Petrol prices set to rise: Economy round-up

A spike in petrol prices could be on the horizon after crude oil prices surged to a record $US86.54 a barrel in New York and $US86.23 in Singapore in the early hours of this morning.

There are two causes for the surge in oil prices: concern that Turkey plans to conduct military incursions into Iraq, a move that could disrupt oil supplies from the nation even further; and a statement by the Organisation of Petroleum Exporting Countries that its recent increase in oil production is being offset by a fall by non-OPEC countries.

A lift in petrol prices may be one thing that could put a slight dent in the booming growth of the Australian economy. The Treasury 2007-08 Mid-Year Economic and Fiscal Outlook statement released yesterday revised expected economic growth upward to 4.25% from the 3.75% forecast in this year’s budget.

This should mean the Federal Government will deliver a $14.8 billion budget surplus for 2007-08, an amount equal to 1.3% of GDP and surpluses in excess of $10 billion over the next three years. The result could be even higher if Labor is elected and decides to deliver a more modest tranche of tax cuts than the Government’s $34 billion package.

On the markets, the S&P/ASX 200 has taken quite a strong dip: at 12.30 pm it was 6681.5 points, down 0.9% on yesterday’s close.

At the same time the Australian dollar is trading at US89.82¢, down from yesterday’s US90.48¢ close.