Fuel hike hits Labor – again

Soaring oil prices brought the Whitlam government’s honeymoon to an abrupt end, a generation ago.

And the Rudd government’s luck, with oil prices, hasn’t been good, either.

So far, though, it hasn’t suffered anything like the damage that the Whitlam government did.

But the opposition, led by a reinvigorated Brendan Nelson, has been making its attack stick.

Nelson – and his colleagues – have been demanding a guarantee that the government’s Fuel Watch scheme won’t add to fuel prices.

The Prime Minister, Kevin Rudd, has of course, refused. Political leaders, since the time of King Canute, have known that government orders don’t hold back waves.

Bob Hawke learnt his lesson, on decrees, the hard way, after he had he boldly declared that “by 1990, no Australian child will live in poverty.”

Still, Rudd has been left in an awkward position.

His Fuel Watch scheme was never going to have much effect on fuel prices, either way.

And it became an embarrassment, when news that the Resources Minister, Martin Ferguson, had opposed the plan  was leaked.

The government’s embarrassment became acute, a few days later, when another leak revealed that at least four government departments had also advised the government against adopting the Fuel Watch plan.

That’s the rub. The government appears to be incompetent, because it can’t stop its own public servants leaking embarrassing information, about their submissions to Cabinet.

The government’s defence is sound enough. The Treasurer, Wayne Swan, says the Competition and Consuumer Commission, which is the expert in this area, had said that the scheme would probably help to keep fuel prices down.

But there are, also, more fundamental forces, like supply and demand, at work.

Governments, of course, do have a right to reject bureaucratic advice, when they believe that is necessary.

That’s what we have governments for. To make democratic choices. And to take the consequences, if they get it wrong.

But a sense of perspective is needed, too.

Fuel price hikes are certainly painful.

But petrol prices in Australia are still among the lowest in the developed world.

We should remember, too, that oil prices quadrupled, in a very short time, back in the early 1970s.

So far, they have risen by just 60 per cent, in the six months the Rudd government has been in power.

The responses of the two governments have been very different, too.

The Whitlam government came to power, back in 1972, with a big spending program.

It destroyed any economic credibility it might have had, when it persisted with its heroic spending, despite the then rising threat of oil fuelled inflation.

The Labor party has never forgotten that lesson.

With inflation a serious problem, once again, the Rudd government cut deeply into Federal spending programs, when it brought its first budget into parliament in May.

But the present oil price hike will, certainly,  require a careful response.

It is due, in large part, to increased demand from developing countries, such as China and India.

That suggests that higher oil prices will be permanent, this time. It’s time, as Gough Whitlam might have said, to start thinking of smaller cars a better public transport.

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Why fuel taxes won’t fall

The Federal government is not likely to cut the GST it charges on petrol prices, any time soon.

Yes, a senior minister, Jenny Macklin, did say in a television interview yesterday, that this is “one of the issues the government would look at,” in its review of Australia’s tax system.

And yes, technically, the GST, in this case, is a tax on a tax.

That, of course, is something that shouldn’t happen.

In principle, taxes on taxes are a bad thing.

But many economists have been telling us that taxes on fuel are necessary. And some even say they should be even higher than they are, already.

That’s the kind of people economists are.

But it is the politicians, not the economists, who will make the decisions, this time.

And politicians have a chequered history, when it comes to petrol taxes.

Even the great economic reformer, Paul Keating. He warned, famously, several years ago, that the Liberals were planning to turn every service station in Australia into “a branch of the Tax Office.”

Oddly, perhaps, Keating did not remove those taxes, when he came to power.

The present excise on unleaded petrol in Australia is 38.1 cents a litre.

And as the budget papers point out:”It has been at that level since the indexation of petrol excise rates to the Consumer Price Index ceased in March 2001.”
The Federal Treasury also takes pleasure in reminding us, in its budget papers, that among OECD countries, only the United States has lower petrol taxes than Australia.

Don’t forget, either, that the Prime Minister, Kevin Rudd signalled, very clearly, at the weekend, that there won’t be any quick fixes, from the inquiry into Australia’s taxation system, that he has asked the Treasury Secretary, Ken Henry, to conduct.

Rudd said he had asked Mr Henry to report on “how we confront the long term, interrelated challenges of our tax, welfare and retirement income systems, which will include a review of aged pensions, due in February 2009.”

Mr Henry is no slouch, at this kind of work. But even he won’t be producing quick results, with an assignment like that.

But  petrol taxes do hit motorists’ pockets and purses very hard.

Shell estimates, for example, that taxes and duties account for 30-35 per cent of the price people pay, at the nation’s petrol pumps.

With city motorists now paying about $1.60 a litre, for petrol, that means a government grab of between 48 and 56 cents, for every litre of petrol you put into your car.

No wonder people hate economists.

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China learns from its disaster:Burma does not

China’s political leaders have matured, as a result of their country’s earthquake.

Burma’s generals, though, have learnt nothing, from the disaster that Cyclone Nargis, dumped on their country.

China’s premier, Wen Jiabao, flew straight to the disaster area in his country.

He was then seen on television, shouting to children buried under a pile of rubble:”This is Granpa Wen Jiabao.

“Children, you’ve got to hold on.”

That graceful, indeed heroic, action would have won hearts, anywhere.

Indeed, that kind of thing is expected from suave, experienced western poliitcal leaders.

Not necessarily, though, from tough Communist bosses.

Wen Jiabao’s response, though, contrasts sharply with that of the Burmese generals, to their country’s disaster.

A Western aid worker overheard one of those generals saying: ” Don’t worry about the dead bodies.

“The fish will eat them.”

Not just callous. But ignorant as well.

Disease is now, probably, the main threat facing survivors of Burma’s cyclone Nargis, with the possible exception of starvation.

Wary of any possible political contamination, from outsiders, the Burmese generals have refused western aid agencies permission to enter the country, although they have allowed some aid workers in from neighbouring countries, and some western agencies have arrived, without permission, anyway.

But while the Chinese government is clearly doing all it can, to relieve the suffering of its people,the Burmese generals have not.

Indeed, they have decided, instead, to proceed with the second round of a constitutional referendum, designed to keep them in power indefinitely, while the Burmese people are suffering, terribly, from the after-effects of Cyclone Nargis.

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Seize environmental opportunities: Rudd tells business

The Prime Minister Kevin Rudd is challenging Australian business people to seize the opportunities now opening up in environmental protection.

But he warned a business forum in Canberra last night that the situation is urgent.

“The age of cheap oil and gas is over,” Rudd said.

“And energy security is now recognised as a key factor in geopolitics and a major driver of long term national security strategies.”

Rudd reminded his audience, too, that there had already been food riots in many parts of the world, including Bangladesh, Haiti, Indonesia and several African nations.

And he said all of this had occurred with a recorded temperature rise of just 0.6 degrees.

Rudd said that while the government is working hard to address these challenges, business leadership is still critical to the success of its environmental policies.

“Governments must create the right frameworks and incentives,” he said.

“But business leadership is needed in adopting energy efficient measures, mobilising capital, creating new markets, developing new technologies, driving innovation, deepening our skills base and developing partnerships across the whole community,” he declared.

“Government, the business community, scientific experts and community organisations must work together, if we are to tackle the challenges of climate change and seize the long term opportunities opening up for Australia, in low carbon energy technologies and environmental services,” he said.

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