This is a superb step by the Coalition to reduce cost of living pressures on Australians. They released an intention to halve the fuel excise tax, which they claim will save consumers at the petrol pump. Under this policy the current fuel excise is halved from 50 cents per litre to 25 cents per litre. This reduction is only temporary and would last one year. We hope this change will save you $14 each time you fill a 55-litre tank. If you refuel weekly, that’s over $700 in annual savings! We expect this initiative to come into effect with a Coalition win in the next federal election.
The reduction in fuel excise will provide immediate relief to Australians. It is regional Australians, tradespeople and suburban families with longer commutes that especially benefit. The money saved might be enough to change the Reserve Bank of Australia’s approach to raising interest rates. This makes it one of the biggest policies to inject money back into the economy.
The Mechanics of the Fuel Excise Reduction
The fuel excise, for example, is an upstream tax on oil suppliers that’s almost exclusively passed onto customers in the form of higher prices at the pump. The Coalition promised to halve the excise, from 50 cents to 25 cents per litre. This decision is intended to address some of the financial burden consumers are facing right now. This reduction is projected to bring real-life savings straight to drivers in short order.
“That is because it starts sooner and the amount being offered in the first year is bigger than under the government’s plan,” said economist Saul Eslake.
The policy’s immediate commencement upon a Coalition election win underscores its potential for swift impact compared to other governmental measures. Unfortunately, this reduction is an illusion — it’s very much only temporary. After 1 year, the excise will go back to its initial amount or a little bit more due to indexation.
Broader Economic Implications
Back of the envelope analysis written by economist Dr. By injecting an estimated $6 billion back into the economy within this financial year, it might influence the Reserve Bank’s decisions regarding interest rates.
“If it’s putting $6 billion back into the economy this financial year, then that’s not an insignificant amount in terms of what the Reserve Bank is looking at,” commented Angela Jackson, an economic analyst.
This policy will postpone future cuts in the interest rate. What’s still less clear is whether these rate reductions will be enough to lower overall rates, even if only at a decelerated clip.
“That doesn’t mean that interest rates won’t still come down, but it might be enough to mean they’ll come down slower than they would have without it — and you have to see the government’s energy supplement in the same realm,” Angela Jackson further elaborated.
The Coalition’s focus on immediate and substantial economic relief contrasts with Labor’s tax cuts, which are set for implementation mid-next year and offer ongoing benefits unless repealed by future governments. Importantly, the Coalition has committed to scrapping these legislated tax cuts should they come to power.
Impact on Regional Australians and Specific Demographics
The Coalition’s diesel fuel excise policy would be a real win for our regional Australian brothers and sisters, tradespeople and suburban families. These populations often consume more fuel due to longer travel distances.
“For tradies and everyone that’s travelling in from outer suburbs to work in the city or running kids around to sport on the weekend, this will be relief for them,” stated Peter Dutton of the Coalition.
“That’s exactly what we’ve designed it for,” Dutton affirmed.
As with any policy, the value of the policy is greatly affected by how much people use fuels and where they do it. Secondly, voters who use the most fuel would benefit the most from this short-lived temporary excise cut.
