The Greens have decided to oppose the government’s plan to reintroduce indexation for petrol excise, without engaging in any negotiation.



This means petrol excise indexation is another key budget decision that faces defeat in the Senate, at a cost to the Abbott government’s budget of $2.15bn over the next four years.



The Greens had said they would support the measure, but they now say that was because it was potentially a tax on pollution, but would not amount to that if the Abbott government spent all the money on new roads. It would then amount to a tax on poor families without access to public transport.



"This is purely about revenue raising for roads," the Greens leader, Christine Milne, said, denying she had been rolled by her party on the issue.

"It is a difficult issue for us because we want to see people using less polluting fuels, but if we facilitate this we will see more and more money going into roads with more cars on them," she said.

"Why would we want to put more money into the Abbott government's pockets to roll out more freeways and tollways that people don't want."

Milne attacked what she said was "the hypocrisy of the prime minister telling President Obama fuel excise is a climate change price signal but here in Australia using the money to build more roads".



The Greens said earlier they see Abbott as a “crash or crash through” politician and have “zero confidence” in his word. They have decided to vote down the whole package of legislation on the fuel excise “with no negotiation”.

And they objected to the government’s plan to pay the excise back to miners and farmers as part of their fuel rebates, claiming that “big miners should pay more for fuel just like everyone else. Why should Gina Rinehart get cheap fuel when ordinary commuters suffer?”

The measure is also opposed by Labor and the Palmer United party, meaning it will fail in the Senate.

The excise on fuel was frozen by the Howard government in 2001 when it was under assault over “cost of living” concerns after the introduction of the goods and services tax in 2001.



The excise was frozen at 38.14 cents a litre, and the twice-yearly automatic indexation of the tax that Labor had introduced in 1983 was abolished.



It was a decision with a cost that escalated over the years, and now leaves the budget well over $5bn a year worse off.

In a scene-setting speech in early April, the treasury secretary, Martin Parkinson, urged the government to increase the proportion of government revenue collected from indirect taxes such as the goods and services tax or fuel excise.

He said research consistently showed that “reduced reliance on income taxes and increased reliance on other, more efficient sources of revenue, including indirect taxes, can support higher growth and higher living standards by increasing workforce participation and lifting productivity”.

He said without changes to indirect taxes such as fuel excise and the GST, Australia was heading in the opposite direction, with much more government revenue coming from personal taxation as inflation pushed more taxpayers into higher tax brackets.

But considering the idea of reintroducing fuel excise indexation, the Grattan Institute think tank said it would hit the bottom 20% of households the hardest because they spend a greater proportion of their income on fuel.

