Senator the Hon Mathias Cormann

ASHLEY GILLON: More now on the Finance Minister's announcement that petrol prices will be rising in a couple of weeks' time. We are taking you live to Canberra now where our Sky News political editor David Speers is speaking with the Senator Mathias Cormann.

DAVID SPEERS: Ashley thank you very much for that, Finance Minister Mathias Cormann, thanks for your time.

MATHIAS CORMANN: Good to be here.

DAVID SPEERS: Firstly, explain to me how you are doing this? The increase in the tariff to affect an increase in the fuel price?

MATHIAS CORMANN: We are using the same methodology the previous government used to give effect to an increase in the excise and the customs duty on so-called 'alcopops' back in 2008. We will be tabling two tariff proposals in the House of Representatives this week in relation to the excise and the customs duty on fuel and that will give effect from 10 November onward to the Budget measure which is, as if the indexation had happened on 1 August, the excise on a litre of fuel will go from 38.143cents a litre to 38.6cents a litre.

DAVID SPEERS: This is a concession isn't it that you are unable to get the legislation to increase the excise through at the moment with the Greens, Labor or the Palmer United Party?

MATHIAS CORMANN: It is not a concession as much as we are keen to ensure that Budget measures are implemented as efficiently as possible. Obviously the 1st of August was the intended implementation date in the Budget...interrupted

DAVID SPEERS: But why not go ahead with that, it's because you haven't been able to reach an agreement?

MATHIAS CORMANN: Obviously, the intended implementation date was 1 August. We are now in late October. We are keen to get underway to start giving effect to what is a very important structural reform in the Budget and so by doing what we are announcing today, we will be able to give effect to that Budget measure come 10 November and the Parliament will then have 12 months within which to validate the decision that the Government has taken.

DAVID SPEERS: How hard has the Government tried, particularly with the Greens, who did signal some support for this, have you exhausted efforts there?

MATHIAS CORMANN: We do know that individual Green Senators are very supportive of this structural reform that we have put forward in the Budget, but Christine Milne has been adamant that under no circumstances would the Greens support this very sensible measure to ensure that the value of the excise on fuel keeps pace with inflation, that it doesn't continue to fall. You have to remember that back in 2001 when fuel excise indexation was abolished it was worth about 42 per cent of the average fuel price. It has gone down to about 25 per cent now. Really what we are trying to do is to ensure that the real value of the excise on fuel doesn't continue to fall. Christine Milne has indicated to us that she is in favour of regular reductions in the real value of the excise on fuel. We think it is important, in order to give ourselves a sustainable basis from which to fund additional investment in economic infrastructure, for us to pursue this reform.

DAVID SPEERS: But you are only getting 12 months here, unless suddenly the Greens and Labor do agree to keep this in place. And yet you are banking in the Budget a four year $2.2 billion tax windfall. Should you be banking four years' worth if you can only guarantee 12 months?

MATHIAS CORMANN: Well the policy decision of the Government is to reintroduce biannual indexation of fuel excise...interrupted

DAVID SPEERS: But you are unable to get it through.

MATHIAS CORMANN: The Parliament will have 12 months now to make a decision on whether or not they support that decision of the Government, and of course the legislation...interrupted

DAVID SPEERS: That is the point I am making. 12 months, yes you can do that, but unless they suddenly agree to keep this in place, you are not going to get the four years that you are banking.

MATHIAS CORMANN: We are very confident that with the benefit of another 12 months that Labor and the Greens will change their tune. We are very confident that the Parliament will validate... interrupted

DAVID SPEERS: But unless they change their tune, your Budget figures are wrong.

MATHIAS CORMANN: Unless they change their tune in about 12 months from now, and that is something Bill Shorten and Christine Milne have to reflect on, in about 12 months from now we would have to refund the additional revenue collected to fuel manufacturers and fuel importers. The decision really for Bill Shorten over the next 12 months is whether he wants the Government to refund taxes collected to fuel manufacturers and fuel importers, or whether he wants that money invested in productivity enhancing road infrastructure so we can grow a stronger, more prosperous economy moving forward.

DAVID SPEERS: Okay, now on this point, it is obviously motorists who will have to pay from November 10 a higher fuel tax. You're saying that if this is knocked off in 12 months' time, it will be the fuel importers and manufacturers who get the windfall. Would they be required to pass that on to motorists?

MATHIAS CORMANN: The short answer is no. The first point I would make is that the impact from our Budget measure on households is quite modest. It is an impact of about 40 cents a week by the end of 2014/15 for your typical family using 50 litres of fuel a week. But if in 12 months time, Bill Shorten and Christine Milne decide that they do not want these important structural reforms to our Budget to stand, then it would be a windfall for fuel manufacturers and fuel importers. There would be no requirement on those fuel importers and manufacturers to pass that windfall on to road users.

DAVID SPEERS: Why not? When the Government repealed the Carbon Tax, it made it very clear that the ACCC would enforce the power companies passed on the saving to people who actually paid it, the customers'. With this, it is the motorists who are paying it. Why not say, we will require that they pass it on?

MATHIAS CORMANN: Our intention is to collect the additional revenue to implement an important structural reform. The fuel excise is payable by fuel manufacturers, the customs duty is payable by fuel importers and the way it works…interrupted

DAVID SPEERS: And the Carbon Tax was payable by the electricity companies.

MATHIAS CORMANN: And our policy was to abolish the Carbon Tax and we made the necessary arrangements to ensure that properly flowed through the economy. It is a matter for Bill Shorten to explain how he wants to deal with the scenario that you are describing where he is...interrupted

DAVID SPEERS: You're the Government. If it is good enough to say we are going to make sure that power companies pass on the savings to people who paid it, surely it is the same here?

MATHIAS CORMANN: It is not the same because in relation to the Carbon Tax our position and our policy was to repeal the Carbon Tax which we have delivered on. And we made the necessary decisions to ensure that it is properly passed through to households and to business. In relation to fuel excise, we believe it is important to ensure that the real value of the excise on fuel keeps pace with inflation, that it doesn't continue to fall on a regular, on an ongoing basis year on year. So we are proposing this reintroduction of biannual indexation of fuel excise. If the Labor party or the Greens take an alternative view, it is up to them to decide on how they would deal with the consequences of that.

DAVID SPEERS: It is just bad luck to motorists?

MATHIAS CORMANN: The impact on motorists is very modest, it is 40 cents a week for your average household. But the positive impact on our economy is very significant because it will help us boost significantly our investment in productivity enhancing infrastructure. It will help us build a stronger, more prosperous economy, which will over time drive increases of revenue to Government on the back of stronger economic growth.

DAVID SPEERS: And just finally on that, will all the money go into roads? I hear you talking about productivity enhancing infrastructure, will it all still go into roads?

MATHIAS CORMANN: The first point is that in the Budget we have announced record investment in infrastructure, $50 billion of money going into infrastructure and our commitment remains for 100 per cent of the revenue collected by the fuel excise indexation to go into road infrastructure investment. The formal mechanism to legislate the special road funding account to give effect to that, will be a part of the validating legislation.

DAVID SPEERS: Finance Minister Mathias Cormann. Thanks for joining us.

MATHIAS CORMANN: Good to talk to you.