Petrol prices have returned to the levels experienced at the time of the March federal budget, but would be a lot higher if not for former treasurer Josh Frydenberg halving fuel excise for six months.
Last week the Australian Competition and Consumer Commission said the cut in fuel excise saw petrol prices fall 39 cents per litre in the nation’s five largest capital cities.
However, this will come as little comfort for motorists with prices back around the $2 per litre mark and eating into their already strained household budgets.
The Australian Institute of Petroleum said the average for national petrol prices rose 6.5 cents to 205.5 cents per litre in the week to June 19.
All states and territories saw petrol prices above $2 per litre, apart from South Australia at a whisker below at 199.7 cents.
Commonwealth Securities chief economist Craig James said record high wholesale petrol prices point to a 216 cents a litre retail price, just one cent below the all-time peak set three months ago.
However, he said there may be some relief for motorists ahead after global oil prices dropped on Friday on fears that interest rate hikes would slow global economies and reduce demand for oil.
“(But) prices are also being boosted by COVID-driven supply chain issues and the war in Ukraine. And political upheaval in Libya – a key oil producer – has also supported oil prices,” Mr James said.
The rising price of petrol is but one factor fuelling cost of living pressures, and combined with higher interest rates, are likely to curb consumer spending.
In its quarterly Retail Forecasts report, Deloitte Access Economics predicts a slowdown in activity from the second half of this year, with a majority of retail turnover growth over the next few years likely to be driven by prices rather than volumes.
It forecasts retail turnover growth slowing from 3.4 per cent in 2022/23 to 0.8 per cent in 2023/24, then slowly recovering by 1.2 per cent and 1.8 per cent in the following two financial years.
Spending on non-discretionary goods and services like fuel, housing and health is less likely to be reduced by households, placing significant pressure on other components of spending.
However, Deloitte Access Economics partner David Rumbens says there are encouraging signs in relation to lower shipping costs.
“For now though, businesses may need to look to ways to lower costs and reduce disruptions to operations to avoid losing competitiveness,” Mr Rumbens said.
This could involve diversifying and building more resilient supply chains.
“With wage pressures high, businesses may need to maximise staff retention as much as possible through investment in the likes of training, talent pipelines and automation,” he said.
Overall, Mr Rumbens says the cost of living squeeze, higher interest rates and preference for spending on services are expected to lead to a slowdown in retail momentum through the second half of 2022.
This may result in retail spending falling over 2023 and 2024.
However, Australians have been frantically booking overseas holidays since international borders were reopened, with spending eclipsing pre-pandemic levels.
National Australia Bank data shows their customers spent $46 million in internationals flights, accommodation, car rentals, cruises, trains and travel agents in May, the largest monthly spend in three years.
In comparison, customers spent $43 million on international travel plans in May 2019.
“For many Australians it has been two years without international holidays, visiting overseas family and celebrating major milestones like weddings,” NAB’s Paul Riley says.
Between January 1 and May 31, NAB customers spent $157 million on overseas travel compared with $23 million in the same period last year.
Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)