Fuel excise deadline a “trap” for government and business, Shippit CEO warns

Labor’s Treasury spokesman has warned the temporary discount on the fuel excise is a thinly laid “trap” that could snap in September, while Shippit CEO Rob Hango-Zada has warned businesses could be forced to pick up the tab.

Tuesday’s budget confirmed the fuel excise — a levy built into the price of petrol to help fund roads and infrastructure — would be halved to 22.1 cents per litre in a bid to stop surging fuel prices amid the Russia-Ukraine conflict.

A similar measure in New Zealand is seeing motorists save up to $17 when they fill up a 60L tank.

Back home, however, the fuel excise discount has a September 28 expiry date, when Treasurer Josh Frydenberg is confident the price of oil will be $100 a barrel, amid the eye-watering cost to the budget.

“We have been clear. This is a $3 billion hit to the budget bottom line. The legislation will be very clear. This will expire on September 28. It will sunset at that time and it won’t be extended,” Frydenberg says.

Labor’s treasurer Jim Chalmers says that day will likely bring a storm of discontent among millions of motorists faced with 22-cent higher pump prices — essentially a can kicked down the road.

“Clearly we’re not going to stand in the way of delivering relief for working families whose real wages are falling. But I think one of the motivations from the government is to take this problem from March 2022 and just to delay it until September 2022,” Chalmers says.

“There’ll be some cost-of-living relief in the interim but there’ll be a difficult period when the price of fuel goes back up.”

Hango-Zada says it’ll be businesses — particularly in the logistics sector — who are expected to ride the wave of petrol prices while shielding customers as much as possible.

“When fuel prices surge, carriers absorb the increased cost in the short-term,” Hango-Zada explains.

“Ultimately, however, these costs hit retailers’ bottom lines. In the end, they’re faced with a lose-lose decision to either absorb the costs themselves or pass them on to their customers, placing more pressure on an already critical cost-of-living crisis.

“We hope this short-term measure doesn’t come at the expense of a longer-term strategy.”

Australasian Convenience and Petroleum Marketers Association (ACAPMA) CEO Mark McKenzie says he expects “the excise cut is expected to provide some significant short term relief to businesses, particularly those in outer metro and regional areas”.

McKenzie has heard from retailers that discretionary spending at petrol stations — that’s everything except the fuel — has fallen by a quarter as people “struggle to pay for fuel”.

In terms of revenue loss, however, he tells SmartCompany it is worth noting that “the estimated $3.25 billion cost of this 22 cents per litre cost, appears to be offset by higher tax receipts from the current high commodity prices being realised by Australian resources companies”.

“So the cut provides immediate relief at the pump but is unlikely to have a marked negative impact on the longer-term economic outlook for businesses,” he says.

Chalmers has not ruled out extending the fuel excise cut if elected in May’s federal election, but flagged it would be tough for any government to make such a discount work for the budget’s bottom line moving forward.

“You always want to do what’s best for the economy at the time and so it’s hard to kind of imagine exactly what the petrol price will be in September, what the economic conditions will be in September,” Chalmers says.

“Doing this doesn’t come cheaply and our commitment to the Australian people is to be responsible with the budget, so we don’t preempt our decisions.

“It would be difficult for a government of either political persuasion to continue this relief indefinitely.”

In the meantime, the Australian Competition and Consumer Commission’s chair Gina Cass-Gottlieb has warned fuel retailers to pass the cut on “as soon as possible, as existing petrol stock levels are used up”.

“We will contact petrol retailers to set out our clear expectations that the savings are passed on to consumers and advise them that we will be monitoring their margins,” Cass-Gottlieb says.

McKenzie says petrol retailers have experienced whiplash amid the snap decision making — the excise was cut on Tuesday midnight with just a couple of days’ notice — but are adjusting fast.

“There have been some adjustment issues for our industry given the speed at which the excise decision was made but we expect these issues to wash through the network in the next five to seven days,” he says.