Oil price rise likely to hit consumers with $4 billion headache and absorb benefit of tax cuts

Australia: The surging oil price will deliver the equivalent of a $3.7 billion tax on consumers, according to the big investment bank Morgan Stanley.

Morgan Stanley’s Daniel Blake said consumers were already facing a tough time with a negligible boost to household income from the federal budget until the 2020 financial year, and a $4 billion headwind from higher petrol costs was on its way this year.

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Mr Blake said the proposed low-to-middle-income tax offset was modest in size — capped at $530 a year — and would not be handed out until the second half of the 2019 financial year.

The tax cuts are estimated to boost total disposable income by only $400 million next year, before rising to $4.1 billion from the 2020 financial year.