Fuel prices on the rise.
Fuel prices on the rise. John Gass

Fuel costs to rise as Abbott brings back yearly tax grab

THE Federal Government is facing a major backlash over plans to introduce higher fuel taxes and a deficit levy with even its own MPs sounding warnings about the impact on everyday costs.

Cabinet has been discussing reintroducing the indexation of the tax, which has been frozen since 2001, as part of its plans to combat Australia's debt.

The plan could see the tax on fuel lifted yearly or twice a year.

But the RACQ has said any increase would be unwarranted and unfair and would place unnecessary strain on the ordinary family.

"Any increase in fuel excise hits motorists and at the same time the trucking and mining industry is subsidised," RACQ executive general manager for advocacy Paul Turner said.

"The average motorist is the one who would be signalled out."

Mr Turner said as it was, motorists were paying about 50 cents a litre in tax.

If the excise was increased by as little as three cents a litre, it would add "$50 a year on the fuel bill", increasing every year.

"Fuel is one of the more expensive consumables for the average family," Mr Turner said.

"A Sunshine Coast family will continue to pay pretty high fuel prices without the increases. We hope this is nothing but speculation."

The ABC reported on Friday, however, that the plan will go ahead, though it is not clear in exactly what form.

A one cent fuel excise lift would increase government coffers by $400 million.

Motorists have already been struggling to cope as the price of fuel at bowsers averaged around $1.60 a litre on the Sunshine Coast yesterday.

Mr Turner said this was because fuel was at the "top of the cycle" and it was expected to come down again to around $1.40.

Queensland Liberal National MP Ken O'Dowd has told the ABC's PM program the fuel changes will put pressure on inflation.

"I'm concerned that it does put all the costs up," Mr O'Dowd said.

"It's another tax and I guess it could be a broken promise.

"Whether it be tomatoes or lettuce, premium beef products ... anything that you buy virtually will all go up and [it] will have that inflationary effect on the economy.''

Mr O'Dowd told the ABC he is already detecting a serious backlash from within the community against the Government's proposed deficit levy.

"The phones haven't stopped, especially with our older folk. We got off on the wrong leg, talking about increasing the pension age, I don't think it was explained too good.''

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