By Boyd Champness

WHILE the Federal Government appears to have reached some sort of agreement with the Democrats on exempting food from the goods and services tax, proposed cuts to diesel fuel remain a major sticking point.

The Democrats – Australias third major political force after the right-wing Liberal and National parties and the opposing left-wing Labor Party – holds the balance of power in the Senate (Upper House) with independent Senator Brain Harradine.

A fortnight ago, the Democrats kept their election promise and opposed the Governments tax reform package, saying it couldnt support the introduction of a GST on food and a diesel rebate for industry in its present form.

But while the Government appears certain to weaken on food, the diesel rebate remains the subject of intense and unresolved negotiations.

The Democrats are concerned the rebate will lead to more truck freight and therefore greater diesel emissions.

According to The Weekly Times, the Democrats are pushing for a A$1 billion (£400m) subsidy for farmers, instead of the A$3.5 billion across-the-board discount in the Governments tax package, after initially opposing the rebate altogether.

This middle ground approach might be enough to appease National Party leader Tim Fischer and his deputy John Anderson, who both threatened to resign from Parliament if the diesel rebate was not delivered.

The National Party relies on rural Australia for its supporter base and failure to get the rebate passed is likely to result in a massive voter backlash at the next election for the already struggling party.

Democrats leader Meg Lees indicated there was an opportunity for compromise on diesel fuel.

“While we would like to throw out the entire diesel fuel rebate programme and look at alternative energy, were not going to get there,” she told The Weekly Times.

“We need to work within their parameters but in an environmentally friendly way as we possibly can.”

Its estimate that the Governments proposed 58% road and rail diesel excise cut in its present form 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.