Dutton promises you’ll save $14 a week on fuel. The real number is less than half that

The average driver would save $6 a week on petrol under the Coalition’s plan to slash the fuel excise despite Opposition Leader Peter Dutton pointing to larger savings for people who fill up more frequently as he vies for votes in outer-suburban electorates.

After rejecting Labor’s proposed tax cuts, the opposition has unveiled a plan to halve the fuel excise – a flat tax for constructing and maintaining road infrastructure – from 50¢ a litre to 25¢ a litre for a year if it wins the coming election.

Opposition Leader Peter Dutton responds to Prime Minister Anthony Albanese during question time on Thursday.Credit: Alex Ellinghausen

Shadow treasurer Angus Taylor said the 25¢ excise cut, which would cost the budget $6 billion, would deliver “very significant but very targeted” relief from cost-of-living pressures, amounting to $1500 a year for those who filled up twice a week, and $750 for families who filled their cars up once.

“That’s $28 a week [for two tanks a week] – or $14 a week for a single-tank family,” Taylor said in Canberra on Thursday.

However, the savings for the average motorist, who fills up less frequently than once a week, will be lower than that.

What would be the impact of a cut?

According to the most recent motoring data from the Australian Bureau of Statistics, the average driver of a passenger vehicle fills up their 50-litre tank once every two weeks.

That’s because motorists drive, on average, 11,100 kilometres a year and use 11.1 litres of petrol for each 100 kilometres driven. That works out to 1332 litres a year, or just over 25 litres a week.

Based on these figures, the average motorist filling up a 50-litre tank once a fortnight would save $6.25 each week.

AMP chief economist Shane Oliver described the proposed excise cut as a “silly economic policy”, which would not achieve savings for the average person anywhere near the Coalition’s claim of $14 a week.

Based on different figures, from ABS household expenditure data, Oliver calculates the proposed 25¢ excise cut would save an average household $8.75 a week at most.

“Some households don’t have a car and don’t get any benefit,” he added. “And increasing numbers of households have electric vehicles.”

While Taylor did not claim the average motorist would achieve the $14-a-week saving on petrol, his figures are reflective of an outer-suburban, two-car household with two parents who commute for work.

“There’s nothing misleading about saying that an Australian family fills up twice a week,” Taylor said. “There’s a lot of those particularly in my neck of the woods in the outer suburbs, the regions, fill up twice a week.”

The Coalition is pitching its petrol savings plan in direct competition with the Albanese government’s tax cuts, which it voted against on Wednesday.

From July 1 next year, the government has proposed cutting the bottom tax rate by 1 percentage point to 15 per cent, and then to 14 per cent in 2027. Every taxpayer who earns more than $45,000 would save $268 in the first year – $5 a week – before doubling to $536 – $10 a week – in the second.

Have governments tried this before?

In the lead-up to the May 2022 federal election, then-prime minister Scott Morrison delivered a six-month cut to the national fuel excise. At the time, unleaded petrol prices had spiked to near-record highs above $2.20 a litre as the fallout from Russia’s invasion of Ukraine choked global oil supplies and pushed up the cost of crude.

“Prices were soaring, and they were trying to blunt the impact,” Oliver said.

Morrison’s decision to cut the excise for six months from 44.2¢ to 22.1¢ reduced the cost of a 50-litre tank of petrol by $11.

Global oil prices have since retreated as markets have returned to more normal conditions. The national average price of unleaded petrol at the bowser in Australia is hovering around $1.80 a litre.

How much is Australia’s fuel excise?

Today, the fuel excise accounts for 50.8¢ in each litre of petrol. The revenue it generates is mainly spent on road building and maintenance, while the rest goes to the government’s general revenue coffers.

The National Roads and Motorists Association (NRMA), a motoring group, said continually cutting the fuel excise as a way to fund tax relief defeated the purpose of having one in the first place. NRMA spokesman Peter Khoury said another excise cut would compromise the federal government’s ability to fund road maintenance and upgrades.

“About 79 per cent of the excise goes into roads,” Khoury said.

“If we are going to halve the excise periodically as a means to fund tax relief, how are you going to forecast how much we can spend on roads?”

Without any laws that would force petrol retailers to pass on the excise cut to consumers, Khoury also raised concerns that it may not be passed on in full.

“How do we know they won’t just increase their retail margins?” he said.

Marion Terrill, an independent transport expert, said the Coalition’s promise to halve the excise once again was not directed at lower-income earners. Rather, it would benefit owners of older vehicles, those who drove more often, and people on higher incomes who spent more money on fuel, she said.

“The problem is that it’s not well targeted,” Terrill said.

At a time when governments are trying to encourage more fuel-efficient vehicles, this “goes in the other direction”, she added, making it less expensive to drive a “gas-guzzling” car. “That is at odds with both the government and the opposition’s commitment to net zero by 2050,” Terrill said.

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