Sunday, June 22, 2008

Libs, Nats Still Running On Empty

Brendan Nelson scored some "PR-points" from the public with his proposed 5c cut in fuel excise. Prime Minister Kevin Rudd certainly felt some heat, in and out of Parliament.

Ultimately, though, such a cut is bad policy. Brendan Nelson was told as much by members of his own party. A 5c/litre cut in the excise on petrol was estimated to cost the Federal Government's budget $1.8 Billion. Today, the National Party says it wants a 20c/litre cut. On a 50 Litre fill, that's just $10/week - close enough to 2 cups of coffee from Gloria Jean's, or similar coffee shops.

In terms of the family budget, it's not much, but its effects could be significant - not just on the budget, but on inflation.

Economically, at lower prices, petrol is reasonably inelastic. When prices rise significantly in a short time, as they have, then it becomes more elastic. To howls of protest from the public and businesses!

Australia, and Australians are being price-forced to evaluate how much they drive, the type of vehicle they drive, and maybe, just maybe, they way they drive.

Just driving more smoothly could save you up to 10% of your fuel bill, and only 5-10 minutes of travel time. On that 50 Litre fill, at $1.70/L, that is $8.50. Almost as much as the National Party's 20c/Litre cut, and with much less risk of higher inflation.

Want to cut your petrol bill? - drive better!