The Government has extended its discount on the fuel excise for another month, at a reduced rate.
It originally introduced a 50% discount on the tax paid on fuel due to the U.S. and Israel’s war with Iran, which drove up global fuel prices.
Following the signing of a peace deal last week, global oil prices are now falling.
In July, the 52.6 cent per litre tax on fuel will be reduced by 16 cents.
Context
The Strait of Hormuz is a narrow waterway which normally sees 20% of the world’s oil every day.
After the U.S. and Israel struck Iran in February, Iran closed access to the Strait to non-Iranian vessels. The U.S. later positioned ships at the entrance to the Strait to block Iranian ships.
On 17 June, the U.S. and Iran signed a deal that includes the Strait being re-opened.
Even with a deal in place, the Strait’s status remains contested, and experts say fuel prices will take time to stabilise.
Fuel excise
The fuel excise is a tax the Government charges on every litre of petrol and diesel.
The normal rate is 52.6 cents per litre, which is paid by manufacturers and then passed on to customers.
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In March, the Government halved the fuel excise to 26.3 cents per litre for three months in response to the Strait-related cost-of-living pressures.
It set aside $2.9 billion to cover the cost of halving the excise. The discount was set to expire at the end of June.
Extension
The Government announced on Monday that from 1 July to 2 August, the excise will continue to be discounted, this time by 16 cents per litre.
It means the excise paid on fuel will be 36.6 cents per litre for the month. The Government says this will save motorists around $11 per 65-litre tank.
The Heavy Vehicle Road User Charge, which affects truck operators, will also be reduced by 16 cents for the same period.
The extension will cost the Government around $400 million.
Response
The Coalition broadly backed the move.
Opposition Leader Angus Taylor said the Coalition had supported the excise cuts from the start, while Shadow Foreign Affairs Minister Ted O’Brien said the “real test” would be whether the Government could absorb the costs.
The Australian Chamber of Commerce and Industry also welcomed the extension, saying it would give freight operators and businesses short-term certainty.
