FEDERAL Opposition leader Tony Abbott has labelled Prime Minister Kevin Rudd the "exaggerator" after his announcement  the carbon tax will be abolished, saving  families $380 a year.

Mr Abbott said the Rudd announcement had simply brought changes planned by former prime minister Julia Gillard forward by 12 months.

"He's not the terminator, he's the exaggerator ... he's the fabricator," Mr Abbott said.

Mr Rudd earlier announced families would save an average of $380 a year in a move to an emissions trading scheme from July 1 next year.

Speaking from Townsville, Mr Rudd said the government would terminate the carbon tax in favour of an emissions trading scheme which he was elected to introduce when he was first Prime Minister.

He said the move was designed to relieve cost-of-living pressures on families and offer a shot in the arm to business.

"This is modest relief but it is real," Mr Rudd said.

However, Mr Abbott said the  $380 saving to families would only apply for one year and the carbon tax was not being abolished but merely renamed.

He said the announcement by Mr Rudd this morning endorsed Opposition claims the carbon tax was hurting ordinary Australians by costing jobs and damaging the economy.

"He's admitted the carbon tax is clobbering the economy," Mr Abbott said.

In his announcement, Mr Rudd said axing the carbon tax would  come at a cost of $3.8 billion over the forward estimates, which would be offset by cuts in other areas, Mr Rudd said.

Treasurer Chris Bowen said the the statutory formula on fringe benefits tax on cars would be abolished, saving $1.8 billion over the forward estimates period. The change will most likely affect 320,000 people, who are expected to no longer be able to justify the claims.

Cuts will also be made to the top end of the public service, with executive and senior executive jobs to be cut by 1%.

Some environmental programs funded by the carbon tax are also being scaled back.

"These are not easy decisions to make, but they are the right decisions to make," Mr Bowen said.

Mr Rudd said the Household Assistance Package would not be affected by the change.


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