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Budget's petrol shock will leave voters fuming

Prime Minister Tony Abbott: Set to to break his no "new taxes" promise for a second time.

Prime Minister Tony Abbott: Set to to break his no "new taxes" promise for a second time.

Motorists will pay more for fuel in future and it looks set to keep rising as Prime Minister Tony Abbott prepares to break his no "new taxes" promise for a second time – this time by taxing petrol at a higher rate.

The plan, which the government refused to officially confirm, compounds another tax increase to be announced in the budget – a special deficit levy on higher income earners designed to raise about $2.5 billion a year for its duration.

It is directed at redressing a budget hitting lower income earners more than the rich, but the political pain may not be worth it and it could be superseded by the incendiary issue of fuel prices.

The twice-yearly adjustment to petrol would be especially hard on families in the outer suburbs whose lives are slave to the car, whose jobs depend on long daily commutes, and who often have no access to public transport.

It is understood the budget – which is now all but finalised and heading to the official printer – contains changes to restore indexation of federal petrol excise according to inflation, adding up to 4¢ or 5¢ a litre within four years, which would be on top of the other factors that have been driving petrol prices up.

Even before the petrol increase had surfaced, the deficit tax had some economists and Liberal MPs, and former Liberal treasurer Peter Costello, arguing it would harm growth by reducing consumers' spending power.

Disgruntled Liberals also believe the special deficit levy represents a blatant breach of an oft-made promise of no new or increased taxes, and, of no surprises.

The Australian Automobile Association (AAA) says the return to using the consumer price index to upwardly adjust the per-litre amount of federal excise would add about 0.6 of a cent per litre in 2014-15 for a modest initial return of $339 million to Canberra.

However, that revenue would climb exponentially as the price rises 3.5¢ to 4¢ a litre in 2017-18, raising $1600 million in that year, or $3.7 billion over the first four years.

Federal excise was frozen at 38.14¢ a litre by John Howard in 2001 as anxiety over the introduction of his 10 per cent goods and services tax threatened to boil over and sink his government during that election year.

Facing a difficult byelection, the then prime minister cut fuel excise by 1.5¢ and then froze it in perpetuity at the 38¢ rate.

That move was bitterly contested by his senior economic ministers at the time, including Mr Costello, who knew it would cause fuel excise revenue to dwindle against the rising per-litre cost of petrol. Federal revenue is about $5 billion lower than it would have been had indexation remained, but petrol has been cheaper too.

Along with the cuts in family payments, taking the eligibility cut-off from $150,000 down to $100,000 per annum, the rise in petrol prices represents a double hit on lower and middle-income earners and many who switched to the Coalition at the election on the promise of lower taxes, and taking the pressure off working families.

National Roads and Motorists' Association (NRMA) president Wendy Machin said motorists already paid enough in fuel excise.

The government raised $15 billion in fuel excise last year but only a third went to road and land transport funding, she said.

"I don't think motorists would be thinking they have had a fuel tax holiday," Ms Machin told ABC radio on Friday.

"[Petrol] is a commodity that absolutely every family and every business uses so it is going to have an impact on every single person in Australia.

"When they go to the bowser to fill up I guess they can consider that they're giving an extra gold coin to the government.

"If they're going to do that let's make sure we get some better value for our money than we got in the past."

AAA executive director Andrew McKellar said the tax increase would be "grossly unfair" and that voters would be left deeply cynical about the government.

"I think the reality is that this would be a grossly unfair tax grab," he said.

"We're seeing a total of about $15 billion being raised through fuel excise each year, but only a small proportion of that, about less than a quarter, ends up getting reinvested in roads and other land-transport infrastructure.

"Any tax increase like this is going to hit those who are living in the outer part of our cities, in our rural and regional areas, it's going to hit them the hardest because they have to drive the longest distances and in many cases, they don't have any choice."

Labor frontbencher Anthony Albanese has slammed the proposal, saying the Coalition government was ''attacking the public through the (petrol) bowser''.

''It's a regressive tax because if you live further away from where you work and you don't have public transport options . . . you'll pay more and you'll pay it every week,'' he told the Nine Network on Friday.

''(It's) bigger than the carbon price on everyone's personal motor vehicle.''

The petrol shock in the budget appears to explain an ominous prediction made to Fairfax Media this week by a federal minister, who said the controversial deficit levy would be "one of the more popular" aspects of next Tuesday's economic statement.

Treasurer Joe Hockey said this week he believed the government was not breaking promises on tax because it had taken a plan to the election to increase taxes on companies to fund its paid parental leave scheme.

"We went to the last election promising to introduce a levy for PPL, so claims that we said we would never introduce new taxes are just wrong," he said.

Mr Hockey also predicted the debt levy would be hardly discussed on budget night, given the weight of other measures aimed at restoring the government's finances back to health.

VIDEO ANIMATION: Sweet Budget Time with Rocco & Denis

756 comments

  • No shock here, just another broken promise from the man who admitted to Kerry O'Brien that he does not tell the truth.

    Commenter
    Captain Grumpy
    Location
    Kingsville
    Date and time
    May 09, 2014, 6:29AM
    • One term Tony....

      Couldn't happen to a better fella...

      Commenter
      n720ute
      Location
      North Coast NSW
      Date and time
      May 09, 2014, 7:06AM
    • Captain Grumpy - yes there will definitely be issues around broken promises in the budget, but wouldn't you agree that we have to return to some fiscal responsibility after the wild west approach of the last six years ?

      Commenter
      Hacka
      Location
      Canberra
      Date and time
      May 09, 2014, 7:07AM
    • The LNP have done so little for voters apart from all the lies, we can all show our thanks by giving all the LNP just what they all truly deserve, give them the LNP back, thats "Last Number Placed" on the ballot at the next election. Give the LNP the "LNP"! After what Abbott and the rest of the lying rorters do to us next week, we will no doubt be lining up to do just that?

      Commenter
      HFR
      Date and time
      May 09, 2014, 7:09AM
    • Jeez, some people are never happy.
      What's to complain about - we've never had it so good with this budget:
      higher petrol prices, a 'debt levy', university fees to increase, lifting the eligibility bar for various pensions, go live somewhere else if you want the 'dole', tax Super pensions, pay when you visit the GP, pay more for your medications, cut family tax benefits……
      Who would want to feel grumpy about these things?

      Commenter
      Howe Synnott
      Location
      Sydney
      Date and time
      May 09, 2014, 7:16AM
    • I hope all those who voted for the Liberal liars realise what they've done.

      I wonder what will be next from the "no surprises" government.

      Commenter
      Peaches
      Date and time
      May 09, 2014, 7:18AM
    • Another day another LNP lie! Whats new! They lie about the budget emergency! Their supporters scream that the tax on the rich will harm the economy, yet cutting pensions etc won't? They lied about implementing Gonski and are now mumbling about not implementing the NDIS. They lie to ICAC! Just like thse LNP lied here in QLD about sacking public servants and throwing the elderly out of retirement homes after they lied about the state of QLD's debt. Inmy 50 odd voting years, and not a member of any political party, I have NEVER seen any party lie like the LNP is at present.

      Commenter
      Pollyho
      Date and time
      May 09, 2014, 7:20AM
    • He's the George W. Bush of Australia. A wrecker and a liar, just like his compatriot, Margaret Thatcher.

      And now we see yet another 'adviser' forced to resign over conflict of interests.

      Abbott is heading down the same path as Howard, who was forced to sack a total of 15 ministers and advisers for abusing their privileges, power and conflict of interests. Abbott, of course, will not be as ethical and truthful.

      Commenter
      Peter
      Location
      Kensington
      Date and time
      May 09, 2014, 7:24AM
    • Unless the budget is brought under control there will be no money for the next Labor government to squander, so its in everyones interest to pay down the public debt.

      Commenter
      SteveH.
      Date and time
      May 09, 2014, 7:25AM
    • Did you see the lie to Tony Jones about meeting with George Pell, I feel sorry anyone who actually trusted Abbott. He and his private sector Tea Party have lived up to all my expectations sadly. Watch the distribution of wealth swing wildly to the top in the next few years, these people have no interest in managing debt, they will increase government debt, funnel money to the wealthy and leave us with the repayments.

      Commenter
      Bruce
      Date and time
      May 09, 2014, 7:34AM

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