Fuel excise increase confirmed, money to be used for road infrastructure

Car advice: Budget 2014 : Fuel excise increase confirmed, money to be used for road infrastructure. by Matt Campbell Senior Editor. 17 May 2014

Motorists will pay more for fuel over the coming years following an announcement from the Abbott Government in its 2014 Budget that it will raise $2.2 billion in revenue by 2018 by indexing the fuel excise it collects against inflation.

The revision to the excise, which comes into play from 1 August 2014, will “create a more stable source of Commonwealth road funding over the longer term”. The indexation will occur twice yearly, though it is unclear what real impact that will have on the prices paid by the public at the fuel pump – not to mention the flow-on effect it could have for goods and services as the increases are passed on to consumers.

According to the Federal Government, the move will “secure funding for additional productivity ‑ enhancing road infrastructure projects”, and the figures suggest the reintroduction of the fuel excise indexation will bring $168 million of revenue to the Federal Government during 2014-15, rising to $380 million in 2015-16, $680 million in 2016-17 and $990 million in 2017-18.

Treasurer Joe Hockey said that “every dollar raised” from the fuel excise indexation would be spent on building better roads as part of its $11.6 billion infrastructure growth package that will see expenditure on roads, rail and ports.

Included is the $11 billion WestConnex tunnel in Sydney which will commence “within 18 months” and “means 10,000 new jobs”, and the Melbourne East West Link, costed at $18 billion with work to commence by Christmas and “6000 new jobs” created.

“Shovels will start moving within a matter of months,” Hockey said. “But these projects will do more than create construction jobs. They will inject money into communities, lower business costs and reduce congestion. This will improve living standards across the country.

“And to help pay for this, the Government is re-introducing fuel indexation where every dollar raised by the increases will be linked by law to the road-building budget,” Hockey said.

“Our future depends on what we as a nation do today,” he said. “This budget will help build a more prosperous nation.

“Now it is our turn to contribute. Now it is our turn to build,” he said. “It is time for us – for all of us – to contribute and build.

“We said that this budget will be a contribute and build budget, and it is.”

Shadow Treasurer Chris Bowen criticised the move to charge motorists more for fuel.

“We never attempted to reindex the fuel excise because we recognise the cost of living pressures on Australian families,” Bowen said on the ABC’s 7:30 program.

It is the first time in 13 years that the Federal Government has increased its take from fuel costs – John Howard froze the fuel excise in 2001 as a means of making good with the public following the introduction of the GST, and since then the excise rate has remained at 38.1 cents per litre.

”Yes, there’s got to be short-term pain, but it’s pain with a purpose,” Prime Minister Abbott told Macquarie Radio earlier today.

Treasurer Joe Hockey told media ahead of the budget that the fuel excise increase – among other changes – would be good for the country, even if it wasn’t good for individuals.

“I would say to the Australian people if you’re only looking in the budget for your own interests, then you may be disappointed, but if you’re looking for the national interests you will be cheered. This budget is about shaping the destiny of our nation,” Hockey said.

Assistant infrastructure minister Jamie Briggs said recently that the increased fuel costs will be offset by increased expenditure from the government to provide better roads.

“Motorists will see enormous benefit from the program we’re putting in place,” Briggs said.

As CarAdvice reported previously, industry figureheads derided any plans to increase the fuel excise when the initial reports of a change were made public.

Australian Automobile Association CEO Andrew McKellar said last week that any increase in the fuel excise would be “unjustified”.

“Motorists already pay too much tax and are not getting fair value for money with only a fraction of fuel excise being returned to spending on transport infrastructure by the Federal Government,” McKellar said.

NRMA president Wendy Machin also slammed the notion of an increase to the fuel excise.

“The Federal Government already collects more than it spends on roads and transport infrastructure, so there is absolutely no basis for this unfair tax hike,” Machin said.

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