Tuesday, March 29, 2022

Budget 2022: Frydenberg spent big, but (on the whole) responsibly

Wes Mountain/The Conversation, CC BY-ND

So good, and so unexpected, has been Australia’s economic improvement over the past three months, it has wiped one-third of the projected 2022-23 budget deficit. Or it would have, had the government not decided to give away almost half (45%) the windfall.

That’s one way of looking at the difference between the projections in the December budget update and those presented three months later in Tuesday’s March budget. In December, the deficit for the coming financial year was to be A$98.9 billion.

Three months later, the budget papers say it would have been $38 billion lower, were it not for an extra $17.2 billion of spending and tax measures taken since the update and in the budget.

The measures leave the 2022-23 budget deficit at $78 billion, something set to shrink to $43 billion over the following three years, but with no help from savings in this budget.

The budget measures expand the deficit in each of the five years for which the government provides projections, by $30.4 billion in total.

Working the other way, improved economic circumstances shrink the deficit by $114.6 billion.

It’s a convenient way to examine the projections, but it’s unfair. Most of the improvement due to economic circumstances is the government’s own work.

An astounding $98.5 billion of the $114.6 billion improvement is because Australia’s extraordinary and unexpected success in driving unemployment down to a near 50-year low, with a further improvement forecast in the budget.

It is helping the budget in two ways. The government is spending much less than it expected on JobSeeker and Youth Allowance, and taking in more than expected in income tax from people it hadn’t expected to be in work.

It’s what former finance minister Mathias Cormann insisted would happen in 2020 when the first COVID budget threw the switch to massive spending.

By throwing everything it could at keeping people in work through programs such as JobKeeper, the government would “grow the economy” and grow tax revenue to push down the resulting government debt as a proportion of GDP.

The budget papers show it happening.

A year ago, net debt was expected to peak at 40.9% of GDP in mid-2025 before sliding as the economy grew. Now it is expected to peak earlier at 33.1% of GDP.

Net interest payments are expected to peak at a very small 0.9% of GDP in 2025-26 before slipping to 0.8% of GDP.

And there are reasons to think things will turn out better than forecast.

Unemployment, now down to 4%, is expected to fall only a little further to 3.75% within months and then stay there before climbing back to 4% in 2026.

But that’s because treasury has assumed unemployment can’t stay as low as 3.75% without sparking inflation – an assumption it concedes might be wrong, noting Australia has “limited recent experience” of an unemployment rate lower than 5%.

Forecasts conservative

Treasury has assumed the iron ore price, at present US$134 a tonne, falls back to US$55 in coming months. It has assumed the coking coal price falls from US$512 a tonne to US$130, the thermal coal price from US$320 a tonne to US$60 and the oil price from US$114 a barrel to US$100. Every one of these assumptions looks conservative.

Frydenberg admitted as much in the budget press conference, saying if commodity prices merely stay put for just the next six months instead of falling as assumed, the budget will be $30 billion better off.

About the only forecast that doesn’t look conservative is the one for wages growth.

At present an embarrassingly low 2.3%, the budget forecasts a jump in annual wages growth to 2.75% within months followed by a jump to 3.25% in 2023 and to 3.5% by June 2025.

The forecasts conveniently put wages growth back above forecast inflation of 3% in 2022-23, leaving Australians with only one more year in which the buying power of wages goes backwards.

In the budget fine print (page 60 of Statement 1) treasury concedes it’s none too sure about its forecast of wages growth we haven’t seen in a decade. It shares an alternative forecast that uses different assumptions to produce annual wages growth no higher than 2.5% – below inflation for a further two years.

Support measures (mostly) well designed

The cost-of-living measures are well-designed (with the exception of the six-month cut in petrol excise that will benefit most the high earners who typically spend the most on petrol). The one-off payment of $250 to Australians on benefits will go to those who do need it.

And the one-year boost of $420 to the low- and middle-income tax offset (bringing it to as much as $1,500) will only be available to Australians earning less than $126,000. They will get it after they put in their tax return from July – when they are most likely to need it – and then no more. It isn’t being continued.

Frydenberg has spent big in 2022 – but on the whole, responsibly. The budget forecasts and the unemployment numbers show his COVID support spending in 2020 and 2021 has paid dividends. They are forecasts for the true believers.

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.


Thursday, March 24, 2022

Cut emissions, not petrol tax. The budget economists want

Overwhelmingly, Australia’s top economists would rather the budget funds measures to cut carbon emissions than cuts income tax or company tax.

They are also dead against rumoured cuts to petrol tax and the tax on beer.

The Conversation’s pre-budget survey of a panel of 46 leading economists selected by the Economic Society of Australia finds almost half want a budget deficit smaller than the A$99.2 billion expected for 2021-22 and the $98.9 billion forecast for 2022-23 in the December budget update.

Higher commodity prices and lower than expected unemployment – which is lifting tax revenue while also cutting spending on benefits – is set to produce a deficit tens of billions of dollars lower, perhaps as low as $65 billion, absent new spending.

But a substantial chunk of those surveyed (41%) want an unchanged or bigger deficit to boost spending in other areas, including an accelerated transition to net-zero carbon emissions and Australia’s defence.

Arguing for a deficit about as big as last year’s, former OECD official Adrian Blundell-Wignall said while spending on defence was important, so too was spending on supply lines to make Australia less dependent on other countries. Events in the Ukraine showed supply chains were as important as weapons.

Curtin University’s Margaret Nowak said the huge reconstruction needs following the floods in NSW and Queensland suggested there was no potential to reduce the deficit and good reasons why it might climb.

Arguing with the majority in favour of a lower deficit, independent economist Nicki Hutley said the government should bank rather than spend any improved psoition to reduce debt ahead of higher interest rates. It would need “reserves at the ready” to deal with economic and geopolitical uncertainty.

James Morley of the University of Sydney said with the economy on the road to recovery, more government handouts would be likely to be inflationary, making it harder for the Reserve Bank to keep inflation within its target band.

Asked to pick up to two spending or tax bonus measures from a list of twelve that would most deserve a place in the budget, more than 60% of those surveyed nominated spending on the transition to net zero carbon emissions.

University of Adelaide economist Sue Richardson said if she had the option, she would have picked “remove all subsidies to fossil fuels”. More than 90% of Australia’s energy now comes from fossil fuels. Reducing that – as the government has said it expects to do to get to net zero emissions by 2050 – will require a massive effort, “made much harder by starting so late”.

More than 32% of those surveyed backed increases subsidies for childcare, in part because it would allow more parents to do more paid work. More than 26% supported a temporary boost to JobSeeker and other payments; 13% supported increased defence spending; and 10.9% supported infrastructure spending and investment in domestic manufacturing.

Asked which of the measures should not be adopted, almost half (45%) picked a reduction in beer tax, and almost 35% nominated a reduction in fuel excise.

Saul Eslake said “gimmicks” such as cuts in beer or petrol excise failed to address the reality that Russia’s invasion of Ukraine had serious economic consequences for Australia, including reducing national income. Governments can’t “pretend this hasn’t happened”.

Instead, what governments could do was ensure Australia’s lowest earners don’t bear the brunt of that economic pain.

The best ways to do this were temporary increases in social security payments, or a one-off special payment, and tax rebates for genuine low earners.

Eslake would fund them from the extra tax that will flow from the companies and shareholders who will benefit from the higher commodity prices following Russia’s invasion.

UNSW Sydney’s Nigel Stapledon was sceptical about higher social security payments. Given Australia’s experiencing a near five-decade low in unemployment, and unprecedentedly high number of job vacancies, he said it was hard to justify a higher rate of JobSeeker.

Also high on the list of measures panellists felt should not be adopted were further company tax cuts (21.7%) and bringing forward the Stage 3 tax cuts income tax cuts directed at high earners and due to start in July 2024 (21.9%).

The budget will be delivered on Tuesday night.

Individual responses:

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.


Wednesday, March 23, 2022

Why Australia’s Reserve Bank won’t hike interest rates just yet

The biggest question relating to the management of the economy right now has nothing to do with next week’s budget. It has everything to do with the Reserve Bank and the board meetings that will follow it.

The question facing the board – the biggest there is when it comes to how the next few years are going to play out – is whether to hike interest rates just because prices are climbing.

On the face of it, it seems like no question at all. It is widely believed that that’s what the Reserve Bank does, mechanically. When inflation climbs above 3% (it’s currently 3.5%) the board hikes interest rates to bring it back down to somewhere within the bank’s target band of 2-3%.

It’s what it did the last time inflation headed beyond its target zone in 2010.

But the inflation we’ve got this time is different, and failing to recognise that misreads the bank’s rationale for pushing up rates, and what it is likely to do.

Inflation, but not as we’ve known it

The Reserve Bank does indeed target an inflation rate of 2-3%. The target is set down in a formal agreement with the treasurer, renewed each time a new treasurer or governor takes office.

Just about the only tool the bank has to achieve its inflation target is interest rates. If inflation is below the target, it can cut interest rates to make finance easier in the hope the extra money will encourage us to spend more and push up prices.

If inflation is above the target, it can push up rates so it becomes harder to borrow and interest payments become more onerous, taking money out of the economy and giving us less to push up prices with.

Here’s how the bank itself puts it:

If the economy is growing very strongly, demand is very buoyant and that’s pushing up prices, we might need to raise interest rates to slow the economy, to get things back onto an even keel.

Note the qualifier: “if demand is very buoyant and that’s pushing up prices”.

Buoyant demand (spending) is most certainly not the main thing pushing up prices now. The main things are beyond the Reserve Bank’s power to control.

Petrol prices have skyrocketed because of an invasion half a world away. It’s also the reason the global prices of wheat, barley and sunflower oil are climbing.

Food processors such as SPC say higher oil and food prices combined threaten to push up the price of a can of baked beans more than 20%.

The price of a set of tyres is set to climb from A$500 to $750 because tyres are made from oil.

Everything that is shipped and trucked using oil is set to cost more.

And trucks and cars themselves are climbing in price because of a global shortage of computer chips.

And it might get worse. Last week China locked down the high tech hub of Shenzhen, said to be the source of 90% of the world’s electronic goods, among them televisions, air conditioning units and smartphones. It reopened the city this week after testing its 17.5 million residents for COVID.

It’s easy to see why prices have shot up, and easy to see why they might not come down for a while. What is harder to see is how pushing up interest rates to crimp demand, to force Australians to spend less, would do anything to stop it.

What’s missing is inflation psychology

It’s a view Reserve Bank Governor Philip Lowe seems to endorse. He said this month that what he is on the lookout for is “inflation psychology” – the view that price rises will lead to wage rises, which will lead to price rises in an upward spiral.

It used to be how things worked. Australians who are old enough will remember when, if they saw something at a price they liked, they rushed out to buy it before it climbed in price. Australians born more recently have learnt not to bother.

The old psychology could come back, but wages growth – which would have to be high if that sort of thing was to happen – has remained historically low at 2.3%, little more than it was before COVID.

When surveyed, trade union officials expect little more (2.4%) in the year ahead.

It is true that these days most Australians aren’t in trade unions. So the Reserve Bank seeks out the views of ordinary households. On average, those surveyed expect wage growth in the year ahead of just 0.8%, which is next to nothing. The psychology hasn’t taken hold.

Until it does, it is best to think about most of what has happened as a series of isolated externally-driven price rises that have dented our standard of living.

Pushing up interest rates to dent living standards further won’t stop them.

The Reserve Bank is right to be on the lookout for internally-driven, self-sustaining inflation. We will know it when we see it – but we’re not seeing it yet.

Asked on ABC’s 7.30 this week whether there was a role for higher interest rates in an oil crisis, a former Reserve Bank board member, Warwick McKibbin, said

the worst thing a central bank can do in a supply shock or an oil crisis is to target inflation, because by targeting inflation you push downward pressure on the real economy

He went on to say that if the bank did it without success and then kept doing it, it would bring on a recession. I am sure the bank doesn’t want to do that.

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.


Wednesday, March 16, 2022

It’s hard to find a case for a cut in petrol tax – there are other things the budget can do

Cutting petrol tax to bring down the cost of living used to be the political version of a joke. Failed US presidential candidates John McCain and Hillary Clinton both tried it in 2008. Their bipartisan advocacy of a “summer gas tax holiday” was derided as dumb, a turkey and a “metaphor for the entire campaign”.

When 230 economists released a letter opposing it in 2008, Clinton said: “I’ll tell you what, I’m not going to put my lot in with economists”.

Her opponent for her party’s nomination, Barack Obama, labelled it a gimmick and went on to win both the nomination and the presidency.

But it isn’t a joke now. There’s talk about it in the US, New Zealand has just cut in its fuel excise 25 cents to ease cost of living pressures, and Australia is considering a budget measure along the same lines.

What has happened to the price of petrol is shocking. In capital cities the unleaded price is about A$2.18, up from $1.60 at the start of the year. That means that whereas it might have cost $80 to fill up a Toyota Corolla at the start of the year, it now costs one third as much again – $109.

If you fill up fortnightly, as many people do, the extra impost is greater than if the Reserve Bank lifted its cash rate by 0.25% and pushed up the cost of payments on your mortgage.

If you own an SUV, by now Australia’s biggest selling type of new car, the extra impost will be greater. And (as with interest rates) there’s every chance petrol prices will climb further.

In New Zealand, where petrol costs more than NZ$3 per litre (A$2.80) the government has cut petrol excise by 25 cents per litre for three months, in the hope that by then the worst effects of the Russia-Ukraine war will have passed.

Australia taxes petrol lightly

Eagle-eyed readers will have noticed that even with the cut, New Zealand petrol prices will still be way above Australia’s. That’s because, like most developed nations, New Zealand charges more in tax for using roads than does Australia.

Until the cut on Tuesday, New Zealand petrol excise was a touch over NZ$0.77 per litre (A$0.72) compared to around A$0.43 in Australia.

Low by international standards

Retail unleaded price (Australian cents per litre) Department of Industry, Science, Energy and Resources

The goods and services tax charged on top of that in both nations brings the NZ excise to about NZ$0.89 per litre (A$0.83) compared to Australia’s A$0.48.

If these figures sound low, it’s because the price of petrol has soared. One of the peculiarities of taxes that are set in cents per litre (climbing only with inflation) is that when the petrol price jumps, the tax as a proportion of the total price shrinks.

A year ago fuel excises accounted for 40% of the cost of New Zealand petrol, and 35% of the cost of Australian petrol. At 28% and 22%, they’ve become self-cutting.

If we abolished fuel excise altogether, cutting the Australian unleaded price 22%, we would only bring the price back to where it was five weeks ago.

And then (as I imagine will happen in New Zealand after three months) the government would find it hard to reintroduce it.

It is finding it difficult to end the $1,080 low and middle earner tax break that was meant to finish two years ago.

The mess it has got itself in to both by hinting that it will cut the excise and by not ending the A$7.8 billion per year low and middle earner offset hints at a way out.

The offset is poorly designed. It is paid out as a tax refund after the end of each financial year, making it the opposite of the “stimulus measure” Treasurer Josh Frydenberg said it was when he last extended it. If he extends it again for the coming financial year, it won’t get paid out until the second half of 2023.

The petrol component of the fuel excise brings in A$5.8 billion per year. The government might be able to hang on to that and use the A$7.8 billion that would have been spent on the offset to support people now when they need it and when petrol prices are high, rather than a year into the future when they might not be.

The A$7.8 billion would be directed to Australia’s lowest earners, the ones who are being hit hardest by the horrendous petrol prices. Low earners (the bottom 40%) on average spend more than 3% of their income on petrol. High earners spend less than 2%.

Support shouldn’t be tied to petrol use

The support to low earners should be delivered in cash rather than as a subsidy to petrol prices. Recipients would be able to spend it on petrol should they need to, but would be able to spend it on other things.

If it was delivered as a petrol subsidy it would go disproportionately to the highest earning households for whom high petrol prices are a mere annoyance. High-income households spend more on petrol in absolute terms (on average 50% more) than low-income households.

If it is delivered as cash rather than a petrol subsidy it won’t blunt the push that high prices give for people will switch to more efficient cars and use petrol less by doing things such as working more from home.

It’s hard to find a case for a cut in Australia’s petrol tax, but it is easy to create a mechanism to help the people high prices are hurting. The budget is due in a fortnight.

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.


Wednesday, March 09, 2022

Putin’s biggest mistake? Trusting the Western financial system

The West is arraying financial weapons never deployed before against a country of Russia’s size, forsaking some of the principles that have defined it.

Part of what has defined the West – and most of what has been the world’s engine of prosperity for the past century and a half – has been the free flow of goods across borders, a working banking system, and property rights.

There’s been an implicit understanding that no sizeable nation (Russia’s economy is about the size of Australia’s) would be denied access to these things. Otherwise the financial system wouldn’t be the financial system.

That seems to have been the understanding of Russian President Vladimir Putin. But ten days ago, the West did the unthinkable, and the global financial system may never be the same again.

Russia’s vast war chest

Over the seven years since Putin last invaded Ukraine (and annexed Crimea) in 2014, Russia’s central bank has almost doubled its holdings of foreign currency and foreign bonds and gold, building up a reserve of US$630 billion at a considerable cost to the living standards of ordinary Russians.

It was a war chest that would enable Russia to continue to buy things that could only be bought in foreign currency, even if customers overseas refused to trade with it and supply it with that currency. It was Russia’s insurance policy.

And although it could have been stored in Russia, much of it was kept in banks in the UK, Western Europe and the US, for easy access when it was needed to buy things on those markets.

Whatever his other suspicions of the West, Putin seemed to think its financial system wouldn’t be turned off – not to a nation of Russia’s size.

China will learn from Russia’s mistake

On February 27 the West froze the assets and travel of named oligarchs and Russian officials, as was expected.

Also, and less expected, it stopped named Russian banks from accessing the messaging system used to transfer money across borders, ensuring they were “disconnected from the international financial system”.

And, much less expected, it froze the reserves of Russia’s central bank stored in France, Germany, Italy, the United Kingdom, Canada, and the US – the hundreds of billions of savings legitimately placed in foreign banks for safekeeping.

That action broke the bond of trust that makes a bank a bank. And while effective – Russia can’t get access to hundreds of billions of foreign dollars it has painstakingly built up to buy supplies and support the ruble on currency markets – it can only be done at this scale once.

China will have taken note and won’t be entrusting any more foreign assets to banks in France, Germany, Italy, the UK and the US than it can afford to lose.

Freezing foreign reserves has been done before – but only to the less powerful nations like Iran, Afghanistan and Venezuela. This is the first time it’s ever been done to a member of the G20 or the UN Security Council.

The battle of the fridge vs the TV

The ruble has collapsed 40%. Denied access to the foreign currency it would need to support the ruble in the market, Russia’s central bank has attempted to stem the tide by more than doubling its key interest rate, lifting it from 9.5% to 20%.

The ruble falls off a cliff

Fraction of a US cent per ruble. Trading Economics

Russia has blocked Russians from sending money abroad, stopped paying foreigners interest payments on government debt and required every Russian firm earning dollars to hand over 80% of them in exchange for rubles.

For ordinary Russians, there’s a “battle of the fridge versus the television”: the stark contrast between the reality of daily life against the claims of state media.

Until recently, Russian TV wasn’t even using the word “war” (although it has started). The television has been telling Russians things are normal.

But Russians’ fridges, ATMs, and their blocked Visa, Mastercard and ApplePay accounts are all telling them something else.

From buying a washing machine to getting a mortgage, an awful lot is suddenly expensive or unavailable. But official polls (for what they are worth) show public support for the “special military operation”. Television has been using the realities of shortages and price increases to attack the West for becoming anti-Russian.

Hitting Russia’s elite and military where it hurts

Whatever ordinary Russians actually think about the war, the impact of the West’s unprecedented sanctions on the Russian elite is likely to matter more. No longer able to travel aboard, access their offshore savings or pay the school fees of their children abroad, the oligarchs have at least the potential to exert influence.

The final way in which the financial embargo might succeed is by starving Russia of foreign exchange to the point where it can’t buy spare parts for its military or the computer chips and other materials needed to make those parts.

There’s every chance none of these will work quickly, every chance they will further impoverish Russians, and every chance that, if Russia subjugates Ukraine, the West will find the sanctions impossible to withdraw without losing face.

The global financial system changed when the West did the barely thinkable on February 27. It’s hard to see a way back.

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.


Wednesday, March 02, 2022

As petrol prices rise, will carbon emissions come down?

No one likes paying A$1.80 per litre for petrol. But amid forecasts of prices climbing to $2.10 as Russian’s invasion of Ukraine drags on, it’s possible some good could come of that pain – including greater energy independence and a faster path to net-zero emissions.

Two months ago, at the start of 2022, the typical Sydney and Melbourne unleaded price was $1.60 a litre. A year earlier, at the start of 2021, it was $1.20.

That increase – from $1.20 to $1.80 in just 14 months – is a jump of 50%.

Estimates of the price elasticity of demand for petrol prepared by Paul Burke of the Australian National University and Shuhei Nishitateno of Kwansei Gakuin University in Japan come up with the number 0.3. Other estimates are higher.

A price elasticity of 0.3 means that for each 10% a price climbs, demand for the product falls 3%.

In the case of petrol, where the price has climbed a phenomenal 50% in the past 14 months, demand for it should fall 15%, a fall big enough to make a dent in Australia’s greenhouse gas emissions.

There’s been nothing like such a drop, and what drop there has been can be explained by COVID measures such as lockdowns and working from home.

The high price needs to last to have an effect

There hasn’t been a big drop because the elasticity estimates are long term. Those of us who drive cars don’t (and often can’t) react straight away.

Sure, we can delay filling up if the price is high, or drive from one station to another, but in the short term we have no choice but to buy petrol.

Longer term, if we think the price is going to stay high, we will change our behaviour. Burke and Nishitateno’s calculations suggest that each 10% increase in the price of petrol that lasts boosts the average fuel efficiency of new cars by 2%.

It’s an average figure. Some of us will go electric altogether, and be freed of petrol bills, others will do nothing, and others will buy smaller cars or hybrids.

Petrol prices change what we buy

This is how things have played out. When prices shot up in the 1970s we switched to smaller cars, most of which weren’t made in Australia, and helped trigger the decline of the Australian car industry. When prices fell after a spike around 2008 we moved to gas-guzzling SUVs.

So what will matter for our demand for petrol (and our emissions) is whether the higher prices last. There’s no doubt we are paying attention.

We spend almost as much on alcohol (2.2% of our budgets) as we do on petrol (2.6%) but we notice petrol prices more. In part this because they are displayed prominently in well-lit letters of a regulated height.

As marketing researcher David Chalke put it, “you have to buy it, and there’s a bloody great big sign always there telling you how much it is”.

In the 1970s and early 1980s, Australia was fairly self-sufficient in petrol. There was a lot of oil in the Bass Strait and Australia refined it locally.

Then the wells ran low. These days 60% of our petrol is imported and most of the 40% that is made here is made from imported oil.

Russia is one the big three suppliers

It means our prices move with international prices, which are determined by how much is needed (COVID and the rise of China have big effects) and how much is supplied.

Supply is partly determined by big oil exporting nations that get together and strike agreements with the aim of keeping prices high, but not so high that buyers buy less. The biggest are Saudi Arabia (17% of exported crude oil), Russia (11%) and Iraq (7.7%).

From time to time they break these agreements, as Russia seemed to in 2009 when it sent far more oil into the market than was expected and helped bring about the biggest price collapse on record, pushing down the price from US$140 per barrel to US$40 per barrel, and helping usher in the era of the SUV.

Australian prices are low

Australian petrol prices are at record highs, but by international standards they are still unusually low; the fourth-lowest among the 33 OECD nations graphed by Australia’s Bureau of Resource & Energy Economics – above only Turkey, the United States and Columbia.

The chief reason is tax, In December taxes (fuel excise plus GST) accounted for only 37% of the price of Australian unleaded petrol, compared to 48% of New Zealand petrol and 60% of German and UK petrol.

Low by international standards

Retail unleaded price (Australian cents per litre) Department of Industry, Science, Energy and Resources

There are good reasons for taxing Australian motorists more. Higher taxes would better reflect the cost of roads and road repair and the environmental damage wrought by cars.

That’s not likely to happen right now – although in 2014 the Coalition reintroduced indexation in the face of surprising opposition from the Greens, ensuring fuel tax at least increased in line with prices. But it suggests there’s little room to cut taxes.

If access to Russian oil remains difficult and prices don’t return to where they were, we will move away from using petrol faster, either by making adjustments such as working more from home or by buying cars that are more efficient or more electric.

It’ll be a bizarre and largely welcome byproduct of war in Ukraine, perhaps the only welcome one. It’ll increase the value of takeover target AGL, Australia’s largest electricity supplier, and speed us on our path to zero emissions and energy independence. It’ll get us where we are going sooner.

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.