Deutsche Bank: Petrol Price Falls Will Make Australian Households $7 Billion Better Off

Photo: Dean Mouhtaropoulos/Getty Images

The sharp drop in the cost of petrol at the bowser will make Australian households almost $7 billion better off in 2015 if prices stay where they are, according to analysis by Deutsche Bank.

The cheaper petrol, driven down by plunging global prices for oil, is the equivalent of a 2.1% lift in disposable income for about 80% of Australians.

Deutsche Bank estimates the fall in petrol prices to date will leave households, which spend an average of a $62 a week on fuel, about $15 better off each week.

If the national average price falls to $1 a litre, the weekly saving would be $19 or about 2.7% of disposable income.

The aggregate benefit to consumers is about $6.8 billion which is equivalent to a half of one percentage point cut to mortgage interest rates.

According to the Australia Institute of Petroleum, the 2014 national average retail petrol price was 149 cents a litre. Now it’s about 111 cents, a fall of more than 25%. Some petrol stations in Sydney this week sold unleaded for 98.9 cents a litre without a supermarket discount.

The fall isn’t expected to have an impact on consumer sentiment. Historically, movements in petrol prices haven’t been a significant driver of sentiment.

And, says Deutsche Bank in a note to clients, the price of petrol has not been a driver of growth in retail trade.

“Our economists believe the reason for the lack of improvement in sentiment is because petrol price declines have been more than offset by other factors,” Deutsche Bank says.

The extra dollars available to households will help drive up food and liquor sales. Companies with big transport overheads will also benefit.

Deutsche Bank says Coca Cola Amatil and Super Retail should also benefit.

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