Bowser boost as oil price falls
Motorists are likely to be up to $10 a week better off, with oil prices falling to their lowest level in four years.
In what would amount to a de facto cut in official interest rates, and provide a much-needed boost to consumers, analysts believe prices could soon average $1.25 a litre.
Oil prices were about $US115 a barrel as recently as June but they have slipped on the back of falling demand and increasing supply, particularly in the US.
Members of the OPEC oil cartel, meeting in Vienna overnight, dropped proposals to cut their production, leading to another fall in oil prices yesterday.
A key marker of prices, West Texas Intermediate, fell to $US69.11 a barrel.
AMP Capital chief economist Shane Oliver said if prices stayed at current levels that would translate into a bowser price of $1.25.
"This will translate to roughly a $10 a week saving for the average family petrol bill since June," he said.
FuelWatch had the average price across Perth yesterday at $1.37 a litre.
Dr Oliver said such low prices would also boost major economies such as Australia's by up to 0.4 per cent a year.
Inflation would also be lower, taking pressure off the Reserve Bank to consider an interest rate increase.
This week, the Paris-based OECD said the Reserve should consider a rate rise in the second half of next year.
But financial markets are betting the Reserve's next move will be a rate cut to offset the impact of the slowdown in the mining sector.
HSBC chief economist Paul Bloxham said the Reserve's next move would be upwards, but there were growing risks it would delay that decision well into next year and perhaps even later.
He said the economy's fundamentals, such as population growth and a big ramp-up in exports, remained strong.
"The main challenges to our view are that mining investment has further to fall in 2015, commodity prices have declined further, and the Government will need to consolidate its fiscal position over time," he said.
The Reserve Bank board holds its final meeting of the year on Tuesday. It last moved rates in August last year.
