Government rules out fuel tax cut amid rising prices

The Australian Government has confirmed it will not reduce the fuel excise tax, even as petrol and diesel prices rise due to the conflict in the Middle East. The decision was announced by Treasurer Jim Chalmers during a recent press conference. Instead, he urged the ACCC to monitor service stations closely to prevent unfair price increases.

Government asks ACCC to monitor fuel prices

Instead of reducing the tax, the government has asked the Australian Competition and Consumer Commission (ACCC) to closely monitor fuel retailers. Jim Chalmers, Treasurer of Australia, said he had written to the ACCC requesting that it ensure service stations do not raise prices unfairly as global oil prices fluctuate. The goal is to prevent price gouging, where businesses increase prices excessively during market disruptions.

Concerns over rising petrol prices

Fuel prices in Aussie capital cities have risen rapidly in recent weeks. The increase is partly linked to global oil market uncertainty due to geopolitical conflict in the Middle East that could affect supply. Some motorists and commentators have raised concerns that retailers may be increasing prices faster than necessary.

More: Australia sets new fuel quality standards

What is fuel excise?

The fuel excise is a flat-rate government tax levied on every litre of petrol and diesel sold at the fuel stations. This rate is not fixed and adjusted twice yearly (in February and August) to keep pace with the Consumer Price Index (CPI).

The excise is currently about 51 cents per litre of fuel and is also subject to an additional 10% Goods and Services Tax (GST). All this tax contributes billions of dollars in government revenue each year.

Fuel tax cut was an election policy

Reducing the fuel excise has been discussed in recent years as a way to ease the cost-of-living pressure on Australians. At the last federal election, the opposition (Liberal-National Coalition), led by Peter Dutton, proposed temporarily halving the fuel excise for one year.

The plan would have reduced fuel prices by around 25 cents per litre. However, the proposal did not proceed after the opposition failed to win the 2025 federal election.