Fuel Excise Cut Plan Sparks Debate Over Inflation Risk

The Australian government's plan to slash fuel excise as petrol and diesel prices soar has sparked a heated debate over whether relief should be targeted towards those struggling most or handed out universally.

Nationals Senate leader Bridget McKenzie argued that the Fuel Price Shield, which would halve fuel excise when global oil prices remain above $US100 a barrel for two weeks, should benefit all motorists to help businesses and industries affected by higher fuel costs.

However, independent MP Allegra Spender pushed back against blanket relief, saying it could be inflationary if not targeted towards households that need it most and industries where soaring fuel costs have broader consequences.

'I think that it can be inflationary if it isn't targeted,' Ms Spender said. 'And actually genuinely I agree with you Bridget on targeted to the trucking industry and the freight industry.'

Ms McKenzie rejected adding further complexity, arguing everyone buying petrol or diesel is paying fuel tax.

The debate comes as the Reserve Bank watches the inflationary impact of elevated oil prices closely. Governor Michele Bullock said this week that oil prices remain elevated and inflation risks remain tilted to the upside.