Federal budget: Fuel excise cut in half

The federal government has moved to provide relief for Australian motorists who are paying more than $2 per litre for fuel across the nation, announcing a six-month fuel excise relief measure in last night’s budget.

Expected to be passed through parliament with bipartisan support today, but not flowing through to consumers for a couple of weeks, the fuel excise will be cut by 22 cents – a 50 per cent reduction and more than what was expected prior to last night’s budget.

This will see excise on petrol and diesel slashed from 44.2 cents per litre to 22.1 cents.

It does not, however, automatically mean that fuel prices will drop by more than 20 cents.

That’s because 50 per cent of the cost of petrol is based on the international price of refined petrol, which is subject to fluctuations in international crude oil prices.

Changes in the Australian-US exchange rate also influence petrol prices in Australia, so there could still be a rocky road ahead for motorists as prices continue to fluctuate and may not necessarily reflect the 22-cent reduction in excise.  

Federal treasurer Josh Frydenberg said the lower prices would flow through over the next two weeks as petrol stations replenish their stock, although this could take longer in regional areas.

He also said a family with two cars who fill up once a week could save around $30 a week, or $700 over the next six months.

“The Russian invasion of Ukraine has seen fuel prices increase, adding to cost of living pressures faced by families and the cost of doing business for small businesses,” the treasurer said.

“The government is taking decisive, responsible and temporary action to cut fuel excise and reduce the pressure of high fuel prices on household budgets.”

The treasurer also warned that the government would use its consumer watchdog, the Australian Competition and Consumer Commission (ACCC), to monitor fuel pricing and take action if lower prices aren’t being realised at the pump.

“We expect that fuel retailers will pass on the cut in fuel excise to reduce the price at the bowser as soon as possible, as existing petrol stock levels are used up,” said ACCC chair Gina Cass-Gottlieb.

“Our petrol team will focus on this price monitoring work for the next six months to determine how retailers are passing through the excise reduction to consumers.

“We will contact petrol retailers to set out our clear expectations that the savings are passed on to consumers and advise them that we will be monitoring their margins. We will also continue to inform consumers of retailer behaviour.”

“As these changes flow through to prices at local servos, this is a good time for consumers to look around and shop at those retailers who have already passed on the cut in the excise to their petrol prices.”

Ms Cass-Gottlieb noted that the full excise has already been paid on existing stocks of fuel, which will be run down first.

This lag in the adjustment of wholesale prices is shorter in larger cities and sites with large turnover, but is often longer in regional locations where lower volumes of fuel are sold and fuel is replenished less frequently.

“If retailers make false or misleading statements to consumers that they have passed on the savings when they have not, the ACCC will not hesitate to take appropriate enforcement action,” she added.

“We encourage consumers in major capitals to also look at the price cycle information on our website, and consumers everywhere to use price comparison sites.”

Government taxes (excise and GST) currently make up 36 per cent of the cost of petrol. Take out the 50 per cent determined by the international cost of refined petrol and that leaves 14 per cent for the retail margin and other costs.

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