Over the next three years sulphur in unleaded petrol will be reduced to 50ppm, a third of the current limit, and diesel will be gradually cut to only 10ppm by January 2009, forced down from its current limit of 500ppm.

It is predicted the cut in diesel fuels will immediately cut pollution from particulate matter by five per cent nationally.

"Lower sulphur will mean much better air quality in Australia's cities and towns and help the two million asthmatics and countless other Australians who suffer from breathing problems,” said Campbell.

"These reductions will have an immediate impact on particle emissions from the existing vehicle fleet and, just as importantly, will hasten the introduction of the next generation of cleaner vehicle engines and emission controls.

"Pollution from particulate matter will be immediately reduced by five per cent nationally with the introduction of 10ppm diesel. Reductions will increase as new vehicle technologies come on stream, designed to run on this virtually sulphur free diesel.

Major fuel refiner Caltex Australia has already welcomed the decision saying the decision will facilitate the introduction of new, cleaner and more efficient engine technologies.

"Despite the high cost of new refining equipment, Caltex is proud to contribute to achieving these major reductions in air pollution. The new standards are comparable to moves in Europe, North America and Asia to improve air quality and will help ensure Australia’s fuels and vehicles are among the cleanest in the world,” said Caltex managing director and CEO Dave Reeves.