Fuel excise expected to provide hip-pocket relief within days as wages rise

Wages will rise at the fastest rate in a decade and a cut to fuel excise will provide $10 a tank savings in hip-pocket budget relief.

A cut to fuel excise will provide hip-pocket relief at the petrol pump within days, with Australia’s consumer watchdog primed to ensure service stations pass on the savings to motorists.

The Morrison government will rush through legislation this week to cut the fuel tax — set at 44 cents a litre — by 10-20c for a predicted six-month period until well after the May election.

Government sources told the Herald Sun the savings would kick in once service stations used up their existing supplies, likely to be within days in metropolitan areas and potentially a couple of weeks at regional pumps.

The Australian Competition and Consumer Commission’s extensive price monitoring powers will be used to make sure drivers are receiving the full discount, worth $10 on a 50-litre tank if the cut reaches 20c.

Australians could soon start to save $10 on their petrol costs once the tax cut is implemented. Picture: AFP

But infrastructure experts have savaged the move, declaring it will not solve the problem of spiralling petrol prices caused by the Ukraine invasion and warning taxpayers will have to cough up to cover the loss of excise revenue used to bankroll infrastructure projects.

The cost of living package — which is also expected to include one-off cash payments for struggling households — is the centrepiece of Treasurer Josh Frydenberg’s pre-election budget to be handed down on Tuesday night.

Labor indicated it would wave through the fuel excise cut, with opposition treasury spokesman Jim Chalmers saying they would support “responsible cost of living relief”.

“We will do the right thing by Australian families, by the budget and by the economy,” he said.

But Infrastructure Partnerships Australia chief Adrian Dwyer said it was an “unequivocally bad idea” and would “make next to no difference to the cost of fuel at the pump”.

“This is robbing Peter to pay Paul,” he told Sky News.

Scott Morrison says this year’s Budget will aim to provide immediate support to households. Picture: Justin Lloyd.

Australia’s peak motoring association has also railed against the excise cut, warning it would create a funding blackhole for crucial road works nationwide.

Asked if it was an attempt to buy votes, Scott Morrison said on Monday: “This budget is about addressing the cost of living pressures being faced by Australian families.”

The Prime Minister said the budget measures would provide immediate support to households, adding that the government would be “moving swiftly … to ensure they are legislated before the election”.

Mr Chalmers said: “This Prime Minister only holds a hose if it’s spraying borrowed money on the eve of an election.”

YOUR RAISE IS COMING

Australians should expect their pay packets to begin increasing at the fastest rate in a decade, according to Tuesday’s budget that will promise wages growth driven by record low unemployment.

Treasury is forecasting the unemployment rate will hit 3.75 per cent within months – the lowest in half a century – and remain low for the next four years.

The rate has already fallen to 4 per cent, fuelling a rapid economic recovery that is ­expected to wipe tens of billions of dollars off the $99.2bn budget deficit forecast in ­December’s mid-year update.

But rising inflation is expected to put a big dent in any pay rises received by workers.

The Herald Sun can reveal the budget will also include new tax breaks for small businesses, a major package aimed at economic growth in ­regional areas, and measures to improve the safety and economic security of women.

Treasurer Josh Frydenberg will deliver the budget in Canberra on Tuesday. Picture: Gary Ramage

National security will be a central theme of Josh Frydenberg’s speech, with the defence budget to be massively ­increased amid commitments to more soldiers, new bases and extra weapons.

The budget will also feature an energy infrastructure ­initiative for regional Australia to improve the reliability and affordability of electricity, as well as extra taxpayer support for low-emissions technologies including hydrogen and carbon capture and storage.

A record 13.4 million Australians are now in work, which is 611,000 more than ­expected at the time of the Treasurer’s first Covid budget in October 2020, and 701,000 people have moved off unemployment benefits since the height of the pandemic.

The Herald Sun believes three-quarters of the upgraded revenue figures in Tuesday’s budget will be attributed to the stronger labour market, with more Australians in work, off welfare, spending money and paying taxes.

“All Australians have contributed to our economic ­recovery from the pandemic which has been faster and stronger than the US, UK, France, Canada, Italy, Japan and Germany,” Mr Frydenberg said.

“This hasn’t been luck. It has been the result of a clear fiscal strategy to save jobs and drive the unemployment rate to historically low levels, which today at 4 per cent is at its equal-lowest level in 48 years.

“With more people in work and less people on welfare, the budget bottom line is improving after providing unprecedented economic support to Australians.”

The budget’s wages growth forecast is expected to be heavily questioned by Labor, given the inaccuracy of previous projections.

Labor leader Anthony Albanese said last week that “the last time I looked, they’d made 55 wage projections going forward, and 52 of the 55 they had failed to meet”.

“Even in today’s projections, it doesn’t keep up with the cost of living, with inflation,” Mr Albanese said.

Treasury feared unemployment could hit 15 per cent as 1.4 million people lost their jobs or were stood down during the first Covid lockdown.

The rate was expected to recover only to 7 per cent by this time, but there are 377,000 more Australians now in work compared with two years ago.

Mr Frydenberg said: “There is more to do and now is not the time to risk the gains we have made in our economic ­recovery with Labor’s higher taxes.”

Mr Albanese will deliver his budget reply on Thursday night, promising “more positive plans” on top of Labor’s existing measures to improve the economy through increased workforce participation, ­improved productivity and a growing population.