Motorists will save between $9.94 and $14.30 on an average tank of petrol after budget commitments to slash excise tax to curb soaring cost of living pressures.
A temporary six month reduction to the tax will take effect from budget night in a bid to ease upward pressure on petrol prices at the bowser.
The measure will see a 50 per cent reduction in fuel excise, reducing the government share from 44.2 cents to 22.1 cents for every litre.
It is estimated an Australian household with one vehicle will benefit by $300 from the excise reduction.
A number of industry groups and politicians across the political divide had been calling for a temporary cut following Russia's invasion of Ukraine which prompted a price shock in oil markets globally.
Fuel prices had also been rising due to supply shortages before the Ukrainian crisis occurred.
The temporary reduction which is applicable to all petroleum based fuels except for aviation fuel is slated to decrease the underlying cash balance by $3 billion.
According to budget costings, the government will forgo $5.6 billion in receipts and decrease payments by $2.7 billion over the forward estimates.
Treasurer Josh Frydenberg outlined a family with two cars would be saving $30 a week.
"This cut in fuel excise, which takes effect from midnight tonight, will flow through to the bowser over the next two weeks," he said. "Whether you're dropping the kids at school, driving to and from work or visiting family and friends, it will cost less."
The Australian Competition and Consumer Commission will be monitoring if retailers are price gouging at the pump, with false and deceptive advertising potentially attracting penalties of up to $10 million.
"If retailers make false or misleading statements to consumers that they have passed on the savings, when they have not, the ACCC will not hesitate to take appropriate enforcement action," new ACCC chair Gina Cass-Gottlieb said.
Australia's terminal gate price on Monday rose 1.6 per cent to 188.8 cents per litre. This is 47.6 cents higher than the low booked on December 8, 2021.
Budget documents show the fuel excise reduction is expected to reduce headline inflation by a quarter of a percentage point.
Treasury expects inflation for 2021-22 will hit 4.25 per cent which is partly being pushed up by recent rises in petrol prices.
From September 28, the fuel excise tax will revert back to 44.2 cents a litre.
The government is making no changes to the road user charges for heavy vehicles on public roads, while lighter vehicles will get a halving in tax paid.
Heavy vehicles are expected to get a 4.3 cents per litre benefit from the excise reductions.
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