Government slashes fuel excise, heavy vehicles charge for 3 months at cost of $2.55 billion

Written by: Michelle Grattan, Professorial Fellow, University of Canberra

The Albanese government will halve the excise on petrol and diesel and reduce the heavy vehicle road user charge to zero, both for three months, at a budget cost of $2.55 billion.

Halving the fuel excise will cut the cost of fuel for motorists by 26.3 cents a litre. That will reduce the cost of a 65 litre tank of fuel by nearly $19.

The heavy vehicle charge is currently 32.4 cents a litre. The relief will help the trucking industry.

The cuts will start on Wednesday.

The government will also defer the next increase in the road user charge for six months. This will be a loss to revenue of $53 million.

The changes are estimated to reduce inflation by half a percentage point through the year to June.

Prime Minister Anthony Albanese announced the measures at a news conference on Monday morning with Treasurer Jim Chalmers and Energy Minister Chris Bowen. They were earlier approved by federal cabinet.

The government said in a statement: “The spike in fuel prices as a result of the war in the Middle East is hurting Australians and causing financial stress. This will help to provide some relief”.

The announcement followed a meeting of national cabinet, which agreed to a national fuel security plan to coordinate responses to the fuel crisis across federal, state and territory governments.

The plan has four stages: plan and prepare; keeping Australia moving; taking targeted action; and protecting critical services for all Australians. The plan has no specific mention of rationing. Level three includes “practical measures” to help reduce use of fuel; stage four refers to “stronger” measures to curb demand.

Albanese said we were currently at stage two.

You can find the plan here ^[1].

The federal opposition has been calling for the excise to be halved. Some government sources were discounting the prospect of it last week but by Friday Albanese had it on the table. Chalmers argued it must be responsible and temporary.

A number of economists have criticised the idea of an excise cut.

Chalmers would not give any indication of offsets to pay for the cuts.

Asked on Monday morning, before the announcement, to categorically rule out cuts to the fuel excise, Chalmers told Channel 9: “Well what we’ve said about that […] is we’ve had a focus more on supply, more on distribution, more on the rip offs, more on cost-of-living relief in other ways. But obviously we always have contingencies and fallbacks that we work through, and we keep under more or less under constant review.”

At the news conference, Albanese said: “People should enjoy their Easter, and it’s important as well that we keep the economy going. This is an important time for tourism destinations, for jobs. They rely upon that.”