Broken pledge to cost drivers

Motorists will pay more for petrol with the Abbott Government's first Budget to increase fuel taxes in another broken election promise that could cause more political pain than the deficit tax.

The West Australian has confirmed Treasurer Joe Hockey's first Budget will reinstate six-monthly indexation of fuel excise, which has been frozen at 38.14c per litre since 2001.

Within a year, filling up a 50-litre car will cost an extra 63c, including GST, or $32.75 over a year, assuming a weekly fill.

Within four years, fuel excise will increase to nearly 42c a litre, adding $1.87 to the cost of a tank of fuel, or $97.25 extra a year.

The Australian Automobile Association said motorists would pay $3.7 billion extra in tax over the next four years.

Prime Minister Tony Abbott promised before the election that there would be no increased taxes under a coalition government but he is now locked into introducing at least two new taxes in Tuesday's Budget.

As revealed in The West Australian yesterday, people on incomes of more than $180,000 a year will pay an extra 2 per cent tax from July 1.

Before the election, Mr Abbott pledged to instigate a taxation White Paper and that the coalition would seek a mandate at the next election before a tax rise.

Former prime minister John Howard froze the indexation of fuel in March 2001 amid motorist anger about pump prices and the GST. At the time, petrol cost about 92¢ a litre. Yesterday, it was averaging $1.56 a litre in Perth.

Deloitte Access Economics yesterday calculated that if fuel indexation had not been frozen 13 years ago, motorists would be paying an extra $5.3 billion in excise in 2013-14 alone.

To contain a voter backlash, the Abbott Government is likely to promise that all extra revenue collected by the fuel excise rise will be spent on roads.

AAA chief executive Andrew McKellar said this would be a furphy, given less than a quarter of the $15 billion collected in fuel excise was currently spent on roads and transport infrastructure.

"Voters will be very cynical if they see a cynical tax grab and broken promises," Mr McKellar said.

The Budget will also lock in $2.5 billion in savings from the Government's success in stopping asylum seeker boats.

Immigration Minister Scott Morrison said every boat that arrived under Labor cost taxpayers about $12.5 million in immigration costs alone.

"We are ending the cost, chaos and tragedy that occurred under Labor on our borders," Mr Morrison said.

The West Australian

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