In his budget response, Brendan "I'm a doctor" Nelson proposed cuts to petrol taxes.

Petrol taxes help raise funds for road construction and maintenance. As it is, they barely cover this cost. Reducing this tax would amount to a road subsidy. This effective subsidy is a type of 'negative externality'. Taxpayers who limit their use of the road will be paying to support those who use it more than is economically rational.

Petrol consumption is relatively insensitive to price. This makes petrol taxes a good way to raise revenue while minimising the distorting effect that taxes have on the economy.

Greenhouse emissions are another negative externality associated with petrol. The price of petrol and electricity should be going up to internalise this externality. They will be going up once our kyoto obligations come into force. It makes no sense to lower them in the meantime.

Petrol prices are politically sensitive, probably because people are constantly confronted with the price of petrol on the side of the road. People's awareness of and concern for the price greatly exceeds it's relative impact on our lives. For this reason, lowering petrol prices may be a good short term political move, but it is bad for the economy and bad for the country.

While not as politically popular, blocking the tax on luxury cars would make far more economic sense.

Neferti wrote on May 17^th, 2008 at 3:18pm:


Quite.  I particularly liked the reference Brendan made about Nervous Nelly Swan "he no longer has a straight-A student in the form of Peter Costello to copy. Australians have seen the last tax cut they will see for some time"

He will be fresh out of ideas now.  Some of the measures were lifted straight out of the coalition's election pledges.  Then they added a few tax increases in to show it was a Liebor budget after all.

I think the Opposition should concentrate on tearing Rudd and Co to shreads, rather than give any clues on what they would do.    The Opposition is there to oppose, not direct.  

Neferti wrote on May 17^th, 2008 at 4:11pm:


The only thing they can do is drop Nuclear Power and get serious about the real alternatives.

They have already breathed a few lines about a "solar continent" so their scope is very narrow and they have to come through it...

They can't afford to go playing pansy games with the candyhol issue for too long as they already have a branding issue.

They have to do backflip after backflip and they have to do it and have to start doing it sometime...maybe not soon but sometime before next election and it's only three years away last I heard!

 

BatteriesNotIncluded wrote on May 17^th, 2008 at 4:01pm:


Not quite.  The Australian people decided they were sick of being employed and having low interest rates so they opted for a future of being out of work and having interest rates as high as when Cheating was rooting them soundly while telling them it was in their best interests.

But once they realise that it's hard to get ahead when you don't have a job, your house has been repossessed and Centrelink has closed down they will decide to give the cardboard crowd the heave ho.

Besides which we need nuclear energy.

BatteriesNotIncluded wrote on May 17^th, 2008 at 4:26pm:


How else can I have all my lights on, the tele playing 24/7 and the home theatre keeping the neighbours entertained without a lot of energy?

At the moment there's only one non-polluting way to generate base load when we don't have whacking great rivers crashing through our cities.  Ask the French how they have got their CO2 output down.

BatteriesNotIncluded wrote on May 17^th, 2008 at 4:20pm:


Why are you so interested in what the Opposition says?  Do you think that Rudd will listen and use their ideas?  It's happened already in other areas.  

Brendan Nelson stumbles on $750m blowout

http://www.theaustralian.news.com.au/story/0,25197,23711629-5013871,00.html

BRENDAN Nelson's bid to revive his leadership with a strong response to the Rudd Government's first budget crumbled yesterday as he admitted to a $750million blowout in his plan to cut fuel excise.

As Labor seized on the blowout as evidence of Coalition incompetence, Opposition ageing spokeswoman Margaret May incorrectly declared an increase in pensions was Coalition policy, forcing Opposition Treasury spokesman Malcolm Turnbull to publicly correct her.

The gaffes ended a bad week during which the Opposition Leader and Mr Turnbull struggled to provide a consistent economic message over the need for spending cuts in Tuesday's budget.

On Thursday night, Dr Nelson attempted to reverse his fortunes, delivering a forceful formal budget reply in which he vowed a Coalition government would reduce fuel excise by 5c a litre to 33.14c, improve standards of teacher education and ease capital gains tax on small business.

---

some interesting letters to the editor:

To cut consumption taxes at this time is short-sighted

http://blogs.theaustralian.news.com.au/letters/index.php/theaustralian/comments/to_cut_consumption_taxes_at_this_time_is_short_sighted



MOST TALKED ABOUT
BUDGET BRAWL

THE current sparring between the federal Government and Opposition over fuel tax is disingenuous ("Nelson fuels budget brawl’’, 16/5).

To deal with the inflation problem, spending must fall. The Rudd Government has done its bit and those with home loans are doing theirs. Consumption taxes are part of the general solution to the problem of excessive demand in the economy. To reduce consumption taxes at this time is expedient and short-sighted.
Langford White
Rose Park, SA

BRENDAN Nelson made a valiant effort in his reply-to-the-budget speech. How wise the Coalition has become after just six months in opposition. It has an answer for everything, even for things it could not manage in nearly 12 years of government. Imagine how much wiser it will become in a decade or so.
Robert Keane
Taigum, Qld

IT would seem that Brendan Nelson has finally found some back-bone and emotion in replying to Wayne Swan’s budget. If his heartfelt speech is anything to go by, just maybe Nelson is actually capable of leading the Opposition.
Sven Knudsen
Acacia Gardens, NSW

BRENDAN Nelson’s plan to cut petrol excise is economically and environmentally senseless. The reason why the price of oil is so high is because people are burning too much and there is not enough supply to meet demand. Total world oil supplies are continually diminishing as it is a non-renewable resource. As such, cutting petrol excise is illogical because it will encourage people to use more, when the real solution is to use less. The way to do that is improve and encourage public transport and to use rail and shipping instead of road for transporting freight. Neither of the major parties seem to have a policy for that.
Anna Payne
Boronia, Vic

IT’S quite intoxicating to see Brendan Nelson on white charger riding to the rescue of the liquor industry. Once an opponent of alco-pops, he now sees them as the lesser of evils in the battle against binge drinking and therefore taxable at a lower rate. If other alcoholic drinks are even more dangerous, as he asserts, surely the correct strategy would be to bump up the tax on them too.
Phil Robins
Toorak Garens, SA

I AGREE with Brendan Nelson. The Australian people should not be patronised by incremental payments of the baby bonus.

I’m sure he’ll extend this principle to business activity statements and pay-as-you-earn income tax when the Liberals are next in government and abolish them.
Jennie Connell
Milton, Qld

BRENDAN Nelson is in opposition, not government, so who cares if he is promising to end the drought, reduce petrol prices and proclaim Souths as NRL premiers? I don’t. The Coalition lost, Labor won. End of story.
Graeme Rankin
Holder, ACT

WILL someone please tell Brendan Nelson that Labor’s plan to increase the income threshhold at which the Medicare surcharge is payable is a tax decrease, not an increase?
Bob Clarke
Adelaide, SA

A COUPLE of years ago, my private health insurer wrote to me to advise that, due to an influx of new members, premiums would have to rise, and they did. Now I’m being told by all and sundry that there will be a decline in private health numbers because of the raising of the income threshold for the Medicare surcharge, and this decline will lead to increased private health premiums. Can somebody please explain?
Peter Jones

THE fact that so many people are expected to ditch private health cover as a direct consequence of the new Medicare levy surcharge thresholds reveals just how grossly distorting and unfair the system actually was.

Every July 1, for a decade, John Howard drip-fed new policyholders to the private health funds by stubbornly refusing to address bracket creep. Yet insurers now threaten to raise premiums because young and healthy people - who never wanted their policies in the first place - will walk away.

Does anyone recall the funds reducing premiums when the same young and healthy people signed-up for private health, thereby diluting the proportion of older, higher-risk members? No, quite the opposite, we were forced to wear the higher premiums, well above CPI, year after year, and had no choice but to pay up or pay the surcharge.