13/01/2004 - 21:00

Petrol pricing doesn’t add up

13/01/2004 - 21:00


Save articles for future reference.

FUEL prices are not something I get worked up over very often.

FUEL prices are not something I get worked up over very often.

Basically, I reckon we take energy for granted and I think higher petrol prices have generally pushed manufacturers to make more efficient vehicles – which is good for all of us in the long run.

But fuel is a basic cost of business, both for the distribution of goods and services and the transportation of workers to their place of employment.

Fuel prices, therefore, are an issue for business.

This is especially the case when something doesn’t appear right with the market, and fuel prices increase when everything indicates they should be falling.

The issue here is that crude oil prices are very much at levels of 12 months ago, after a very steady year, excluding February and March when the lead up to the Iraq war sent them over $30 a barrel.

At the moment crude oil is around $27 a barrel, the same as it was at the beginning of last year.

What has changed is the Australian dollar … considerably.

At the beginning of January the Aussie currency was about US56 cents. Compare that to about US78 cents right now.

That means an Australian currency holder’s purchasing power has improved almost 30 per cent against crude oil prices. One would assume the same change would occur against more refined products from the same basic ingredient.

Yet I haven’t seen anything like a massive fall in petrol prices. The news these days is the price bumping up above $1 a litre.

Is there a case that someone is not passing on the benefits of the rising $A?

The oil companies suggest there are at least two other factors at work, the price of the refined petroleum product out of Singapore and shipping rates.

I’m not sure how the refined product’s price has moved, but earlier in the year it was tracking the crude price. As for freight rates, they have spiked from the New Year.

The question is: are these factors equating to the 30 per cent rise in the $A? I doubt it.

With all manner of exporters fearing the worst – an $A above US80 cents – Australian business is suddenly facing a huge uncertainty.

That is, of course, what business is all about.

But so are the swings and roundabouts of currency fluctuations.

The farmer whose wheat crop has just dived in value is supposed to get a little back when it comes to buying a new imported harvester – and some relief on the cost of the fuel to run the thing.

Targeting tax

FEDERAL Labor pollie Wayne Swan came out swinging about tax last week, rightly complaining that middle Australia’s incentive to work harder has been unhinged from the reward process.

Mr Swan’s view was that many wage earners who pick up benefits for a variety of things, such as family allowances, end up effectively taxed by as much as 80 cents in the dollar if they earn more than they expected.

He sees this as a disincentive to work harder and get ahead – and therefore get off the welfare system entirely.

I couldn’t agree more, with that part of the argument.

Where he goes wrong is pointing at the so-called fat cats of corporate Australia.

Sure, there are people who are paid too much, especially when the company they run has actually gone backwards.

But these so-called fat cats on million dollar salaries are a drop in the ocean and should not be used for a good old Labor ‘them against us’ political rallying cry.

Yes, middle Australia gets taxed too much and more should be done to ensure there is a big incentive to work harder. But many people on high incomes also work hard and they lose up to half in tax.

Where is the incentive in that?

Those skilled people and business starters we want to immigrate here or repatriate from other countries look at the tax cost versus the isolation of Australia and decide they are better off where they are now.

If Mr Swan wants to reverse the brain drain and help reposition Australia in the global economy, he should broaden his argument to include all Australians (even prospective ones) and get away from divisive politics that worked better a generation ago.


Subscription Options