Prime Minister Scott Morrison is considering defying the lessons of history by reducing the excise motorists pay on increasingly expensive petrol. Sounds logical, but anyone with memories ancient enough to recall the trauma of petrol prices threatening to push past $1 a litre might also remember it is a doomed attempt at relief.
And it certainly is not the time for the Liberals to again pose their cherished question: “What would John Howard do?”
Twenty-one years ago, Howard was in electoral trouble. Not as much as Morrison is now, but still significant. Like now, the household cost of living jumps were a central issue. Those rises are more acute today, with some grocery items feared to rise 10%.
To be simplistic, if the price on your breakfast cereal rises by 10 cents a packet, you are angry maybe once a month. If petrol prices go up 10 cents a litre, you get angry possibly once a week or more. But for the trucking and delivery industry operators it’s a daily fury.
The extra costs of running their vehicles are passed on to consumers.
Howard reduced excise in 2001 when that quaint $1 barrier was at risk. And later regretted it.
It sounds good politics to argue an excise reduction would compensate for rising bowser prices caused by global ructions. Trouble is, even a small cut in the current 44.2 cents a litre would deny the government a lot of taxpayer money. The levy is projected to cost motorists close to $50 billion in the years 2021-22 and 2023-24.
The freezing of the twice-a-year indexation of prices by the inflation rate would also shrink government revenue significantly. And rising inflation costs the government hundreds of millions in indexed pensions and superannuation payments.
The Morrison government just doesn’t have the budget leeway to forgo a chunk of petrol excise.
Inflation usually becomes a bother when the economy is booming, but at the moment it is limping from the supply chain restrictions caused by the pandemic, and the shudder the Russian invasion of Ukraine is sending through the global economy.
So if fiddling with petrol excise is out, what options are left? If Labor wins government in May the petrol price crisis won’t just disappear.
Labor has yet to release a detailed economic blueprint but is expected to argue that a reduction in other household expenses would give families greater liquidity to afford fuel for their vehicles. These cuts might be in such cost as childcare and education, for example.
The policy hope is that these concessions would help keep family cars running — and, if coupled with aid to business, keep jobs secure.
It might be a good time to ask Howard what not to do.
Howard introduced the petrol excise in 1978 when treasurer to Liberal prime minister Malcolm Fraser. As prime minister in 2001, he cut excise and dumped automatic indexation which had been introduced by the Hawke Labor government.
This would “impose a welcome discipline on future governments”, he said at the time.
Perhaps more pertinent were the words of Kevin Rudd who as prime minister reintroduced indexation. In 2008 — as the international recession gained speed — he confessed on behalf of all prime ministers: “I can’t control the global price of oil.”
