Jim Chalmers has warned motorists to brace for impact with petrol prices set to rise by 26 cents a litre from July.
Following better than expected inflation figures, the Treasurer delivered his strongest signal yet that the temporary cut to fuel excise will not be extended.
For many motorists that’s likely to increase the cost of filling up a tank of fuel by around $20.
Australia’s temporary fuel tax cut kicked in on April 1 and runs until June 30 – unless the government decides to extend it.
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“We’re not anticipating extending that or expecting to extend it, but we keep it under review,” the Treasurer said on Wednesday.
“So that fuel excise relief will come off at the end of June, as we announced at the time, but really from week to week we’ll review it.”
The $2.5 billion fuel tax cut officially took effect amid predictions that the petrol crisis will peak in April as the fallout from the war against Iran continues.
And while most banks are not predicting another interest rate hike in June, it’s not impossible.
The RBA has hiked the cash rate three times this year and Westpac has previously predicted the rate could increase again in June, prior to today’s better than expected inflation figures.
That could deliver motorists a double hit if there’s an interest rate increse in June.
According to the latest inflation figures, annual housing inflation climbed to 6.3 per cent in the last 12 months.
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Electricity costs are up 22.5 per cent compared to where they were 12 months ago.
The fuel excise has masked some underlying pressures, as fuel prices are down 7 per cent from March.
The ABS noted that fuel prices are still up 23% compared to where they were before the war in the Middle East.
Treasurer Jim Chalmers has previously noted the important role of the fuel excise cut in bringing down inflation.
“It shows just how important and how necessary that decision from the government was since we’ve halved the fuel excise,’’ he said.
“After this period that we’re talking about now in the inflation data, we’ve seen petrol and diesel prices fall by at least 70 cents in most capital cities, and this shows how important that fuel excise relief is for the next couple of months.
“Our fuel excise cut has been a very important factor taking some of the sting out of fuel prices.”
One Nation leader Pauline Hanson told news.com.au that she believed the excise cut should be extended, but the Albanese Government needed to cut spending to pay for it. “People are struggling so I support an extension of the fuel excise cut, but we need to reduce spending elsewhere to make up for the loss in revenue, such as subsidies for renewables,” she said.
Last month, Anthony Albanese left the door open to extending the fuel excise cut to help contain the price of petrol.
But he cautioned that a decision on the “very costly” measure will be made close to June 30.
Currently the changes are saving motorists $19 on the cost of a 65L tank of fuel.
“We’ll do an assessment closer to the day, it’s costly, but as well it has made a difference,” Mr Albanese said on Thursday.
“We are doing pretty well with what the expectations were, people have stopped asking me about it, which is good about supply.
“We’ll make the assessment, like it’s really volatile times we don’t know when this war in the Middle East is going to end.
“We’ve got the ceasefire still going at the moment, we want (the conflict) to end.”
Richard Holden, an emeritus professor of economics at the University of NSW, has previously warned there were downsides to cutting petrol excise.
“It’s a bad idea economically because, despite the best of intentions, any government has a hard time turning the tap off,’’ he said.
