2 June 2008

Labor loses the plot with FuelWatch

Labor has again shown its indifference to small business and is happy to allow large corporations dictate prices. Rudd has chosen to proceed with a national implementation of Western Australia's FuelWatch scheme against the advice given by the following departments:

  • Department of Prime Minister and Cabinet
  • Department of Resources and Energy
  • Department of Finance
  • Department of Industry

They warn of the possibility that the winners will be the large fuel retailers, and the losers the small independent service stations and consumers, which include Labor's "working families".

Treasurer Wayne Swan's response to criticism of the government's decision to ignore the advice of these departments shows that they are rank amateurs in economic management. He stated that they chose to listen to their own "common sense" instead of the "bureaucratic" and "academic" advice of the above four key government departments.

The Regulation Impact Statement (RIS) tabled in Federal Parliament by Assistant Treasurer Chris Bowen clearly states that, as has been demonstrated in Western Australia, the scheme enables fuel retailers with large networks of service stations to employ a strategy of rolling price leaders, putting smaller independent operators at a competitive disadvantage. Ultimately, this could affect motorists with higher fuel prices.

The economic modelling of the analysis released by the Australian Competition and Consumer Commission (ACCC), which the government uses as the foundation for its policy, is highly questionable. Professor Sinclair Davidson from the Institute of Public Affairs (IPA), states that "the ACCC analysis is not convincing," and "the introduction of Coles into petrol retailing totally dominates the effect that the ACCC attributes to FuelWatch." The ACCC has not released the data and has been vague on the econometric techniques used in their analysis. As the Rudd government will soon consider whether to reappoint Graeme Samuel as the chairman of the ACCC when his current term ends on July 31, relying upon the findings of this analysis alone is very naive, but politically this is a convenient option for the government.

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