Howard refuses to cut excise as petrol prices soar

CANBERRA - Australian Prime Minister John Howard has refused to cut fuel excise despite record world oil prices pushing petrol to almost A$1.40 (NZ$1.53) a litre.

Motorists in Sydney, Melbourne and Canberra are paying as much as A139.9 cents a litre today, while prices have reached A137.9 cents in Perth and A134 cents in Adelaide.

And prices could continue to rise as the devastating effects of Hurricane Katrina in the United States on oil markets are fully realised.

Daiwa Securities analyst Mark Pervan says the full effects of the natural disaster are yet to be passed on to the consumer.

"I think the fallout from the hurricane damage is probably going to be larger than expected," he said.

"I wouldn't be surprised if we breached record (oil price) highs in the next few weeks."

Queensland Premier Peter Beattie, whose state uses its share of GST revenue to subsidise petrol prices, says the federal government should cut excise to help out motorists.

"The reality is they cream off a huge amount every day. He can do something about it if he really wants to," Mr Beattie said.

But Mr Howard said cutting the excise by enough to make a difference would cost the government billions of dollars.

"I'm sorry, and I know this is not a popular thing to say, and I know people are hurting, but the fact is, to have any appreciable impact on the price, you're looking at billions and billions," Mr Howard told Southern Cross Radio.

The federal government cut the excise on petrol by A1.5 cents in 2001 and removed the old system of automatic indexation -- saving motorists about six and a half cents a litre on current prices.

Cutting the excise by just one cent a litre would cost the government A$380 million, and motorists would want a cut of at least five to 10 cents a litre, Mr Howard said.

He dismissed NSW Premier Morris Iemma's call for an inquiry into profiteering, saying world fuel prices were out of the hands of government.

Mr Howard blamed Hurricane Katrina for the price spike and said he hoped the effect would be temporary.

"It is a very difficult situation. It is 100 per cent due to world market circumstances. There is very little room for the government to move," Mr Howard said.

But he played down concerns that the states were raking in huge increases in GST revenue as petrol prices rose.

"If people have got to spend more money on petrol and they have a set amount of money each week, then they end up spending less on something else," Mr Howard said.

"And if the something else is something that attracts the GST, well what goes up with GST collections on petrol goes down with GST collections on those other items so you don't necessarily have an increase in GST collections, or not a big one."

- AAP