ABC

The Federal Government has announced an increase in the Bass Strait passenger vehicle subsidy.

The federal member for Denison, Duncan Kerr says the increase honours an election promise and will benefit Tasmania's economy and bring in more tourists.

The vehicle subsidy increases from $168 to $180, while a 20 per cent subsidy increase will also apply to other eligible vehicles like motorhomes, buses, motorcycles, vehicles towing caravans and bicycles.

Mr Kerr says the subsidy will also grow.

"And it means that it's guaranteed into the future," Mr Kerr said.

"It means that each time the CPI goes up, the assistance goes up, so yes its a strong commitment and keeping promises that were made at the election," he said.