REMOVAL OF STATE AND TERRITORY FUEL SUBSIDIES

Acting Treasurer and Minister for Finance and Administration, the Hon

John Fahey MP, today advised that the Treasurer has written to the Chief

Minister of the Northern Territory, the Hon. Denis Burke MLA, in relation

to the proposed abolition of the Northern Territorys general on-road

fuel subsidy of 1.1 cents per litre from 1 July 2000.

The Treasurer advised the Chief Minister that the abolition of the subsidy

would result in an increase in fuel prices of 1.1 cents per litre to Territorians

and an unjustified financial windfall to the Northern Territory.

The Treasurer has also written in similar terms to the Premier and Treasurer

of Western Australia, the Hon. Richard Court MLA, in relation to that

States Budget announcement proposing to abolish its on-road diesel fuel

subsidy from 1 July 2000.

The Acting Treasurer has noted recent reports that Victoria is also considering

abolishing its on-road fuel subsidies.

At no stage in formulating the Intergovernmental Agreement on the

Reform of Commonwealth-State Financial Relations (IGA) did the States

and Territories canvass an intention to remove their on-road fuel subsidies.

If Victoria, the Northern Territory or Western Australia proceed to abolish

their on-road fuel subsidies, the Commonwealth will examine all options

available to it, including deduction of the savings from the abolition

of the subsidies from the budget balancing assistance provided to States

and Territories under the IGA.

“These fuel subsidies arose as a result of the Commonwealth acting

to protect State and Territory revenues in light of the 1997 High Court

decision striking down state fuel taxes. The subsidies are in place to

benefit motorists,” Mr Fahey said.

“The very strong view of the Commonwealth is that these subsidies

should not be abolished. Any State or Territory doing so will be increasing

the cost of fuel to their motorists and receiving an unjustified financial

windfall”.

CANBERRA

26 June 2000