The excise on petrol and diesel will be cut from 44.2 cents per litre to 22.1 cents per litre.

Delivering his Budget speech on Tuesday night, Treasurer Josh Frydenberg said a family with two cars who fill up once a week could save around $30 a week or around $700 over the next 6 months.

“This cut in fuel excise, will flow through to the bowser over the next 2 weeks,” the Treasurer said.

“The competition watchdog will monitor retailers to make sure these savings are passed on in full.”

University of Sydney Senior Finance Lecturer Dr Elvis Jarnecic said the excise fuel tax serves a critical purpose in maintaining roads and related infrastructure, yet a reduction is politically charged.

“The excise tax reduction is politically beneficial ahead of an election particularly given rising fuel prices,” Dr Jarnecic said.

“The reduction is short term during what are seen as temporary oil price pressures and hence the revenue impact should only be for a short period.”

AMP Chief Economist Shane Oliver said overall the temporary fuel excise reduction is bad economic policy.

“It may be very hard to reverse [the excise cut] if oil prices keep rising or stay high and it will make no sense if oil prices fall back on say a Ukraine peace deal,” Mr Oliver said.

Once the temporary fuel excise cut comes to an end in September, the Treasurer believes the forecast price for a barrel of oil will come back to around $100.

Currently Tapis crude oil, the oil Australia primarily uses, sits at a price north of $160 AUD per barrel.

Recently, the Federal Chamber of Automotive Industries (FCAI) called for a road user charge to replace fuel excises and other motoring taxes.

FCAI Chief Executive Tony Weber said State and Territory Governments are beginning to adapt to the changing nature of mobility in Australia, including the rise of electric vehicles that do not pay fuel excise. 

“Applying road user charge more broadly and scrapping taxes like fuel excise and the luxury car tax will ensure that all motorists are paying an equitable amount to use Australia’s road network,” Mr Weber said.

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Image by Erik Mclean via Unsplash.