Budget 2014: Joe Hockey moves to assure miners over diesel fuel rebate

Updated

Treasurer Joe Hockey has moved to head off a damaging fight with Australia's mining industry, assuring them there will not be any cuts to the diesel fuel rebate in next Tuesday's budget.

Leaked confidential correspondence between top mining chief executives, obtained by the ABC, reveals deep anxiety within the resources sector.

Their concerns are shared by members of the Coalition, who warn any reduction to the multi-billion-dollar tax credit would have a devastating impact on farmers.

Recent speculation of a possible cut to the 38 per cent fuel tax credit in next week's budget has prompted emergency crisis meetings across the resources sector.

The ABC's AM has obtained a confidential brief sent on April 28, which warns of the potential impact of the budget savings measure.

"We've run the numbers on any substantial change to the rebate and the impact would be profound. Most likely far greater than any MRRT (Minerals Resource Rent Tax) and probably a little less than the first mining tax," it read.

The leaked correspondence written by one CEO explains that after labour costs, fuel is the next biggest expense for miners.

"With so many projects in their infancy or in early stages of developments in three states - such changes would alter the landscape for investment - and no doubt spook financiers," the message said.

Rebate expected to cost $2.4 billion over next financial year

Government sources have confirmed the budget razor gang has examined the diesel fuel rebate, now formerly known as the fuel tax credit.

According to the Parliamentary Budget Office, the rebate to the mining industry is expected to cost $2.4 billion over the next financial year.

Sorry, this video has expired Video: John Williams warns against cutting diesel fuel rebate (ABC News)

AM has been told Mr Hockey gave an assurance late yesterday that the Government would not touch the rebate in its first budget.

A spokeswoman for the Treasurer would not comment on the suggestion.

But Mr Hockey appears to have also avoided a messy stoush with his Coalition colleagues in the Nationals.

Nationals senator John Williams, a former farmer, warns if the rebate is significantly reduced it could push some marginal producers into bankruptcy.

"The diesel fuel rebate is essential for the people on the land," he said.

"Be aware that farmers who are farming their paddock are not wearing the roads out."

Senator Williams says it is important that costs are kept down for farmers so they can compete.

"No matter how big or small those properties are, whether they are growing just 500 acres of wheat a year or they're growing 50,000 acres of wheat a year, that diesel fuel rebate should remain as is with 38 cents rebate to the farmers," he said.

The Australian Conservation Foundation (ACF) has called on the Treasurer to scrap the rebate, with the foundation's Dugald Murray saying dumping it would not cost jobs.

"I think it's pretty clear that the Australian mining sector could take some short-term pain here, it's not actually a lot," he said.

"It's what most other businesses have to deal with and it's paying 32 cents a litre for their diesel that the rest of us pay for."

Voters will thank us for fixing budget: Abbott

Meanwhile, Prime Minister Tony Abbott says voters will eventually thank him for trying to repair the budget bottom line, even if it includes breaking his promise not to introduce new taxes.

He says the Government's "most fundamental commitment of all" was to "get Labor's debt and deficit disaster under control".

And he says voters will eventually "thank" the Government if it meets its top promises.

"You've just got to make hard decisions at times like this, and I think in the long run the voters will thank us for doing what is absolutely necessary if Labor's debt and deficit disaster is to be tackled," he told the Nine Network this morning.

But Opposition Leader Bill Shorten says no-one will be thanking the Government for breaking its promise of no new taxes.

"No political leader in the history of Australia has staked so much of their reputation on someone who keeps their election promises," he said.

Topics: budget, mining-industry, industry, business-economics-and-finance, rural, agricultural-subsidies, government-and-politics, federal-government, australia, act, nsw, nt, qld, sa, newcastle-2300, tas, vic, wa

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