One-off cash payment and fuel price cuts to deal with cost of living

Households under stress from cost-of-living pressure will get a one-off cash payment in the budget with a temporary cut to fuel excise also on the cards.

Tax cuts worth up to $1080 for low and middle-income earners are unlikely to be ­extended for another year, with the federal government ­instead prioritising billions of dollars in immediate cost-of-living relief.

That package, to be unveiled in Tuesday’s budget, is expected to include a temporary cut to fuel excise and one-off cash payments for households under the most ­financial stress.

The cut to the 44.2c-a-litre fuel excise could be between 10c and 20c for six months, The Australian reported.

By comparison, New Zealand reduced fuel charges by 25c a litre for three months on March 14.

Senior ministers have been debating for months whether to spend $8bn on another year of the low and middle-­income tax offset, which runs out on June 30.

Federal Treasurer Josh Frydenberg is gearing up for the budget on Tuesday. Picture: Gary Ramage

Scrapping it would lift taxes for 10 million workers in the next financial year but an extension could also add to inflationary pressures.

Government sources indicated on Sunday the offset would not continue, given workers would receive the ­existing refund upon doing their tax returns after June 30.

Josh Frydenberg said the offset was always a temporary measure designed as a fiscal stimulus when the economy was hit by the pandemic.

“The economy is recovering very strongly,” the Treasurer said.

“The low and middle-­income tax offset … can be claimed by Australians from July 1. That can see someone get up to a $1080 refund on their tax and that will put more money into their pockets.”

Scott Morrison said the government’s focus was on responding to “immediate cost-of-living pressures”.

“We’ve done the homework and spent the time to get the right design on the packages to support Australians right now,” the Prime Minister said.

Opposition Treasury spokesman Jim Chalmers said Labor would support the government if it chose to extend the offset and was “unlikely to stand in the way” of a temporary cut to fuel excise, which is currently 44c per litre.

He also called for the government to invest in measures that delivered an “enduring economic benefit”.

“There’ll be lots of money spraying around and squirting around in the hope that Australians won’t notice the cracks until after the election,” Mr Chalmers said.

Mr Frydenberg indicated the excise would be cut for a limited time, with cost-of-living measures to be targeted, temporary and proportionate.

“We do understand that the No.1 topic around the kitchen tables of Australian families is cost of living, and one of the highest costs is fuel prices,” he said.

“What we will do on Tuesday is provide relief for those families, recognising that fuel costs are very high right now.”

In a series of pre-budget ­interviews, Mr Frydenberg also confirmed the budget would reveal improved forecasts for wages growth, due to rise, as well.

Originally published as One-off cash payment and fuel price cuts to deal with cost of living