Are We Facing Food Stamps and Ration Cards?

This morning’s Insiders program was interesting on a number of levels.

One of the more fascinating moments was Joe Hockey’s claim about petrol prices. Now, I don’t recall him actually stating that petrol would always be cheaper under a coalition government, but I probably wasn’t paying attention, or away from the screen at the time getting the second Sunday cuppa. If he did, then I missed it, but how ironic is it that a coalition member should make such a claim, when it was a coalition government which blithely laid a GST on top of an already unpopular fuel excise, put into place by John Howard as Treasurer to Malcolm Fraser in 1978?

The excise was originally slapped on as a salve to world trade parity arguments, and to act as a brake on supposed profligate usage by you & me of a so-called dwindling resource. It hasn’t kept pace with the former, and long ago lost any impetus with regard to the latter when viewed in context with spiraling speculation in commodity markets. The the real driver behind oil prices today.

Here’s a little nostalgia for you:

"Since the [major oil producing] countries quadrupled the price of crude oil in 1973-74, Australians have continued to enjoy artificially low prices for [Australian-produced] crude oil. While the rest of the world was facing up to the inescapable fact the days of cheap energy were over, Australians were continuing to pay less than half the world price for Australian oil. In the light of the budgetary situation and the desirability of improving energy use, the government has decided all Australian-produced crude oil should, from tomorrow, be priced to refineries at import parity levels. This will mean [motorists] will in future pay [petrol and diesel] prices based on world oil prices…

"This decision will add about 3½ cents a litre to the price of petrol. The maximum allowable retail price for premium petrol in Sydney is now 21 cents a litre, and even with the increase would remain much lower than the price paid in most comparable countries. For example, Italy 49 cents a litre, France and Japan 44 cents, and 28 cents in the United Kingdom…"

That was John Howard on budget night, 1 March 1978. $0.21/litre……oh, how I recall the angst and pocket pain of those days. The Howard government, thirteen years later when subjected to public pressure over the lash of the litre on consumer pockets, decreed that:

"From tomorrow, fuel excise will be reduced by 1½ cents a litre and we will legislate immediately to abolish all future half-yearly indexations of fuel excise. That will bring to an end the indexation introduced by the Hawke government in 1983 and will impose a welcome discipline on future governments…"

The power of public opinion when it’s so sorely needed. A political decision, to be sure, but one a government, badly in need of popularity at the time, was only too willing to take. Proof positive if ever it was needed that governments can and will do whatever it takes to ensure the public remains assuaged of unnecessary grief which might impact on how it votes. The same is happening now, although in a reverse situation. The coalition, still unable to come to terms with not being in power after six months, and in the face of an overwhelmingly popular government, is saying anything to try to garner popularity. Nelson says $0.05/litre cut in the excise and Turnbull, although not saying it out loud currently, thought $0.10/litre would be popular.

Kevin Rudd said he’d put a brake on the increasing cost of living, which petrol prices feed into everything we buy. Did he lie? Was he being populist? Yes to both, I believe. He made a claim he’s unwilling to support. He was attempting to win government. He’s a politician, need any more be said? Now comes the harsh light of reality to shine brightly on the Rudd government. Petrol is a daily necessity for ‘working families’. Petroleum powers the transport which delivers our daily bread. It powers the aircraft which sustain commerce, correspondence, trade, tourism indeed, any aspect of our daily lives you care to think about. The cost of petroleum fuels the cost of living. How long does the Rudd government truly believe it can hold out against the power of public opinion, when it exhorts us all to tighten belts and live more frugally by not escalating wage claims?

That will be the next front that Kevin Rudd will need to reinforce. Wages are being eroded tremendously at present, by monetary policy and by fuel costs. I keep a running spreadsheet for our two cars, collating fuel purchases and economy of each vehicle as a means of deciding when the latter is falling away, and a service is warranted. This time last year, 65 litres cost me $75. This week, when I filled the tank, and I always choose a Wednesday morning, $86. That’s a 15% increase. Extrapolate that percentage across the spectrum of transport which has incurred that same increase as it provides us the necessities of a daily existence, and there you have the cost of living. Has your income increased by 15% over the last year? I know damn well, mine hasn’t.

Now we read that the government is looking at the ‘interaction between the goods and services tax and fuel excise.’ Without Nelson’s broadly populist claim of a $0.05/litres reduction in petrol prices in his budget reply, we’d not be seeing any such announcement. Pressure’s on, honeymoon’s over and the government is left with a pile of stained bedsheets and an electorate which feels somewhat used & abused. Of course, there’s wriggle room involved. This so-called assessment of interaction is to be encompassed into the government’s ‘root-and-branch’ review of taxation, which wasn’t to include the GST. Well, surprise, surprise, it now will. Purely by dint of the relationship the GST has to petrol pricing, the fuel excise, and by direct relation, everything else the GST touches. That much is inescapable now. You cannot conduct a review of a sweeping form of taxation like a Goods and Services tax, without the review being in itself, sweeping. If you believed the rhetoric from Rudd that ‘root-and-branch’ didn’t include the GST, then think again. A full review of the GST, what it’s on and what it’s not on is closer than you might think. 2010 is a log way off. Voters like you & me, we want action NOW!

The standard for any government on a three year term is to introduce the hard policies in year one, bed them down and put out any fires in year two and then hand out the largesse in year three, just in time to be re-elected. Rudd’s plan was to play hard ball this year and settle inflation but inflation is really out of his hands in the form of petrol prices. Without something concrete, like a halving of the excise, wages pressures will come upon this government like the proverbial ton of bricks. A taxation review, be it ‘root-and-branch’ or piecemeal, doesn’t take three years. That much has been proven by Howard, Keating, Hawke, Fraser ad infinitum reversi. Politics decrees that really thorough ‘root-and-branch’ reform is a pipedream. Populist changes, changes aimed at maintaining an electoral status quo can be made literally on the spur of the moment. Shortfalls are made up on the run. Evidence the alcopop tax increase.

Of course, the lynch-pin to any action by the government in the short term in regard to heading off a wages claim epidemic, is pressure. Public pressure, but more pointedly, political pressure. Concerted, united pressure from an effective opposition. Given what we’ve seen since November 24, 2007 in regard to a united opposition coalition of Liberal and National parties, my suggestion is a girding of the loins for harder times ahead.

Bread and dripping, holidays at home and making one’s own clothes seems almost appropriate