Stop petrol prices fuelling inflation
National Seniors is calling for a cut in the fuel excise, which means more spending power to manage the cost of living.
Is the retailer’s share fair?
It's not just the government that’s taking a big slice of the price you pay for petrol service station operators have also received criticism for increasing their profit margins.
Queensland’s peak motoring body, the RACQ, has called for government intervention to end the sudden and dramatic petrol price spikes in the state’s south-east.
RACQ’s principal economic and affordability specialist, Dr Ian Jeffreys, said retail margins were significantly higher than they should be.
Unleaded petrol prices jumped from a low of 179.9 cents per litre to 229.9 cents per litre at more than 16% of sites across Brisbane last week. At this price, indicative retail margins are 56 cents per litre.
The RACQ wants the Queensland Government to limit the amount by which service stations can increase petrol prices in one day.
National Seniors is calling for a cut in the fuel excise, which means more spending power to manage the cost of living.
Did you know when you pull into a petrol station to fill up, nearly 50 cents of every litre you pump goes to the Federal Government?
As of February this year, the government’s fuel excise increased from 48.8 cents per litre to 49.6 cents per litre. While 0.8 cents is by no means a dramatic rise, the latest increase will mean close to $40 in total excise costs per tank for a large SUV with an 80-litre capacity.
With fuel prices spiralling upwards, even with so-called discounted periods, it’s a key component to how we measure inflation and a contributor to the widening cost-of-living pressures.
Bear in mind that Australia has the third lowest proportion of fuel taxes of all countries involved in the Organisation for Economic Co-operation and Development. Denmark topped the list in the June quarter of 2023, with almost half of its fuel prices made up of taxes.
National Seniors Australia asks: in the face of current cost-of-living pressures, would cutting the fuel excise be a real way to bring down prices across the board?
The tax goes toward maintaining and developing infrastructure and roads throughout Australia, and is just one of the major components that influence the price at the pump:
- The international benchmark price of refined petrol – which is largely driven by international crude oil prices and the AUD-USD exchange rate
- Taxes, including the excise and the goods and services tax (GST)
- Other costs and margins, at the wholesale and retail levels.
In addition to the fuel excise, the GST is also levied on the retail price of fuel (inclusive of the excise) at the standard rate of 10%. So, it can be argued that the fuel excise is a ‘tax on a tax’.
The fuel excise was forecast to collect $16.65 billion in 2025–26.
A temporary reduction to fuel excise was a major recommendation NSA made to its 2024-25 Federal Budget Submission.
We’re continuing to push it because rocketing petrol prices are a key driver of inflation and rising prices of everyday items, including groceries.
To reduce the impact of rising fuel prices, government could:
Temporarily reduce the fuel excise while oil prices remain high (up to 20c per litre)
Pause indexation while oil prices are high
Revise the method used to calculate indexation to ensure it is not contributing to inflationary pressures.
According to the Australian Bureau of Statistics, automotive fuel was one of the primary contributors to change in CPI in recent times.
The cost leapt by 7.9% in the 12 months to September 2023 – one of several key CPI categories experiencing high increases over this period (others include: rents 7.6%, bread 12.6%, ice cream and dairy 11.2%, postal services 14.2%, electricity 14.5%, and insurance 14.7%).
While government has little control over oil and refined petrol prices, it does control end prices via the fuel excise.
Reducing the fuel excise by 20 cents per litre over six months would cost about $5 billion, while a more modest cut of 10 cents per litre could enable government to spread this over a 12-month period at the same cost. At the very least, the Federal government could pause indexation of the excise, so it does not rise further, at a very modest cost to the budget.
With inflation and migration boosting underlying revenue, the government is in a good position to provide targeted cost-of-living relief via fuel costs, especially if this reduces inflationary pressures in the broader economy.
