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Home / World

The good oil and bad news for Rudd

By Greg Ansley
NZ Herald·
3 Jun, 2008 05:00 PM4 mins to read

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Fuel prices are hurting Kevin Rudd. Picture / Reuters

Fuel prices are hurting Kevin Rudd. Picture / Reuters

KEY POINTS:

On the far south coast of New South Wales tree-lopper Tony Hughes is preparing to put his diesel ute back on the road again after a rebuild.

When he does, Hughes will not be filling up at his local service station.

Instead, he will collect used vegetable oil from fish and chip shops, add a catalyst to prevent it solidifying, filter it to remove rogue chips and other impurities, and pour it into his tank.

The ute, Hughes says, will run like a dream - if a little smelly - and will benefit both him and local takeaways: he runs his vehicle for free, the fish and chipperies avoid the cost of removal and disposal of used oil.

"I'm doing this because the government in this country is not doing the right thing by the rest of us," he says.

Hughes says that added to high taxation, the cost of fuel is rapidly racing beyond the reach or ordinary Australians, and that he cannot afford to run his business at the present level of prices.

"We've got to do something, and this is my way around this situation."

Hughes is not alone in his frustration at the government.

Despite Prime Minister Kevin Rudd's protestations that world oil prices are beyond his control, and that he is doing all he can to contain the soaring costs of driving and living, his seven-month-old government is taking heavy political flak.

A Newspoll in yesterday's Australian newspaper said more than half the nation's voters believed he had promised during last year's election campaign to keep petrol prices lower.

And while the government still held a commanding lead overall, Rudd has been punished personally over the price of petrol and last week's debacle that saw leaked cabinet papers revealing his Fuelwatch plan flies in the face of advice from his key departments.

Bureaucrats and some senior ministers argued that Fuelwatch, an internet-based service that will provide consumers with comparative fuel prices, would not achieve Rudd's aim of keeping prices down.

Newspoll said dissatisfaction with Rudd's performance had almost doubled to 30 per cent, and that while Opposition Leader Brendan Nelson's support as preferred prime minister had risen from 10 per cent to 17 per cent, preference for Rudd had fallen four points to 66 per cent.

At this early stage of the electoral cycle, and with the opposition rent by internal divisions, the immediate crisis reflects an end to Rudd's unusually protracted post-election honeymoon rather than a fatal cancer.

But the pressures on Australia's sprawling mortgage belt are increasing, driven most sharply and painfully by petrol prices and interest rates, and could in time develop into a real political nightmare.

The Reserve Bank yesterday gave some reprieve by deciding against a further rise in interest rates, leaving the official rate at 7.25 per cent and in turn maintaining standard variable mortgage rates at about 9.5 per cent.

But the ANZ Bank and other analysts have predicted another two rises before the end of the year, hitting household budgets hard.

A new Morgan poll said that if the Reserve Bank increased rates by a further 25 basis points, the number of homeowners at risk of falling behind in their repayments would rise by 78,000 to 871,000 - with about one half likely to be at "extreme risk".

Although the mining boom is insulating broad economic figures, the impact of higher fuel prices is starting to filter through, with retail sales and business investment beginning to slide.

And tourism, which employs more than 550,000 Australians and is among the nation's biggest export earners, is bracing itself for the fallout.

While Western Australia has been buffered by new cut-price airlines and resources-fuelled corporate travel, other states have already felt the first blows and are preparing for more.

Qantas has cut capacity by 5 per cent and axed a number of tourist routes, including Sydney-Gold Coast and Melbourne-Ayers Rock, with further cuts likely on international flights.

Cut-price offshoot Jetstar has canned flights between Sydney and Queensland's Whitsunday coast, Adelaide and the Sunshine Coast, and Brisbane and Hobart.

Virgin Blue is expected to announce similar measures this week.

Queensland Tourism Industry Council chief executive Daniel Gschwind said that as well as airline cutbacks rising fuel prices were having a significant impact on business costs.

The impact was flowing through the multi-billion dollar self-drive market, hire cars, coaches and similar operators, and was significantly increasing the costs of the diesel-based maritime tourism sector.

In Tasmania, State Tourism Industry Council chief executive Daniel Hanna said the industry was bracing for problems as fuel costs hit air and sea travel, and the big self-drive market. "Let's say [fuel prices] are a real pressure we're very concerned about," he said.

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