Tony O'Kane | May 11, 2009

THE RUDD GOVERNMENT is due to present the Federal Budget tomorrow, and concern is already mounting over what it may have in store for petrol pricing.

The Victorian Automobile Chamber of Commerce (VACC) has called on Treasurer Wayne Swan not to be tempted to raise the excise on fuel, saying such a change would hit motorists in the hip pocket and have a negative effect on the auto industry.

"Fuel prices are perceived to be relatively low following last year’s record prices and as such, the Treasurer might feel tempted to target fuel excise as a way to raise revenue in tomorrow’s Budget," VACC Executive Director, David Purchase, said.

"But the global economic slowdown has already forced motorists to budget for every cent so any increase will have an impact.

"VACC appeals to the Treasurer to leave fuel alone and not to increase excise. This includes LPG and diesel, as well as unleaded petrol."

Wayne Swan, Treasurer

The Treasurer is under pressure to find new sources of revenue to fill a $200 billion shortfall in the budget; the un-freezing of former Prime Minister John Howard's fuel excise cap being an attractive target.

Howard's fuel excise freeze has 'cost' the Australian Government $12.6 billion in foregone revenue since it was instigated in 2001, and is estimated to be worth another $20 billion over the next four years.

"People tend to forget they are already paying two types of tax on fuel. 38.14 cents per litre is excise while 3.8 cpl is the GST component of the excise," said Mr Purchase.

"This is a blatant tax-on-the-tax and rather than be increased, it should be removed completely.

"VACC is hopeful Mr Swan recognises the importance of tomorrow’s Budget for the Australian Automotive Industry. The industry is doing it tough and the Treasurer has a responsibility to do all he can to stimulate the industry."

While some commentators have labelled the halt on fuel excise rises as poor fiscal policy, to reverse it now would surely be a politically damaging move. But is there anything to be worried about?

Late last year Prime Minister Kevin Rudd announced a scheme that would drop the fuel excise cent-for-cent to match fuel price rises, thus stabilising petrol prices until 2013, when the excise would be reviewed. However that scheme is not due to kick in until later in 2010 (but don't hold your breath), so what happens in the interim is anyone's guess.

We'll find out tomorrow.

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