Petrol tax: Labor strikes deal with Government to revive twice-yearly hike in fuel excise

Updated

The Federal Government and Labor have struck a deal that will increase tax on petrol twice every year, with the next hike coming in August.

The Opposition agreed to back the Government's reintroduction of petrol excise hikes and approached it on Tuesday offering its support.

The Government said the current excise cost is estimated at 40 cents per week for a typical household.

The tax will jump in February and August annually, in line with inflation.

"While the impact on individual households is modest, this measure will provide a predictable and growing source of revenue, which will help the Government boost its investment in job creating and productivity enhancing road infrastructure," the Government said in a statement.

"This is a significant structural reform."

The Government said the deal is expected to raise $3.6 billion over five years to the end of 2018-19, and $23 billion over the next decade.

The Coalition said all excise increases will go into road infrastructure, and agreed to Labor's demand for more than $1 billion over two years to go into the Roads for Recovery program.

The deal between the major parties followed shadow cabinet on Monday night agreeing to the measure, after the ALP rejected it last year.

The Opposition decided to vote against the measure at the time, saying it broke a Government promise not to introduce new taxes.

"In a beauty parade, between giving money to oil companies and putting money back into Australian roads, generating jobs and confidence, it is clear which way Labor has to go," Opposition Leader Bill Shorten said.

"If Labor didn't compromise ... all the money that Australian motorists had paid would go back to oil companies."

Regular increases in the excise were scrapped by the Howard government and were reintroduced by regulation in October last year after the Government failed to secure the change by legislation.

But the regulation will lapse and revenue be returned to oil companies if the change is not made law by October this year.

The Government recently did a deal with the Greens on pension changes and the two parties had been working towards a deal on fuel tax.

"This was a difficult decision for us, for our ERC [expenditure review committee], our shadow cabinet and Caucus," Shadow Treasurer Chris Bowen said.

"We don't like to see petrol taxes going up at all but difficult decisions are necessary and Labor is prepared, where we can, to make a positive contribution.

"It provides an important economic stimulus; local government has projects ready to go right across the country, but they haven't been able to be funded.

"It also ensures a contribution to the long-term health of the budget."

Topics: government-and-politics, tax, oil-and-gas

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