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Economists warn fuel price cut likely to come with 'sting in the tail'
The war in the Middle East has triggered sky-high fuel prices and shortages around Australia. (ABC News: Timothy Ailwood)
Economists have warned the government's move to halve the fuel excise to provide some relief from sky-high petrol prices could adversely impact demand for petrol and keep inflation higher.
The tax on every litre of petrol and diesel will be slashed for three months from tomorrow, with Treasurer Jim Chalmers estimating it will save Australians about $19 on a 65-litre tank of gas.
Some economists say the move could mean the Reserve Bank is more likely to increase interest rates again when it next meets in May.
Fuel tax cuts could mean interest rate pain
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Australians could face worse cost-of-living pressures over the coming months despite temporary relief through a cut to the fuel excise.
From Wednesday, petrol and diesel costs around the nation will be slashed by 26.3 cents a litre as the federal government moves to head off the worst effects of the war in the Middle East.
That equates to $10.50 on a small 40-litre tank or $21 for Australia's best-selling new car – the Ford Ranger – which has an 80-litre tank.
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Did Anthony Albanese just cement a third interest rate hike in May by cutting the fuel excise?
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Economists will say that what millions of motorists gain in cheaper fuel through the prime minister’s three-month fuel excise cut, they will lose in more expensive mortgages.
It may be good politics, but injecting $1.5bn via petrol subsidies into an economy that is already struggling with a resurgent inflationary problem is not going to make the Reserve Bank of Australia’s job any easier.
Jim Chalmers says halving the 52.6c a litre fuel tax for three months will save a motorist $19 at the bowser on a 65-litre tank – and much more for those driving the ubiquitous gas-guzzling utes.
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