Coalition proposes automatic fuel excise cut when oil prices rise

An oil-price trigger for fuel excise

The Coalition announced its proposed Fuel Price Shield on 20 September. Under a future Coalition government, it would automatically halve fuel excise when Brent crude oil averaged more than US$100 a barrel over two weeks. Nationals Senate leader Bridget McKenzie told Seven’s Sunrise the measure would apply to petrol and diesel. It is an opposition proposal, not a reduction currently in force. ²³

Opposition Leader Angus Taylor estimates the cut would amount to about 27 cents a litre and save roughly $15 on a typical tank of petrol. He told Nine’s Today program the proposal would provide relief when fuel prices were high. Those figures are the Coalition’s projected savings, rather than a guarantee that every service station would immediately lower its posted price by the same amount. ²¹

The ABC reports that the cut would end three months after being triggered or when the eight-week average oil price fell back below US$100, whichever came first. The proposed expiry test therefore uses a longer averaging period than the two-week test for starting the cut. ²

Heavy vehicles and the cost of the plan

Taylor also proposed eliminating the 32-cent-a-litre heavy vehicle road user charge to reduce transport costs. That charge is separate from the proposed fuel-excise cut. McKenzie argued on Sunrise that freight operators, like households, could not avoid buying fuel when prices rose. ²³

The Coalition says tobacco excise changes would fund the Fuel Price Shield and estimates the fuel measure would cost about $950 million a month, according to Seven. The ABC reports that the Coalition’s separate proposal to cut tobacco excise by 80 per cent is projected to raise $8 billion under modelling it attributes to the Parliamentary Budget Office. That revenue projection depends on consumers switching from illicit to legally sold cigarettes as legal prices fall. ²³

Taylor told Nine’s Today program that funding the fuel cut through the tobacco change meant it would not add to inflationary pressure. Treasurer Jim Chalmers rejected the funding claim, describing the fuel proposal as uncapped and unfunded. Nine also reported a warning from Cancer Council Australia chief executive Jacinta Reddan in August about the long-term health consequences of cutting tobacco excise. ¹²

Disagreement over inflation and targeting

Economists interviewed by the ABC differed on the inflation effect. Chris Richardson argued that a fuel-tax cut could lower bowser bills while adding to spending power and pressure on other prices. Westpac economic spokesperson Luci Ellis said the experience of an earlier cut suggested lower petrol prices could prevent fuel-related increases flowing into other prices. MST Financial’s Saul Kavonic questioned reducing the incentive to conserve fuel during a period of scarcity. ²

The scope of relief prompted a separate dispute. Independent MP Allegra Spender argued on Sunrise for assistance targeted at households and industries most affected, including freight, rather than a broad cut. McKenzie opposed adding that distinction; The Nightly reported her argument that everyone buying petrol or diesel pays fuel tax. These are competing positions on the proposal, not changes to its announced trigger. ³⁴

What earlier cuts show

The federal government also cut fuel excise temporarily in 2026. When that measure was announced in March, the ABC reported an initial reduction of 26.3 cents a litre from a charge of about 53 cents a litre. Its September account describes subsequent changes to the discount and says the measure was extended until midnight on 2 August. Those earlier rates and dates should not be confused with the Coalition’s proposed 27-cent-a-litre saving. ⁵²

A tax reduction need not appear at every bowser immediately. During the March announcement, Treasurer Chalmers said the full benefit could take one to two weeks to reach motorists as retailers sold stock bought at the previous tax rate. The ABC also cited a competition watchdog finding that, following a 2022 excise cut, the reduction had reached prices at the vast majority of petrol stations after six weeks. Neither example establishes a timetable for the Coalition’s proposal. ⁵

Government position and current prices

In July, Taylor said any extension of the government’s then-current fuel-excise cut would need to be properly funded. After the Coalition announced its September policy, Chalmers told the ABC the government was not discussing or considering another cut, although he said it had previously shown a willingness to respond to economic conditions. ⁶²

The proposal comes amid renewed pressure at the bowser. In its 23 September report, Seven cited the NSW FuelCheck website for statewide average prices of about $2.37 a litre for E10 petrol and $2.88 a litre for diesel. Those New South Wales averages are a snapshot of retail prices, not national prices or an indication that the Coalition’s proposed oil-price trigger has been met. ³