The war between the United States, Iran and other countries across the Middle East is expected to place pressure on Australian households, according to new analysis by The Australia Institute.
This comes as household spending remains soft and consumer sentiment struggles to rise out of its slumps, with discretionary spending such as apparel being most affected.
The Australia Institute has found that domestic diesel, petrol, gas and electricity prices will all rise in the coming months if the war continues, which will push up the prices of a broad range of products and services almost immediately.
Essentially, the Institute predicts that global energy prices and gas, electricity and petrol prices paid by Australian households will grow in tandem, while multinational gas companies exporting Australian gas will profit.
From this, Australian governments will raise very little extra revenue.
While Australia is not a major oil producer, The Australia Institute pointed out that we are the second biggest liquefied natural gas exporter in the world.
However, they note that unlike other energy superpowers, Australia does not receive a significant tax or royalty benefit when prices rise.
The situation is worse for Australian consumers, who will pay surging world prices for Australia’s own resources.
The Australia Institute co-CEO Richard Dennis called it both a humanitarian disaster overseas and an economic disaster for Australian households.
“Australians could and should be shielded from the worst economic consequences of this war,” Dennis said.
“While the largely foreign-owned gas companies exporting Australian gas will make billions, Australian families will suffer.
“Australian nurses pay more tax than gas exporters. Australian beer drinkers pay more than gas exporters. Australian students pay more in HECS repayments than the gas industry super profits tax raises. If ever there was a time to stop Australia’s enormous gas giveaway, it is now.”
The Australia Institute is calling for the Australian Government to divert ‘uncontracted’ gas away from the export market and towards Australian domestic use, and ensure none of Australia’s gas is given away for free by imposing a 25 per cent export tax on all gas exported from Commonwealth waters, as proposed by the Australian Council of Trade Unions.
“Australia has significant diplomatic and economic power and a close relationship with the US,” Dennis added. “For decades, Australia has played a role in creating and upholding the international rules-based order.
“Rather than meekly supporting the US and Israel’s military action in the Middle East, Australia could use its influence to help bring peace.”
It must be noted that Australia’s consumer watchdog, the ACCC, is urgently meeting with fuel market participants to seek more detailed explanations for recent pricing conduct during the current Middle Eastern crisis, amid consumer concerns about sudden petrol and diesel price spikes and distribution issues in regional and rural Australia.
According to various media reports, petrol prices across Australia have surged, with some petrol stations charging over $2.50 per litre.
The ACCC confirmed it will also commence weekly market updates to provide increased transparency to consumers and enhanced scrutiny of retailers’ behaviour.
“We know the impact that higher prices are having on Australian consumers,” ACCC commissioner Anna Brakey said. “We have been watching pricing behaviour closely since the outbreak of recent hostilities in the Middle East and will take action against any case of misleading consumers about the reason for the steep and rapid increase in prices by individual retailers or any breaches of the competition provisions.”
Brakey said that if there is conduct that is collusive or misleading or deceptive, the ACCC will investigate it and take action.
In addition, the ACCC is urgently exploring measures to assist with diesel distribution issues in regional and rural areas, in partnership with other relevant agencies.
“We are aware of concerning reports about diesel availability in regional and rural Australia,” Brakey said. “We know how critical diesel supply is to primary producers, transport businesses and many others, so we are prioritising our work to assist with this.
“The ACCC is able to authorise conduct, such as coordination or agreements relating to distribution, where it provides a net public benefit. We stand ready to receive an application for authorisation.”
The ACCC wrote to petrol retailers last week seeking information about recent price increases, with responses expected to be coming through.
“We are now calling the industry into an emergency meeting to explain their actions during this period of volatility,” Brakey said.
“At that meeting, we will reiterate our expectations to industry and ask that they explain to the Australian community the reasons behind recent price spikes. We are also inviting representatives of motoring organisations representing the voice of consumers to be part of these discussions.
“The petrol industry should be under no illusions. We will act decisively and to the fullest extent of the law.”
The ACCC also welcomed government plans to increase the maximum penalties for relevant breaches of Australian Consumer Law and the Competition and Consumer Act by fuel companies from $50 to $100 million, and will seek the highest penalties appropriate in any cases it brings to the courts.
New Zealand’s consumer watchdog, the Commerce Commission, has launched a similar inquiry and ramped up scrutiny on petrol prices.
Commissioner Bryan Chapple said more frequent reporting will be used to call out any pricing behaviours that give the Commission cause for concern, both publicly and directly with fuel companies.
“Public scrutiny is a powerful tool, and we will use it. Nobody wants to see fuel companies using the situation in the Middle East as an excuse to unjustifiably increase prices at the pump,” Chapple said.
“Any retail price increases should be aligned with actual increases in the cost of sourcing fuel. I have communicated that message directly with fuel companies.”
The Commission does not set fuel prices and does not have the power to control them. Its role is to monitor, report and hold companies to account through transparency and scrutiny.
It is also the Commission’s job to ensure the sector remains competitive and that representations around pricing (including reasons behind any changes) are fair and accurate.
The reports, available on the Commission’s website, will provide updates on retail fuel price movements and compare them with changes in the cost of importing fuel.
“We want consumers to feel confident that petrol price increases are justified and that decreases in global costs are passed through to retail prices as quickly as the increases have been,” Chapple said.
Chapple also encourages Kiwis to shop around, using tools like the Gaspy app to compare prices. Gaspy lets motorists check the lowest fuel prices in their area without having to drive around to find a better deal.