Seems someone in the Department of Finance has really messed up on reviewing the Government’s medicare policy:

Treasury expects 485,000 people will dump private cover, saving $230 million next financial year.

In a report commissioned by the Australian Medical Association (AMA), Access Economics says to achieve those savings, 800,000 people would have to abandon private cover by July.

So to achieve the Government’s savings from not paying the private health care rebate, as a result of people dumping their private cover with the increase in the medicare levy threshold, more people will have to dump their private coverage than what the Government is saying.

So which is it? More people will dump their private coverage to deliver the savings to the Federal Government but increase the fiscal burden of the public system, or less people will dump their coverage and not deliver the savings to the Federal Government, but still increase the fiscal burden of the public system – just not to the same extent. Either way the state governments have just had an additional fiscal burden placed upon them, the issue is just to what extent.

The drama over Nelson’s proposal to cut the fuel excise tax by five cents per litre is getting traction in the mainstream media for all the wrong and typically misguided reasons we have come to expect from Australian media outlets. Basically, if Turnbull had not opposed the policy and if the media had been kept in the dark over his disagreement with cutting the excise, then all of the media coverage would have been at least non-committal, but now:

Liberal sources say Mr Turnbull was arguing for a 10c a litre excise cut just three or four weeks ago when this issue was before shadow cabinet. His suggestion to the strategy meeting last Tuesday night that it might be unwise to undermine the party’s credentials with a populist approach to reducing the price of petrol, may have been a little late and directed more toward those within the party whom he hopes to lobby during the inevitable leadership struggle.

What has been overlooked by commentators hoping to exploit a Liberal leadership wrangle is the reality that the punters want action, not reviews or summits and study groups.

Ditto, but what the public wants is not what the media wants, which is a Liberal Party blood bath to detract from the lukewarm reaction Rudd has received from the public over the Budget. So called conservative commentators, such as Gerard Henderson on ABC’s Insiders, have argued against the excise tax cut as being fiscally irresponsible, or words to that affect.

Such complete ignorance is gnarling. Fuel is one of the biggest single contributors to the consumer price index, both directly and indirectly. It has also exhibited large growth, over thirty per cent twelve months to March 2007, in the CPI – with fuel costs at record levels. Also let’s not forget that forty one per cent of the cost of around fifty litres in fuel is taken in taxes by Government’s around the country. The Federal Government alone takes over $16 billion annually in fuel and related taxes. Fuel is also taxed four times by State and Federal Government, so taxes taxing taxes. With fuel being a staple and essential commodity for consumers, would we allow milk, fruit, bread or other similar items to be taxed as many times. Hardly.

Cutting the excise is deflationary, not just for fuel but all products and services that depend upon fuel for transportation needs – air travel, food stuffs, general recreation and transportation, etc…the list is pretty long. So what’s the problem with cutting the excise then? It’s not like there is a fiscal crisis at the Federal level. Why not use the $21 billion in surplus to reduce the rate of inflation by cutting the excise, which in turn would spark the type of deflationary economic growth Australia needs right now? Well, probably because the Government sees fuel as essential to its needs as consumers do, but for other reasons as explained by Treasury:

Taxation of fuel, particularly petroleum products, is widely considered an efficient means of raising government revenue because fuel is widely used by the community and compared with many other goods, its level of consumption is not generally affected by changes in price. This makes it a relatively stable and reliable source of revenue to fund the range of services provided by governments. Furthermore, the administrative framework required to collect specific fuel taxes is relatively less onerous than for other taxes.

Oh that’s good to know, the Federal Government needs fuel taxes to fund itself – a means to its own end. Preying on the essential nature of fuel. While they are at it why not just tax water and air too? Oh that’s right, the government either already does or plans too.