Petrol prices are tipped to reach $2.20 a litre soon and remain elevated for some time despite the recent cut to the fuel excise, posing a challenge for the new Labor government, which plans to hand down a budget within weeks of the cost-of-living relief measure ending.
The temporary halving of the 44¢-a-litre fuel excise was unveiled by the Coalition government in its March 29 budget as petrol prices topped $2.10 a litre on weekly capital city averages.
Petrol prices are expected to continue rising.Credit:Eddie Jim
Petrol prices fell to lows of about $1.60 a litre in April due to the excise cut and falling global oil prices, but have gradually risen since then.
Last week, petrol averaged $2.05 a litre in Melbourne and $2.04 a litre in Sydney, according to the Australian Institute of Petroleum, and CommSec chief economist Craig James said people could expect to see prices around $2.15 to $2.20 a litre soon. On Monday, pump prices in parts of Sydney were already at $2.19, including the 22¢-a-litre fuel excise discount.
James said factors including a fire at a South Korean oil refinery, China’s zero-COVID strategy and a proposed European Union ban on Russian oil imports due to its invasion of Ukraine could keep prices elevated for some time.
“Petrol seems set to return to record levels,” he said. “If that tightness continues … that means the pump price will continue to rise.
“That’s going to create some real challenges for the new government in terms of [the fuel excise cut] expiry … and whether they need to keep that degree of relief in there for longer.”
During the election campaign, Treasurer Jim Chalmers said it would be hard for Labor to extend that temporary bowser relief, which is due to finish on September 28.
“It runs out in September. Obviously, we’d play the cards we’re dealt with at the time, but it will be difficult to find the billions of dollars that it would cost to extend that forever,” Chalmers told Nine’s Today show last Wednesday.
At the end of April, Chalmers said Labor was committed to handing down its own budget in October, and while cost-of-living relief was important, it would be hard to make the tax cut indefinite.
“We’ll see what the budget and economic conditions are at the time. But it will be hard to extend that relief indefinitely,” he told reporters at the time.
The fuel excise cut had served its purpose in the short term, James said, but the fluctuations in the petrol market meant people might not feel it was helping.
“It could be a whole lot worse. But for the average punter, they just want to know how much they’re paying at the petrol pump, and if they’re paying more there will be complaints about the cost of living,” he said.
“This is a test of the new government in its early days because it was constantly campaigning on the cost of living and the need to be able to reduce that and voters will want to see early signs that they’re going to be following through on that promise.”
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