Fuel prices will push inflation into “dangerous territory” in the coming months, the Australian Industry Group says, while the consumer watchdog warns it has a close eye on fuel retailers as tax discounts are slashed.
In analysis published on Monday, the building, tech construction and transport peak body warns the effects of the fuel crisis are only showing up in the national inflation figures because of reduced household spending.
“It does not yet include the impacts on industrial users – transport, manufacturing, construction and agriculture – which will take some months to be passed on via higher sales prices,” the analysis says.
“As three-quarters of Australia’s fuel is used in industry, the bulk of the pressure has yet to work its way through and become visible in the inflation data.”
Separately on Monday, the consumer watchdog put fuel companies on notice as the fuel excise cut is reduced.
From July 1 until August 2, 16c of government excise will be knocked off each litre of fuel, a reduction in the 32c discount in place since March.
The Australian Competition and Consumer Commission warns it will seek fines or even lawsuits if fuel retailers jack up prices beyond the 16 cent difference or companies try to squeeze consumers.
“The ACCC expects that fuel retailers will not attempt to take advantage of this increase in excise,” ACCC commissioner Anna Brakey said.
“We will closely examine fuel price movements and market behaviour, both in the lead-up to and following the increase in fuel excise.
“We will not hesitate to take action if retailers make false or misleading statements about price movements or if there is evidence of anti-competitive behaviour.”
The consumer watchdog says fuel prices may rise 16 cents per litre from July 1, but international prices still influence domestic retail prices.
“Fuel retailers may not face higher costs straight away on 1 July, as new fuel supplies can take time to reach them,” Ms Brakey said.
As oil prices skyrocketed in March, the ACCC moved from quarterly fuel price reports to weekly reports. The latest report shows unleaded prices have fallen to pre-Iranian conflict levels, and diesel prices are almost at pre-conflict prices.
The AIG cautions that while much focus has been on bowser prices, many products made from petrochemicals that transit the Strait of Hormuz, including plastics and resin, urea, bitumen, and industrial chemicals such as ammonia and methanol, are still under ongoing inflationary pressure.
No urea is made in Australia, and the only type of primary plastic made domestically is polypropylene.
While the immediate economic shock of the Strait of Hormuz being closed has been borne in a consumer price index spike in March, the peak industry group warns these top-line inflationary data points are only washing over purchases such as fuel, airfares and public transport.
The inflationary effects are yet to fully set into the transport industry, manufacturing, construction and agriculture, the AIG said.
“It is therefore highly likely that inflation will continue to rise over the coming months, even if energy markets normalised today,” the analysis said.
Currently at 4 per cent, the CPI would reach “dangerous territory” in “the upper 4s” with a long tail, the AIG said.
Tax tweak to ‘make life harder’
One Nation leader Pauline Hanson has slammed the Albanese government’s move to partially restore the excise, saying it “will make life harder” for Australians and small businesses and fuel inflation.
“The government’s decision to increase the price of fuel by 16c a litre from the 1st of July will make life harder for everyday Australians and small businesses while also contributing to inflation,” she posted on social media.
Speaking to reporters late last week, Treasurer Jim Chalmers defended the move as easing Australians back into paying the full excise.
“We had three motivations for extending that excise relief,” he said.
“First of all, cost‑of‑living help delivered in the most responsible way that we can.
“Secondly, there’s still a lot of uncertainty in the Middle East, even with welcome developments in the last couple of weeks.
“And thirdly, we wanted to make sure that there wasn’t a big 32c change at midnight on the last day of June.”
He also said halving the tax had always meant to be temporary and he did not foresee extending it again.
Originally published as ACCC puts servos on notice, industry group warns price hikes to continue for months
Get the latest news from thewest.com.au in your inbox.
Sign up for our emails