Fuel tax cut not a long-term fix for cost-of-living pressures

Economists are tipping a rise in inflation from its current level of 3.5 per cent, putting the government under greater pressure to show how its March budget can support household incomes. Pump pain will be felt the most by lower-income households and those in regional and outer suburban areas with unavoidable car travel needs. While axing the fuel excise would help those households, economists have argued they could be better targeted with lower income tax cuts or a one-off pension or benefits boost.

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There is no simple solution to cost-of-living challenges, but it is incumbent on politicians to level with Australians about what they can do to address the problem which has been exacerbated by a war in Europe, global oil embargoes and ongoing pandemic struggles.

United States President Joe Biden has told Americans that “Putin’s price hike” is driving up the cost of oil around the world. Prime Minister Scott Morrison has also blamed Russian President Vladimir Putin and his invasion of Ukraine for the cost pressures and says Australians understand the issue.

But while they may understand, Australians will also expect the government and the opposition to have a clear plan for how they will help households weather higher costs for housing and groceries, beyond the bowser. A tax on fuel also provides an environmental benefit in discouraging car use.

The best you could say about a reduction in the fuel excise is that it will be popular. But it will also create a budget hole that will need to be filled in some other way. If the government wants to help households with the cost of living, it needs concrete policies, not symbolic gestures.

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