Joint Release By the Acting Treasurer

and the Deputy Prime Minister, Minister For Transport and Regional Services

PETROL AND DIESEL EXCISE REDUCTION AND FUEL SALES GRANT SCHEME

We are announcing today a reduction in petrol and diesel excise rates

from 1 July. This reduction, together with cost savings from tax reform,

will mean that the pump price of petrol and diesel need not rise with

the introduction of the GST.

From 1 July 2000, the new excise rates will be 37.481 cents per litre

(cpl) for unleaded petrol and diesel and 39.725 cpl for leaded petrol.

This is a reduction in the excise rates of around 6.7 cpl. Cost reductions

that will flow to the industry as a result of tax reform are estimated

to reduce the price of petrol and diesel by around 1.5 cpl.

This total reduction of 8.2 cents per litre is based on a strike price

of 90 cents per litre, which is higher than the actual average price of

unleaded petrol in metropolitan areas throughout Australia over past months.

The cost of the reduction in excise rates is around $2.12 billion pa.

Adding to that is the fuel sales grants scheme at a cost of around $0.1

billion p.a., for a combined cost of over $2.3 billion.

These measures mean that consumers, including those in regional areas,

will not need to pay any more for petrol and diesel as a result of the

GST. For businesses, which get a credit for GST, the cost of fuel will

fall by about 10 per cent. For heavy transport and those qualified for

the Diesel and Alternative Grants Scheme, costs will fall further (see

below).

Fuel Sales Grant Scheme

The Government has announced that from 1 July 2000 a fuel sales grant

will be available to all retailers of petrol and diesel in non-metropolitan

and remote areas where fuel prices are generally higher. The grant, in

addition to the excise reduction, will mean that prices in non-metropolitan

and remote areas need not change relative to metropolitan prices and in

many cases the differential will narrow.

Regulations have been agreed to by the Governor General for setting the

eligible locations and grant rates The Government has recommended to the

Governor-General that regulations be made stating the mechanism for setting

the eligible locations and also setting the grant rates. Subject to the

Governor-General’s approval, it is proposed that the regulationsand will

contain the following information.

A grant rate of 1 cpl will be paid for sales of petrol and diesel

to consumers in non-metropolitan areas, with a 2 cpl grant provided

for sales in remote areas. For isolated cases where fuel prices are beyond

$1.20 per litre in remote areas, fuel retailers may apply to the ATO for

an additional grant.

The boundaries for the grant have been set using an independent index

called the Accessibility/Remoteness Index of Australia (ARIA). This index

of remoteness was developed last year by the National Key Centre for Social

Applications of Geographic Information Systems at the University of Adelaide.

Detailed maps of the boundaries are available from the Australian Taxation

Office (ATO) at their website www.taxreform.ato.gov.au.

The Government has made it very clear that fuel retailers will be held

accountable for passing on the full benefit of the grant to consumers.

The grant will be prescribed under the Price Exploitation legislation

administered by the Australian Competition and Consumer Commission (ACCC).

Any failure to pass the grant on to final consumers may result in substantial

penalties of up to $10 million for corporations and up to $500,000

for individuals.

While the ACCC will continue to monitor petrol and diesel prices to ensure

that retailers comply, we we would encourage consumers who are

concerned about the pass through of the grant to contact the ACCC hotline

on 1300 302 502 with their concerns.

Fuel retailers will have received a registration form for the fuel sales

grant from the ATO. Fuel retailers should register now with the ATO to

receive an advance payment.

Further information on the fuel sales grant scheme can be obtained from

the ATO Fuel Infoline, 1300 657 162 or the ATO website, www.taxreform.ato.gov.au.

Diesel Excise Reductions

The new on-road Diesel and Alternative Fuels Grants Scheme will, when

combined with the New Tax System and the reduction in diesel excise rates,

reduce the effective diesel excise from 44 cpl to 20 cpl for eligible

vehicles. This will include vehicles with a gross vehicle mass (GVM) of

20 tonnes or more. For vehicles with a GVM of between 4.5 tonnes and 20

tonnes, the grant is payable for trips outside the metropolitan area.

The existing off-road Diesel Fuel Rebate Scheme is also being extended.

Under the new arrangements, a full rebate will be available to existing

eligible activities, including agriculture, fishing, forestry and mining,

as well as some private residences, nursing homes, hospitals and aged

person homes, and eligible businesses in rail transport and marine transport.

Together with The New Tax System changes, this will take about 44 cents

a litre off the cost of diesel for rail and marine transport.

The combined impact of these measures will be of major benefit to regional

and rural Australia by lowering transport costs and improving the competitiveness

of Australian exports.

CANBERRA

22 June 2000

Contact: Michael OBrien (Treasurers Office)

02 6277 7340

0417 206 972

Paul Chamberlin (Deputy Prime Ministers Office)

02 6277 7680