Budget 2014: Government MP speaks out against 'broken promise' on fuel tax rise

Updated

A Federal Government MP has spoken out against plans to raise the fuel excise, warning it will force up the cost of everyday groceries.

The ABC has confirmed that millions of motorists are set to pay more with a change to indexation of the fuel excise.

The change will be included in Tuesday's budget, although it is not clear how much the excise will be increased by, or for how long.

It has already sparked an angry reaction from one motoring group, with the Australian Automobile Association labelling the plan a "back-door carbon tax".

Queensland Liberal National MP Ken O'Dowd has told the ABC's PM program the move will put pressure on inflation.

"I'm concerned that it does put all the costs up," Mr O'Dowd said.

"It's another tax and I guess it could be a broken promise.

"Whether it be tomatoes or lettuce, premium beef products ... anything that you buy virtually will all go up and [it] will have that inflationary effect on the economy.

"I'd like to see us reducing prices across the board [rather] than putting it up, this will only just add to [already high prices].

"We already pay a pretty high price for our fuel in Australia as it is. This will anger the people to a certain degree. Anything over one or two cents you'll get a reaction from the public."

Mr O'Dowd says he is already detecting a serious backlash from within the community against the Government's proposed deficit levy.

"The phones haven't stopped, especially with our older folk. We got off on the wrong leg talking about increasing the pension age. I don't think it was explained too good. It really concerned a lot of old people that they were going to lose their rights."

West Australian Liberal Senator Chris Back, a former fuel distributor and retailer, says motorists would be more likely to accept the rise to the excise if the proceeds went towards improving roads.

"My experience in the past would tell me that if motorists genuinely believe that an increase in excise would be going into road maintenance of road infrastructure, I think motorists around Australia would find that more acceptable," he said.

"If they think it's just going to go straight into consolidated revenue, then I think they would be highly cynical.

"It's a non-elective payment, in a sense.

"Nobody gets out of bed on a Saturday morning rushing down to want to buy fuel, so in a sense it's a resentment payment."

Senator Back says the Government needs to find new revenue sources to reduce debt.

"I don't think most Australians realise that we're actually paying nearly $1 billion a month interest on the debt at the moment," he said.

"That's $30 million a day."

Fuel tax increase a 'back-door carbon tax'

Motoring groups are opposing the move to raise the fuel excise, which would be the first increase to the rate in more than a decade.

The AAA has called on the Government to rule out an increase in fuel tax.

"It seems to fly in the face of many of the commitments that were made at the last election," AAA chief executive Andrew McKellar told PM.

"Effectively, it is a back-door carbon tax.

"How it can be rationalised by the Government that this makes any sense at all, either economically or politically. I think it really leaves many people wondering.

"Any increase in fuel excise in this budget would be unjustified. The Government must be honest with motorists and confirm that there will be no increase in fuel tax.

"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."

Former prime minister John Howard abolished fuel excise indexation in 2001 in the wake of the introduction of the GST, amid soaring petrol prices.

Currently, motorists pay 38 cents to the Federal Government in tax on every litre of fuel they buy.

The Government's Expenditure Review Committee (ERC), also known as the "razor gang", is understood to be finalising the details.

Labor is attacking the Government for breaking its pre-election promises.

Opposition Leader Bill Shorten says the Government should be lowering families' taxes.

"Are they hitting families or are they hurting families?" he said.

But Treasurer Joe Hockey is defending the Government's pre-election promises on taxes, following a backlash over its debt levy.

Mr Hockey says the Government never promised not to introduce new taxes, pointing to the 1.5 per cent tax increase on big business that is proposed to fund the paid parental leave (PPL) scheme.

The Government is staring down backbench dissent over the idea, saying raising income taxes for the rich is the only the way the wealthy can contribute to repaying the debt.

But Liberal MPs, including Queensland backbencher Teresa Gambaro, say it is a breach of the Coalition's promise not to introduce any new taxes.

Mr Hockey has told the Australian Financial Review the belief that the Coalition never promised new taxes is "wrong".

"We went to the last election promising to introduce a levy for PPL, so claims that we said we would never introduce new taxes are just wrong," he said.

"We actually went to the last election with a written policy saying we were introducing the 1.5 per cent levy for PPL."

Cabinet signed off on a debt levy on Wednesday, with Finance Minister Mathias Cormann pleading with his colleagues and voters to trust the Government.

Meanwhile, former treasurer Wayne Swan says he left the budget in "sound shape".

Mr Hockey says if left unchecked there will be $123 billion of deficits and $667 billion of debt, based on last year's mid-year economic fiscal outlook.

Topics: budget, government-and-politics, federal-government, tax, business-economics-and-finance, australia

First posted