Jessica Page: Fuel excise cut effectively throwing $2.6 billion onto inflationary fire

Careful what you wish for.

The Albanese Government had to do something to quell the rising anxiety over fuel prices.

But a fuel excise cut that will be wiped out within a week or two — if the current upward trend of global crude prices continues - is effectively throwing $2.6 billion onto the inflationary fire.

The sugar-hit won’t last long for motorists.

And it won’t last long for the Government either.

The Opposition can’t oppose it. It called for it. And the Morrison Government did the same in 2022 when Russia’s invasion of Ukraine sent global oil prices spiralling.

Vladimir Putin predicted that war would be over in three days. It’s been four years.

Donald Trump originally set a timeline of four to five weeks for Iran. But his War Secretary Pete Hegseth immediately inserted ‘latitude’ and said the war plan “could move up, it could move back.”

And that’s why slashing fuel excise again in 2026 isn’t only a short-sighted economic solution, it’s bad politics too.

Because taxpayers are still paying for it, sooner or later, one way or another.

Jim Chalmers says it’s not inflationary, because it’s temporary.

Remember Mark McGowan’s “one-off” $600 power bill credit?

Turning the fuel relief tap off in three months will be even harder if oil prices remain even higher.

Voters loved the power bill credits that were dished out by State and Federal Governments to take the sting out of high interest rates, but there was plenty of criticism around the fact they benefited the rich as well as the poor.

Likewise, slashing fuel excise across the board could backfire and encourage more stockpiling over the next three months.

Because the saving is also being extended to those who don’t need the hand-out, or don’t need the fuel.

It should have been limited to those using fuel for business.

“The idea that the primary driver of inflation is an announcement we made at 1230 yesterday. I don’t think any objective observer could sign up for that,” Treasurer Jim Chalmers insisted.

“This assistance is timely. It’s temporary, it’s responsible, and it recognizes that it’s not the fault of Australian motorists or Australian truckies that there’s a war in the Middle East.”

He denied it risks increasing fuel demand.

“The high prices we’re seeing right now, we think will mean about a 10% hit to demand in fuel. What we announced yesterday may be two or three percent so still very, very substantial price signals in fuel markets,” Dr Chalmers said.

So if fuel is still too expensive for some people, what’s the point?

Either you want to reduce demand or you don’t.

The Government is trying to have it both ways to fix a perception problem, not the actual problem.

Bankwest Curtin Economics Centre director Alan Duncan believes they’ve miscalculated, for the same reason welfare groups didn’t like uniform power bill credits.

“If you take the $2.6 billion that it’s costing could you have found other ways of more targeted support being delivered to those at greatest need, or to those industries that need diesel or petrol most,” he said.

“Whether or not that comes to more means tested support for vulnerable households, whether or not it comes in the form of targeted and direct subsidies delivered to key industry sectors, I think that would be a really good response.

“But it’s also important that we take ownership of the need to manage demand.

“This is a supply driven crisis, and so any measures that look to drive up demand in the face of constrained supply are only going to increase prices further. A lot of work needs to be done, I think, to manage demand.”

Everyone seems reluctant to contemplate that. Perhaps they fear the public still has Covid fatigue and won’t comply?

“There is no desire to mandate Covid-era restrictions on Australians, and there is no need to at this stage,” Roger Cook said this week, after agreeing to a national plan for fuel security.

“People are making their own choices to deal with the rising prices. If we need to move to level three, an approach will be developed by national cabinet that provides incentives and mechanisms to encourage other voluntary measures.

“It would not be until we get to level four that we would consider any mandated demand management responses . . . we’re a long way from that.”

But if WA is only willing to pull the supply lever, it’s not doing that to full effect either.

The Cook Government engaged quicker than others and announced it’s 7-point-plan and an industry operational group on March 11, to divert diesel, petrol and fertiliser supplies where they’re needed most.

Exactly three weeks later, miners in the Goldfields are laying off staff and claim they’ll run out of diesel in 10 days.

The Premier and WA Energy Minister Amber-Jade Sanderson have had trouble getting line of sight on where all the diesel (that’s apparently still coming in as scheduled) is going.

Roger Cook can demand that information, under emergency powers.

Instead, he decided to ask nicely. It was arguably already too late for that.