By Boyd Champness

AUSTRALIAN Prime Minister John Howard has reiterated that farmers will not be disadvantaged by changes to the Federal Governments tax package.

Mr Howard made the comments after Australias third major party, the Democrats, teamed up with independent senator Brian Harradine to defeat the Governments tax reforms in the Senate/Upper House last week.

Speaking to the National Farmers Federation annual conference in Longreach, Queensland, Mr Howards comments came as some comfort to farmers who were concerned that the Federal Government would bow to the Democrats demands and drop its promised 58% cut in diesel excise.

Its estimated that a 58% road and rail diesel excise cut would offer savings of about A$1 billion for rural Australia – about A$2500 (£1000) a year for the average farmer – and give Australian exporters a A$4.5 billion boost.

But the Democrats, who hold the balance of power in the Senate with senator Brian Harradine, are primarily opposed to three aspects of the Governments tax package: a goods and services tax (GST) on food, further sell-off of Telstra (Australias telecommunication carrier) and a cut in diesel excise.

The Democrats are opposed to the diesel excise cut on environmental grounds.

An across the board GST on all purchasable items is the cornerstone of the Governments planned tax reforms.

And while it has maintained in the past that its proposed GST on food is not up for negotiation, the early signs indicate that it may relent in this area in order to get its reforms through.

This is the one area where the Democrats seem to be adamant.

But the Government, a coalition made up of the conservative Liberal Party and the rural-based National Party, is only too aware what will happen if its planned 58% cut in diesel excise is blocked.

Dissatisfied rural voters, who gave the coalition Government a scare at the last federal election by voting for Pauline Hansons populist One Nation Party, are banking on the diesel excise cut to boost their flagging economies.

Failure to deliver on diesel would decimate the National Party, whose leaders Tim Fischer and John Anderson have already threatened to quit if the GST package passes without the promised diesel rebates.