Chapter 1: What is the main topic discussed in this episode?
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As the global energy crisis drags on, the Australian government has urged calm and to carry on, but with some extra financial relief. The economic landscape remains worrying, inflation running hotter than desired, unemployment on the rise and growth hard to come by. So is Australia headed towards the dreaded R-word recession if this war continues on? Or could we already be there?
Welcome to ABC Business Daily.
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I'm Carrington Clarke.
And I'm Tom Crowley. By day, an economics reporter in Parliament House, but by the very early morning, still night for a little while, I'm also filling in as the political correspondent on Radio National Breakfast, which Carrington makes us colleagues and part of the same show. We don't get to talk to each other, though, very often, do we? No. I'm pleased to be with you today.
The silos have been completely broken down here, the political and the economy coming together. What a beautiful thing it might be, or maybe not right now. Tom, you've written, dare I call it, a provocative article suggesting, or at least positing the question, has Australia already entered a recession? What do you think?
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Chapter 2: What is the current economic situation in Australia?
And what would that look like?
The government is obviously very concerned by anyone talking about a recession at this point. They say this is not what they're expecting to occur. But it did feel like this week, was a significant gear shift, both in terms of messaging.
It was just seemingly a message to kind of keep calm, carry on, do what you need to do, but be mindful of when you can help out by maybe lowering how much you're travelling in your car and if you can take public transport, take it. But it wasn't... about a substantive change to the current policy settings. There is no rationing, etc. But also, we did have this significant cut to the fuel excise.
First of all, Tom, talk us through why do we even have a fuel excise? What is the purpose of this tax? And how significant would you say it is having the cut that we saw this week? And will it make a dent in people's expenses?
As far as why we have a fuel excise, it's often linked, at least in the minds of policymakers and politicians, to road funding. The rationale for the tax is that people who use the roads, they should pay in some way for that usage of the roads, and therefore we have a fuel excise.
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Chapter 3: Are rising inflation and unemployment indicators of a recession?
In reality, it's not as if the funding of roads is tied to the fuel excise. As such, that's always been more of a rhetorical device than anything than anything actual. But it's an excise. It's, you know, much like many other different products. It's just one of those things that I suppose is easy to tax, is a reliable, has been a reliable source of government revenue for some time.
This is not an unprecedented move. It's actually becoming quite a drearily regular move during crises to cut the fuel excise temporarily.
Which is why it was suggested that this could be a response that was kind of knocked down by the government relatively early on, wasn't it?
Yes, and then backtracked relatively quickly. I mean, Angus Taylor called for this, I think it was on Friday of last week, and then by Monday it was the government's policy. It's also something Peter Dutton took to the last election. It's always tempting. It's sitting there, right? I mean, I think I heard someone else say this the other day, that the fuel price...
When we're talking broadly about cost of living pressures, it's the most salient cost. It's flashing up on signs literally as you drive past it. You see when it goes up. It's very visceral when you're at the bowser filling up your car, exactly what that cost is.
And so when you have typically 50 cents of every litre being taxed, it's such an easy thing for the government to say, well, there's an easy way that we can make that tangible difference right at that salient point at the bowser and make you feel like you're a little better off.
And one of the reasons that the excise is popular among governments is because Travel is pretty inelastic or spending money on fuel is usually what economists call inelastic, that people don't usually – they can't kind of lower or higher it normally or they're not as price sensitive as they might be for other things. And that's part of the reason they do it.
But that's also why it's so painful for people because they do find it quite difficult, don't they, to avoid using it.
That's absolutely right. So, yeah, I think the argument there being that it doesn't change, as you say, with the elasticity too much, the demand, how often people choose to drive or not to drive. Whether that applies at this ultra extreme end of the price curve that we're in now, this unprecedented territory with these enormous prices.
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