The federal government has announced it is cutting the fuel excise in half, from midnight.

Josh Frydenberg delivered the news in his federal budget speech on Tuesday.

The Treasurer says it will save Australians 22 cents a litre on petrol.

But it will ultimately be the fuel companies who’ll decide how much of that is passed on to motorists.

The Treasurer has warned fuel companies they must pass on the saving, or face penalties.

Mr Frydenberg said the cut would be in place for the next six months.