On Tuesday morning, the agreement on the revised budget was presented. The agreement did not contain any measures against fuel prices. Fiscal policy spokesman for the Labor Party, Eigil Knutsen, tells news that higher interest rates are “scarier” and a “twice as large” financial burden for the Norwegian average family as high fuel prices. – Abolishing the road use tax and the CO₂ tax can give a family an annual saving of NOK 6,000-7,000. In comparison, an interest rate increase of 0.5 percentage points will give 13,000 kroner in increased interest costs to a household with 3.4 million in loans, he says. He assumes an annual mileage of 15,000 kilometers and a fuel consumption of 0.06 liters per kilometer (see fact box for details). This is the calculation of the government The household has a loan of NOK 3.4 million. If the interest rate increases by 0.5 percentage points, the household’s interest expenses after tax will increase by 0.5% * (1-22%) * 3.4 million ≈ NOK 13,000. The same household has an annual mileage of 15,000 km and an average fuel consumption of 0.06 liters per km. It gives a total annual fuel consumption of 900 liters, or a monthly fuel consumption of 75 liters. A abolition of the road use tax and the CO₂ tax will, subject to full pass-on of the tax in the prices, be able to reduce the pump prices for petrol and diesel by, respectively. NOK 7.59 and NOK 6.53 per liter (including VAT). Given a monthly fuel consumption of 75 liters, this will give a monthly saving of resp. 570 and 490 kroner. The annual savings will be at resp. 6,800 and 5,900 kroner. On Sunday, several media outlets reported that Norway has “the world’s second most expensive petrol”, only beaten by Hong Kong. At the same time, “half of Europe” has reduced fuel taxes, but not Norway. – It will increase the risk of higher interest rates, says Minister of Finance Trygve Slagsvold Vedum (Sp). In a written response to the Storting, he writes that reduced taxes will “strengthen wage and price pressures in the economy in the future”. – It is the big threat for most people in Norway today, he says. PREVIOUS EXAMPLE: – Reducing fuel taxes will increase the risk of higher interest rates, says Minister of Finance Trygve Slagsvold Vedum (Sp). Photo: Debatten / news Highest price growth since 1988 Several economists news has spoken to support the reasoning that tax cuts contribute to higher interest rates (see fact box). Increased subsidies will lead to increased spending Ola Honningdal Grytten, professor at NHH – The Norwegian economy is in full swing, and then there is no longer room for tax relief in the same way as other countries, where the state spits far less into the economy. Tax relief on fuel will in isolation lead to lower inflation, but increased subsidiaries will lead to increased spending and thus inflation and higher interest rates. Kjersti Haugland, chief economist at DNB – In terms of the effect on inflation, there is no difference between the electricity subsidy and a possible reduced fuel tax. Both contribute directly to reducing inflation, something that can potentially reduce wage demands on employees. At the same time, such measures helped to increase the already high demand pressure in the economy, which in turn could lead to a steeper and larger rise in interest rates, at least if purchasing power is not withdrawn elsewhere, for example through increased taxes. Olav Chen, manager of Storebrand – The Norwegian economy has reached the ceiling. Lowering fuel prices means higher interest rates. Thina Saltvedt, Chief Analyst for Sustainable Finance at Nordea – If you get a cut in taxes on petrol and diesel, it means that households will have more money to spend on other products and services. Then the government must cut use elsewhere. In the short and medium term, we are now in an energy, fuel and potentially a food crisis, at the same time we must keep in mind that we are also in a natural and climate crisis that must be resolved at the same time. High petrol and diesel prices therefore give us a signal to reduce the consumption of fossil fuels and a signal to invest more in renewable energy. Investments we make now will be with us for a long time to come. Therefore, it is important that we invest in solutions that take us closer to our climate goal and do not lock us into the traditional fossil solutions. At the same time, there are also voices that say that an imaginary “petrol subsidy” can curb inflation. – There is no one who buys anything without transport being involved. Such lower transport costs will be a good measure to reduce cost development, says Tore Wallestad, who is a daily camper at Tenden Transport in Stryn in Nordfjord. – Strong tax cuts would help people in a time where everything is becoming more expensive, says Ingunn Handagard in NAF. In May, the consumer price index was 5.7 per cent higher than a year ago. This is the highest inflation over 12 months since 1988. – Lower prices reduce the pressure on interest rates FRP leader Sylvi Listhaug argues that a “petrol subsidy” will have the same effect as the electricity subsidy: – A reduction in fuel taxes will result in lower prices and reduce interest rate pressure, she says. She participated in Politisk kvarter on Tuesday morning, and added that other European countries “can afford to help people even if they also have pressure on interest rates”. Ola Honningdal Grytten, professor at NHH, says that Norway does not have “room for tax relief in the same way as other countries, where the state spits far less into the economy”. FRP leader Sylvi Listhaug argues that a “petrol subsidy” will reduce the pressure on interest rates. – Affordable fuel, without increasing purchasing power Professor of economics at NHH, Frode Steen, says the comparison between petrol support and electricity support is lame because the latter “has a certain social profile”, while reduced fuel taxes hit flat. – In principle, reduced taxes will lead to lower fuel prices, and in isolation reduce inflation. But then there is the question of whether the tax reduction in the short term increases purchasing power, so that the pressure in the Norwegian economy becomes greater. Then we have only made fuel relatively cheaper, without increasing purchasing power, he says. In the revised budget, the Støre government spends 352 billion «oil kroner» (2.9 per cent of the value of the oil fund). That is NOK 30 billion more than they provided for in the original (unaudited) budget from October. The action rule is a self-imposed ceiling that says that we should only use 3 percent of the fund over time. PRESS CONFERENCE: Kari Elisabeth Kaski (SV), Eigil Knutsen (Labor Party) and Geir Pollestad (Sp) held a press conference on the revised national budget in Vandrehallen in the Storting on Tuesday morning. Photo: Stian Lysberg Solum / NTB – Interest rates can be seen faster – I understand well that many are calling for tax relief on fuel. However, I fear that a tax reduction may contribute to Norges Bank having to raise interest rates faster and more sharply than they have previously communicated, says Cecilie Tvetenstrand, who is a consumer economist at Storebrand. “If there are prospects for more lasting high inflation, interest rates may be seen rise faster than the interest rate forecast in the previous monetary policy report,” the Central Bank announced when they announced a rate hike in May. – What the central bank will first and foremost crack down on is an underlying price pressure that is higher than expected, says chief economist at Handelsbanken, Kari Due-Andresen. He adds: – One-off payments from the state will not necessarily contribute to this. But if the payments continue and the state increases spending, it can contribute to higher interest rates. – We can not count on perpetually low interest rates Chief analyst at Nordea, Thina M. Saltvedt, reminds that most Norwegians spend a small part of their salary on food and fuel. – We must keep in mind that there are many who have a much bigger problem than what we have in Norway now during this energy, fuel and food crisis. We have had a long period with low energy prices and low interest rates, we can not count on it lasting forever, she says.
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– The interest rate is «scarier» than the pump price – news Vestland
