Budget relief for motorists and most taxpayers – but opportunities missed by Treasurer

Macquarie University/The Lighthouse
Voters will soon deliver their verdict on Tuesday’s budget – meanwhile Macquarie Business School economists analyse what the Treasurer got right, and what he got wrong.

Dr Lurion De Mello, Senior Lecturer, Department of Applied Finance, Macquarie Business School

There is budget relief for motorists and most taxpayers – but some opportunities have been missed by the Treasurer.

Motorists will save up to $15 when filling up a medium sized car after fuel tax was halved in Tuesday’s budget.

Treasurer Josh Frydenberg slashed petrol by 22 cents a litre for six months as part of a budget designed to help households battling sharp rises in the cost of living.

The move will cost the Government $3 billion with the Treasurer promising road fixing programs will not be sacrificed to fund the shortfall.

With an election looming – and the Government trailing in the polls – it’s hard not to be cynical about Mr Frydenberg’s motives.

Don’t expect retailers to pass on the full saving … motorists would be well advised to shop around.

A simple, easy-to-understand boost to voters’ hip pockets just days before the date of the next federal election is unveiled.

But in opting for a six-month quick fix the Government has scorned an opportunity to improve our fuel habits.

The Treasurer should have used the $3 billion tax cut to reward motorists choosing lower emission fuels like 95 and 98 premium petrol.

And while the Government expects petrol prices to stabilise in six months, the trucking industry will be hit with prolonged high diesel costs for the next 12 months.

This will ensure supply chain costs remain high, meaning shoppers will have to get used to paying higher prices in the supermarket.

Having the same excise tax across all fuels simply does not make sense.

Currently there are diesel supply shortages – with Europe introducing rationing. The tax on diesel should have been cut more to help the wider transport industry.

The other issue is whether motorists will reap the full benefit of the fuel tax reduction – or will suppliers pocket a significant slice for themselves?

The Australian Competition and Consumer Commission (ACCC) will find it challenging to monitor this cut as the Government has failed to give it significant teeth in this area.

The fuel excise drop should see premium 98 unleaded fuel drop to below $2 unless there is further upward pressure on crude oil prices.

But don’t expect all retailers to pass on the full saving.

Motorists would be well advised to shop around and use the available fuels apps to avoid being short-changed by unscrupulous suppliers.

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Dr Prashan Karunaratne, Course Director, Bachelor of Commerce, Macquarie Business School

In targeting his $250 one-off payment to those who need it most the Treasurer is being cautious with his budget stimulus.

The payment to pensioners, veterans, jobseekers and concession card holders will be ploughed straight back into the economy – because these groups are most likely to spend the cash.

The Government has missed an opportunity to stimulate the role of universities in enhancing employability.

It is prudent that the Low and Middle Income Tax Offset (LMITO) – fondly known as the “lamington” – of $1,500 per single or $3,000 per couple is limited to low and middle income earners because a non-means tested tax cut could increase inflationary pressures.

Caution is required because our economy is experiencing record low levels of unemployment as well as rising inflation.

There is some increase in infrastructure spending via rail for The Gold Coast, Brisbane, Melbourne, Sydney and Newcastle.

However these are not new projects and do little to future-proof the Australian economy.

I would have welcomed more forward-thinking infrastructure such as inter-state high speed rail and new technological infrastructure, allowing Australia to compete in new and emerging industries. We risk simply becoming better at what we are already good at.

There is a $5,000 payment for new apprentices as well as wage subsidies to encourage employers to take new trainees on board – which will address some gaps in our economy in the short-term.

But, again, we are simply supporting our traditional industries and not looking to the economic diversification we will need in future.

There will be 30,000 more university places and $2.2 billion devoted to university research.

But the Government has missed an opportunity to stimulate further the role of universities in enhancing employability and workforce productivity.

A more future-focused budget would have funded the university sector to partner with industry, TAFE and schools to train our future workforce in emerging skills such as data analytics and artificial intelligence.

It would also have encouraged teaching the transferrable skills – like digital literacy and problem-solving – required to build the agile workforce Australia will need in the coming decades.

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