders.
“They need their car to get to and from work, they need their car to drop their kids to school, these are costs that families are incurring and of course it’s putting real pressure on the households.”
But he says any changes would be “temporary” and “targeted” to address cost-of-living pressure now as the government moves away from big spending on relief packages in the pursuit of our COVID-19 economic recovery.
Labor’s Treasury spokesman Jim Chalmers says the opposition would back a temporary cut to fuel excise but stressed that cost-of-living pressures go far beyond the pump.
“Petrol is a big part of the story, as everybody knows, but it’s not the only part of the story,” he told Insiders.
“We think that there is a place for cost-of-living relief in the childcare system. We think there’s a place for cost-of-living relief when it comes to power bills.”
Greens Leader Adam Bandt warned the temporary fuel excise cut “might may not even make its way to people’s pockets”.
“There’s every chance that world oil prices or profiteering from oil corporations will wipe out any gains to motorists overnight, at very substantial cost to the budget.”
The government will urge petrol stations to pass the savings onto customers immediately, but the Australian Association of Convenience Stores (AACS) is wary of owners becoming the scapegoat for consumer frustration about price.
“It’s important for consumers to understand the external factors that impact the price they pay at the pump,” AACS says in a statement.
“The price of petrol is largely determined by external factors, not least the amount of tax applied by the Australian government. Then there are other macroeconomic factors and external pricing cycles that come into play.
“Before retailers make any margin on petrol, there are transport costs, marketing and administration costs, and operational costs like wages, rent and utilities to cover. These have increased significantly in recent years, particularly energy costs, which especially affect those service stations which trade 24 hours a day.”
But the ripple effect of rising petrol costs affects nearly all Australian businesses, Alexi Boyd, the chief executive of the Council of Small Businesses of Australia (COSBOA) told SmartCompany last month.
“Logistics affects nearly all businesses through freight and supply delivery and even through the knock-on effects of a service delivery partner, for instance,” Boyd says.
“There’s a reason why inflation is affected by fuel prices regardless of whether you’re selling goods or services.”