Global oil prices are soaring amid supply pressures, pushing regular unleaded petrol in Australia to around $2.38 per litre on average. The headlines focus on bowser shock, but the numbers tell a different story. Australia's fuel excise is significantly lower than in many other countries, and that advantage becomes clearer when viewed against what motorists elsewhere endure.
The Australian government imposes a fuel excise currently set at 52 cents per litre, with fuel also subject to GST at 10 per cent. A litre of petrol minus the fuel excise is around $1.70, meaning the tax component represents roughly a quarter of the total pump price. Global crude oil costs drive the majority of recent price increases.
The international comparison is striking. Compared to other OECD member states, Australia has some of the cheapest petrol prices and related taxes, with taxation for roads via excise being very, very low when looking at similar economies. Australia has a pretty good deal for road users. Norway has a tax of $1.68 per litre, and in France that number is $1.40 per litre, a substantial difference from Australia. Europeans regularly pay upwards of $3 per litre of petrol on any given day, with that number even higher now with ongoing conflicts.
Understanding how Australia's tax structure works is essential to appreciating this advantage. The excise tax creates revenue for the government to spend on roads and infrastructure. It doesn't cover the total costs of maintenance and upgrades, but it makes a positive difference in the budget. However, this framing obscures an important detail: the formal link to road funding most recently ceased in 1992. Since then, fuel tax has been a general revenue-raising tax with only a minor link with the Australian Government's overall level of road funding.
Motorists sometimes grumble about what feels like double taxation. The fuel excise and GST are a tax on a tax, and the only other commodities where that happens are alcohol and cigarettes. Yet in reality, Australia has a relatively low fuel tax rate compared with most other OECD countries, even accounting for the GST layer.
The tax has also been subject to significant policy changes. Since 2014, it has been indexed and has been able to fluctuate with inflation. The most recent temporary intervention came during the cost-of-living crisis. The 2022-23 Budget measure temporarily halved excise rates for the six-month period from 30 March 2022 to 28 September 2022, which provided temporary relief from high fuel prices for households, but the operation of the fuel tax credit system means that it provided limited relief to businesses.
For households struggling with fuel costs, the hard reality is that cutting excise provides limited relief if crude oil prices remain elevated. Minus the fuel excise, petrol costs around $1.70, with much of this cost coming directly from rising oil prices overseas. Brent crude oil has been costing around $143 per barrel this week. If Australia is going to get real relief at the bowser, it must come from falls in oil prices, because cutting the excise while still paying record prices offers minimal benefit.
Australia's fuel tax remains one of the developed world's most modest, a reflection of both policy choice and economic positioning. For now, that arrangement shields Australian households from the far steeper costs their European counterparts routinely face. The question is not whether Australia's tax burden is high; it is whether the current rate, linked to inflation but not to roads, reflects sensible fiscal policy or represents an opportunity cost elsewhere in the budget.