2014 Budget countdown: 4 days to go

The floated increase in the fuel excise tax will hit low income households the hardest, experts say.
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01.Fuel tax backlash

vintage car on the road

As fuel prices approach $1.65 per litre in some parts of the country, the ABC has reported that an increase in the fuel excise will be included in Tuesday’s budget. 

The Australian Automobile Association reportedly labelled the proposed fuel excise “a back-door carbon tax” and backbench Liberal National Party MP Ken O’Dowd told the ABC it will have an inflationary effect on the economy and it could be a broken promise.

History of the fuel excise

Former Prime Minister John Howard reduced the fuel excise by 1.5 cents and froze it at 38.14 cents a litre in 2001, following a backlash over the introduction of the GST. The decision to freeze the excise rather than indexing it to inflation has reportedly cost the government over $5bn a year.

How much will it cost consumers?

The Abbott government is reportedly considering a three cent increase in the excise, as well as indexation. In the short term, this would add an extra $2 to the average fuel tank. The increase in fuel prices is likely to reverberate throughout the economy - with transportation costs increasing, the price of groceries could well go up.

A Grattan Institute report says re-introducing the fuel excise will hit the bottom 20% of households the hardest as they spend a higher proportion of their income on fuel.

Octogenarian levy gets attention

In other financial news, former prime minister Paul Keating has called for a tax levy of two to three per cent to support Australians over 80. Keating told ABC’s Lateline program we should introduce a Commonwealth insurance scheme to help pay for accommodation and healthcare costs of people aged 80 to 100 and continue to accumulate superannuation for people aged 60 to 80 by boosting compulsory superannuation contributions to 12%.



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