Less than two months ago Prime Minister John Howard was telling Federal Parliament that there was no net benefit to the government in rising fuel prices.
Using figures supplied from an elaborate Treasury calculation, Howard explained that as petrol prices soared so too did the cost of living, which flowed on to pensions, which had to be increased, and higher social security payments.
But following the release of Treasurer Peter Costello’s mid-year economic outlook there has been a slight change of tune.
While the Prime Minister is still resisting calls to cut the fuel excise tax, he is now pushing for a major budget spending spree on rural roads.
Upward revisions in the Treasury’s forecasts have seen the Budget surplus rise from $2.8 billion to $4.3 billion. Many economic commentators claimed afterwards that the revised figure will significantly underestimate the final amount the Treasurer will have stuffed into the Government’s coffers by the end of the financial year.
The same Treasury forecasts estimated that oil prices would fall by 20 per cent over the first half of next year.
Apart from a windfall in company tax revenue ($2.3 billion more than forecast), and $760 million extra in individual income taxes, there was also a hefty $480 million increase in the Petroleum Resource Rent Tax.
This, Treasury said, was a result of sustained strength in the world price of crude oil, but of course there was no mention of this being stripped away by higher pensions, etc. As soon as Howard heard the good news he was heralding a major road package for the bush.
The Prime Minister was not alone among those who had ideas about how to spend the money. To the Treasurer’s chagrin, the airwaves were immediately full of calls from the various lobby groups, from education to welfare, putting their hands out.
But it is likely the Prime Minister will have the first bite of the new surplus. In reality the extra road funding can mean only one thing – Liberal Party polling in the regions must be looking particularly black.
Country roads were obviously not an urgent enough concern at the time of the last Budget to warrant extra spending, but now have suddenly become a top priority.
The problems for the Government in the bush are many, but there is clearly extraordinary anger about fuel prices, and about the GST being levied on the total cost of fuel plus excise tax.
It has to be remembered that the GST was only very reluctantly accepted by the National Party when it was put to them by Howard and Costello.
The junior coalition partner accepted the GST basically on one proviso – that fuel taxes and therefore fuel costs would fall in the bush. Clearly this has not eventuated.
Opposition leader Kim Beazley dismissed the Howard road funding push as a “boondoggle” for the National Party which he explained was a US political term for pork barrelling.
Beazley’s definition was in fact slightly askew (according to Webster’s Dictionary the word means a wasteful or unnecessary project, often involving graft), but had National Party leader John Anderson and most journalists in the press gallery diving into the dictionaries.
Definition in hand, Anderson was able to take a swipe at Beazley for claiming spending on country roads was a waste of money.
But while Beazley got a chip from Anderson and is perhaps running the risk of turning himself into an eccentric intellectual oddity like British Labour’s Michael Foot, the real dangers remains with Howard.
By resisting calls for a cut in fuel excise or even forgoing the indexation increases, Howard is taking a big gamble. He is betting that fuel prices will fall by at least the 20 per cent being forecast by the Government’s friends in Treasury.
If there is no fall by the middle of next year there will be justifiable panic on the backbench and Howard’s re-election hopes will be in very serious trouble. Howard appears to have has avoided some down sidein his $1.2 billion road package by handing the decision making for where the money is to be spent onto local governments.
When country people think about road funding, they mean for “their” road, and usually “their” road is not even on the Federal Department of Transport’s map.
Any political heat about misallocation of funding should fall on local governments, while Howardwill be able to take credit for the overall package.
A major upgrade of the Pacific Highway on the north coast of New South Wales costing tens of millions of dollars will do little to assuage the folk on the other side of the continent or even a few kilometres away who have their own important artery to civilisation pot-holled and breaking apart.