Australia sets fuel-tax increase despite opposition

Petrol pump (file image) Image copyright PA
Image caption The government says the impact of the tax increase on motorists will be modest

The Australian government has announced an increase on fuel tax, despite the move being opposed in the Senate.

Finance Minister Mathias Cormann said federal tax on petrol at the pump would increase by less than one cent to 38.6 cents (20p) a litre starting on 10 November.

The tax will then increase every six months in line with inflation.

The move is expected to raise an extra A$2.2bn for the government over the next four years.

However, the prospect of higher fuel prices has angered many Australians a year after Prime Minister Tony Abbott's conservative government was elected on a platform of raising no taxes.

"The impact on households will be modest but the impact on our capacity to earn a stronger, more prosperous economy will be significant,'' Mr Cormann said.

The government pressed ahead with the increase, despite being unable to get a majority in the senate to support it.

If the senate does not validate the tax increase within the next year, the government will be forced to refund A$120m of additional taxes raised to oil companies. Analysts say motorists are unlikely to be reimbursed.

Mr Cormann said he was "confident" that the increase would be validated and called on the opposition to support the new legislation in the senate.

The government announced the increase in its May budget and planned to impose it in August, but then failed to win sufficient support in the senate.

Political analysts say increases in fuel tax are likely to prove less popular in car-loving Australia than the controversial carbon tax that Mr Abbott's government repealed in July.

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