The devastating double leak

Cabinet leaks are never fun. Unless you’re on the other side of the chamber and can dine out for weeks at a time on the information. There’s a couple of things alarming about the recent leaks, both regarding petrol.The first leak regarded Martin Ferguson’s objections to the Fuel Watch scheme inside the apparent sanctity of Cabinet; and he was forced to front the press with an admission of arguing against it in Cabinet, but he backed the policy as Cabinet had decided it. Embarrassing.

The second, and in my opinion far more damaging, appeared last night in a Laurie Oakes exclusive. It showed that several departments (Finance, Industry, Treasury and the PM’s own DPM&C) had provided advice that the introduction of the Fuel Watch scheme nationally would impose high compliance costs on independent retailers, and eventually have an upward influence on prices rather than the opposite.

The FuelWatch scheme has at its centre an idea to set the prices the night before and not have them change for the duration of the day, under threat of fines and other penalties. Even if this is on a day by day basis, it resembles the introduction of a price floor and a price ceiling, which tends to disrupt prices. The effort of attempting to collate prices from across an entire nation is admirable, but by forcing service stations to set their prices in advance may preclude consumers from accessing fuel at the lower prices. Over the course of say, a week, the average price will be set for the entire week; eliminating the fuel price drop on Tuesdays. Is this really going to help working families*, who know of that lower price?

The Government has firmly relied on the economic modelling from the ACCC, but newspaper headlines around the country suggest he has actually misrepresented the advice. A highlighter was passed across the table in Question Time yesterday, which asked the PM to highlight the relevant sections of the ACCC report, an offer that was passed up. Kevin Rudd was shuffling papers like a casino croupier, putting them into different piles on the Table.

But back to Cabinet leaks. It’s very worrying to have a Cabinet leaking this early into the life of a government. The electronic system for circulating Cabinet papers may not be as secure, or the bureaucrats who had their advice ignored got angry. All sensitive leaks are investigated, but the culprit is often never found. Which leads to the suggestion that Ferguson himself may be angry about being overridden in Cabinet, or that his criticism was not given a fair hearing. Marn’ being of the Victorian Left, could this be the factions reasserting themselves. If their views aren’t respected, they may leak.

As I recall, the various incarnation of the Howard Government rarely leaked, as Howard made sure that each of the opposing views was heard, even if he didn't act on it. Cabinet was tight. If every minister's decision is leaked, it just encourages discussion out of cabinet. Ironically, the corridors of Parliament House are far less secure than the Cabinet Room. As petrol prices continue to rise, maybe a bit of panic is settling in. After the Opposition's divisions on the excise, it must be a welcome change to have some disunity in the government.


*If I hear the term working families once more from Kevin Rudd, I’m liable to put a brick through my television.

Petrol Competition

Petrol once again has dominated politics, this time with the Prime Minister admitting that more could be done on the GST applied to the fuel excise, or the entire excise. Any change would certainly impact on the budget of states, through the GST collection. Maybe Brendan Nelson has found a way to cause some disquiet amongst the wall to wall Labor governments? As I’ve said before, I disagree with the “five cents off” provision, mainly as it can be easily wiped out by an overnight change in the oil price.
Then again, politics is never always necessarily about what’s right for the economy, often rank populism gets you air.

Brendan Nelson is starting to find his own way. An opposition leader always lurches from one ‘important/crucial test’ to another. In Nelson’s case, it was navigating the opening of the new parliament, climate change and most recently the Budget Reply. Unfortunately, it never stops, as the Gippsland by-election is the next stop. But Nelson has managed to appeal to Rudd’s me-tooism, and he’s now (reviewing) at least the budget measures. The next couple of weeks will be tough for Rudd, as he has to deal with the comment that his government has done everything physically possible to help with the cost of living. The increase in fuel prices must transfer through to the cost of consumption goods; ‘working families’ must be really pleased that no further help is in the offing from government.

To be fair to Rudd and his government, a lot of the price increases are not due to Australian factors; petrol is a component of the CPI, but he must deal with the promises made at the election to all those he promised life would be better.

(Electoral) Petrol Shock?

Currently, the most politically divisive issue relates to bowser prices at the local forecourt. Brendan Nelson's budget reply was sprinkled with opposition to many of the means testing provisions, as well as his pledge to cut fuel excise, which is interesting in itself.

Rudd strategy to provide relief is to give assistance in the broader "family" budget and lift the burden through tax and transfer payments. This frees up money to pay for the rising cost of petrol. If you're not a working family though, you're missing out on that end.

Nelson's excise play was openly opposed by his Treasury spokesman, Malcolm Turnbull. He's now fallen into line, but not without some damage to the consistency of the position adopted. I personally disagree on two fronts. The first is that for each cent 'saved' by motorists, there is huge amount of money to be set aside for it in the forward estimates period, that can certainly be spent on infrastructure projects. The other has particular regard to the huge rises in the cost of raw oil, and any potential savings to be wiped out, especially with the sharp rise in the price of crude. The fluctuations, with an increasing trend, would make very little difference.
Then again, if you're not a motorist, you miss out on the relief there. It's being sold as a 'real' tax cut.

Although it feels like we've come full circle on the link between Petrol and by elections. The Age editorialised on 26 April 2002:

A fortnight before the Ryan by election, Mr Howard cut fuel excise by 1.5 cents a litre and cancelled twice-yearly indexation for inflation - at a cost to revenue of $2.6 billion over four years. Then on the eve of the Aston by election, a turning point in the Coalition's fortunes, he launched an inquiry, to report back last month, into fuel taxation and pricing.

Sound familiar? Replace Ryan with Gippsland, and the method of cutting fuel costs. That was the last major change to the pricing of fuel in the country, at least from the government side. The then Howard government also gave back the "Tax on A Tax" by eliminating the GST applied on fuels.

Not surprisingly, the Nationals candidate in that by election, Darren Chester, is 100% in support of that same policy, despite the three corner contest between Labor, Nationals and Liberals:

“Cutting the fuel excise by five cents per litre is a saving of about $3 per tank on the family Falcon and the benefits would flow through to reduced transport costs for industry."

The by election caused by the retirement of Peter McGauran becomes the first test of whether the electorate feels Kevin Rudd has delivered on the style promised on the hustings in November last year. Do families feel that the government has done all within its power to limit increases in grocery, house and petrol prices. The realpolitik comes into play now, and it tests Brendan Nelson in particular.

The other sentiment that may flow through (and I've been waiting for it) is that consumers have to realise that their contribution to stem global warming needs to be paid out of their pockets. Turnbull has even called for petrol to be excluded from the trading scheme. The effects unfortunately don't stop on the petrol side, with the Oz reporting that the European Union has estimated the prices of cars themselves may rise by up to 6%.

Wayne Swan, enjoying the limelight from a budget that was seen a firm but fair, can only look forward to more leadership tension within the Liberal party.

Kevin Rudd appeared on the ABC program Q&A, and was very smooth. It reminds of the UK based TV show called "Question Time" and I think this is where the show will head, as Difference of Opinion fell flat in delving too far into subject material without making it interesting. The format would not have suited John Howard, as I think he would really struggled to keep that slightly petulant side of his persona in check. An ABC audience is not a place where Howard thrived; perhaps that's part of why there was a large amount of control on media appearance and set pieces were always tight.

Rudd on the other hand appeared relaxed and eager to talk, and was open to all sorts of question, some which he dodged very nicely (he must have swotted up), although Tony Jones is going to need to watch that the questioners don't run the show with continuous supplementaries and interjections, it kills the flow.