Federal budget: How the fuel excise cut will affect roads funding

A six-month fuel excise cut will leave a multi-billion dollar hole in funding, which would have been spent on Australian roads.

A fuel excise cut for the next six months will leave a multi billion dollar hole in revenue which otherwise would have gone towards Australian roads. Picture: David Crosling

A six-month fuel excise cut will result in a $5.7 billion loss in funding, which would have been funnelled into Australian roads.

The Federal Government last night announced Australia’s 44.2c/lt fuel excise would be slashed by 50 per cent to just 22.1c/lt, in a bid to curb rapidly rising petrol and diesel costs for motorists. Yesterday’s Budget Strategy and Outlook paper one stated “addressing cost of living pressures through a temporary reduction in fuel excise, reducing receipts by $2.8b in 2021-22 and $2.9b in 2022-23.”

Investment in infrastructure as outlined in yesterday’s budget papers appeared to allocate $687.167 million for roads next financial year, down on the $904.018m estimated for 2021-22 financial year.

Budget papers also outlined additional road commitments, including $2.6b for the Darlington to Anzac Highway in South Australia; $2b for the Great Western Highway upgrade at Katoomba to Lithgow, NSW; $400m in additional funding for the Bruce Highway in Queensland; $380m for the Pakenham roads upgrade in Victoria, $150m for the Northern Territory National Highway Network; and $113.4m for Midland Highway upgrades in Tasmania.

Another $1 billion has been added to extend the Local Roads and Community Infrastructure Program, while the Road Safety Program is also flagged for extension in 2022-23, with $1b allocated “for projects that will improve roads and save lives”.

Victorian Farmers Federation president Emma Germano said her organisation was pleased the Federal Government “heeded our warning not to reduce road funding as a result of cutting the fuel excise”.

“All eyes now look towards regional Victoria getting a fair go in the Victorian State Budget on May 3,” Ms Germano said.

Australian Dairy Farmers policy director Craig Hough welcomed the fuel excise cut, noting it would somewhat ease input costs for farmers.

“Most of the cost-of-living initiatives are temporary and targeted, and there is a commitment to reduce the budget deficit going forward,” he said.

“But there will need to be care that we don’t fuel inflation and undermine the very intent of the budget itself,” Mr Hough said.

However, the Australian Automobile Association labelled the fuel excise cut a “booby trap” that will do little to solve the nation’s transportation woes.

“The decision to booby-trap the Commonwealth Budget with a 22.1 cents per litre fuel excise cut for the next six months will fix neither Australia’s transport tax problems, nor the factors driving up petrol prices,” the AAA said in a statement.

“The AAA notes the change may possibly offer some short-term relief for motorists in a volatile global fuel market, but believes it generates more medium-term challenges than it solves.

“The immediate problem is that there is no guarantee that this tax cut will be passed on to motorists, as the international experience shows similar measures have delivered fuel retailer profits, rather than price drops for consumers.”