Jim Chalmers rules out extending fuel excise cut amid rising interest rates

A $3 billion measure designed to ease pressure on Australian households is set to expire despite mounting cost-of-living stress.

There may be mounting pressures on Australians’ purse strings, but Treasurer Jim Chalmers has emphatically ruled out an extension to the fuel excise cut.

Cost of living has been hiked even further after the Reserve Bank of Australia raised its cash rate to 1.35 per cent on Tuesday – the highest since June 2019.

It’s the third straight month of rate hikes, adding some $360 a month to repayments on an average $560,000 home loan.

Dr Chalmers said the government was looking at ways to improve the cost of living but could not extend the cut to the fuel excise past September.

Petrol prices are now higher in some cities, like Adelaide pictured here, than they were before the Morrison government halved the fuel excise in March for six months. Picture: NCA NewsWire / David Mariuz

The Morrison government slashed the fuel excise in March for six months, saving Australians about 20c a litre at the bowser – at the cost of $3bn to the taxpayer.

But petrol prices have surpassed what they were before the cut was introduced, sparking fears for how much of an impact September’s rise will have on motorists.

Dr Chalmers said the Albanese government needed to weigh up the fiscal reality and the economic reality in providing the right amount of cost-of-living relief.

“That six-month petrol price relief … ends in September,” he told ABC Radio.

“To extend it for another six months would cost another $3bn. To extend it indefinitely would cost the budget a lot of money, and we have to weigh all these things up responsibly.

“We can’t do everything we would like to do when you’ve got a budget which is heaving with a trillion dollars in debt.

“You’ve got to work out where could investment of taxpayer dollars give taxpayers the best bang for their buck.”

Treasurer Jim Chalmers said the government could not extend the cut to the fuel excise past October. Picture: NCA NewsWire / Dan Peled

The Albanese government will use its October budget to outline other ways to help with the cost of living given there are expected to be more interest rate rises over the coming months.

In the meantime, Assistant Treasurer Stephen Jones said there was an expectation that banks would pass the higher cash rate onto lenders, but he called for banks to do the right thing by savers.

“This isn’t happening without a reason. We know that if we do not fight the inflation beast then the impact on cost of living, the impact on the economy, is going to be even greater,” he said.

“We’ve got a short window in which we can deal with this, where we can stop that inflation spiral getting out of control.

“We feel the pain of the Australian people … but nothing would be worse for the Australian economy and for Australian households than to see the price of everything galloping ahead at 10 and 15 per cent. That would be the result unless we put in place this short-term action now.”