Australia to Wind Back Fuel Excise Discount

The federal government is winding back its discount to the fuel excise, after three months of relief for motorists.

The 50 per cent discount, which has knocked 32 cents off each litre of petrol, will drop back to 16 cents between July 1 and August 2, before tapering off altogether.

The Heavy Vehicle Road User Charge, which has been free since April, will rise to 16 cents per litre until August.

It still offers a discounted rate, usually costing 32.4 cents per litre.

Both temporary measures were originally set to expire on June 30.

The changes to the discounts means fuel prices are likely to jump slightly, but other factors like global oil prices will also impact domestic costs.

The government says it welcomes the end to the war in the Middle East, and the subsequent substantial drop in fuel prices as a result, but says it recognises people are still under pressure.

Prime Minister Anthony Albanese said the extra month of discounted fuel will also help manage demand at service stations as the excise tapers off.

"The 16 cents a litre extension to the fuel tax cut that we've announced today will reduce the cost of a 65 litre tank of fuel by around $11," he said.

"We'll continue to do what we can to shield Australians from the worst impacts of this conflict including securing additional fuel from our partners."

Treasurer Jim Chalmers says the extra month of discounts will continue to help take the sting out of prices.

"On top of our other cost of living help including more tax cuts for every taxpayer, this will make a meaningful difference when it comes to helping Australians make ends meet," he said.

The cost of the extension to the fuel excise cut and reduction to the Heavy Vehicle Road User charge will be around $400 million.

Global fuel prices keep falling

Fuel excise relief was introduced on April 1, after the United States and Israel's strikes on Iran triggered the closure of the Strait of Hormuz and sent global oil prices skyrocketing.

It reduced fuel costs by 26.3 cents per litre.

Since they peaked at the end of March, the government says petrol prices in most capital cities have dropped by about 90 cents per litre, and are now lower than when the conflict began.

It says diesel prices are down by about $1 a litre, but still average about 20 cents per litre higher than when the conflict broke out.

Mr Albanese says the government has taken action to protect Australia against the impacts of the war in the Middle East, including boosting the Minimum Stockholding Obligation, legislating new ACCC powers to crack down on price gouging, and creating the $7.5 billion Fuel and Fertiliser Security Facility to support additional supply and storage.

He has also warned that it may take several months before things return to normal, with the shock waves of the closure of the Strait of Hormuz set to continue.

State and territory governments also pitched in, using their GST revenue to fund a 5.7 per cent portion of the cut to the fuel excise over the last three months.

The government says it will seek support from the states to cover the extension through July, at a national cabinet meeting on Monday.