Don Brash is suggesting raising and lowering the tax on petrol in order to control spending and inflation.
I bet the oil industry are impressed with that. The idea of using an industry to control the economy of a country is rather bold and interventionist. One day the government subsidises petrol companies and the next day punishes them. How would they react? New Zealand is not a very large market in the scheme of things. I am ever mindful of the way pharmaceutical manufacturers have reacted to Pharmac's interference over the last 15 years.
The objective is for people to spend less on petrol when inflation is low and there is a need to stimulate general spending. Surely the petrol companies would, to some point, drop their prices to protect their sales? But I am no economist. What am I missing here?
Update; I had deleted this post on realising that I had misrepresented the intention of increasing petrol tax being to boost other spending. The increase is intended to damp the economy and lower inflation. It is still arguable that this would happen. It supposes that people will, over the short term, still use the same amount of petrol and spend less overall.
Otherwise I still hold with my concern about how the oil industry could react and the level of interventionism. Interventionism always brings unintended consequences.
But as the Herald on Sunday have mentioned the post and some may be looking for it I have resurrected it.
Subscribe to:
Post Comments (Atom)
3 comments:
the actual profit that oil companies make on petrol is a few cents per litre - I doubt that they are enough for them to materially change prices to manipulate the market to offset changes in petrol tax.
Surely the more important point is that if oil prices go up, our inflation goes up, which gives the Reserve Bank an excuse to put the OCR up which affects all mortgages. I wonder what the inflation figures would be if "imported inflation" was removed?
The problem isn't the petrol tax - its the taxes that pay for the welfare state, and the fact that most people don't see the true cost for the inefficinet and ineffective compulsory secular state-mandated schools, universities, and so-called "health" system.
Privatise the schools; make the hospitals truly responsible to their patients - make people responsible for their health care and education --- that is the path to prosperity and freedom!
Post a Comment