SUBJECTS: FuelWatch, GST/Fuel excise, LPG
Five cents a litre in Perth so that means the GST on petrol is somewhere around about getting close to 15 cents a litre. Now if the GST was taken off petrol that would be a considerable, that would be a tangible saving wouldn't it? The Government will still get its excise, which is about 38.2 cents a litre, that is not a bad whack for the government for doing absolutely didley squat, so what's all this talk about they might take off the GST on the excise, which is something like about 4 or 5 cents a litre. That's next to nothing and the Opposition is saying we plan to cut the excise by about 5 cents a litre. That is next to nothing. So what's it all about, it's all about the government sitting on fat wads of cash isn't it - $21 billion as far as the Federal Government is concerned. $2.1 billion as far as our State governments are concerned. Joining me now is Chris Bowen the Federal Assistant Treasurer and the Federal Minister for Competition, that is interesting work, Policy and Consumer Affairs.
SATTLER:
Hello Chris
BOWEN:
G'day Howard, good to talk to you again.
SATTLER:
Why don't you do something tangible like take the whole GST on petrol, why wouldn't you do that?
BOWEN:
Well government budgets are just like a household budget, if you take something off somewhere you have to find the money somewhere else.
SATTLER:
No you don't
BOWEN:
Or you can reduce the surplus which would put more pressure on interest rates.
SATTLER:
Now c'mon explain that to me?
BOWEN:
Well because Howard every economic commentator in the country agrees that if you didn't have a government surplus in this country you would have higher interest rates.
SATTLER:
$21 billion. It's like nothing else before, it's huge.
BOWEN:
It's a big surplus and we worked very hard to build it up because people are doing it tough and we need to put downward pressure on interest rates. So you need to be sensible about these things and you need to give people release in an efficient way and as quickly as you can bearing in mind that you need to put downward pressure on interest rates.
SATTLER:
But you've only told half the story the other half of the story is that the price of petrol is putting upward pressure on interest rates because it is a major ingredient in inflation you didn't say that.
BOWEN:
Well it is a major ingredient but reducing the tax does not necessarily put downward pressure on inflation for two reasons Howard. Firstly there are fuel tax credits for business, which means that you don't get the full bang for the buck when you take the tax off, it doesn't necessarily flow through the business. Also what you will see is a one off reduction in the price of fuel which the Reserve Bank will not take into account when setting interest rates they make it very clear that they do not look at one off increases or reductions.
SATTLER:
We took into account a one off interest increase in banana prices about a year ago.
BOWEN:
No they didn't actually, the Reserve Bank doesn't but smooths all those things out and doesn't take into account when setting their interest rates. They look at the underlying inflation rate. So look we're doing a range of things Howard. We've got Fuelwatch which I know that you're familiar with., which Western Australia.
SATTLER:
The price of fuel isn't any cheaper here because of FuelWatch I've got to tell you.
BOWEN:
There are indications by the ACCC, who have done a very thorough analysis, that Fuelwatch does have a downward pressure on prices because you force service stations to put in the cheapest price.
SATTLER:
Minister with respect you are tinkering up the edges here that only accounts for one or two cents.
BOWEN:
Yes, that is a hundred per cent right, we have never said otherwise in terms of the one or two cents downward pressure, it also gives people a lot more information about where they can find cheap petrol but West Australians, your listeners, already have the benefit of FuelWatch and the rest of us don't.
SATTLER:
How do you think a pensioner, we've got plenty of pensioners listening to this program, how do you think they're feeling at the moment with petrol as I said at $1.52 or something like that for the average around $1.60 in lots of places, they can't even go out anymore a lot of those people, how do you think they're feeling about all this discussion that we're having at the moment?
BOWEN:
We are very aware of just what impact this is having on pensioners, on people on low incomes across the board, that's why we are putting as much downward pressure as we can through competition and transparency.
SATTLER:
What competition is there in the fuel business?
BOWEN:
There's not enough. We have what the ACCC has called a cosy oligopoly which has been left to run without check for years, which we are putting in place a number of factors do deal with. The Petrol Commissioner, the increased powers of the ACCC etc. and there is evidence that is having some effect but, it is at the margins. It is at the margins because the biggest impact on Australian petrol prices is world oil prices and it doesn't matter if we have a Labor Government or a Liberal Government.
SATTLER:
We thank Malcom Fraser for that don't we, parity pricing in 1978.
BOWEN:
Import parity and in fairness it's hard to think of a system which will work better because if we didn't have import parody pricing we would have fuel shortages in this country as they just exported all their oil for where they would get a better price for it.
SATTLER:
And now you're going to slap an excise on LPG for goodness sake you would think you want us to use LPG instead of petrol.
BOWEN:
The government has made no decisions about that excise on LPG, the previous government had plans to and we haven't made any decisions about that Howard.
SATTLER:
So that may not happen?
BOWEN:
That's not quite right we haven't made any decisions about that issue.
SATTLER:
Look I'm not asking you that, it may not happen?
BOWEN:
That's correct.
SATTLER:
When are you going to decide that?
BOWEN:
Well I don't think from memory the excise was due to come on under the previous government's plans until 2011 we'll have to reassess the situation a bit closer.
SATTLER:
Do you want us to switch to LPG?
BOWEN:
Well LPG certainly has some environmental benefits and it is cheaper, although I must say most of the price benefits the LPG comes from, is because it is a lower tax and of course the previous government had a LPG conversion scheme which we have kept, so that is one of the measures we have in place to help people through if they do choose to transfer to LPG.
SATTLER:
I think the Treasurer once said that you can't just take the GST off petrol because you can't have a mish mashed GST on some things and a GST on other things but of course we don't have a GST on fruit and vegies.
BOWEN:
No we don't
SATTLER:
So already we have some exclusions?
BOWEN:
The previous government did that and we supported that taking it off fruit and vegetables/fresh food. But the bottom line is Howard, look you could take GST off petrol we could take it off a number of things but that would mean a lot less revenue to the states, they would need to then cut their government expenditure or raise the money elsewhere or raise the money elsewhere or we would need to do it for them.
SATTLER:
You wouldn't have a fat surplus like they've got here.
BOWEN:
Again, Howard whenever you raid the surplus then you are putting upward pressure on interest rates and that is not something this country can afford quite frankly. I mean we need a big surplus, we are unapologetic for the big surplus, we need to be responsible, we need to get government expenditure under control that's what we've done and we do have a big surplus and it's a surplus that is necessary.
SATTLER:
Nice to distribute a bit of the wealth to the tax payers that have put in?
BOWEN:
Of course, when you can then you can return it in tax cuts or you invest in the future, which is what we're doing. But I can tell you we spent a lot of time on this budget doing up this surplus because another few increases in interest rates will do a lot of damage to a lot of people that are on the edge at the moment, so that has got to be a number one priority for the government.
SATTLER:
I hope you've got it right.
BOWEN:
Well we're certainly pretty confident we've got the balance right Howard, there are very difficult economic circumstances throughout the world, very turbulent times and government needs to be conservative in their approach. That's why we have the issue with the Opposition's approach which has been to just simply say we'll cut the excise by five cents but they haven't told us how they will pay for it. If there are indications they would reduce the surplus and we think that is a really irresponsible policy at this point of the cycle.
SATTLER:
Thanks for your time.
BOWEN:
Pleasure.