“World oil prices may have eased, but a declining Kiwi dollar means motorists may face even harder times since the latest 5c rise at the pumps. That follows a 13c rise in the litre price of petrol and an 18c one for diesel since the start of last week - including a 5c lift on both fuels on Tuesday.” Stated by Mathew Dearnaley (10th March, 2011) from one article in New Zealand Herald.
This is already the fourth “big add” to petrol price this year; petrol price is almost the same as record price of $2.16/litre in 2008. Due to personal interest, I have looked into the proportion of rates and other costs in current fuel price (as Figure 1). Apart from 48% of pure fuel cost which depends on the world crude oil price and 2% of shipping cost, one quarter of current fuel price are margin of importer, and the rest accounts GST and other tax applied by government. Since the 2.5% GST increase from last year, most grocery and other basic need products’ price have gone up more than simply just 2.5%, this may be also caused by inflation, but what I am trying to say is that prices of everything is going up in a rapid trend and is way beyond people’s buying capacity against income increase. New Zealand is also one of the highest GST revenue countries, whereas Australia’s GST is 10%.
In my opinion, the increase in price can lead to following issues:
- people losing faith in local economy
- reduce in purchasing capacity
- reduce GDP nationally
- government lose GST revenue
- reduce in community and economic development capacity
- further impact on already weaken economy
I identify the government’s revenue as the main sector in influencing market price. This will finally lead to a further weakening in economy nationally. The worst situation is that people lose faith in economy and government goes to financial bankrupt. Solution that I may think of is that government should emphasis on economic development rather than trying to squeeze more revenue from citizens. However, my perspectives may be true, or may be too naive?
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