An Open Letter to the Federal Parliament and the Reserve Bank of Australia

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When I filled up the car this week I didn't say anything to the person next to me at the bowser but I could tell from the look on their face they were doing the same mental arithmetic I was. That quiet calculation of what else has to give this fortnight.

Fuel Prices and the Domino Effect

Fuel prices are going ratcheting up at a rate of knotts. Oil is sitting above US$100 a barrel right now because the war in Iran has effectively shut down the Strait of Hormuz, the narrow waterway that carries one-fifth of the world's daily oil supply. It could reach $200. Nobody knows when it reopens. Nobody knows when this ends.

And we know what comes next. We've seen this before. Fuel goes up, and then everything goes up. Every truck moving groceries around this country runs on diesel. Every train. Every delivery. The price of fuel is baked into the cost of everything that gets grown, moved, refrigerated, or delivered in this country. Which is most things. So we're about to get hit at the bowser, and then again at the checkout. The financial types call that inflation. And we all know what the Reserve Bank does when inflation hits.

It raises interest rates.

Because that is apparently the only tool in the shed. Inflation hits, rates go up. Doesn't matter what caused the inflation, doesn't matter whether raising rates has any chance of fixing it. That is the play.

What Raising Interest Rates is Supposed to Do

But stop and think about what raising interest rates is actually supposed to do. It is designed to slow down an economy that is running too hot. Too much money chasing too few goods, so you make borrowing more expensive, people spend less, demand drops, prices stabilise. That is the theory and in the right circumstances it works.

This is not those circumstances.

The price of everything is going up because of a supply shock we have no control over. That is a supply-side problem. There is no version of raising interest rates that puts more oil through the Strait of Hormuz. There is no version of making our mortgages more expensive that brings the price at the bowser down. Raising rates does not change a single thing about why this inflation is happening. What it does do is make life harder for every Australian carrying a mortgage or paying rent, right at the moment when their fuel bill and their grocery bill are also climbing.

It does not fix anything. It just adds to the pain.

Who Actually Bears the Pain

And let's be clear about who it adds pain to, because it is not evenly distributed.

Raising interest rates works by making mortgages more expensive. That is the mechanism. That is the point. And for those lucky enough to own their home outright, it barely touches them. A little inflationary pressure on groceries and fuel like everyone else, but their housing costs do not move. They are largely insulated.

Everyone else is not. Those paying off a mortgage watch their repayments go up. Those renting find their landlord's repayments go up on the investment property they live in, and that cost gets passed straight to them. Either way, housing costs climb at exactly the moment fuel and grocery bills are climbing too.

And it gets worse than that. Because while the mechanism punishes mortgage holders and renters alike, it simultaneously rewards the asset-rich. Term deposits pay better returns. Investment portfolios rebalance in their favour. So the same lever that is squeezing everyone without a fully paid off home is quietly putting more money in the pockets of people who have already won the game.

The pain lands on families with young kids trying to get them through school. People who bought a home in the last ten years and are already stretched on the repayments. People who cannot opt out of filling up the car because the bus doesn't go where they need to be at six in the morning. People who would love to just go and buy an EV and sidestep the whole fuel price conversation but do not have that option right now and won't for years. Younger Australians who were told that if they worked hard and saved hard they could build a life, and are now getting hit with higher fuel, higher groceries, higher mortgage repayments, and stagnant wages, all at the same time.

This is not a shared burden. It is a very precisely targeted one.
And the targeting, whether intentional or not, consistently finds the same people.

How Did We Become This Exposed?

Which raises the question nobody in Canberra seems particularly keen to answer. How did we end up this exposed in the first place?

Both major parties thought they'd found something clever. Australia produces high-quality crude oil and rather than refine it domestically, successive governments allowed it to be sold overseas at a premium while cheaper refined fuel was imported from Singapore, Korea, and Japan. The refineries closed one by one because importing was more economical. We went from a country with meaningful domestic refining capacity to one that now meets roughly 90 percent of its fuel needs through imports. It looked brilliant on a spreadsheet. It looked like exactly the kind of sophisticated economic thinking that gets a minister on the front page of the AFR.

Every government in power while that refining capacity disappeared owns a share of this. Every government since that saw the vulnerability and decided it was someone else's problem owns a share of it too. Labor can point at the Liberals. The Liberals can point straight back. Both observations will be correct, and neither will help the person standing at the bowser doing the maths on what else has to give.

We Can't Fix 30 Years Overnight — So Use the Tools We Do Have

And yes, before anyone says it, you cannot reverse thirty years of that overnight. There is no quick fix on the refining side. That ship has sailed. But that is precisely why the government needs to reach for the tools it actually has right now.

The first one is straightforward: Cut the fuel excise.

It goes straight to the bowser price. It is immediate. It is targeted exactly where the pain is. It has been done before. When Russia invaded Ukraine in 2022 and prices spiked, a government reached for this lever because it was the right one for the situation. The same situation is here again, except bigger.

Yes, it costs the budget. But we are already paying, and we did not create this problem.

But here is the catch

If the fuel excise comes down and transport costs ease, there is nothing stopping Coles and Woolworths from quietly keeping their prices exactly where they are and pocketing the difference. We have watched them do it before. Costs go up, prices go up immediately. Costs come down, prices stay right where they are. The margin expands and the press release talks about investment in local suppliers.

Any serious government response to this crisis has to come with teeth. The ACCC needs the power and the explicit mandate to investigate pricing behaviour in real time, not eighteen months later in a report that gets tabled and forgotten. If transport costs fall and supermarket shelf prices do not follow, that needs to be treated as the predatory behaviour it is. The duopoly has had a free ride on this for long enough. A government that cuts the excise without simultaneously putting a watchdog on the door of every distribution centre is just cutting prices for Woolworths shareholders.

Relief at the bowser only works if it actually reaches the people who need it.
That means making sure it doesn't get swallowed somewhere between the refinery and the checkout.

The Second Lever: Make EVs Genuinely Accessible

And there is a second lever, one that does not just soften the immediate pain but starts to reduce how exposed we are in the first place. Make it genuinely attractive for ordinary Australians to buy an electric vehicle. That means two things: removing the barriers that still exist, and creating incentives that actually reach people.

The FBT exemption that currently exists is genuinely useful, but it only works if you can access a novated lease or a company-funded vehicle. For anyone whose employer does not offer that, or who is self-employed, or who simply needs to go out and buy a car like a normal person, it does not help at all. The mechanism that is supposed to make EVs more accessible is only accessible to some.

What is missing is a direct personal tax incentive for purchasing an EV. Something that makes the decision to buy electric over petrol meaningfully more achievable for an ordinary household, not just those lucky enough to have the right employer at the right time. Done properly, it shifts the calculus for enough people quickly enough to materially reduce future fuel consumption, which reduces our exposure, which reduces the leverage that global oil markets have over Australian household budgets every time the world decides to catch fire.

Some Australians remain anti-EV and will want to argue about range anxiety or the superiority of the combustion engine. That is fine. Nobody is suggesting we take anyone's petrol car away. But that preference should not be the reason everyone else is locked out of an alternative that would reduce their fuel costs, ease pressure on the family budget, and reduce how exposed we all are the next time a war breaks out on the other side of the world. The only thing stopping a lot of Australians from making that switch willingly right now is that the financial barrier is too high. Fix that, and it becomes a genuine choice. Leave it where it is, and it stays a choice that only some people get to make.

This Is Not Complicated

None of that is complicated. None of it requires a royal commission or a five year plan. These are decisions that could be made in a budget, in a policy announcement, in a press conference. The only thing missing is the political will to make them.

The least we are owed is a government that actually governs. That means making active choices about the tools at its disposal, rather than deferring to the Reserve Bank and letting them be the bad guy while the political class keeps its hands clean.

That means cutting the excise, keeping the supermarkets honest, and making it genuinely attractive for ordinary Australians to get off petrol for good. Not as a political gesture. As a demonstrable act of fiscal management that tells the Reserve Bank it does not need to do the heavy lifting alone.

And while we are having that conversation, it is long past time for an honest one with the RBA about whether interest rates should remain the primary mechanism for managing inflation at all. A tool that deliberately targets people with mortgages while leaving asset-rich Australians untouched is not neutral economic management. It is a design choice. And it is a design choice that keeps landing on the same people every single time.

A Call for Leadership

Both of you can do better than this. Australians are not naive. We understand that governing involves competing interests and uncomfortable pressures. But there are moments that require a political class to set aside whatever influences are pulling at them and simply act in the interests of the people they were elected to serve. This is one of those moments.

It is time to step up and prove that is still possible.