Make petrol tax cuts permanent

Next month Australians will see petrol prices increase suddenly by $0.22 per litre, as the petrol tax bounces back up from $0.22 to $0.44/litre. This is a bad idea, and the government should think twice.

The petrol tax increase will obviously make things more difficult for people filling up their cars, but it will also have a flow-on impact on price levels as higher transport costs push up retail prices. This would be poor policy at any time, but it is a particularly bad idea now given high levels of inflation. The government should make the current petrol tax rate permanent and abandon the tax increase. If they are unwilling to do that, they should at least delay the petrol tax increase until inflation is under control.

The government claims that they need the revenue from higher petrol taxes to deal with the budget deficit. They are right that the budget needs to be balanced, but that should be achieved by reducing wasteful government spending rather than higher taxes.

Indeed, rather than raising taxes we should be pursuing lower taxes to help boost productivity. Our income taxes are some of the highest in the world, stamp duties are a drag on efficiency, and “sin” taxes are a regressive impost on ordinary people just trying to live their lives. The current high debt and deficit makes large tax cuts difficult… but at the very least we should not be increasing taxes. Especially not petrol taxes, and especially not now.