Mike's Minute: Petrol tax cut exposes Government's economic weakness

OPINION:

The Government has a two-fold problem messing with petrol.

One, it sets a precedent. And a dangerous one given you won't really notice it given petrol is so fluid in price. Savings can be eaten up in a day.

If, and when, the day comes and oil drops, suddenly you don't see savings because you already banked them. It's the lesson in false economics. There is no free lunch, someone somewhere is paying.

And if it's good enough for petrol, why not everything else that is going through the roof in pricing?

In Australia, where petrol is going up in price but to nowhere near the extent it is here, they can fiddle with excise, because they don't have inflation like we do. Their economy is more robust. Their prices aren't through the roof.

We are already at 5.9 per cent and most banks think it's about to hit 7 to 7.5 per cent. Australia is 3.5 per cent and the Reserve Bank think maybe, maybe it could get to 4 per cent.

That's a big difference. Given that their government isn't under the same sort of pressure to do more beyond petrol.

The trouble for the government here is most of this is of its own making, and as such, you can't hide. You can obfuscate like the Prime Minister did last week pretending it isn't a crisis. I note enough people clearly got to her over the weekend and suggested she might like to rectify that, so at least there is now official acknowledgment that it is indeed a crisis.

But what you won't get, despite the fact it's true, is that they did it to themselves, and by definition to us. They will tell you it's all over the world and we can't help it.

We know better. Fruit and vegetables up 17 per cent, food in general up 6 per cent, confidence at multi-year, if not multi-decade lows, and spending has cratered.

So, what are they going to do? The answer is nothing. They can fiddle with petrol tax, but that is a very small Band-Aid.

When you have fundamentally undermined the economy with a fire hose of printed money handed out to all and sundry whether they needed it or not, at some point the bill is going to arrive and some medicine is going to need to be taken.

Look around the world, how many countries and how many of our trading partners are going into recession this year? Exactly.

Then how come ours most likely will?