The Coalition has proposed an automatic fuel tax cut whenever international oil prices surge, putting the policy at odds with the Albanese government’s decision not to introduce another reduction in fuel excise.
Opposition Leader Angus Taylor announced the Coalition’s “Fuel Price Shield” on Sunday, saying it could reduce petrol and diesel prices by as much as 27 cents a litre and save motorists roughly $15 on a standard tank.
Under the proposal, the fuel excise would be cut by half if the two-week average closing price of Brent crude rose above US$100 a barrel.
Taylor said the measure would give Australian households and businesses protection from international energy shocks capable of driving up costs across the economy.
The plan would also temporarily reduce the heavy vehicle road user charge to zero. The Coalition says that would ease pressure on trucking companies and eventually help bring down freight expenses passed on to supermarkets and consumers.
“When global events send oil prices through the roof, Australians should know there is a clear automatic safeguard in place to provide temporary and targeted relief,” Taylor said.
The excise cut would remain in effect until the eight-week average price of Brent crude fell below US$100 a barrel, or for three months, whichever came first. The government could choose to extend the measure.
Coalition analysis suggests the mechanism would have been activated only twice over the past five years: during the oil price shock in early 2022 and again in March 2026.
Angus Taylor (right, with Nationals Leader Matt Canavan) said the plan could save Australians about $15 on a typical tank of fuel
Treasurer Jim Chalmers moved quickly to attack the proposal on Sunday, calling it an “uncapped” and “unfunded” scheme that could cost taxpayers billions of dollars
Treasurer Jim Chalmers quickly rejected the proposal on Sunday, describing it as an “uncapped” and “unfunded” policy that could leave taxpayers facing billions of dollars in lost revenue.
Speaking on News24 on Sunday morning, Chalmers said the Opposition had not explained how it would finance the plan.
“That’s what makes it uncapped and unfunded,” he said.
“That’s why he can’t tell us how much it costs, how he’ll pay for it.”
Chalmers also claimed the announcement was driven by political pressure on Taylor rather than a credible response to economic conditions.
“I think what we’ve seen overnight from Angus Taylor is more about polling numbers than petrol prices,” he said.
“He is under very serious political pressure and that matters much more to him than the cost-of-living pressures that people are feeling around the country.”
Chalmers nevertheless confirmed that Labor is not currently considering another fuel excise cut, despite having intervened previously when global energy prices climbed sharply.
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The Albanese government is not considering a second temporary cut to the fuel excise
The Albanese government’s temporary fuel excise reduction during the recent US-Iran conflict cost about $2.5 billion over three months before the measure was withdrawn.
Chalmers said Labor was now focusing on permanent cost-of-living relief through tax cuts and wage growth.
The Coalition estimates the Fuel Price Shield would cost around $950million for every month it operates.
Taylor said the policy would be funded by another Coalition promise, an 80 per cent cut to tobacco excise.
‘The cut to tobacco excise will raise $8billion of funding,’ he said.
‘We worked through that with the Parliamentary Budget Office and that will fully fund the cut to the fuel excise.’
Taylor said the plan would be ‘anti-inflationary’, as it would ease transport costs and help motorists when prices approach $3 per litre.
The Coalition says the ACCC would monitor wholesale and retail prices to ensure consumers benefit.
AMP chief economist Shane Oliver said the Coalition’s proposal would likely prove politically popular but questioned whether it would provide anything more than temporary relief.
He described fuel excise cuts as a ‘Band-Aid solution’ and a ‘sugar hit’ that reduce prices in the short term without addressing the underlying causes of higher fuel costs.
‘The main beneficiaries are often those driving bigger, less fuel-efficient vehicles, who tend to be higher-income earners,’ he told the Daily Mail.
Dr Oliver argued a more targeted approach would be preferable, including relief for truck drivers, farmers and low-income households.
While he backed the proposal to abolish the heavy vehicle road user charge during oil price shocks, he said broad fuel tax cuts could undermine market signals that encourage consumers to reduce fuel use or switch to alternatives such as electric vehicles.
‘If fuel prices remain elevated for a long period, all this really does is delay the adjustment that eventually has to occur,’ he said.
‘It’s a short-term measure that provides relief, but it doesn’t solve the underlying problem.’