Fed: Excise on hot air would solve petrol price crisis

AAP General News (Australia)
08-25-2000
Fed: Excise on hot air would solve petrol price crisis

By James Grubel, Chief Political Correspondent

CANBERRA, Aug 25 AAP - If there was an excise on all the political hot air over petrol
prices in the past week, John Howard could just about wipe out the government's foreign
debt.

Then the government wouldn't have to sell the rest of Telstra, and National Party MPs
could happily watch the Olympics from the comfort of Telstra's corporate box.

Sadly for motorists, there is no financial return from a week of heated political posturing
over the increasing cost of a tank of petrol.

One thing, however, is clear.

State and federal politicians are feeling increasingly uneasy as the price of a litre
of petrol crosses the $1 mark.

They know that higher petrol prices are making voters angry, especially those in rural
and outer suburban seats who spend more time in the car than those in inner city electorates.

The prime minister and Treasurer Peter Costello have been busy all week trying to deflect
any criticism of the government's tax take on petrol.

They lay the blame for higher prices on rising world oil prices and the dip in the
Australian dollar.

And they say there is little the government can do, short of raiding the Budget surplus
and risking higher interest rates.

Mr Howard and Mr Costello have ruled out any cuts to the petrol excise, saying the
latest rise on August 1 added only 0.6 cents to the price at the pump.

However the states and the federal government's own backbench have their sights set
on the next excise hike in February next year, which could add another two to three cents
a litre to the cost of petrol.

The federal government's role in petrol pricing stems from two main areas.

Back in the late 1970s, Mr Howard, in his role as federal treasurer, introduced world
parity pricing - a move which artificially inflated the price of Australian-produced oil.

The policy had bipartisan support and was introduced to ensure domestic oil producers
had an incentive to fund research and exploration.

Mr Howard said the massive discoveries in the Timor Sea would not have been made without
world parity pricing.

Then, in the mid 1980s, Labor's Paul Keating introduced six-monthly increases in the
petrol excise, with the rises linked to the inflation rate.

Both policies have provided tens of billions of dollars in revenue for successive governments.

Figures produced by the Australian Automobile Association this week demonstrate the
extent of taxation in a litre of petrol.

In 1983, total state and federal tax on petrol was 12.2 cents per litre.

In March 1996, when petrol prices hit 71 cents a litre, the total tax take was 41.7 cents.

But with petrol now at about $1.00 a litre, taxation accounts for 47.2 cents a litre.

According to the AAA, excise accounts for 38.1 cents and the GST and state taxes account
for a further 9.1 cents.

Mr Howard rejects charges that the government gets any taxation windfall from the GST.

He says all GST revenue goes to the states, and it is unfair to suggest any GST-inspired
rise in petrol prices is the fault of the federal government.

State leaders are not convinced by the comments.

Queensland's Premier Peter Beattie was the first to capitalise on the issue, quickly
trying to lay the blame for higher prices at Mr Howard's door.

It was exactly the kind of federal-state blame-shifting the GST was designed to avoid.

In one respect, the GST will be responsible for the next hike in the federal excise on petrol.

The GST is set to lead to an inflation spike of up to 7 per cent over the coming months
- a figure which will set the benchmark for the next excise hike in February.

Western Australian Liberal Premier Richard Court is now leading the push for the government
to scrap the next excise hike because of the one-off impact of the GST on inflation.

He has a strong case, and one which will grow stronger if petrol prices don't settle
back below 90 cents a litre in the coming months.

But Mr Beattie and Mr Court can also act.

State leaders, who have a final veto on the GST, will come together in November for
the next premier's conference.

If they all decided to drop the GST component on petrol prices, the federal government
would have no option but to grant their request.

In return, the states would have to accept cuts in revenue.

Given the history of state financial arrangements, that would be about as likely as
a tax on hot air.

AAP jg/daw/rs/bwl

KEYWORD: NEWSCOPE FEDERAL

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