News Summary 2

Week 6

Title of Article: Budget 2014: Motorists to pay more with Coalition poised to reintroduce indexation of fuel excise

URL: http://www.abc.net.au/news/2014-05-08/government-poised-to-increase-fuel-excise-tax/5438056

1.     Briefly summarize the issue. Include a link to the article if it is available online.

This article talks about how the Australian government, on Tuesday, will enforce a fuel excise that will increase the amount motorists will have to pay for gas. The government is receiving a lot of flak for their new budget but Mr. Hockey said,"if left unchecked there will be $123 billion of deficits and $667 billion of debt." This budget is going to make many people unhappy.

2.     Relate the issue to one or more of the economic concepts we have discussed in class.

Raising the taxes on gas will send out ripples to businesses and families. The economic concept of transportation relates to this issue for the obvious reason of increasing the cost for businesses to transport goods. Also, increasing the costs of traveling for tourists by car, boat, and plane. For businesses, the transportation of the goods to the consumers will have an increased cost, which in turn will increase the price of their goods potentially hurting business. In addition, the costs of machinery that runs on fuel will increase also increasing the costs of products. All these increased costs will feed to the consumer who will have less buying power. This leads to the potential for decreased consumer spending, leading to a lower GDP.

3.     What led to this situation? Can you suggest a resolution to this problem? Are there politics that could improve the situation?

The proposed paid parental leave (PPL) led to this situation because the government couldn’t pay for it. They had to find a way to pay for it, and they chose a tax on fuel.

There isn’t a simple solution to this problem that I can think of besides cut spending in one or multiple other areas as to obtain the money for PPL but that creates other problems with the areas that had the funds cut. Junior minister Jamie Briggs had this to say about the new budget, "there'll be a range of things… that people won't particularly like, and we have no joy in doing much of what we have to do, but we have to do it."