The fall in crude oil prices has driven down the cost of Australian household fuel bills so much that Commsec chief economist Craig James has likened it to a 25 point RBA rate cut.
James said that on a monthly basis, households a month ago were spending around $186.24 per month on average on petrol. But in the week to December 21 this year CommSec estimates “that the average household spent $154.08 on petrol”.
That’s $32 less a month less, which James says is equivalent to Australian households “saving around $285 million a month (8.9 million households at $32 a month) on petrol.
“If the savings were to be spread over a year, this would equate to $3.4 billion,” he said.
Because petrol savings also act like a tax cut, families have more in their pockets at the end of the month, so it’s reasonable to expect some extra retail spending.
“If the savings were all spent, the fall in the petrol price would serve to boost Australian retail spending by 1.2 per cent over a year,” James said.
That’s great news for spending and hopefully consumer confidence… if petrol prices stay low.