Drivers brace for impact as brakes hit on fuel tax cut
Poor Australians will bear the brunt Higher prices on the bowser in the coming days due to the partial rollback of the wartime fuel tax cut.
The 32-cent discount per liter on gasoline and diesel will be reduced to 16 cents as of Wednesday and will end completely at the beginning of August.
The measure aims to reduce the oil bill shock during ongoing negotiations to end the Middle East conflict.
The closure of the Strait of Hormuz following US and Israeli attacks on Iran caused chaos in global oil markets and caused Australian fuel prices to soar.
This shock to household budgets was much larger for low-income people than for wealthy Australians, according to a report by the e61 Institute.
“Low-income households spend a much larger share of their income on oil, which means they are more affected by price increases,” said economist Adit Maitra.
The research found Australians were more sensitive to petrol and diesel price increases than previously thought, with a 10 per cent cost increase linked to a 3.8 per cent drop in fuel consumption.
Mr Maitra said reducing the fuel tax would hit lower-income households harder, but that did not mean the measure would remain in place.
He said the consumption tax cut was not well targeted because it disproportionately benefited high-income households that use the most oil.
The federal government defended its decision to reduce the amount of assistance offered to drivers, arguing that recent prices were lower than before the war began.
“Our fuel excise tax cut is part of the story, but we’ve also seen positive developments in global oil markets in the Middle East,” Finance Minister Jim Chalmers told reporters on Tuesday. he said.
“We have undertaken this very responsible, targeted, temporary, phased extension of the fuel excise tax cut for good reason,” he said.
The NRMA said oil prices were expected to rise next week from their lowest level since October 2021, but this immediate impact was somewhat mitigated by the decline in global oil prices.
The consumer watchdog has warned fuel retailers not to use excise duty to boost profits and encouraged drivers to shop around for the best price.
US and Iranian officials are heading to Doha, Qatar’s capital, but there are conflicting reports about whether the two sides will meet to discuss a potential peace deal.
US President Donald Trump says his country won the war militarily and insists Iran should not be allowed to produce nuclear weapons.
While both sides agreed to a ceasefire, America accused Iran of attacking at least two commercial ships trying to pass through the Strait of Hormuz in recent days.
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