Fuel excise subsidy to end soon

NOTWITHSTANDING GST in the price of fuel at the bowser, the ‘petroleum products’ honeymoon is over at 11.59pm on September 28, 2022 when the Federal Government’s Fuel Excise (tax) and customs equivalents on petroleum based products is reimposed at the full rate of 44.2 cents per litre from the temporarily halved rate of 22.1 cents per litre.

The six-month reduction was implemented just before this year’s election by the previous Liberal Government in response to alarming increases in cost of living pressures that were causing financial stress for many Australians.

Unfortunately, said pressures have become worse since the excise reduction which will cost the government a whopping $3.0 billion in lost revenue over the six months.

This is not an insignificant amount and to put it into perspective, $3.0 billion is almost as much as the total promised budget spend in NSW on infrastructure projects, and about twelve times larger than the Federal Government’s electric vehicle plan, the ‘Future Fuels Fund’.

Excise is a regressive tax that is felt more at the lower end of the income spectrum than the higher end. The reduction favoured higher income earners relative to those on lower incomes which is counter to the rationale behind said cuts in the first instance.

With excise at ‘full freight’, that scenario is exacerbated particularly when viewed in concert with other inflationary pressures affecting the cost of living at the moment such as rising interest rates and falling house prices, rising food prices and stagnant wages growth.

More than a few economists say a perfect recessionary storm could well be developing in conjunction with the return of full fuel excise.

Of greater concern is that existing biannual fuel excise indexation arrangements will continue  according to the consumer price index and as already mentioned, Goods and Service Tax (GST) will continue to be applied to the excise inclusive price of fuel…. a tax on a tax situation.

With reimposition of full excise imminent, the true (as opposed to government subsidised) price of petroleum products are expected to flow through to most service stations across Australia within minutes despite being mandated to apply only to new supplies of fuel.

This is likely the reverse of the excise cut experience which, in some instances took weeks to filter through…. and was largely absorbed into profit margins.

According to data sourced by GoAuto, the net weekly saving to small car owners during the excise cut was $10, medium size vehicle owners benefitted by $15.00 and large vehicle owners benefitted by $20.00 a week.

After the hiatus, Australian motorists can expect a hefty increase in the price of fuel before the end of September. It will no doubt stoke inflationary pressures and accelerate cost of living increases.

However, there are a number of actions the average motorist can take to reduce the price spike’s effect.

Short of owning an electric vehicle or claiming business fuel tax credits, owners of cars with internal combustion engines should adopt the following to maximise their fuel economy/minimise fuel consumption.

• Ensure tyre pressures are set at manufacturer’s recommended value.

• Drive with windows wound up.

• Avoid hard acceleration.

• Minimise air-conditioning use.

• Ensure the engine is correctly tuned and vehicle maintained.

• Defray costs by car-pooling where possible.

• Drive smaller, more efficient cars wherever possible.

• Ride a bicycle or walk for small errands.

• Catch public transport.

We nearly forgot… Get a fuel price app on your phone which makes it easy to ‘shop’ the price of fuel in your area or where you’re heading. There are plenty of others to choose from.