tag:theconversation.com,2011:/au/topics/fuel-excise-11337/articlesFuel excise – The Conversation2023-10-25T03:54:46Ztag:theconversation.com,2011:article/2159922023-10-25T03:54:46Z2023-10-25T03:54:46ZNational road-user charges are needed – and most people are open to it, our research shows<figure><img src="https://images.theconversation.com/files/555716/original/file-20231025-23-x7jo6h.jpg?ixlib=rb-1.1.0&rect=8%2C0%2C5501%2C3667&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The <a href="https://www.theguardian.com/law/2023/oct/18/why-the-high-court-struck-out-victorias-ev-tax-and-the-ripple-effects-of-the-decision#:%7E:text=Victoria%20introduced%20a%20distance%2Dbased,2.3c%20for%20each%20kilometre.">High Court</a> ruled last week that Victoria’s road-user charge for electric vehicle (EV) drivers is unconstitutional. Because the court decided it’s an excise, only the <a href="https://eresources.hcourt.gov.au/downloadPdf/2023/HCA/30">Commonwealth</a> can now impose such a tax. </p>
<p>The Victorian government introduced the <a href="https://www.abc.net.au/news/2023-09-27/ombudsman-victoria-electric-vehicle-road-user-charge-unfair/102905834">controversial</a> distance-based charge in 2021. The court decision will likely derail similar <a href="https://www.smh.com.au/environment/sustainability/electric-vehicle-court-ruling-ups-pressure-for-federal-approach-20231018-p5ed55.html">plans by other states</a>. </p>
<p>Current road taxes are blunt instruments that don’t reflect the <a href="https://fbe.unimelb.edu.au/newsroom/why-we-should-be-taxing-australian-drivers-differently">true costs of driving to society</a>. The fuel excise does not properly account for traffic congestion or emissions. It makes no allowance for people’s ability to pay. Car registration fees are also not related to the amount of travel, congestion or emissions produced by driving. </p>
<p>Hence the need for road-user charges. To understand public attitudes to such charges in Australia, we surveyed more than 900 people in Melbourne and Sydney. The results of <a href="https://imoveaustralia.com/education/phd-student-profile/tariq-munir/">this research</a> showed a good appetite for road taxation reform in the nation’s two largest cities. </p>
<p>Only about a third of respondents opposed road-user charges to reduce traffic congestion in their cities. And support increased when they were told the revenue would be used to improve traffic infrastructure and public transport. The findings offer insights into how road-user charging could be rolled out successfully across the nation.</p>
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Read more:
<a href="https://theconversation.com/its-good-the-high-court-overturned-victorias-questionable-ev-tax-but-theres-a-sting-in-the-tail-215985">It's good the High Court overturned Victoria's questionable EV tax. But there's a sting in the tail</a>
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<h2>What do people think about road-user charges?</h2>
<p>For our research, we surveyed a representative sample of 929 people (373 in Melbourne and 556 in Sydney) in April 2022 (Melbourne) and November 2022 (Sydney). </p>
<p>A majority of respondents (70% in Sydney and 65% in Melbourne) supported the introduction of measures to reduce traffic congestion in their respective cities. </p>
<p>When specifically asked if they would support road-user charges, only 32% of respondents in both cities opposed the idea. Around 29% of respondents in Sydney and 34% of respondents in Melbourne were undecided. </p>
<p>They were then told the revenue raised would be used to improve all forms of transport infrastructure and services. Levels of opposition and uncertainty fell. </p>
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<a href="https://images.theconversation.com/files/555728/original/file-20231025-23-8y2az3.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Stacked bar chart showing percentages supporting, opposing or undecided about road-user charges depending on where revenue is invested." src="https://images.theconversation.com/files/555728/original/file-20231025-23-8y2az3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/555728/original/file-20231025-23-8y2az3.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/555728/original/file-20231025-23-8y2az3.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/555728/original/file-20231025-23-8y2az3.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/555728/original/file-20231025-23-8y2az3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/555728/original/file-20231025-23-8y2az3.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/555728/original/file-20231025-23-8y2az3.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>In particular, respondents in both cities were most supportive of road-user charges if the revenue raised was used to improve public transport. Opposition fell to 20% in Sydney and to 23% in Melbourne. The percentage of undecided respondents fell to 24% in Sydney and to 30% in Melbourne. </p>
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<a href="https://images.theconversation.com/files/555731/original/file-20231025-19-xutsw1.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Pie charts show percentage of respondents supporting, opposing or undecided about road-user charges if revenue is spent on improving public transport" src="https://images.theconversation.com/files/555731/original/file-20231025-19-xutsw1.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/555731/original/file-20231025-19-xutsw1.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=443&fit=crop&dpr=1 600w, https://images.theconversation.com/files/555731/original/file-20231025-19-xutsw1.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=443&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/555731/original/file-20231025-19-xutsw1.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=443&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/555731/original/file-20231025-19-xutsw1.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=557&fit=crop&dpr=1 754w, https://images.theconversation.com/files/555731/original/file-20231025-19-xutsw1.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=557&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/555731/original/file-20231025-19-xutsw1.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=557&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>Around 96% of respondents in Melbourne owned a private car, compared to 90% in Sydney. These cars were the main means of transport for most respondents (75% Melbourne, 64% Sydney). Average vehicle occupancy was 1.25 people per vehicle in Melbourne and 1.27 in Sydney. </p>
<p>Sydney had a higher proportion of public transport users (27% Sydney, 16% Melbourne). Around 7% of respondents in both cities preferred walking and <a href="https://theconversation.com/banning-tiny-vehicles-would-deny-us-smarter-ways-to-get-around-our-cities-113111">micro-mobility</a>, such as bikes and scooters, as their main means of getting around.</p>
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Read more:
<a href="https://theconversation.com/the-high-court-decision-on-electric-vehicles-will-make-charging-for-road-use-very-difficult-216107">The High Court decision on electric vehicles will make charging for road use very difficult</a>
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<h2>Savings affect willingness to pay road-user charges</h2>
<p>We found willingness to pay a road-user charge varies with the level of expected savings. </p>
<p>Around 66% of respondents in both cities were willing to pay a road-user charge if it saved them up to $800 a year on registration fees and fuel taxes. Another 13% of respondents in Sydney and 11% in Melbourne were willing to pay the charge if savings exceeded $800 a year. </p>
<p>Around 55% of respondents in Sydney and 46% in Melbourne would be willing to pay a congestion charge if it cut their total daily travel times by 10 to 30 minutes. Another 18% of respondents in both cities would pay the charge if it cut travel times by more than 30 minutes. </p>
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<figcaption><span class="caption">Jonas Eliasson, architect of Stockholm’s congestion pricing scheme, explains how subtly nudging just a small percentage of drivers to stay off major roads can end traffic jams.</span></figcaption>
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Read more:
<a href="https://theconversation.com/will-drivers-who-paid-victorias-electric-vehicle-tax-be-able-to-get-their-money-back-216021">Will drivers who paid Victoria's electric vehicle tax be able to get their money back?</a>
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<h2>Why oppose road-user charges?</h2>
<p>Many <a href="https://www.mdpi.com/2071-1050/13/21/12048">factors</a> influence public opposition to road-user charging. These include <a href="https://www.sciencedirect.com/science/article/abs/pii/S0965856419313175">distrust</a> in governments, uncertainty about <a href="https://www.sciencedirect.com/science/article/abs/pii/S0967070X10000326">benefits</a>, and concerns over <a href="https://link.springer.com/article/10.1007/s11116-013-9459-4">equity</a>. Other barriers include <a href="https://www.hindawi.com/journals/jat/2020/4242964/">understanding</a> how the scheme works, <a href="https://www.sciencedirect.com/science/article/abs/pii/S0967070X19307450">complexity</a> of implementation, and uncertainty about how <a href="https://www.sciencedirect.com/science/article/abs/pii/S0967070X10000326">revenues</a> will be used.</p>
<p>In our survey, the undecided respondents said they needed more information to better understand the user-pays approach and its benefits. International <a href="https://www.mdpi.com/2071-1050/13/21/12048">studies</a> have reported the same response. </p>
<p>Information campaigns to demystify road-user charging and highlight its benefits can win over undecided people. </p>
<h2>Road tax system is broken</h2>
<p>The road taxes in place today – which include fuel excise and motor vehicle ownership taxes – are near <a href="https://www.afr.com/policy/economy/no-choice-broken-taxes-must-be-fixed-20220210-p59vc7">breaking point</a>, according to political, policy and business leaders. <a href="https://www.carexpert.com.au/car-news/australias-best-selling-electric-cars-so-far-in-2023">Soaring electric vehicle sales</a> will hasten the decline in fuel excise revenues. </p>
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<p>Victoria’s <a href="https://www.legislation.vic.gov.au/bills/zero-and-low-emission-vehicle-distance-based-charge-bill-2021">levy</a> of 2.8 cents for each kilometre travelled (2.3 cents for plug-in hybrids) was intended to raise revenue from drivers who don’t pay fuel excise. The High Court decision has prompted <a href="https://www.theguardian.com/environment/2023/oct/18/victoria-ev-tax-australia-state-taxes--revenue-electric-vehicles-cars-states-high-court-ruling">warnings</a> of major hits to state coffers.</p>
<p><a href="https://www.afr.com/politics/tax-review-rudd-cautioned-on-road-user-charges-20100113-iw75b">Tax reviews</a>, peak bodies such as <a href="https://www.infrastructurevictoria.com.au/project/research-transport-network-pricing/">Infrastructure Victoria</a> and experts have long called for road-user charges to replace current road taxes. </p>
<p>Aside from the decline in revenue, another problem with fuel excise is that drivers with different travel patterns pay the same tax. There will be drivers who travel in regional Victoria or in an outer suburb of Sydney for local shopping or school drop-offs who pay the same excise as a driver who travels into the city centre or other congested areas. This means fuel excise is less effective for reducing traffic congestion and emissions than road-user charges.</p>
<p>But to be effective and fair, these must be applied to all vehicles as part of a holistic national approach. It will help to manage travel demand, cut emissions and raise revenue to maintain transport infrastructure.</p>
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Read more:
<a href="https://theconversation.com/distance-based-road-charges-will-improve-traffic-and-if-done-right-wont-slow-australias-switch-to-electric-cars-150290">Distance-based road charges will improve traffic — and if done right won't slow Australia's switch to electric cars</a>
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<h2>The road ahead</h2>
<p>The High Court decision has placed road taxation reform squarely on the national agenda. But any road-user charging scheme that targets <a href="https://www.drive.com.au/news/treasurer-electric-car-tax-fuel-excise-revenue/">only electric vehicles</a> would be a missed opportunity for <a href="https://australiainstitute.org.au/post/worlds-worst-ev-policy-scrapped-by-high-court/">meaningful reform</a>.</p>
<p>Our survey findings show Australia is ready for a rational and transparent discussion about road-user charging on all vehicles, not only electric vehicles. </p>
<p>The findings show a majority of people would support such charges if they are transparent, equitable and replace or reduce other road taxes. Support would increase if the public is assured the revenue will be used to improve all transport infrastructure, not only roads. </p>
<p>If well planned and implemented, a national approach to road-user charges can raise enough revenue to replace the fuel excise tax. It will also ease congestion, promote sustainable transport and help achieve Australia’s targets for cutting transport emissions.</p><img src="https://counter.theconversation.com/content/215992/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hussein Dia receives funding from the Australian Research Council, the iMOVE Cooperative Research Centre, Transport for New South Wales, Queensland Department of Transport and Main Roads, Victorian Department of Transport and Planning, Department of Infrastructure, Transport, Regional Development, Communications and the Arts, and Beam Mobility Holdings.</span></em></p><p class="fine-print"><em><span>Hadi Ghaderi receives funding from the iMOVE Cooperative Research Centre, Transport for New South Wales, Queensland Department of Transport and Main Roads, Victorian Department of Transport and Planning, Department of Infrastructure, Transport, Regional Development, Communications and the Arts, IVECO Trucks Australia limited, Innovative Manufacturing Cooperative Research Centre, Victoria Department of Education and Training, Bondi Laboratories, Australian Meat Processor Corporation, 460degrees and Passel.</span></em></p><p class="fine-print"><em><span>Tariq Munir acknowledges the financial support received in the form of a PhD scholarship from Swinburne University and the government of Pakistan. He also acknowledges the PhD top-up scholarship received from the iMOVE CRC and supported by the Cooperative Research Centres program, an Australian government initiative.</span></em></p>Support for road-user charging strengthens when people are assured that revenue goes into reducing traffic congestion, maintaining transport infrastructure, improving public transport.Hussein Dia, Professor of Future Urban Mobility, Swinburne University of TechnologyHadi Ghaderi, Associate Professor in Logistics and Supply Chain Management, Swinburne University of TechnologyTariq Munir, PhD Candidate, Centre for Sustainable Infrastructure and Digital Construction, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1910812022-09-28T03:24:51Z2022-09-28T03:24:51ZWhat now for petrol prices? Global doom and gloom makes the outlook surprisingly positive<figure><img src="https://images.theconversation.com/files/486704/original/file-20220927-26-u9kuvv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">shutterstock</span> </figcaption></figure><p>In early March Russia’s invasion of Ukraine pushed global oil prices up by about 30% and Australians faced paying more than $2.15 a litre for petrol. Contrary to <a href="https://theconversation.com/cut-emissions-not-petrol-tax-what-economists-want-from-the-budget-179837">economists’ advice</a>, the Morrison government decided to halve of the fuel excise for six months, reducing the cost of petrol by 22.1 cents a litre.</p>
<p>That discount period ends at midnight. So what can you expect local fuel prices to do now?</p>
<p>To begin with, the <a href="https://www.ato.gov.au/business/excise-on-fuel-and-petroleum-products/lodging,-paying-and-rates---excisable-fuel/excise-duty-rates-for-fuel-and-petroleum-products/">fuel excise is indexed</a> so it will add 23 cents to a litre of petrol. But not immediately. Your local service station’s tanks are likely to still hold fuel for which the retailer paid the discounted excise. </p>
<p>Federal treasurer Jim Chalmers has <a href="https://www.abc.net.au/news/2022-09-20/fuel-excise-shouldnt-cause-immediate-price-spike/101457614">cited industry estimates</a> of about 700 million litres of discounted fuel still being “in the system”. To put that in perspective, Australians consumed an average of about <a href="https://www.energy.gov.au/government-priorities/energy-data/australian-petroleum-statistics">42.5 million litres</a> of petrol a day in 2021. So it may be one to two weeks, depending on where you live, before you’re paying extra.</p>
<p>But what you will then be paying probably won’t be that different to before Russia invaded Ukraine, with global oil prices dropping due to efforts to increase supply and a deteriorating global economic outlook suppressing demand. </p>
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Read more:
<a href="https://theconversation.com/what-is-petrol-excise-and-why-does-australia-have-it-anyway-179373">What is petrol excise, and why does Australia have it anyway?</a>
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<h2>Global prices dictate local prices</h2>
<p>Australia imports about <a href="https://theconversation.com/conflict-in-the-south-china-sea-threatens-90-of-australias-fuel-imports-study-188148">90% of its refined fuel needs</a>, so the main determinants of the price of petrol and diesel in Australia are international oil prices and the value of Australian dollar to the US dollar (because oil prices are determined in US currency). </p>
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Read more:
<a href="https://theconversation.com/conflict-in-the-south-china-sea-threatens-90-of-australias-fuel-imports-study-188148">Conflict in the South China Sea threatens 90% of Australia's fuel imports: study</a>
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<p>Over the past six months the Australian dollar’s buying power has declined from about 75 to 65 US cents (a 13% drop). But that has been offset by oil prices falling more than 30% since June.</p>
<p>There is no single oil price because oil is traded in different markets according to its quality (with names reflecting the historical source of that type of oil). The following graph shows two commonly cited benchmarks – West Texas Intermediate (from Texas) and Brent Crude (from the North Sea). </p>
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<p>Prices spiked after the invasion of Ukraine due to Russia’s signicance as an oil exporter (the second-biggest after Saudi Arabia, accounting for about <a href="https://www.worldstopexports.com/worlds-top-oil-exports-country/">8% of exports in 2021</a>) and uncertainty about what the conflict would mean for those exports, as well as Russia’s gas exports to Europe and markets generally.</p>
<h2>Increased supply, faltering demand</h2>
<p>The steady decline since June is due to two main reasons. </p>
<p>First, the efforts of the European Union and the United States to increase non-Russian oil supplies. This has been both to ease inflationary pressures on their own economies as well as to drive down the windfall revenue Russia has made from its oil exports (mostly to <a href="https://oilprice.com/Energy/Energy-General/Global-Oil-Flows-Are-Changing-As-Russian-Crude-Moves-East.html">China and India</a>).</p>
<p>The G7 is working on a plan to further choke off those revenues through imposing <a href="https://www.brookings.edu/events/capping-the-price-of-russian-oil-will-it-happen-will-it-succeed/">a price cap</a> on Russian oil exports. Whether this will succeed depends first on finding <a href="https://www.bloomberg.com/news/articles/2022-09-26/eu-countries-plan-to-delay-russian-oil-price-cap-amid-divisions?leadSource=uverify%20wall">agreement in Europe</a>, which is divided over the plan. </p>
<p>The Australian government is <a href="https://indaily.com.au/news/2022/09/20/australia-to-back-g7-russian-oil-price-cap/">supporting the price cap</a> but this is mostly symbolic. At this point I can’t see it having much practical impact on Australian petrol prices.</p>
<p>Second, the global economy is weakening, which is taking the pressure off demand. The OECD’s economic outlook published this month predicts global economic growth will slow to <a href="https://www.oecd.org/economic-outlook/september-2022/#global-outlook">2.2% in 2023</a>.</p>
<p>As a consequence, the International Energy Agency’s <a href="https://www.iea.org/reports/oil-market-report-august-2022">Oil Market Report</a> last month revised upwards its outlook for world oil supply (though it also warned “another price rally cannot be excluded” given disruption risks). </p>
<p>Crude oil prices are now below US$90 a barrel – less than at the start of Russia’s invasion of Ukraine. For the next 12 months oil prices can be expected to decline to below US$80. This will put Australian petrol and diesel prices back to where they were in 2021. Which is good news for motorists, if not the global economy.</p><img src="https://counter.theconversation.com/content/191081/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Joaquin Vespignani does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>With global oil prices falling, the end of the fuel excise discount will put Australian motorists back in familiar price territory.Joaquin Vespignani, Associate professor, University of TasmaniaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1893302022-08-29T00:47:38Z2022-08-29T00:47:38ZHave we seen the last of $2 petrol for a while?<figure><img src="https://images.theconversation.com/files/480983/original/file-20220825-20-j7142u.jpg?ixlib=rb-1.1.0&rect=0%2C114%2C5472%2C3522&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Erik Mclean/Unsplash</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Average fuel prices in Australian capital cities remain well below the peaks seen in March and June. <a href="https://www.drive.com.au/news/fuel-prices-today/">Recent data</a> reveal fuel is around 30-35 cents per litre lower than the highs of two months ago. As of last week, the average price of 95 octane unleaded across eight capitals stood at A$1.90 per litre.</p>
<p>The question on the minds of many motorists and businesses relying on road transport to deliver goods and services is: have we seen the last of $2 petrol for a while? </p>
<p>Given this year’s trends in international oil prices (<a href="https://theconversation.com/what-russias-war-means-for-australian-petrol-prices-2-10-a-litre-177719">a key component</a> of Australia’s petrol prices), the answer would be: “It depends on the fuel excise”.</p>
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<a href="https://images.theconversation.com/files/480987/original/file-20220825-24-dw2s7a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/480987/original/file-20220825-24-dw2s7a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/480987/original/file-20220825-24-dw2s7a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/480987/original/file-20220825-24-dw2s7a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/480987/original/file-20220825-24-dw2s7a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/480987/original/file-20220825-24-dw2s7a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/480987/original/file-20220825-24-dw2s7a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/480987/original/file-20220825-24-dw2s7a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">In March this year, as Russia’s invasion of Ukraine began to drive international oil prices up.</span>
<span class="attribution"><span class="source">Image by Markus Spiske from Pixabay</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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Read more:
<a href="https://theconversation.com/what-russias-war-means-for-australian-petrol-prices-2-10-a-litre-177719">What Russia's war means for Australian petrol prices: $2.10 a litre</a>
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<h2>A fuel excise cut after Russia invades Ukraine</h2>
<p>A <a href="https://www.accc.gov.au/consumers/petrol-diesel-lpg/about-fuel-prices#:%7E:text=On%2029%20March%202022%20the,per%20litre%20for%20automotive%20LPG.">fuel excise</a> is a tax on fuel levied by the Australian government. </p>
<p>In March this year, as Russia’s invasion of Ukraine began to drive international oil prices up, the previous federal government <a href="https://budget.gov.au/2022-23/content/factsheets/download/factsheet_excise_offpublicroads.pdf">announced</a> a 50% cut in fuel excise for six months. In other words, it would charge less tax on fuel until September (in an effort to soften the impact of soaring international oil prices on Australian consumers). After this decision, the cost of petrol reduced by 22 cents per litre.</p>
<p>While the general trend is downwards in recent months, crude oil <a href="https://www.marketwatch.com/investing/future/brn00?countrycode=uk">prices have ranged</a> between US$92 and US$123 per barrel – much higher than the norm in recent years.</p>
<p>With Australia’s <a href="https://theconversation.com/high-petrol-prices-hurt-but-cutting-excise-would-harm-energy-security-178766">halved fuel excise</a>, this price range translates to average 95 octane unleaded petrol prices across eight capitals of between A$1.90 and A$2.25 per litre. </p>
<p>Globally, crude oil is <a href="https://tradingeconomics.com/commodity/crude-oil">down about 25%</a> from the June high of US$123 per barrel. That’s in part due to growing fears a global economic slowdown would affect consumption, as central banks around the world raise interest rates to combat spiralling inflation.</p>
<p>The potential revival of a <a href="https://finance.yahoo.com/news/oil-prices-plummet-iran-nuclear-200000751.html">deal</a> between Iran and Western countries that could lead to more Iranian oil exports has also helped <a href="https://finance.yahoo.com/news/oil-prices-plummet-iran-nuclear-200000751.html">drive oil prices</a> down. This is generally good news for petrol prices in Australia.</p>
<h2>What next for the fuel excise in Australia?</h2>
<p>However, a lot will depend on what the Australian government does about the fuel excise.</p>
<p>It is uncertain whether the new government will extend the fuel excise cut brought in by their predecessors in March.</p>
<p>The excise cut is set to expire in September, right in the middle of a cost-of-living crisis in Australia.</p>
<p>In July, amid calls to extend the fuel excise, Treasurer Jim Chalmers said <a href="https://www.sbs.com.au/news/article/the-price-of-fuel-is-set-to-rise-heres-why-and-how-much-it-could-cost-you/w2v0xrwpm">an extension is not an option</a>:</p>
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<p>We’ve tried to be upfront with people and say they shouldn’t expect that petrol price relief to continue forever.</p>
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<p>According to the federal budget, the six-month excise cut has resulted in a <a href="https://theconversation.com/josh-frydenbergs-budget-is-an-extraordinary-turnaround-but-leaves-a-40-billion-problem-180123">A$3 billion hit</a> on the economy.</p>
<p>Recent news reports indicated the prime minister was “examining” a fuel excise cut <a href="https://www.crikey.com.au/2022/08/24/pm-examining-fuel-excise-cut-extension/">extension</a>, but remains adamant the cut is a temporary measure.</p>
<p>If the cut is not extended, average petrol prices in Australia will almost certainly return to the above $2 territory by early October.</p>
<p>However, the solution to Australians being held hostage to volatile global prices and geopolitical developments will not come from extending the fuel excise cut. </p>
<p>The solution will come from reducing demand for oil-based fuels through policies promoting local energy generation and switching to low-emissions vehicles.</p>
<h2>The longer-term outlook</h2>
<p>Over the longer term, there is hope oil and petrol prices will not affect the pockets of Australian motorists and the Australian economy to the same extent as they have earlier this year.</p>
<p>The new Australian government <a href="https://www.cnbc.com/2022/08/22/australian-bank-to-scrap-loans-for-new-diesel-and-gasoline-cars-.html">has acknowledged</a> the country is “significantly behind the pack when it comes to electric vehicles.” </p>
<p>Only 2% of cars sold in Australia are electric, <a href="https://www.iea.org/data-and-statistics/data-product/global-ev-outlook-2022">five times lower</a> than the global average.</p>
<p>The government recently released some detail on plans to set up a <a href="https://infrastructuremagazine.com.au/2022/08/22/australias-first-national-electric-vehicle-strategy/">National Electric Vehicle Strategy</a>, with a discussion paper on the matter due to be released soon for consultation.</p>
<p>At the heart of the strategy will be a plan to grow the Australian electric vehicle market, in a bid to improve uptake of electric vehicles and improve affordability and choice. </p>
<p>Australia is <a href="https://theconversation.com/the-road-to-new-fuel-efficiency-rules-is-filled-with-potholes-heres-how-australia-can-avoid-them-188814">the only OECD country</a> to not have, or be in the process of developing, mandatory fuel-efficiency standards for road transport vehicles. </p>
<p>The new government <a href="https://www.cnbc.com/2022/08/19/australia-plans-fuel-efficiency-standards-to-boost-electric-car-supply.html">will seek to introduce</a> vehicle fuel efficiency standards to help increase the supply of electric cars, improve affordability for motorists and drive down emissions.</p>
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Read more:
<a href="https://theconversation.com/high-petrol-prices-hurt-but-cutting-excise-would-harm-energy-security-178766">High petrol prices hurt, but cutting excise would harm energy security</a>
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<img src="https://counter.theconversation.com/content/189330/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Vlado Vivoda does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>If the fuel excise cut is not extended, average petrol prices in Australia will almost certainly return to the above $2 territory by early October. But a different solution is needed.Vlado Vivoda, Honorary Fellow, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1803302022-04-04T19:58:59Z2022-04-04T19:58:59ZWhat will the fuel excise cut save you? Not as much as the Treasurer says<figure><img src="https://images.theconversation.com/files/455422/original/file-20220331-15-z1cjp.jpg?ixlib=rb-1.1.0&rect=0%2C323%2C3988%2C2017&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>As an appeal to middle Australia, to the voters politicians routinely describe as working families or battlers, the Morrison government’s centrepiece <a href="https://theconversation.com/au/business">budget move</a> to halve the fuel excise for six months has obvious attractions. </p>
<p>“A family with two cars who fill up once a week could save around $30 a week or around $700 over the next six months,” declared Treasurer Josh Frydenberg <a href="https://joshfrydenberg.com.au/latest-news/budget-2022-2023/">on budget night</a>, a point he’s repeated <a href="https://www.abc.net.au/7.30/interview:-josh-frydenberg/13818088">many times since</a>.</p>
<p>But our calculations show most households, particularly those on lower incomes, won’t gain anything near the amount touted by Frydenberg. </p>
<p>At a cost of about $3 billion, cutting 22 cents in tax from every litre of petrol for six months will disproportionately help wealthy households. The economic gain is doubtful. Depending on what happens with the global oil prices, it may even contribute to inflationary pressures. </p>
<h2>Who benefits most?</h2>
<p>We’ve calculated the effects of the fuel excise cut on household budgets using a <a href="https://www.sciencedirect.com/science/article/pii/S0967070X21002821?casa_token=O5pMXVHUTrEAAAAA:nfXYPrMk5dsjNr9upzcJEuP4zCIJYSB38NCqP_lB1yYhFtgchigDp0z2vBWmnNf_RlJ-0j9E3YbK">computer model</a> developed by the <a href="https://www.governanceinstitute.edu.au/centres/national-centre-for-social-and-economic-modelling-natsem">National Centre For Social And Economic Modelling</a>.</p>
<p>Our results show the six-month cut to the fuel excise will save the average household in inner-urban areas of Sydney and Melbourne about $132. The average households in outer suburbs will save about $242. Those in the outer suburbs of smaller cities will save less as they need to drive shorter distances. The average household in rural and remote areas will save $194.</p>
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<img alt="" src="https://images.theconversation.com/files/456031/original/file-20220404-11-6400c7.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/456031/original/file-20220404-11-6400c7.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=662&fit=crop&dpr=1 600w, https://images.theconversation.com/files/456031/original/file-20220404-11-6400c7.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=662&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/456031/original/file-20220404-11-6400c7.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=662&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/456031/original/file-20220404-11-6400c7.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=832&fit=crop&dpr=1 754w, https://images.theconversation.com/files/456031/original/file-20220404-11-6400c7.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=832&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/456031/original/file-20220404-11-6400c7.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=832&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="attribution"><span class="source">Author provided/The Conversation</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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<p>These amounts reflect average outcomes across all households, including those with just one vehicle, or no vehicle. </p>
<p>It’s possible some two-car households will save the $700 cited by Frydenberg, but not many. That would require a household spending well over $10,000 a year on petrol, buying about 150 litres a week.</p>
<p>The budget papers themselves say the cut will “deliver an average benefit of around $300 to households with at least one vehicle”. </p>
<h2>Why economists oppose the cut</h2>
<p>In The Conversation’s pre-budget survey of 46 leading economists selected by the Economic Society of Australia, not one thought cutting the fuel excise a good idea. About a third rated it among the worst possible policies. </p>
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Read more:
<a href="https://theconversation.com/cut-emissions-not-petrol-tax-what-economists-want-from-the-budget-179837">Cut emissions, not petrol tax. What economists want from the budget</a>
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<p>Their reasons are the uncertain economic benefit and inconsistency with important long-term policy goals to reduce dependence on oil-based imports, lower greenhouse gas emissions and cut government debt.</p>
<p>Frydenberg has <a href="https://www.theguardian.com/australia-news/2022/mar/29/australia-federal-budget-2022-cost-of-living-petrol-fuel-excise-income-tax-parental-leave-one-off-payments-temporary-cuts">promoted</a> the cut as anti-inflationary, reducing consumer prices by 0.25 percentage points in the June quarter. But prices will simply rise by the same amount in the December quarter.</p>
<p>Global fuel prices may fall long before the end of six months. Last week <a href="https://www.aljazeera.com/economy/2022/4/1/oil-eases-as-nations-agree-to-release-reserves">benchmark oil prices fell 13%</a> on news the US will release more from <a href="https://theconversation.com/biden-bets-a-million-barrels-a-day-will-drive-down-soaring-gas-prices-what-you-need-to-know-about-the-strategic-petroleum-reserve-180461">its strategic reserves</a> as well as a truce in the long-running civil war in Yemen. </p>
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<img alt="The United States will be releasing a million barrels of crude oil every day for the next six months from its Strategic Petroleum Reserve." src="https://images.theconversation.com/files/456014/original/file-20220404-17-8qr2e3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/456014/original/file-20220404-17-8qr2e3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/456014/original/file-20220404-17-8qr2e3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/456014/original/file-20220404-17-8qr2e3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/456014/original/file-20220404-17-8qr2e3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/456014/original/file-20220404-17-8qr2e3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/456014/original/file-20220404-17-8qr2e3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The United States will be releasing a million barrels of crude oil every day for the next six months from its Strategic Petroleum Reserve.</span>
<span class="attribution"><span class="source">Eli Hartman/Odessa American/AP</span></span>
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<p>If oil prices drop the government will be adding billions of dollars to the deficit for no real economic gain. It could even be adding to underlying inflationary pressures by increasing household spending, pushing <a href="https://www.afr.com/markets/debt-markets/economists-divided-on-rba-budget-pressure-20220330-p5a9gg">the Reserve Bank to increase interest rates</a> sooner or by more.</p>
<p>Furthermore, while the fuel excise cut is legislated to be in place just six months, history shows governments find it hard to reverse cuts once implemented. In 2001, for example, the government of John Howard was panicked by poor opinion polls to suspend indexation of the petrol excise when prices reached $1 a litre. Indexation was not restored for 14 years, at a cost of <a href="https://australiainstitute.org.au/wp-content/uploads/2020/12/P164-Get-regular-excise-fuel-tax-FINAL.1.pdf">more than $40 billion</a> in forgone tax revenue.</p>
<h2>Well distributed?</h2>
<p>Economists prefer targeted measures, and the problem with cutting the fuel excise is that lot of the benefit will go to sustaining the driving habits of wealthier households.</p>
<p>On average those in the most affluent 40% of households drive about <a href="https://www.sciencedirect.com/science/article/pii/S0967070X21002821?casa_token=O5pMXVHUTrEAAAAA:nfXYPrMk5dsjNr9upzcJEuP4zCIJYSB38NCqP_lB1yYhFtgchigDp0z2vBWmnNf_RlJ-0j9E3YbK">50% more kilometres</a> than those in the poorest 40%.</p>
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Read more:
<a href="https://theconversation.com/5-maps-that-show-why-free-public-transport-benefits-the-affluent-most-179847">5 maps that show why free public transport benefits the affluent most</a>
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<p>Wealthier households are more likely to have second or third cars, and to have larger cars – such as SUVs – that use more petrol. They also have the money for leisure pursuits such as weekend getaways. </p>
<p>A better approach would be target help to businesses that must buy fuel and to those on low incomes, such as through a cash bonus, leaving it to them to decide if they want to spend on petrol or other things.</p>
<p>This would also help those without a car, those who do not drive much and those with electric vehicles, who all face cost pressures as petrol prices feed into prices at the supermarket.</p><img src="https://counter.theconversation.com/content/180330/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Hawkins is a former Treasury officer.</span></em></p><p class="fine-print"><em><span>Yogi Vidyattama does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Josh Frydenberg says halving the fuel excise will save a family with two cars $700. Our calculations show for most households it will be less.John Hawkins, Senior Lecturer, Canberra School of Politics, Economics and Society and NATSEM, University of CanberraYogi Vidyattama, Associate Professor, National Centre for Social and Economic Modelling, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1801792022-03-30T05:56:00Z2022-03-30T05:56:00ZPoor policy and short-sightedness: how the budget treats climate change and energy in the wake of disasters<figure><img src="https://images.theconversation.com/files/455167/original/file-20220330-5217-1fx5eq0.jpg?ixlib=rb-1.1.0&rect=18%2C25%2C4174%2C2483&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p><a href="https://budget.gov.au/index.htm">This year’s federal budget</a> is characterised by an avalanche of immediate handouts in response to cost-of-living pressures, some sound initiatives and deferral of more fundamental decisions. This is precisely reflected in how the budget treats energy and climate change.</p>
<p>The A$1 billion to expand Australia’s low emission technology capabilities, such as green hydrogen, is welcome. But cuts to the fuel excise represent poor policy on fiscal and environmental grounds. </p>
<p>From the devastating bushfires of 2019-2020 to this year’s shocking floods, unprecedented climate-related disasters have wrought havoc across Australia. </p>
<p>It is deeply regretful that the budget and forward estimates do not specifically recognise the ongoing, and escalating, scale and the fiscal impact of these disasters. </p>
<h2>Fuel excise is poor policy</h2>
<p>For six months, the government will halve fuel excise to 22.1 cents per litre to offset soaring petrol prices. This short-term reduction will undoubtedly be welcomed by anyone with a petrol or diesel vehicle, and may provide the sort of political boost the government seeks ahead of the election. </p>
<p>Yet, it is poor fiscal policy. First, the outlook for global oil prices is as unpredictable as the outcome of the Ukraine war. That means the cut in fuel excise will quickly be either too strong a response or insufficient. </p>
<p>Second, restoring the level will not be politically simple. As a relief for households under financial stress, the measure is poorly targeted. </p>
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Read more:
<a href="https://theconversation.com/a-cost-of-living-budget-cuts-spends-and-everything-you-need-to-know-at-a-glance-180124">A cost-of-living budget: cuts, spends, and everything you need to know at a glance</a>
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<p>It is also a stark illustration of how motorists today would already be financially better off if Treasurer Josh Frydenberg was able to implement his proposed fuel efficiency standards <a href="https://joshfrydenberg.com.au/latest-news/clean-air-and-cars-can-be-a-much-healthier-mix/">in 2017</a>, when he was the minister for energy and the environment.</p>
<p>At that time, the benefit to motorists was calculated to be more than $500 per year by 2025 – and that was based on prices below $1.50 per litre, well short of current levels above $2. And of course, we would have been making tangible progress on reducing emissions in the transport sector.</p>
<h2>Funding low-emissions technologies</h2>
<p>Development and deployment of low-emission technologies – such as clean hydrogen, green steel and carbon capture and storage – will be critical to meeting Australia’s commitment to net-zero carbon emissions by 2050. </p>
<p>The government’s commitment of more than $1 billion to projects to support these technologies is welcome, as is the allocation of $84 million to support the development of <a href="https://theconversation.com/floods-left-thousands-without-power-microgrids-could-help-communities-weather-the-next-disaster-178311">microgrids</a>. </p>
<p>These investments are generally aligned with the government’s <a href="https://consult.industry.gov.au/climate-change/technology-investment-roadmap/supporting_documents/technologyinvestmentroadmapdiscussionpaper.pdf">technology investment roadmap</a>, released in 2020. However, it would be better for these projects to be selected via an independent agency with criteria set by the government.</p>
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<strong>
Read more:
<a href="https://theconversation.com/floods-left-thousands-without-power-microgrids-could-help-communities-weather-the-next-disaster-178311">Floods left thousands without power. Microgrids could help communities weather the next disaster</a>
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<p>The government emphasises a “technology, not taxes” approach to bringing Australia’s emissions to net zero. But funding the net-zero transition from government coffers is not sustainable. </p>
<p>We need policies such as a price on carbon that encourage the market to deploy these technologies at scale. <a href="https://theconversation.com/climate-wars-carbon-taxes-and-toppled-leaders-the-30-year-history-of-australias-climate-response-in-brief-169545">The recent history</a> of such policies in Australia means this will be a big challenge for whoever is energy minister after the looming federal election.</p>
<p>Australia’s extensive renewable energy and critical minerals resources mean we could be a global leader in manufacturing, for instance, downstream processing or iron ore, copper, lithium and similar metals critical in a low emissions world. </p>
<p>So the $1 billion in the budget to boost our <a href="https://www.minister.industry.gov.au/ministers/taylor/media-releases/2022-23-budget-backs-australian-industry-energy-security-and-net-zero-emissions">manufacturing capability</a> is another step in the right direction. </p>
<p>But again, good governance should include a clear framework that determines which projects get selected. This process should be based primarily on Australia’s potential competitive advantage. </p>
<p>The primary source of such advantage lies in our renewable energy and minerals resources, while specific regions may also have advantages based on existing infrastructure such as ports and skilled workforces.</p>
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Read more:
<a href="https://theconversation.com/federal-budget-160-million-for-nature-may-deliver-only-pork-and-a-fudge-180096">Federal budget: $160 million for nature may deliver only pork and a fudge</a>
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<p>Investments in low-emission technologies and manufacturing is closely aligned with this budget’s focus on Australia’s regions. </p>
<p>Investment in new opportunities will be welcomed in the regions. It should be accompanied by an equally strong commitment to working with regional communities that may suffer job losses and other economic harms in the transition away from fossil fuel industries.</p>
<h2>Short-term climate thinking</h2>
<p>Frydenberg’s budget acknowledged the devastation wrought in Australia by floods, drought and bushfires. Yet it failed to acknowledge the future cost of such disasters on the budget under climate change.</p>
<p>The budget includes measures to make regional Australia more resilient, to mitigate the impact of these disasters and support insurance coverage. But these are short-term commitments. </p>
<p>Even if we <a href="https://theconversation.com/mass-starvation-extinctions-disasters-the-new-ipcc-reports-grim-predictions-and-why-adaptation-efforts-are-falling-behind-176693">manage</a> to stop global warming beyond 1.5°C this century, the frequency and severity of natural disasters will only worsen. Australia is <a href="https://theconversation.com/climate-change-has-already-hit-australia-unless-we-act-now-a-hotter-drier-and-more-dangerous-future-awaits-ipcc-warns-165396">already feeling</a> the damage. </p>
<p>The economic and fiscal consequences of these disasters will only increase. And there will be other risks from a changing climate such as rising health spending and reduced government revenues from key exports, including liquefied natural gas. </p>
<h2>So what should the government do differently?</h2>
<p>At the very least, the federal government should move to better understand and quantify <a href="https://grattan.edu.au/news/explainer-how-climate-change-affects-budget/">the fiscal risks from climate change</a>.</p>
<p>First, it should include some of the immediate risks of climate change in the budget’s “Statement of Risks”, which outlines the <a href="https://budget.gov.au/2021-22/content/bp1/download/bp1_bs9.pdf">general fiscal risks</a> that may affect the budget. </p>
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<strong>
Read more:
<a href="https://theconversation.com/climate-change-has-already-hit-australia-unless-we-act-now-a-hotter-drier-and-more-dangerous-future-awaits-ipcc-warns-165396">Climate change has already hit Australia. Unless we act now, a hotter, drier and more dangerous future awaits, IPCC warns</a>
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<p>Second, it should adjust medium-term fiscal projection models to factor in declining revenue from fossil fuels, higher cost of debt, and higher expenditure on health and natural disaster supports.</p>
<p>Third, the longer-term impacts of climate change on the budget must be modelled. This should inform the next <a href="https://treasury.gov.au/publication/2021-intergenerational-report">Intergenerational Report</a> in 2025, which provides an economic outlook for Australia over coming decades.</p>
<p>Climate change ultimately challenges governments to reconsider their fiscal strategy. The many climate-related uncertainties make a strong case for preserving fiscal flexibility and firepower to cushion the direct impacts of climate change, including natural disasters.</p><img src="https://counter.theconversation.com/content/180179/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Through his superannuation fund, Tony Wood owns shares in several companies related to the energy and resources sectors. </span></em></p>It is deeply regretful that the budget and forward estimates don’t specifically recognise the ongoing scale and the fiscal impact of climate disasters.Tony Wood, Program Director, Energy, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1793732022-03-16T05:30:58Z2022-03-16T05:30:58ZWhat is petrol excise, and why does Australia have it anyway?<figure><img src="https://images.theconversation.com/files/452380/original/file-20220316-27-m3wann.png?ixlib=rb-1.1.0&rect=210%2C353%2C2261%2C1254&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Bianca de Marchi/AAP</span></span></figcaption></figure><p>One government, in <a href="https://www.beehive.govt.nz/release/government-cuts-25c-litre-fuel-excise-cost-living-relief-package">New Zealand</a>, has already cut its fuel excise, by 25 cents per litre for the three months it hopes will be the worst of the oil price crisis, and in the <a href="https://www.businessinsider.com.au/democrats-gas-tax-holiday-cut-prices-biden-agenda-stalled-2022-2">United States</a> and <a href="https://www.smh.com.au/politics/federal/scott-morrison-flags-tax-relief-as-petrol-hits-record-highs-20220314-p5a4cr.html">Australia</a> there’s talk of the same sort of thing.</p>
<p>Before considering whether it should be cut, temporally waived, or removed in this month’s budget, it’s worth reacquainting ourselves with what it is.</p>
<p>As is the case with the goods and services tax, it isn’t explicitly quoted when we buy petrol or other fuels; it is rolled into the advertised price.</p>
<p>At the moment the excise on standard unleaded petrol is <a href="https://www.ato.gov.au/Business/Excise-on-fuel-and-petroleum-products/Lodging,-paying-and-rates---excisable-fuel/Excise-duty-rates-for-fuel-and-petroleum-products/">44.2 cents per litre</a>, an impost which itself is subject to the goods and services tax. This brings the total to 47.6 cents per litre, something that would have been significant a year ago when the price of petrol was lower, accounting for one third of the price. </p>
<p>It is now less important, accounting for 22% of the price of petrol.</p>
<p>The fuel excise is imposed by the Commonwealth government. As a matter of law and as required by the <a href="https://www.aph.gov.au/About_Parliament/Senate/Powers_practice_n_procedures/Constitution/chapter4#chapter-04_81">Constitution</a>, all revenue raised by the Commonwealth goes into “one consolidated revenue fund”. But from 1926 to 1959 all or part of the fuel excise was <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp0001/01RP06">earmarked</a> for spending on roads. </p>
<p>Since then, it has generally been available for any sort of spending – although the impression remains that it is a crude form of user fee for roads and associated government-funded infrastructure, and for maintenance of that infrastructure.</p>
<h2>Effectively a road user charge</h2>
<p>The excise is collected at the points of distribution from local refineries and importers rather than at the petrol pump, making it easy to administer. </p>
<p>Making it much more difficult to administer are the substantial <a href="https://www.ato.gov.au/business/fuel-schemes/fuel-tax-credits---business/">rebates</a> offered to off-road users of petrol and diesel, which have the effect of making it a charge for using roads. They cut the total takings from about <a href="https://budget.gov.au/2021-22/content/bp1/download/bp1_bs5.pdf">A$20 billion</a> to <a href="https://budget.gov.au/2021-22/content/bp1/download/bp1_bs6.pdf">A$11 billion</a>.</p>
<p>State and territory governments impose another set of taxes on the use of motor vehicles. These include stamp duty on the registration, annual registration fees, the charge for drivers licences, and taxes on vehicle insurance. State taxes on the use of motor vehicles amounted to <a href="https://www.abs.gov.au/statistics/economy/government/taxation-revenue-australia/latest-release">A$11.3 billion</a> in 2019-20.</p>
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Read more:
<a href="https://theconversation.com/its-hard-to-find-a-case-for-a-cut-in-petrol-tax-there-are-other-things-the-budget-can-do-179272">It's hard to find a case for a cut in petrol tax – there are other things the budget can do</a>
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<p>These taxes also go into general revenue, and with no specific link to state government decisions on road infrastructure and maintenance or the provision of services such as traffic police and hospitals.</p>
<p>Taken together, the Commonwealth’s takings from fuel excise and the states’ takings from special motor vehicle taxes appear to <a href="https://www.pc.gov.au/inquiries/completed/productivity-review/report/productivity-review-supporting9.pdf">roughly equal</a> their spending on roads and associated infrastructure and fall short of the total costs imposed by road users on others including the costs of noise, pollution and policing.</p>
<h2>There are better ways to do it</h2>
<p>In an ideal world we would charge explicitly for road use, pollution and congestion in the cities during peak hours.</p>
<p>Fuel excise is an increasingly inappropriate way of charging for road use because more and more cars (including hybrids) are using less fuel per kilometre, and some (including all-electric vehicles) are using none.</p>
<p>Some states, including Victoria, charge electric vehicles per kilometre travelled. Owners are required to provide a photo of their odometer and the fee is added to the <a href="https://www.vicroads.vic.gov.au/registration/registration-fees/zlev-road-user-charge">cost of their registration</a>.</p>
<p>While in the spirit of user charging, what Victoria and other states are doing is a limited first step.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/373522/original/file-20201208-23-p0p899.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/373522/original/file-20201208-23-p0p899.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/373522/original/file-20201208-23-p0p899.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/373522/original/file-20201208-23-p0p899.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/373522/original/file-20201208-23-p0p899.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/373522/original/file-20201208-23-p0p899.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=565&fit=crop&dpr=1 754w, https://images.theconversation.com/files/373522/original/file-20201208-23-p0p899.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=565&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/373522/original/file-20201208-23-p0p899.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=565&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<p>Ideally, and subject to considerations of simplicity and operating costs, the user charge would vary by weight per axle, aggregate weight and distance travelled, and perhaps by road type. </p>
<p>Given the fixed cost of much road investment and maintenance, a modified version of current annual registration fees should continue.</p>
<p>The combustion of petrol and diesel generates external pollution costs not considered by businesses and individuals in their use of motor vehicles. </p>
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Read more:
<a href="https://theconversation.com/high-petrol-prices-hurt-but-cutting-excise-would-harm-energy-security-178766">High petrol prices hurt, but cutting excise would harm energy security</a>
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<p>External pollution costs include particulates with adverse effects on health and smog, and emissions of carbon dioxide that contribute to climate change. </p>
<p>A pollution fee that is much smaller than the current 43.3 cents per litre excise should be imposed on fuel used for both off-road and on-road purposes as part of a comprehensive price on greenhouse gas emissions associated with the combustion of fossil fuels.</p>
<p>Congestion causes costs estimated to be in the tens of billions in terms of lost time, uncertainty, and extra fuel use, with only a small portion borne by the road user concerned. An important part of the reform package should be a congestion charge for peak hours along the lines suggested by the <a href="https://grattan.edu.au/report/why-its-time-for-congestion-charging/">Grattan Institute</a>.</p>
<p>This ideal set of changes would be imposed independent of the price of oil.</p><img src="https://counter.theconversation.com/content/179373/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Freebairn does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Our fuel tax is only a rough approximation of the cost of using roads and it will get worse.John Freebairn, Professor, Department of Economics, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1792722022-03-15T04:06:47Z2022-03-15T04:06:47ZIt’s hard to find a case for a cut in petrol tax – there are other things the budget can do<p>Cutting petrol tax to bring down the cost of living used to be the political version of a joke. Failed US presidential candidates John McCain and Hillary Clinton both tried it in 2008. Their bipartisan advocacy of a “<a href="https://www.reuters.com/article/us-usa-politics-gastax-economists-idUSN3038243520080430">summer gas tax holiday</a>” was derided as <a href="https://www.nytimes.com/2008/04/30/opinion/30friedman.html">dumb</a>, a <a href="https://www.economist.com/free-exchange/2008/05/02/how-do-i-hate-thee-gas-tax-holiday">turkey</a> and a “<a href="https://www.motherjones.com/politics/2008/05/gas-tax-follies-obama-and-clinton-camps-spar/">metaphor for the entire campaign</a>”. </p>
<p>When <a href="http://voices.washingtonpost.com/44/2008/05/05/economists_release_letter_oppo.html">230</a> economists released a letter opposing it in 2008, Clinton said: “I’ll tell you what, I’m not going to <a href="https://chicago.suntimes.com/news/2008/5/4/18595932/clinton-talks-about-gas-tax-holiday-on-abc-s-this-week-transcript-may-4-2008-show">put my lot in with economists</a>”.</p>
<p>Her opponent for her party’s nomination, Barack Obama, labelled it a <a href="http://archive.boston.com/news/nation/articles/2008/04/30/obama_assails_lifting_of_gas_tax_as_gimmick/">gimmick</a> and went on to win both the nomination and the presidency.</p>
<p>But it isn’t a joke now. There’s talk about it in the <a href="https://www.forbes.com/sites/lisakim/2022/02/15/democrats-propose-federal-gas-tax-holiday-to-combat-rising-prices-heres-what-you-need-to-know/?sh=55e779e71001">US</a>, New Zealand has just cut in its fuel excise <a href="https://www.beehive.govt.nz/release/government-cuts-25c-litre-fuel-excise-cost-living-relief-package">25 cents</a> to ease cost of living pressures, and Australia is considering a budget measure <a href="https://www.smh.com.au/politics/federal/scott-morrison-flags-tax-relief-as-petrol-hits-record-highs-20220314-p5a4cr.html">along the same lines</a>.</p>
<p>What has happened to the price of petrol is shocking. In capital cities the unleaded price is about <a href="https://motormouth.com.au/">A$2.18</a>, up from <a href="https://www.aip.com.au/pricing/pump-prices">$1.60</a> at the start of the year. That means that whereas it might have cost $80 to fill up a Toyota Corolla at the start of the year, it now costs one third as much again – $109.</p>
<p>If you fill up fortnightly, as many people do, the extra impost is greater than if the Reserve Bank lifted its cash rate by <a href="https://www.mortgagechoice.com.au/home-loan-calculators/">0.25%</a> and pushed up the cost of payments on your mortgage.</p>
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<em>
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Read more:
<a href="https://theconversation.com/as-petrol-prices-rise-will-carbon-emissions-come-down-178024">As petrol prices rise, will carbon emissions come down?</a>
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<p>If you own an SUV, by now Australia’s <a href="https://www.fcai.com.au/news/index/view/news/753">biggest selling</a> type of new car, the extra impost will be greater. And (as with interest rates) there’s every chance petrol prices will climb further.</p>
<p>In New Zealand, where petrol costs more than <a href="https://www.globalpetrolprices.com/New-Zealand/gasoline_prices/">NZ$3 per litre</a> (A$2.80) the government has cut petrol excise by <a href="https://www.beehive.govt.nz/release/government-cuts-25c-litre-fuel-excise-cost-living-relief-package">25 cents per litre</a> for three months, in the hope that by then the worst effects of the Russia-Ukraine war will have passed.</p>
<h2>Australia taxes petrol lightly</h2>
<p>Eagle-eyed readers will have noticed that even with the cut, New Zealand petrol prices will still be way above Australia’s. That’s because, like <a href="https://theconversation.com/as-petrol-prices-rise-will-carbon-emissions-come-down-178024">most</a> developed nations, New Zealand charges more in tax for using roads than does Australia.</p>
<p>Until the cut on Tuesday, New Zealand petrol excise was a touch over <a href="https://www.mbie.govt.nz/building-and-energy/energy-and-natural-resources/energy-generation-and-markets/liquid-fuel-market/duties-taxes-and-direct-levies-on-motor-fuels-in-new-zealand/">NZ$0.77</a> per litre (A$0.72) compared to around <a href="https://www.ato.gov.au/Business/Excise-on-fuel-and-petroleum-products/Lodging,-paying-and-rates---excisable-fuel/Excise-duty-rates-for-fuel-and-petroleum-products/">A$0.43</a> in
Australia.</p>
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<p><strong>Low by international standards</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/449337/original/file-20220301-13-1rqa8js.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/449337/original/file-20220301-13-1rqa8js.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/449337/original/file-20220301-13-1rqa8js.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=304&fit=crop&dpr=1 600w, https://images.theconversation.com/files/449337/original/file-20220301-13-1rqa8js.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=304&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/449337/original/file-20220301-13-1rqa8js.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=304&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/449337/original/file-20220301-13-1rqa8js.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=381&fit=crop&dpr=1 754w, https://images.theconversation.com/files/449337/original/file-20220301-13-1rqa8js.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=381&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/449337/original/file-20220301-13-1rqa8js.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=381&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Retail unleaded price (Australian cents per litre)</span>
<span class="attribution"><a class="source" href="https://www.energy.gov.au/publications/australian-petroleum-statistics-2021">Department of Industry, Science, Energy and Resources</a></span>
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<p>The goods and services tax charged on top of that in both nations brings the NZ excise to about NZ$0.89 per litre (A$0.83) compared to Australia’s A$0.48.</p>
<p>If these figures sound low, it’s because the price of petrol has soared. One of the peculiarities of taxes that are set in cents per litre (climbing only with inflation) is that when the petrol price jumps, the tax as a proportion of the total price shrinks. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/452121/original/file-20220315-27-1me4yn2.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/452121/original/file-20220315-27-1me4yn2.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=970&fit=crop&dpr=1 600w, https://images.theconversation.com/files/452121/original/file-20220315-27-1me4yn2.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=970&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/452121/original/file-20220315-27-1me4yn2.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=970&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/452121/original/file-20220315-27-1me4yn2.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1219&fit=crop&dpr=1 754w, https://images.theconversation.com/files/452121/original/file-20220315-27-1me4yn2.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1219&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/452121/original/file-20220315-27-1me4yn2.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1219&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">New Zealand prices exceed NZ$3 per litre.</span>
<span class="attribution"><span class="source">Benjamin McKay/AAP</span></span>
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</figure>
<p>A year ago fuel excises accounted for 40% of the cost of New Zealand petrol, and 35% of the cost of Australian petrol. At 28% and 22%, they’ve become self-cutting.</p>
<p>If we abolished fuel excise altogether, cutting the Australian unleaded price 22%, we would only bring the price back to where it was <a href="https://www.accc.gov.au/consumers/petrol-diesel-lpg/about-fuel-prices">five weeks ago</a>.</p>
<p>And then (as I imagine will happen in New Zealand after three months) the government would find it hard to reintroduce it. </p>
<p>It is finding it difficult to end the $1,080 low and middle earner tax break that was meant to finish <a href="https://theconversation.com/this-pointless-1-080-tax-break-should-have-ended-years-ago-but-has-become-hard-to-stop-177546">two years ago</a>.</p>
<p>The mess it has got itself in to both by hinting that it will <a href="https://www.smh.com.au/politics/federal/scott-morrison-flags-tax-relief-as-petrol-hits-record-highs-20220314-p5a4cr.html">cut the excise</a> and by not ending the A$7.8 billion per year low and middle earner offset hints at a way out.</p>
<p>The offset is poorly designed. It is paid out as a tax refund after the end of each financial year, making it the opposite of the “<a href="https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/speeches/budget-speech-2021-22">stimulus measure</a>” Treasurer Josh Frydenberg said it was when he last extended it. If he extends it again for the coming financial year, it won’t get paid out until the second half of 2023.</p>
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Read more:
<a href="https://theconversation.com/this-pointless-1-080-tax-break-should-have-ended-years-ago-but-has-become-hard-to-stop-177546">This pointless $1,080 tax break should have ended years ago – but has become hard to stop</a>
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<p>The petrol component of the fuel excise brings in <a href="https://budget.gov.au/2021-22/content/bp1/download/bp1_bs5.pdf">A$5.8 billion</a> per year. The government might be able to hang on to that and use the <a href="https://budget.gov.au/2021-22/content/bp2/index.htm">A$7.8 billion</a> that would have been spent on the offset to support people now when they need it and when petrol prices are high, rather than a year into the future when they might not be.</p>
<p>The A$7.8 billion would be directed to Australia’s lowest earners, the ones who are being hit hardest by the horrendous petrol prices. Low earners (the bottom 40%) on average spend more than <a href="https://www.abs.gov.au/statistics/economy/finance/household-expenditure-survey-australia-summary-results/latest-release#">3%</a> of their income on petrol. High earners spend less than 2%.</p>
<h2>Support shouldn’t be tied to petrol use</h2>
<p>The support to low earners should be delivered in cash rather than as a subsidy to petrol prices. Recipients would be able to spend it on petrol should they need to, but would be able to spend it on other things.</p>
<p>If it was delivered as a petrol subsidy it would go disproportionately to the highest earning households for whom high petrol prices are a mere annoyance. High income households spend more on petrol in absolute terms (on average <a href="https://www.abs.gov.au/statistics/economy/finance/household-expenditure-survey-australia-summary-results/latest-release#">50%</a> more) than low income households.</p>
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Read more:
<a href="https://theconversation.com/high-petrol-prices-hurt-but-cutting-excise-would-harm-energy-security-178766">High petrol prices hurt, but cutting excise would harm energy security</a>
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<p>If it is delivered as cash rather than a petrol subsidy it won’t blunt the push that high prices give for people will switch to <a href="https://theconversation.com/as-petrol-prices-rise-will-carbon-emissions-come-down-178024">more efficient cars</a> and use petrol less by doing things such as working more from home.</p>
<p>It’s hard to find a case for a cut in Australia’s petrol tax, but it is easy to create a mechanism to help the people high prices are hurting. The budget is due in a fortnight.</p><img src="https://counter.theconversation.com/content/179272/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The government has held out the promise of a cut in petrol tax, and New Zealand has delivered one. There are better ways to help.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1787662022-03-09T19:08:12Z2022-03-09T19:08:12ZHigh petrol prices hurt, but cutting excise would harm energy security<figure><img src="https://images.theconversation.com/files/450867/original/file-20220309-23-1m7r3df.jpg?ixlib=rb-1.1.0&rect=108%2C954%2C5067%2C2491&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>Australian petrol prices are rising as Russia’s invasion of Ukraine pushes up global oil prices. It’s likely motorists will be paying more than $2.15 a litre for unleaded petrol within a few weeks.</p>
<p>In response, independent South Australian senator <a href="https://www.theaustralian.com.au/nation/politics/calls-for-cut-to-fuel-excise-to-address-high-cost-of-living/video/49c978114efa5cfaf12b80ae8ac75aa2">Rex Patrick</a> has called on the federal government to halve the fuel excise on petrol for 12 months. “Extreme petrol prices are an economic boa constrictor throttling household budgets,” <a href="https://www.rexpatrick.com.au/50_cut_in_fuel_excise_required">he said</a> this week. “We have to take the pressure off.” </p>
<p>The fuel excise is a fixed amount, currently set at 44.2 cents a litre. Halving it would therefore knock 22.1 cents off the price of petrol. </p>
<p>That would certainly offer some relief at the bowser, and to the economy. It would not, however, serve Australia’s economic and national interests in the longer term.</p>
<p>At a time when world events underline the importance of greater energy security, it would prolong our already alarming dependence on oil-based imports and undermine policies to shift the nation away from fossil fuels.</p>
<p>Calls to cut fuel tax arise whenever Australian petrol prices rise. This is despite Australian taxes – the fuel excise plus 10% GST – being among the lowest rates in the OECD and making little contribution to price increases. </p>
<p>All GST revenue is distributed to state and territory governments. The fuel excise is (theoretically) levied to pay for Australia’s road infrastructure. </p>
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Read more:
<a href="https://theconversation.com/what-russias-war-means-for-australian-petrol-prices-2-10-a-litre-177719">What Russia's war means for Australian petrol prices: $2.10 a litre</a>
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<p>In 2019-20 the government collected A$5.6 billion from petrol and about $11.8 billion from diesel (much of which was reimbursed through diesel tax rebates). </p>
<p>The net revenue from all fuel excises, according to the Australian Automobile Association, is about <a href="https://www.aaa.asn.au/fuel-excise-explained/">$11 billion</a>, a figure that hasn’t changed much for a decade. </p>
<h2>Undermining decarbonisation</h2>
<p>While making energy prices as cheap as possible does have some short-term economic logic, cutting the fuel excise would undermine the government’s longer term strategic goal to decarbonise the economy. </p>
<p>This is important both for Australia to meet its international obligations to take action on climate change and to look after the narrower national interest of preparing the Australian economy to compete in a carbon-constrained world.</p>
<p>Shifting away from fossil fuels to electric (and some hydrogen fuel-cell) vehicles is a key part of this. The Morrison government has acknowledged this with a target of 30% of all new car sales being electric by 2030. (Electric vehicles made up just under <a href="https://www.theguardian.com/environment/2022/jan/31/new-electric-vehicle-sales-triple-in-australia-with-tesla-outstripping-other-makers">2% of new car sales</a> in 2021.) </p>
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Read more:
<a href="https://theconversation.com/as-petrol-prices-rise-will-carbon-emissions-come-down-178024">As petrol prices rise, will carbon emissions come down?</a>
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<p>While the government has committed $250 million to its <a href="https://www.industry.gov.au/data-and-publications/future-fuels-and-vehicles-strategy">Future Fuels and Vehicles Strategy</a> to help achieve the target, its policy mostly depends on low-emissions vehicles achieving “<a href="https://www.industry.gov.au/sites/default/files/November%202021/document/future-fuels-and-vehicles-strategy.pdf">pricing parity</a>” with internal combustion engines by mid-decade, and for market forces to do the rest.</p>
<p>Slashing the fuel excise won’t do anything to help this plan become reality. It would also undermine state and territory government spending on policies to encourage the uptake of electric vehicles, <a href="https://www.theguardian.com/environment/2021/nov/13/thinking-of-buying-an-electric-car-heres-what-you-need-to-know-about-models-costs-and-rebates">through incentives</a> such as stamp-duty waivers, free registration and rebates.</p>
<h2>Taking energy security seriously</h2>
<p>Moving away from fossil fuels is critical for addressing Australia’s growing energy insecurity. This entails two things: uninterrupted availability and affordability. </p>
<p>They are issues Senator Patrick cares about. </p>
<p>In <a href="https://www.news.com.au/technology/environment/sustainability/bob-katter-joins-forces-with-greens-crossbench-mps-and-senators-to-fight-for-fuel-security/news-story/3b037d43292b5ca4607aceadcef805ab">mid-Febuary</a> with Greens leader Adam Bandt and independentrs Andrew Wilkie and Bob Katter he hopped aboard an Australian-built electric bus for a photo opp in front of Old Parliament House.</p>
<p>Energy security doesn’t get much attention during normal times, but current events have underlined the dangers of being dependent on foreign supplies. </p>
<p>As Prime Minister Scott Morrison said this week, the world has entered a period of “<a href="https://www.afr.com/policy/foreign-affairs/scott-morrison-is-in-his-political-element-20220307-p5a2ji">profound strategic challenge and disruption</a>”. </p>
<p>It is at the mercy of the international market and global supply chains for our supply security and fuel affordability.</p>
<p>Australia’s dependence on oil imports has been growing for <a href="https://theconversation.com/australias-growing-oil-imports-are-an-energy-security-issue-7749">at least a decade</a>. </p>
<p>Closure of oil refineries along with declining oil production means we now import more than 90% of our needs. Yet we have abundant renewable resources to generate electricity and power low-emissions vehicles. </p>
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Read more:
<a href="https://theconversation.com/explainer-what-is-energy-security-and-how-has-it-changed-102476">Explainer: what is energy security, and how has it changed?</a>
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<p>The solution to consumers being hostage to foreign oil supplies and volatile global prices will not come from slashing the fuel excise. </p>
<p>It will come from reducing demand for oil-based fuels through policies that promote local energy generation and switching to low-emissions vehicles – like the electric bus that Patrick sat in a just few weeks ago.</p><img src="https://counter.theconversation.com/content/178766/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Vlado Vivoda does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Proposals to cut Australia’s fuel excise will prolong an already alarming dependence on oil-based imports and undermine policies to shift the nation away from fossil fuels.Vlado Vivoda, Senior Lecturer in Strategic Studies (Australian War College), Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1502902021-01-05T19:01:22Z2021-01-05T19:01:22ZDistance-based road charges will improve traffic — and if done right won’t slow Australia’s switch to electric cars<p>Road-user charges on electric vehicles based on distance driven were announced in November 2020 by the governments of <a href="https://www.abc.net.au/news/2020-11-11/sa-to-introduce-electric-vehicle-user-charge/12869302">South Australia</a> and <a href="https://www.drive.com.au/news/victoria-to-tax-electric-and-plug-in-hybrid-vehicles-from-2021-124619">Victoria</a>, while New South Wales ministers have <a href="https://www.smh.com.au/national/nsw/we-ve-got-to-be-bullish-nsw-ministers-at-odds-over-electric-car-tax-20201128-p56irz.html">differing views</a>. These charges are justified on several grounds, including the costs of road use and congestion. </p>
<p><a href="https://www.getup.org.au/campaigns/climate-justice/electric-vehicles-vic-contact-ask/call-for-clean-energy-not-a-new-tax-on-electric-vehicles">Critics</a> <a href="https://australiainstitute.org.au/post/ev-road-user-charge-a-great-big-new-tax-on-not-polluting">argue</a> the new charges will deter uptake of these more environmentally-friendly vehicles. But Australian governments could learn from examples overseas, including New Zealand, where incentives for buyers of electric vehicles more than offset the impacts of road user charges. </p>
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Read more:
<a href="https://theconversation.com/think-taxing-electric-vehicle-use-is-a-backward-step-heres-why-its-an-important-policy-advance-150644">Think taxing electric vehicle use is a backward step? Here's why it's an important policy advance</a>
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<h2>Road use creates huge costs</h2>
<p>One reason for introducing a distance-based charge for electric vehicles is that owners of petrol cars pay fuel excise, currently 42.3 cents per litre. With <a href="https://www.abs.gov.au/methodologies/survey-motor-vehicle-use-australia-methodology/12-months-ended-30-june-2018">average fuel use</a> of about 10.8 litres per 100km for Australian cars, drivers pay excise of about 4.6 cents per kilometre for road use. This is much higher than Victoria’s proposed distance charge of 2.5 cents per kilometre for electric vehicles. </p>
<p>The average passenger car in Australia was driven <a href="https://www.abs.gov.au/statistics/industry/tourism-and-transport/survey-motor-vehicle-use-australia/latest-release">about 11,100km</a> in the year to June 2020 (the pre-COVID average was about 13,000km). This means the federal government collected about A$557 in fuel excise per car. </p>
<p>Although the excise is not specifically dedicated to funding roads, the Australian government is a generous funder of road construction and maintenance. All up, Australia’s three levels of government <a href="https://www.bitre.gov.au/publications/2020/australian-infrastructure-statistics-yearbook-2020">spent A$28.5 billion on roads</a> in 2018-19. It is reasonable to expect electric vehicle drivers to make some contribution to the roads they use. </p>
<p>The main argument against the new charges is that Australia’s uptake of electric vehicles has been slow and governments should be promoting a shift away from fossil fuels. However, the main disincentive is the cost of buying a new electric car, on par with a luxury car. </p>
<p>Governments could overcome this issue by reducing taxes on electric vehicle purchases and/or providing a subsidy for these purchases, as <a href="https://www.transport.govt.nz/area-of-interest/environment-and-climate-change/electric-vehicles-programme/">New Zealand has done</a> since 2016 (with an exemption from distance charges until 2021).</p>
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Read more:
<a href="https://theconversation.com/transport-is-letting-australia-down-in-the-race-to-cut-emissions-131905">Transport is letting Australia down in the race to cut emissions</a>
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<h2>Congested roads demand action</h2>
<p>Infrastructure Australia found the economic <a href="https://www.infrastructureaustralia.gov.au/publications/urban-transport-crowding-and-congestion">cost of road congestion</a> in the six largest capitals and their satellite cities was about A$19 billion in 2016. If infrastructure did not keep up with demand, this was likely to increase to A$39 billion a year by 2031.</p>
<p>However, the evidence from Australia and overseas is clear: building more roads does not overcome congestion. The phenomenon of <a href="https://www.gov.uk/government/publications/induced-travel-demand-an-evidence-review">induced demand</a> means new roads simply fill up with more cars making more trips. </p>
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Read more:
<a href="https://theconversation.com/climate-explained-does-building-and-expanding-motorways-really-reduce-congestion-and-emissions-147024">Climate explained: does building and expanding motorways really reduce congestion and emissions?</a>
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<p>The emergence on our roads of electric vehicles that don’t generate fuel excise revenue has led to growing calls for road-user charges on these vehicles, including from <a href="https://infrastructure.org.au/ruc-for-evs/">Infrastructure Partnerships Australia</a> in 2019 and <a href="https://theconversation.com/think-taxing-electric-vehicle-use-is-a-backward-step-heres-why-its-an-important-policy-advance-150644">RMIT researchers</a> in November 2020.</p>
<p>COVID-19 has driven a shift to car use. Before recent outbreaks reduced travel, road traffic in Australian cities was as much as 25% above pre-pandemic volumes.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/376935/original/file-20210103-13-1z0jptw.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Chart showing trends in driving, walking and public transport use in Australian cities since January 2020" src="https://images.theconversation.com/files/376935/original/file-20210103-13-1z0jptw.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/376935/original/file-20210103-13-1z0jptw.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=432&fit=crop&dpr=1 600w, https://images.theconversation.com/files/376935/original/file-20210103-13-1z0jptw.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=432&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/376935/original/file-20210103-13-1z0jptw.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=432&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/376935/original/file-20210103-13-1z0jptw.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=543&fit=crop&dpr=1 754w, https://images.theconversation.com/files/376935/original/file-20210103-13-1z0jptw.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=543&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/376935/original/file-20210103-13-1z0jptw.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=543&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Australia-wide mobility trends from January 13 2020 to January 2 2021.</span>
<span class="attribution"><a class="source" href="https://covid19.apple.com/mobility">Apple Mobility Trends</a></span>
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Read more:
<a href="https://theconversation.com/cars-rule-as-coronavirus-shakes-up-travel-trends-in-our-cities-142175">Cars rule as coronavirus shakes up travel trends in our cities</a>
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<h2>Policy remedies are proven</h2>
<p>The proven remedy for road congestion is a combination of better public transport and road <a href="https://theconversation.com/au/topics/congestion-charges-17784">congestion charging</a>. This can be a charge to enter a specific area (cordon) or a charge per kilometre. It can be varied by time of day.</p>
<p>In NSW, a <a href="https://catalogue.nla.gov.au/Record/3048968">ministerial inquiry into sustainable transport</a> proposed such charges back in 2004. A large proportion of submissions in response to a 2002 federal AusLink green paper favoured congestion pricing. <a href="https://theconversation.com/au/topics/congestion-charges-17784">Many Conversation articles</a> have also advocated this policy. </p>
<p>In a <a href="https://www.infrastructurevictoria.com.au/project/30-year-strategy">forward-looking strategy</a>, now open for <a href="https://engage.vic.gov.au/victorias-30-year-infrastructure-strategy">public consultation</a>, Infrastructure Victoria proposes a review in the next two years of the Melbourne <a href="https://www.sro.vic.gov.au/car-parks">congestion levy on parking</a>, congestion pricing for all new metropolitan freeways and, in the next five years, a trial of full-scale congestion pricing in inner Melbourne.</p>
<p>Singapore has used congestion pricing since 1975 and automated <a href="https://development.asia/case-study/case-electronic-road-pricing#:%7E:text=Singapore%20launched%20Electronic%20Road%20Pricing,about%209%20years%20to%20implement.">electronic road pricing</a> since 1998. </p>
<p>London, after some controversy, implemented a cordon scheme in 2003. The <a href="https://theconversation.com/london-congestion-charge-what-worked-what-didnt-what-next-92478">benefits</a> include reduced traffic, noise and air pollution along with improved public transport. The scheme has been modified over the years and access is now free for electric vehicles and certain hybrids and small cars.</p>
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Read more:
<a href="https://theconversation.com/london-congestion-charge-what-worked-what-didnt-what-next-92478">London congestion charge: what worked, what didn't, what next</a>
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<p>Other large cities with congestion pricing include Stockholm and Milan. New York is expected to follow in 2022. A <a href="https://www.rnz.co.nz/news/national/431773/auckland-city-centre-facing-congestion-charge-">congestion tax is also being considered</a> for Auckland. </p>
<h2>Road freight is on the rise too</h2>
<p>I discussed road-user charges for heavy trucks in a 2017 <a href="https://theconversation.com/trucks-are-destroying-our-roads-and-not-picking-up-the-repair-cost-79670">Conversation article</a>. At that time in Australia, hidden subsidies for heavy truck use in the form of unrecovered road system costs, along with related external costs of road crashes, pollution, emissions, noise and road congestion, totalled about A$3 billion a year. I now estimate this shortfall to be about A$4 billion.</p>
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Read more:
<a href="https://theconversation.com/trucks-are-destroying-our-roads-and-not-picking-up-the-repair-cost-79670">Trucks are destroying our roads and not picking up the repair cost</a>
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<p>Australia should introduce mass distance pricing as has been used in New Zealand since 1978 and increasingly in Europe. Instead it relies on annual registration fees and a discounted heavy vehicle fuel excise of <a href="https://www.ntc.gov.au/laws-and-regulations/road-user-charges">25.8 cents per litre</a>. These charges have essentially been frozen for five years.</p>
<p>Proposals for a modest 2.5% increase in the heavy vehicle fuel charge <a href="https://minister.infrastructure.gov.au/mccormack/media-release/continued-support-truckies-keep-australia-moving-during-covid-19">were shelved</a> after COVID-19 hit. They are now <a href="https://www.ntc.gov.au/transport-reform/ntc-projects/heavy-vehicle-charges-2021-22">under review</a> again.</p>
<p>One in three submissions to a <a href="https://www.infrastructure.gov.au/transport/freight/freight-supply-chain-priorities/index.aspx">federal inquiry</a> into developing a National Freight and Supply Chain Strategy highlighted the need for road pricing. The final <a href="https://www.freightaustralia.gov.au/">2019 strategy</a> all but ignored this issue, despite a projected near-doubling of road freight by 2040.</p>
<p>Failure to reform road pricing coupled with ongoing relaxation of mass and dimension limits for heavy trucks is a recipe for <a href="https://www.abs.gov.au/articles/road-freight-rise">ever more “loads on roads”</a> at the expense of rail freight and coastal shipping.</p>
<p>In 2002, the then Treasury secretary, Ken Henry, <a href="https://www.australasiantransportresearchforum.org.au/sites/default/files/2003_Laird.pdf">said</a> of the projected increases in city traffic and interstate road freight: “Not dealing with these issues now amounts to passing a very challenging set of problems to future generations.”</p>
<p>In 2010, the <a href="https://treasury.gov.au/review/the-australias-future-tax-system-review/final-report">Henry Tax Review</a> made several road-pricing recommendations. These included that Australian governments “should accelerate the development of mass-distance-location pricing for heavy vehicles”.</p>
<p>The review also recommended governments analyse the network-wide benefits and costs of introducing variable congestion pricing on tolled roads and consider extending it across heavily congested parts of the road network. </p>
<p>Road pricing reform is now long overdue. And it should include electric vehicles.</p><img src="https://counter.theconversation.com/content/150290/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Philip Laird owns shares in some transport companies and has received funding from the two rail-related CRCs as well as the ARC. He is affiliated, inter alia, with Action for Public Transport (NSW), the Chartered Institute of Logistics and Transport, the Railway Technical Society of Australasia and the Rail Futures Institute. The opinions expressed are those of the author. </span></em></p>The benefits of road-user charging are now well established. And including electric vehicles doesn’t have to be a deterrent to their uptake, as New Zealand and other nations have shown.Philip Laird, Honorary Principal Fellow, University of WollongongLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1509362020-12-08T19:08:51Z2020-12-08T19:08:51ZVictoria’s electric vehicle tax and the theory of the second-best<figure><img src="https://images.theconversation.com/files/373561/original/file-20201208-24-d7orkm.jpg?ixlib=rb-1.1.0&rect=423%2C310%2C2793%2C1557&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Alexandru Nika/Shutterstock</span></span></figcaption></figure><p>One of the central ideas in tax policy is the principle of <a href="https://cdn.theconversation.com/static_files/files/1347/Theory_of_Second_Best.pdf?1606799608">the second-best</a>.</p>
<p>Economic theory gives us a good idea of what an ideal tax system would look like, given our objectives. But in real life, things fall short. </p>
<p>It might be thought that piecemeal reform, moving some taxes closer to the ideal, would be a step in the right direction.</p>
<p>But it needn’t be, if other taxes aren’t moved.</p>
<p>Here’s an example. Imagine that the goods and services tax exempted health products, both mainstream and alternative.</p>
<p>An ideal GST wouldn’t exempt health products (though the government might provide subsidised access to some products, as it does through the Pharmaceutical Benefits Scheme). </p>
<p>Imagine is administratively possible to remove the exemption for mainstream health products, which would bring it closer to the ideal.</p>
<p>Now imagine that for jurisdictional reasons it isn’t as easy to remove the exemption for alternative products.</p>
<h2>Second-best can make things worse</h2>
<p>Removing the exemption for mainstream products, which can be done straight away, seems like a good idea because it would be one step closer to removing all exemptions.</p>
<p>But if it is actually done straight away, without waiting the removal of the exemption on alternative products, it would have unintended (and perhaps dangerous) consequences.</p>
<p>People would be encouraged to switch from mainstream to alternative health products.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/think-taxing-electric-vehicle-use-is-a-backward-step-heres-why-its-an-important-policy-advance-150644">Think taxing electric vehicle use is a backward step? Here's why it's an important policy advance</a>
</strong>
</em>
</p>
<hr>
<p>The same sort of issues arise with the plans to charge electric vehicles per kilometre driven in order to treat them more like conventionally-powered vehicles (which are taxed per kilometre driven through fuel excise).</p>
<p><a href="https://www.statebudget.sa.gov.au/budget-docs/2020-21_budget_speech.pdf">South Australia</a> and <a href="https://www.parliament.nsw.gov.au/lcdocs/transcripts/2321/Transcript%20-%209%20March%202020%20-%20CORRECTED%20-%20PC1%20-%20Treasury%20-%20Budget%20Estimates%202019-20%20-%20Further%20hearings.pdf">NSW</a> have announced plans to do so. Victoria has announced details, and will introduce the charge from <a href="https://www.vicroads.vic.gov.au/registration/registration-fees/zlev-road-user-charge">July 2021</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/373522/original/file-20201208-23-p0p899.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/373522/original/file-20201208-23-p0p899.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/373522/original/file-20201208-23-p0p899.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/373522/original/file-20201208-23-p0p899.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/373522/original/file-20201208-23-p0p899.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/373522/original/file-20201208-23-p0p899.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=565&fit=crop&dpr=1 754w, https://images.theconversation.com/files/373522/original/file-20201208-23-p0p899.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=565&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/373522/original/file-20201208-23-p0p899.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=565&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p>It will charge electric and other zero emission vehicles 2.5 cents per kilometre travelled and plug-in hybrids at cents per kilometre travelled.</p>
<p>Victoria <a href="https://www.vicroads.vic.gov.au/registration/registration-fees/zlev-road-user-charge">justifies the charge</a> this way:</p>
<blockquote>
<p>Australian drivers pay fuel excise when they fill up their vehicle with petrol, diesel or liquefied petroleum gas. Zero and low emission vehicle owners currently pay little or no fuel excise but still use our roads. </p>
</blockquote>
<p>Conventionally-powered car typically pay about 4.2 cents per kilometre through fuel excise and fuel-efficient cars <a href="https://cdn.theconversation.com/static_files/files/1360/assumptions.pdf?1607399943">about 2.1 cents</a>.</p>
<p>This means Victoria will be charging electric vehicles as much or more than fuel-efficient vehicles, even though (at least when charged through rooftop solar) they won’t contribute to global warming. </p>
<p>Not only that, but conventionally-powered cars generate health and other costs through air and noise pollution, for which they are not charged.</p>
<h2>What first-best would look like</h2>
<p>The ideal system would include charges to cover the cost of</p>
<ul>
<li><p>building and maintaining the roads</p></li>
<li><p>congestion </p></li>
<li><p>the injury, death and damage caused by car crashes</p></li>
<li><p>the health and other damage caused by air and noise pollution</p></li>
<li><p>the global price of carbon emissions</p></li>
</ul>
<p>Right now we charge through fuel taxes, registration fees and tolls (mostly paid to private firms, but this is irrelevant in economic terms) along with a variety of minor fees. </p>
<p>However, because fuel excise was <a href="https://finance.nine.com.au/business-news/fuel-excise-hike-before-parliament/7bbe8d6f-efe3-4668-bca5-7fa043f22847">frozen</a> by the Howard government in 2001 (and only began increasing again in 2014) the revenue from it is barely enough to cover the cost of constructing and maintaining roads and grossly insufficient to cover the broader costs of conventional vehicle use.</p>
<h2>Conventional vehicles get things for free</h2>
<p>Although there is much debate about how carbon can or should be priced, any serious attempt to achieve the goals of the <a href="https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement">Paris Agreement</a> is likely to require a carbon price of $100/tonne, which corresponds to 23 cents a litre.</p>
<p>Estimates for local air pollution costs (including the cost of <a href="https://www.smh.com.au/politics/federal/road-death-toll-should-include-victims-of-vehicle-emissions-report-20190628-p522a8.html">deaths from cancer and asthma</a>) start at 10 cents a litre. Noise pollution costs are extra.</p>
<p>Electric vehicles powered by renewable energy generate hardly of these costs. </p>
<p>Put simply, just as much (or more than) the owners of electric vehicles, the owners of conventional vehicles pay a mere fraction of what they should.</p>
<h2>Second-best would be worse</h2>
<p>Increasing what the owners of electric-powered vehicles pay is a second-best solution that might move us further away from first best.</p>
<p>It might discourage the takeup of vehicles that impose fewer costs on society.</p>
<p>To end on a positive note, the 1997 decisions of the High Court that <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/Publications_Archive/CIB/CIB9798/98cib01">effectively prohibited states from taxing petrol</a> forced the Commonwealth to collect the tax and pass it on to the states, exacerbating the problems of an unbalanced federal tax system. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/wrong-way-go-back-a-proposed-new-tax-on-electric-vehicles-is-a-bad-idea-127608">Wrong way, go back: a proposed new tax on electric vehicles is a bad idea</a>
</strong>
</em>
</p>
<hr>
<p>There appears to be no constitutional impediment to a tax on kilometres travelled (and nor a privacy impediment, Victoria will implement it by asking for odometer readings once a year rather than monitoring where cars travel). </p>
<p>It would help redress the tax imbalance.</p><img src="https://counter.theconversation.com/content/150936/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Quiggin is a former Member of the Climate Change Authority and an active campaigner on climate issues</span></em></p>Sure, the owners of electric cars don’t pay properly to use the roads, but it’s even worse for the owners of conventionally-powered vehicles.John Quiggin, Professor, School of Economics, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/879312017-11-26T19:09:47Z2017-11-26T19:09:47ZDelay in changing direction on how we tax drivers will cost us all<figure><img src="https://images.theconversation.com/files/195996/original/file-20171123-6035-xkovik.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Reforming how drivers pay for the costs of their road use can help keep traffic flowing, which is just one of the potential benefits. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/sydney-city-skyline-443951992?src=AHSkJxZz-VZiOF2EsBjT1g-1-0">Holli/Shutterstock</a></span></figcaption></figure><p>The federal government <a href="https://www.google.com.au/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0ahUKEwiY_OyQ4tXXAhWKn5QKHTazCMEQFggmMAA&url=http%3A%2F%2Fwww.afr.com%2Fnews%2Fplan-to-replace-fuel-tax-with-user-charges-20161123-gsw85c&usg=AOvVaw1mV6sYjoHwABOI4_ehGc25">announced</a> a year ago that it would review the charges imposed on drivers for using our roads. That review hasn’t yet happened. They should get on with it, because reforming the way we charge road users will make our economy more productive and our cities more liveable. The longer we wait, the harder the path to those improvements becomes.</p>
<p>The problem with the present system is that there is only a weak link between what motorists pay and the costs they create when they use roads. The amount motorists pay for registration, for example, does not vary with the amount of time they spend on the road, let alone how long they’re stuck in traffic jams.</p>
<hr>
<p><em><strong>Further reading:</strong> <a href="https://theconversation.com/road-user-charging-belongs-on-the-political-agenda-as-the-best-answer-for-congestion-management-65027">Road user charging belongs on the political agenda as the best answer for congestion management</a></em></p>
<hr>
<p>But before we get to the benefits of reforming how drivers pay for the costs of their road use, we need to debunk a big myth about road funding in Australia. It’s one that has become a major distraction in discussions about the need for change.</p>
<h2>The myth of the fuel excise crisis</h2>
<p>Vehicle technology is improving. Cars are becoming more fuel-efficient, and powering them with electricity is becoming more mainstream. At the same time, our commuting patterns are changing – over the past few years, the average distance Australians travel by car <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/9208.0Main+Features112%20months%20ended%2030%20June%202016?OpenDocumenthttp://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/9208.0Main+Features112%20months%20ended%2030%20June%202016?OpenDocument">has fallen</a>.</p>
<p>This is worrying the government, which collects fuel excise from us every time we fill the car with petrol. Urban Infrastructure Minister Paul Fletcher has <a href="http://minister.infrastructure.gov.au/pf/speeches/2017/pfs015_2017.aspx">specifically raised concerns</a> that: </p>
<blockquote>
<p>…the revenue from fuel excise and car registration is unlikely to keep pace with the amount we spend as a nation on operating, maintaining and investing in roads.</p>
</blockquote>
<p>The government’s key economic advisory body, the Productivity Commission, <a href="https://www.pc.gov.au/inquiries/completed/productivity-review/report/productivity-review-supporting9.pdf">recently suggested</a> reform of the fuel excise levy was “becoming more urgent”. But talk of a funding crisis is overblown.</p>
<p>First, the minister knows that the government doesn’t, and can’t, segregate revenue from road use to spend on roads. Federal spending on infrastructure is funded from general government revenue, the pool of funds received from the full range of federal taxes. As far as the government is concerned, road funding is just one of many expense programs claiming a piece of the budget pie.</p>
<p>As for revenue from the fuel excise, the decision in 2014 to <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/BudgetReview201415/FuelExcise">reintroduce indexation</a> will deliver much-needed relief for the government. The truth is, revenue did not fall much over the past decade and the levy now increases each year in line with inflation. The government may cry poor, but it can’t cry broke.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/196051/original/file-20171123-6013-158o9e3.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/196051/original/file-20171123-6013-158o9e3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/196051/original/file-20171123-6013-158o9e3.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/196051/original/file-20171123-6013-158o9e3.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/196051/original/file-20171123-6013-158o9e3.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/196051/original/file-20171123-6013-158o9e3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/196051/original/file-20171123-6013-158o9e3.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/196051/original/file-20171123-6013-158o9e3.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<h2>So, do we still need that long-promised review?</h2>
<p>Fuel excise revenue is not the problem the government would have you think it is. But its promised review remains important because reforming road-user charges would bring big benefits for Australia.</p>
<p>The disconnect between what motorists pay and the costs of their road use matters because traffic congestion is the main cost that cars create when they use existing roads. The regular wear and tear of our roads is overwhelmingly caused by trucks and other heavy vehicles; cars do negligible damage to paved roads. </p>
<p>An <a href="https://www.ntc.gov.au/heavy-vehicles/heavy-vehicle-charges/">existing mechanism</a> ensures that trucks are charged for their wear and tear on roads. What’s needed is an equivalent mechanism to ensure that cars are charged for the costs they create by adding to congestion.</p>
<p>As we describe in our report <a href="https://grattan.edu.au/report/stuck-in-traffic/">Stuck in traffic? Road congestion in Sydney and Melbourne</a>, such a mechanism would mean charging people who drive at peak times on congested roads a small fee.</p>
<hr>
<p><em><strong>Further reading:</strong> <a href="https://theconversation.com/stuck-in-traffic-we-need-a-smarter-approach-to-congestion-than-building-more-roads-84774">Stuck in traffic: we need a smarter approach to congestion than building more roads</a></em></p>
<hr>
<p>People who pay the charge would get a quicker and more reliable trip, because there would be fewer cars on the road at peak times. People who can travel outside of the peaks would not have to pay, because there would be no congestion charge when the roads are not congested. Because traffic flows would be spread more evenly across all hours of the day, our economy would become more efficient and our cities more liveable.</p>
<p>Critics of these decongestion schemes argue that charging motorists in this way is unfair. Why should low-income earners or those living on the fringes of our major cities, they argue, be hit with a new charge for something they can’t avoid when they go to work?</p>
<p>It’s a valid concern, but our report suggests it is entirely feasible to redesign motor vehicle charges in ways that actually make them fairer. </p>
<p>A key element of fairness is that any new congestion charge should be offset by reducing or removing vehicle registration charges. The goal should be to change how we pay for roads, not how much we pay. Developing such options is precisely what the long-promised review should do.</p>
<p>This reform would allow us to get the greatest value from the road network we already have, before we ask taxpayers and motorists to pay for constructing big and expensive new roads.</p>
<h2>Time to get the show on the road</h2>
<p>If we don’t make changes, congestion and delays on the roads in our biggest cities will only get worse. The government should provide terms of reference for the review before Christmas. These terms should acknowledge the importance of developing options for charging motorists for the congestion they cause. </p>
<p>In doing so, it will be important to resolve how the range of state-levied taxes on motorists, <a href="https://theconversation.com/city-wide-trial-shows-how-road-use-charges-can-reduce-traffic-jams-86324">including existing and prospective toll roads</a>, might fit within new charging arrangements. Only then should the review turn to the question of how many expensive new roads the states should be building.</p><img src="https://counter.theconversation.com/content/87931/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and Grattan uses the income to pursue its activities.
</span></em></p><p class="fine-print"><em><span>Hugh Batrouney does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Traffic congestion is the main cost that cars create when they use existing roads. Road use charges are a more efficient and fairer way to cover the cost and help ensure traffic flows.Marion Terrill, Transport Program Director, Grattan InstituteHugh Batrouney, Transport Fellow, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/827502017-08-24T19:13:20Z2017-08-24T19:13:20ZGetting serious on roads reform is one way our political leaders can get back on track<figure><img src="https://images.theconversation.com/files/183075/original/file-20170823-13639-cy4ktp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The majority of working Australians drive to and from work.</span> <span class="attribution"><span class="source">AAP/Dan Himbrechts</span></span></figcaption></figure><p>Structural economic reform is hardly the stuff of epic election campaigns. But tax reform, including some form of road user charging, <a href="http://www.news.com.au/national/breaking-news/no-progress-made-in-15-years-henry/news-story/d3b78f5dd2b17a761c5fc2e3a85a28e3">is well overdue</a> for Australia. </p>
<p>Road user charging will involve a shake-up of all road-related revenues and how we pay for and use our roads and transport infrastructure. This will require federal leadership and the agreement of the states and territories. The Commonwealth’s fuel excise and the states’ and territories’ car registration fees will be affected. </p>
<hr>
<p><em><strong>Further reading:</strong> <a href="https://theconversation.com/road-user-charging-belongs-on-the-political-agenda-as-the-best-answer-for-congestion-management-65027">Road user charging belongs on the political agenda as the best answer for congestion management</a></em></p>
<hr>
<h2>The road to reform</h2>
<p>The Commonwealth’s fuel excise <a href="http://taxreview.treasury.gov.au/content/ConsultationPaper.aspx?doc=html/publications/Papers/Consultation_Paper/section_12.htm">is obsolete</a>. Despite <a href="http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/BudgetReview201415/FuelExcise">the reintroduction</a> of indexation, the fuel excise revenue base is steadily declining and will eventually disappear. </p>
<p>Fuel excise is obsolete because fuel-efficient and electric vehicles use less fuel. It is also unfair, because people who can afford the latest <a href="http://www.abc.net.au/news/2017-08-21/can-electric-cars-go-the-distance-on-aussie-roads/8827926">Tesla cars</a> will <a href="http://minister.infrastructure.gov.au/pf/speeches/2016/pfs007_2016.aspx">pay nothing</a> in fuel excise. And it does not signal market demand for, or go directly back into, building and maintaining transport infrastructure.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/182801/original/file-20170821-4959-1gs19pr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/182801/original/file-20170821-4959-1gs19pr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=509&fit=crop&dpr=1 600w, https://images.theconversation.com/files/182801/original/file-20170821-4959-1gs19pr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=509&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/182801/original/file-20170821-4959-1gs19pr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=509&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/182801/original/file-20170821-4959-1gs19pr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=640&fit=crop&dpr=1 754w, https://images.theconversation.com/files/182801/original/file-20170821-4959-1gs19pr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=640&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/182801/original/file-20170821-4959-1gs19pr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=640&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The contribution of fuel excise to road-related budget revenue is shrinking. (A$‘000s in 2015 prices)</span>
<span class="attribution"><span class="source">BITRE</span></span>
</figcaption>
</figure>
<p>Also, the fuel excise provides a <a href="https://www.forbes.com/2009/02/19/incentives-compensation-bonuses-leadership_perverted_incentives.html">perverse incentive</a> by encouraging motorists with fuel-efficient cars to drive more. However, road user charging <a href="https://en.oxforddictionaries.com/definition/incentivize">incentivises behavioural change</a> that can help <a href="https://theconversation.com/road-user-charging-belongs-on-the-political-agenda-as-the-best-answer-for-congestion-management-65027">reduce traffic congestion</a>.</p>
<p>The typical urban worker commutes for about <a href="http://press.regus.com/australia/rush-hour-the-daily-commute-just-got-longer/">one hour</a> each work day, and time spent commuting is rising. The <a href="http://mccrindle.com.au/the-mccrindle-blog/getting-to-work-infographic">majority</a> of working Australians drive to and from work. Australians are not getting any <a href="http://www.aihw.gov.au/who-is-overweight/">healthier</a>, and <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1490117">longer commuting times</a> are at least part of the problem.</p>
<hr>
<p><em><strong>Further reading:</strong> <a href="https://theconversation.com/whats-equity-got-to-do-with-health-in-a-higher-density-city-82071">What’s equity got to do with health in a higher-density city?</a></em></p>
<hr>
<p>If we do nothing, traffic congestion in capital cities is expected to cost <a href="http://infrastructureaustralia.gov.au/policy-publications/publications/files/Australian-Infrastructure-Audit-Key-Findings.pdf">A$53.3 billion by 2031</a> – or 290% more than it did in 2011.</p>
<p>Some argue that “<a href="https://theconversation.com/dont-panic-traffic-congestion-is-not-coming-for-our-cities-45154">peak car</a>” will save the day. But per-capita car ownership figures mean nothing if the number of actual cars isn’t reduced. Driverless cars may even <a href="https://www.businessinsider.com.au/self-driving-cars-traffic-congestion-2017-6">make things worse</a>. </p>
<h2>Why it’s been difficult to achieve</h2>
<p>The reality is that roads are the “<a href="http://competitionpolicyreview.gov.au/files/2015/03/Part2_final-report_online.pdf">least reformed of all infrastructure sectors</a>”. And roads, <a href="http://www.news.com.au/finance/money/costs/every-road-in-australia-should-have-tolls-says-report/news-story/e94d65a58dacfb61f4d90947dd0d704f">according to competition expert Ian Harper</a>, are the:</p>
<blockquote>
<p>… only example of an infrastructure asset, where the government owns the great bulk of the asset, funded through the tax system and given away for nothing.</p>
</blockquote>
<p>So, why is road reform so hard?</p>
<p>Road pricing is <a href="https://www2.deloitte.com/au/en/pages/public-sector/articles/road-pricing-transport-infrastructure-funding.html">long overdue</a> and it’s <a href="https://theconversation.com/road-user-charging-belongs-on-the-political-agenda-as-the-best-answer-for-congestion-management-65027">happening elsewhere</a>. But it’s as big as the GST, and it could prove to be <a href="http://www.abc.net.au/news/2013-08-08/youtube-gst-cake/4874420">just as unpalatable</a>. </p>
<p>Truckies already pay for their use of the roads, and moves are afoot to <a href="http://paulfletcher.com.au/home-m/item/1885-media-release-improved-data-transparency-to-progress-heavy-vehicle-road-reform.html">increase the charges</a> to more accurately cover the cost of the damage trucks do to the roads.</p>
<p>This is supported by the <a href="https://www.ara.net.au/sites/default/files/uploads/publications/RoadPricingReforms2010.pdf">railways</a>, which have effectively cross-subsidised trucks ever since the <a href="http://nla.gov.au/nla.news-article205442848">truckies stopped cross-subsidising them</a>. But politicians are reluctant to tackle road pricing for private cars because motorists <a href="http://www.dailytelegraph.com.au/news/nsw/new-congestion-tax-could-hit-drivers-hard-as-experts-call-for-a-reduction-in-road-tolls-and-the-way-it-is-collected/news-story/a86f832973f572a2772575bd7375ee4a">don’t like the idea</a>. </p>
<hr>
<p><em><strong>Further reading:</strong> <a href="https://theconversation.com/trucks-are-destroying-our-roads-and-not-picking-up-the-repair-cost-79670">Trucks are destroying our roads and not picking up the repair cost</a></em></p>
<hr>
<p>There has at least been some movement. Urban Infrastructure Minister Paul Fletcher <a href="http://www.news.com.au/national/politics/malcolm-turnbull-puts-microscope-on-road-rail-in-new-infrastructure-review/news-story/4ba88e3eda647c8ebc875bf4b365bc40">announced</a> in 2016 that an eminent Australian will conduct a study into the impact of road user charging for light vehicles.</p>
<h2>What reform did for Hawke and Howard</h2>
<p>The recent <a href="http://www.governanceinstitute.edu.au/magma/media/upload/publication/408_Democracy100-report-IGPA.pdf">Democracy100 event</a> at Old Parliament House was held in response to mounting dismay at the state of today’s politics. Speaking at the event, former prime ministers <a href="http://www.smh.com.au/comment/the-turnbull-governments-margin-of-survival-just-got-narrower-20170818-gxz583.html">Bob Hawke and John Howard</a> recommended a bipartisan approach. Focusing on key reforms to “rejuvenate the economy”, like roads reform, would do the trick.</p>
<p>While that may sound uninspiring, Howard observed that public esteem for politicians “has fallen in a time when there’s not been major reform”.</p>
<p>Howard and Hawke are two of the top three longest-serving <a href="http://primeministers.naa.gov.au/primeministers/">prime ministers</a> in Australian history. Both are living proof that major reform agendas can win elections. Howard oversaw the introduction of the “<a href="https://theconversation.com/would-abbotts-gst-full-stop-turn-into-a-comma-17009">never-ever</a>” GST; Hawke set the stage by undoing protectionism and dragging Australia into a global market economy.</p>
<p>And what do we have to lose? It’s clear self-centred professional politics isn’t working.</p>
<p>Australians expect parliament to do the hard work of reform, instead of playing <a href="http://www.abc.net.au/news/2017-08-18/pauline-hanson-burqa-stunt-disproved-her-point/8819162">dress-up</a> and acting for the cameras. And history shows voters reward that hard work with electoral success.</p><img src="https://counter.theconversation.com/content/82750/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael de Percy is an Academic Fellow of the Institute for Governance and Policy Analysis (IGPA), which was involved in the organisation of the Democracy100 event. IGPA resources some of Michael's work as a researcher at the University of Canberra. He is also a Chartered Member of the Chartered Institute of Logistics and Transport - Australia, but has no official role with the organisation beyond his professional membership.</span></em></p>Australians are crying out for political leadership. One way our leaders can redeem themselves is by getting to work on a complete shake-up of how we pay for and use transport infrastructure.Michael de Percy, Senior Lecturer in Political Science, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/650272016-09-12T00:17:13Z2016-09-12T00:17:13ZRoad user charging belongs on the political agenda as the best answer for congestion management<figure><img src="https://images.theconversation.com/files/137133/original/image-20160909-13375-for1t3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Road user pricing would encourage people to take non-essential trips at a different time, or not at all.</span> <span class="attribution"><a class="source" href="https://thomasthethinkengine.com/2014/07/02/trevors-in-traffic-a-pr-strategy-for-congestion-charging/">thomasthethinkengine.com</a></span></figcaption></figure><p>Road user charging is probably the best idea we have to reduce congestion and to enable better decisions on road investment. Average travel speeds in our cities <a href="http://algin.net/austroads/site/index.asp?id=5">are decreasing</a>, and congestion is only likely to worsen as our population continues to grow.</p>
<p>Urban Infrastructure Minister Paul Fletcher recently <a href="http://minister.infrastructure.gov.au/pf/speeches/2016/pfs007_2016.aspx">gave an important speech</a>, albeit largely unnoticed, in which he made the case for a universal road user charging scheme. Charging people to drive has previously been the dream of <a href="http://www.infrastructure.org.au/Content/RoadPricing.aspx">transport</a> and <a href="http://competitionpolicyreview.gov.au/final-report/">economic</a> policy wonks – serving politicians tend to see the idea as political poison.</p>
<p>Fletcher trod gently, cautioning his Sydney Institute audience that “there is a lot of work to do” and that any move in this direction would be “a ten to 15-year journey”. It is still remarkable that a federal minister even took these first steps.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/137134/original/image-20160909-13371-1wizr88.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/137134/original/image-20160909-13371-1wizr88.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/137134/original/image-20160909-13371-1wizr88.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=448&fit=crop&dpr=1 600w, https://images.theconversation.com/files/137134/original/image-20160909-13371-1wizr88.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=448&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/137134/original/image-20160909-13371-1wizr88.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=448&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/137134/original/image-20160909-13371-1wizr88.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=563&fit=crop&dpr=1 754w, https://images.theconversation.com/files/137134/original/image-20160909-13371-1wizr88.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=563&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/137134/original/image-20160909-13371-1wizr88.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=563&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Singapore introduced the world’s first electronic road pricing system back in 1998 to manage traffic volumes in the city.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/streamishmc/6274080479/in/photolist-ayqixn-5u8Nod-6kAdNB-6kEFcN-8XzoZ8-6kEdMs-5u4oZB-6kExbo-6kAnkV-6kEjhE-6kAshx-6kApxX-6kzXpi-6kEy1C-6kDRm3-6kDSsN-6kEck7-6kApoF-6kDUvY-6kzKii-6kAq66-6kE2YA-6kzGwH-6kEeK1-6kzUbx-6kAgL4-6kDRHE-6kzWQP-6kEsk1-59QJSA-6kzXhX-6kDUJw-6kED9m-6kzYMV-6kAs7F-6kzS4H-5VeLzE-6kEcFw-6kzSTX-6kEnjs-6kA7RK-6kEaKh-6kA2XK-6kEBMA-6kAitZ-6kEBd3-6kEg3N-6kAeRv-6kE6Cu-5VeM3A">Jason Tester Guerrilla Futures/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
</figcaption>
</figure>
<p>Fletcher warned of the potential impact of electric vehicles on fuel excise revenue, but <a href="https://theconversation.com/au/topics/driverless-cars-11740">automated vehicles</a> represent an even bigger change. </p>
<p>The future of road use is made unclear by the looming arrival of these vehicles. Despite predictions that these could be the <a href="https://theconversation.com/self-driving-cars-could-be-the-answer-to-congested-roads-33438">answer to traffic congestion</a>, complications include the <a href="https://theconversation.com/going-down-the-same-old-road-driverless-cars-arent-a-fix-for-our-transport-woes-50912">interaction of autonomous and traditional vehicles</a> and the complexities of human behaviour. </p>
<p>Autonomous vehicles could even lead to greater congestion. The ease of travel in these vehicles might encourage travellers to take more trips as they reduce the time cost of being stuck in traffic by being able to read emails and stay connected while the car drives itself. Empty vehicles travelling to pick up goods and passengers could further clog roads. </p>
<p>Thus it is prudent to target road congestion now, especially when current strategies aren’t helping much. <a href="http://www.nber.org/papers/w15376.pdf">Building more road capacity</a> or even <a href="https://blogs.crikey.com.au/theurbanist/2015/11/12/is-more-public-transport-the-answer-to-traffic-congestion/">improving public transport</a> can’t solve congestion. </p>
<p>The best strategy is management of demand via a pricing mechanism that reflects the cost of the congestion caused by one more vehicle on the road. With prices that vary by location, time of day and distance travelled, such a scheme would encourage people to take non-essential trips at a different time, or not at all. </p>
<p>The charge could be efficient, as the trips that are discouraged are those for which the congestion caused outweighs the benefit derived. And it would be fair: drivers adding to the delay faced by others pay more, while those who drive in non-congested areas or at non-peak times pay less. </p>
<p>The ability to observe road users’ willingness to pay for road space will also give a better signal to planners of where additional road capacity will be of value to the community.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/137135/original/image-20160909-13348-1rgsfdi.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/137135/original/image-20160909-13348-1rgsfdi.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/137135/original/image-20160909-13348-1rgsfdi.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=393&fit=crop&dpr=1 600w, https://images.theconversation.com/files/137135/original/image-20160909-13348-1rgsfdi.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=393&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/137135/original/image-20160909-13348-1rgsfdi.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=393&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/137135/original/image-20160909-13348-1rgsfdi.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=494&fit=crop&dpr=1 754w, https://images.theconversation.com/files/137135/original/image-20160909-13348-1rgsfdi.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=494&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/137135/original/image-20160909-13348-1rgsfdi.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=494&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The European experience of road user charging has produced multiple economic and social benefits.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/eucyclistsfed/26638768610/in/photolist-GzYDPY-GzYDPC-GX9HEy-9VgVMr-5pJqhD-5HYUz1-5HYUyW-c3x2hw-yuCe7L-xQmxLc-xQdgEw-xQmKH8-yMf6PB-yA61n2-yTp9Ug-yA5ZUD-xVJXnM-yQjiuL-ySBFsM-yzYJVS-ySBH5K-yA2vxy-yRBKAj-yzZYdJ-xVzJk3-yRCfSq-xVGXFM-yA2hys-yTnyop-xVHQeR-yA3epu-yzYXkd-ySB4DH-yA6tNV-xVz82N-yzYK73-yQgdFy-yTnYAx-yA7Qn8-yzXHvm-yA19Qo-yA4vZx-yQgbz9-yA4vtn-yzZzCw-yRAUwN-yRzFfu-xVxDeq-yTmDse-yzXFoA">Federation European Cyclists/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<h2>Don’t treat it as a revenue raiser</h2>
<p>So Fletcher deserves plaudits for raising the issue. But he got one important thing wrong: he said that the fuel excise tax funds road spending. </p>
<p>Pointing out that fuel excise receipts would fall with the advent of more fuel-efficient vehicles, and electric cars in particular, he argued for a road user charging scheme on the ground that it would raise revenue for road spending. </p>
<p>Linking fuel excise to road funding is a furphy and gets us onto the wrong track at the very start of the road-pricing journey. Fuel excise is merely one source of general government revenue and is not in any way hypothecated, meaning pledged by law to be spent on a specific purpose – in this case roads. </p>
<p>It is no more relevant to say that falling excise revenues will put road funding under pressure than it is to say this will put pressure on health spending or the age pension.</p>
<p>Furthermore, about 75% of road funding comes from state and local government revenue, while fuel excise is a federal tax. It is true that falling fuel excise receipts would add to the federal government’s deficit problems. But there is no reason why a loss of fuel excise revenue must be replaced by another charge on motorists, or why motorists alone should fund additional road spending. </p>
<h2>Take care to avoid an inefficient, distorting tax</h2>
<p>The government should take a holistic approach to repair its pressured budget. It should restrict the most wasteful spending, wherever it is, and introduce or increase the most efficient, fair and simple taxes. It is not helpful to limit our thinking to motorist-based taxes to solve that part of the budget problem caused by falling fuel excise receipts.</p>
<p>The other problem with introducing road user charging as a revenue raiser rather than a congestion reducer is that a scheme designed on those terms is likely to produce poor results. </p>
<p>If we approach the task asking how we can maximise revenue, we’ll end up with charges on the wrong roads, at the wrong times, priced to maximise financial return rather than optimise congestion. For example, we might charge heavily on major roads, just to increase revenue, when some targeted charges on minor roads might do more to reduce traffic. In short, we’ll have one more inefficient, distorting tax.</p>
<p>So kudos to the minister for opening the debate. Let’s talk about road user charging, but let’s talk about what it should really achieve. </p>
<p>If we start by asking the right questions, road user charging could be the best congestion management policy we’ve seen in Australia. It could improve the driving experience without the need for big spending on more road capacity, and make sure we get the most economic and social value from our roads.</p><img src="https://counter.theconversation.com/content/65027/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and Grattan uses the income to pursue its activities.</span></em></p><p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and Grattan uses the income to pursue its activities.</span></em></p>Charging people to drive has been the dream of policy wonks – serving politicians tend to see it as political poison. So when federal minister Paul Fletcher raises it, that’s a step forward.Marion Terrill, Transport Program Director, Grattan InstituteOwain Emslie, Associate, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/332392014-11-13T01:17:25Z2014-11-13T01:17:25ZIncreasing fuel taxes could save thousands of lives worldwide<figure><img src="https://images.theconversation.com/files/62931/original/ygtrzznn-1414456441.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Economic modelling suggests raising fuel taxes could get cars off the road - and therefore save lives. </span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/index-in.mhtml">Khongkit Wiriyachan/Shutterstock</a></span></figcaption></figure><p>Road safety is a seriously important public policy issue. Around <a href="http://www.who.int/mediacentre/factsheets/fs310/en/">1.3 million</a> people die in road crashes around the world each year. Among teenagers and young adults, road crashes are the <a href="http://www.who.int/mediacentre/factsheets/fs358/en/">number-one</a> cause of death. </p>
<p>As many as <a href="http://www.who.int/violence_injury_prevention/publications/road_traffic/world_report/en/">50 million</a> people a year also suffer non-fatal road injuries.</p>
<p>As economists, <a href="https://researchers.anu.edu.au/researchers/nishitateno-s">Shuhei Nishitateno</a> and I felt that economics is perhaps more useful in understanding road safety than it is often given credit for.</p>
<p>We collected data for 144 countries over the period 1991-2010 to answer one question: do higher petrol prices reduce road death rates?</p>
<p>Our <a href="http://onlinelibrary.wiley.com/doi/10.1111/ecin.12171/abstract">study</a>, just published, finds strong evidence that the answer is “yes”, with a 10% increase in petrol prices typically reducing road deaths by between 3% and 6%. The effect is largely a result of a reduction in driving. We’ve previously found that higher fuel prices lead to people
substituting away from “<a href="http://theconversation.com/gas-guzzlers-fuelled-by-shrinking-petrol-tax-12552">gas guzzlers</a>” — also part of the story.</p>
<p>Ours is the first comprehensive international study on the topic.</p>
<h2>Subsidising road risks</h2>
<p>Our findings are of most relevance to fuel-subsidising countries such as Venezuela, where petrol is sold for only <a href="http://data.worldbank.org/indicator/EP.PMP.SGAS.CD">2 cents per litre</a>. Other countries with discount fuel include the oil-rich nations of Iran and Saudi Arabia.</p>
<p>These countries’ roads are among the world’s most dangerous. The World Health Organisation reports that <a href="http://apps.who.int/gho/data/node.main.A997">37 people per 100,000 population</a> die in road crashes in Venezuela each year, <a href="http://www.who.int/violence_injury_prevention/road_safety_status/2013/en/">double the global rate</a>.</p>
<p>We calculate that, globally, around 35,000 road deaths per year could be avoided by the removal of fuel subsidies. This is a football stadium of people, annually. The bulk would be in Iran, Venezuela, Indonesia, and Nigeria.</p>
<p>In Indonesia, subsidies for vehicle fuel account for <a href="http://www.tandfonline.com/doi/full/10.1080/00074918.2014.938403#.VC4uJldpdAs">around 15%</a> of all central government expenditures. We estimate that these result in several thousand additional road deaths each year, one of the many reasons subsidising fuel is such poor policy. Subsidy reform is <a href="http://www.reuters.com/article/2014/09/18/indonesia-fuel-subsidies-idUSL3N0RJ1VF20140918">a key priority</a> of Indonesia’s new President Joko Widodo.</p>
<h2>Global action on road safety</h2>
<p>We are at the middle of the United Nations’ Decade of Action for <a href="http://www.who.int/roadsafety/decade_of_action/en/">Road Safety 2011-2020</a>, which has the goal of stabilising and then reducing the number of global road deaths.</p>
<p>The <a href="http://www.who.int/roadsafety/decade_of_action/plan/en/">Global Plan</a> for the Decade of Action is silent on the potential role of fuel subsidy reductions and taxes in reducing road death rates. Our findings suggest more attention should be paid to the idea.</p>
<h2>Implications for Australia</h2>
<p><a href="https://www.bitre.gov.au/publications/ongoing/road_deaths_australia_annual_summaries.aspx">1,193</a> people lost their lives in road crashes in Australia in 2013. Australia’s road death toll has <a href="http://www.bitre.gov.au/publications/2010/is_038.aspx">fallen by almost 70% since its peak in 1970</a>, but our per-capita road death rate remains <a href="https://www.bitre.gov.au/publications/ongoing/international_road_safety_comparisons.aspx">stuck above</a> the rates of some other developed countries. Australia has among the <a href="http://theconversation.com/factcheck-do-australians-pay-high-petrol-taxes-29264">lowest petrol taxes in the OECD</a>. </p>
<p>The government has <a href="https://theconversation.com/government-gets-round-senate-on-fuel-33538">just reindexed</a> Australia’s fuel excise to the rate of inflation. One outcome will likely be slightly fewer deaths on Australia’s roads.</p>
<p>It is interesting to consider by how much Australia’s road death toll would fall if we had a more radical increase in our fuel excise. We estimate that an excise hike that brought Australia’s average gasoline price to the level of the United Kingdom (a huge increase of 71 Australian cents per litre, analysing year-2010 data) would reduce Australia’s annual road deaths by 200-300 per year.</p>
<h2>Falling global oil price</h2>
<p>Our results suggest that the <a href="https://theconversation.com/why-an-80-barrel-of-oil-is-bad-33147">more-than-20% fall in the world oil price</a> since June 2014 will unfortunately flow on to more casualties on the world’s roads.</p>
<p>But, like Australia, other countries have the potential to achieve sizeable reductions in road deaths from fuel tax increases. Our estimates imply that a tax increase that brought fuel prices in the United States up to the United Kingdom average would reduce the annual road toll in the United States by more than a quarter (around 10,000 lives per year as of 2010). </p>
<p>There are of course other factors to consider in setting fuel taxes. And one day vehicles may be <a href="https://theconversation.com/boys-and-their-toys-a-crash-course-in-driverless-cars-2319">so safe</a> that road deaths diminish as a policy issue. But, for the moment, that’s a lot of lives.</p>
<p><em>“Gasoline Prices and Road Fatalities: International Evidence” has been published by Economic Inquiry. The paper and data can be accessed from <a href="https://crawford.anu.edu.au/people/academic/paul-burke">Paul Burke’s website</a>. An open-access version is available <a href="https://ideas.repec.org/p/pas/papers/2014-18.html">here</a>.</em></p><img src="https://counter.theconversation.com/content/33239/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Burke does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Road safety is a seriously important public policy issue. Around 1.3 million people die in road crashes around the world each year. Among teenagers and young adults, road crashes are the number-one cause…Paul Burke, Fellow, Crawford School, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/335572014-10-28T10:37:03Z2014-10-28T10:37:03ZWith friends like the Feds, life becomes even harder for Napthine government<figure><img src="https://images.theconversation.com/files/63005/original/w9qx33rx-1414492346.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Victorian Premier Denis Napthine faces an uphill battle at November's state election.</span> <span class="attribution"><span class="source">AAP/Lukas Coch</span></span></figcaption></figure><p>On the ropes already and facing the polls on November 29, the Victorian Liberals have yet again been knocked by their federal colleagues.</p>
<p>Tuesday’s move to <a href="https://theconversation.com/government-gets-round-senate-on-fuel-33538">reintroduce fuel indexation</a> by the tariff route, with the gamble that validating legislation will get through later, is a clever tactic from a federal government desperate to secure what it can of its outstanding budget measures.</p>
<p>But even a very small petrol price rise on November 10, as voters are tuning into the state campaign, is unhelpful for the Napthine government.</p>
<p>Harder to understand is the timing of Tony Abbott <a href="https://theconversation.com/abbott-floats-gst-change-but-puts-limits-on-commitment-to-major-federation-reform-33448">bringing the GST back</a> onto the agenda.</p>
<p>Abbott was delivering a major speech on federalism at the weekend, as work continues on a white paper. But he did not have to include an explicit declaration that the federal government was willing to consider a deal with the states to broaden the indirect tax base.</p>
<p>That would mean increasing or widening the GST, or both. All GST revenue goes to the states.</p>
<p>Napthine <a href="http://news.smh.com.au/breaking-news-national/vic-premier-rejects-call-for-gst-boost-20130920-2u433.html">retorted</a> that he was “not interested in increasing the GST”, but Victoria did want a fair share of the revenue.</p>
<p>Napthine launched a further attack when the fuel hike was announced, declaring that “any increase in fuel excise hurts Victorian families and hurts Victorian businesses”. He pointedly added a dig about the way it was being done: “any such proposal, I would believe, should go through the proper parliamentary process”.</p>
<p>This week’s blows are the latest from Canberra to hit the Victorian government. The state budget was popular, only then to be overshadowed by the highly unpopular federal one.</p>
<p>There is plenty of opportunity in coming weeks for the state opposition to associate Napthine with Abbott and urge people to send a message to Canberra.</p>
<p>This week’s <a href="http://www.galaxyresearch.com.au/22-24-october/">Galaxy poll</a> has the state government trailing Labor 48-52%, although Napthine leads opposition leader Daniel Andrews as preferred premier 43% to 27%.</p>
<p>Liberal optimists say people haven’t tuned in yet and put Napthine’s chances of survival at 50-50. The more common view is that the government, which has operated in an often shambolic hung parliament, is headed for a loss.</p>
<p>ABC election analyst Antony Green says state Labor has been ahead in the polls since the change of government in Canberra. “Labor’s favoured to win,” he says. “Of the nine government marginal seats on the new boundaries, only three have sitting members to defend them.”</p>
<p>The fuel decision won’t help, Green says. “It’s one of the few costs men notice.”</p>
<p>Ironically John Howard scrapped indexation when, after the introduction of the GST, petrol prices featured in big backlashes in West Australian and Queensland elections in 2001.</p>
<p>Earlier this year the Liberals had hoped to pick up South Australia from Labor, which would have put all the states in conservative hands. They just missed out.</p>
<p>If Victoria were lost, two of the six states would be Labor. But in political terms, Victoria is much more crucial than South Australia.</p>
<p>A Labor win there would be important in the ALP national rebuilding effort. Queensland and NSW are set to stay in conservative hands when these states face elections early next year, but significant swings would affect the national political mood.</p>
<p>Defeat in Victoria would set back Abbott’s hopes of any big tax shake-up. He told the joint parties meeting on Tuesday that on the GST “nothing will happen unless all of the states want it, because it is a tax for the states”.</p>
<p>From the vantage point of Melbourne the Abbott government is very Sydney-centric. Not one of the four Liberal Party parliamentary leaders, or the treasurer, is Victorian. There are just four Victorians in the 19-member cabinet – Kevin Andrews (Social Services), Andrew Robb (Trade and Investment), Greg Hunt (Environment) and Bruce Billson (Small Business).</p>
<p>Although voters distinguish state and federal elections, if the Victorian Liberals lose, there is likely to be a good deal of that familiar federalism game of blame-shifting from Melbourne to Canberra. </p>
<p><strong>Listen to the latest <a href="http://michellegrattan.podbean.com/e/ken-wyatt">Politics with Michelle Grattan podcast, with Ken Wyatt here</a>.</strong></p>
<iframe id="audio_iframe" src="https://www.podbean.com/media/player/audio/postId/5348515?url=http%3A%2F%2Fmichellegrattan.podbean.com%2Fe%2Fken-wyatt-1414492588%2F" data-link="http://www.podbean.com/media/player/audio/postId/5348515?url=http%3A%2F%2Fmichellegrattan.podbean.com%2Fe%2Fken-wyatt-1414492588%2F" height="100" width="100%" frameborder="0" scrolling="no" data-name="pb-iframe-player"></iframe><img src="https://counter.theconversation.com/content/33557/count.gif" alt="The Conversation" width="1" height="1" />
On the ropes already and facing the polls on November 29, the Victorian Liberals have yet again been knocked by their federal colleagues. Tuesday’s move to reintroduce fuel indexation by the tariff route…Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/326722014-10-19T20:05:17Z2014-10-19T20:05:17ZSix ways to boost funding for better public transport<figure><img src="https://images.theconversation.com/files/61206/original/2bkszq9w-1412813357.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">We've all experienced the frustration of waiting for public transport, but would we pay more tax for improvements?</span> <span class="attribution"><span class="source">Purple Wyrm/Flickr</span>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>Although Australia’s tax-to-GDP ratio is <a href="http://www.treasury.gov.au/Policy-Topics/Taxation/Pocket-Guide-to-the-Australian-Tax-System/Pocket-Guide-to-the-Australian-Tax-System/Part-1">low by international standards</a>, no-one wants to discuss how we might pay for the improvements needed to public transport, and even less the need for taxation to support better infrastructure and services.</p>
<p>Louis XIV’s Finance Minister, Jean Baptiste Colbert, had a good feel for taxation:</p>
<blockquote>
<p>“The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”</p>
</blockquote>
<p>In Australia we hear lots of hissing but don’t see many feathers when it comes to increased taxation to support better infrastructure and services.</p>
<p>There are three main sources of potential funding for improved transport services - government (on behalf of the community), users, and other beneficiaries (such as landowners). </p>
<p>The second and third of these funding sources are so-called “beneficiary pays” funding, and we could use such funding to improve transport in our cities, especially public transport.</p>
<p>The important issues to consider are revenue raising potential, predictability and stability of the revenue stream, the extent to which the measure affects travel behaviour, ease and flexibility of implementation, accountability and transparency. </p>
<p>The public also needs to accept the measures as equitable for different socio-economic groups. Alignment with strategic planning and development objectives, such as encouraging the scale, type and location of development conducive to achievement of more compact growth patterns and a strong CBD, should set the context.</p>
<p>Using these criteria, and following Colbert’s advice, the best result is likely to involve multiple measures. Looking at what is done in cities similar to our own in North America, I see considerable revenue raising potential in a number of areas - if our political leaders are prepared to put up with some hissing.</p>
<h2>Fuel excise indexation</h2>
<p>First, the federal government should push on with fuel excise indexation and give the additional revenue to the states, for transport spending. If we had not removed indexation over a decade ago, there would now be an additional A$5 billion available annually from this source.</p>
<p>The Productivity Commission found that current revenue from road users barely pays road infrastructure and maintenance costs, let alone covering the many other costs of road use, such as air pollution, congestion, accidents and carbon emissions. There is a strong case for increasing the fuel excise by more than indexation.</p>
<p>Road users benefit from better public transport. Many jurisdictions internationally – for example, Toronto - therefore spend some fuel tax revenue on public transport. Increasing fuel tax and giving the revenue to the states, with part to be spent on public transport, is economically defensible and would help to reduce the vertical fiscal imbalance between the federal government and states.</p>
<h2>Car parking levies</h2>
<p>Second, state governments should increase and extend their car parking levies. This charge sees road users pay for a small part of the congestion costs they cause in inner areas. The levy raises over A$100 million annually in Melbourne and Sydney, for example, and revenue could be substantially increased, by lifting the charge rate and extending the area that is included.</p>
<h2>Payroll tax</h2>
<p>Third, the states should marginally increase payroll tax levied on businesses located within 800 metres of high frequency tram, train or bus services. In Paris and Portland (Oregon) governments recognise the benefits employers get from access to high quality public transport services and levy them through payroll tax to help fund these services. NSW collects about A$7 billion and Victoria A$5 billion annually from payroll tax, so a small rate increase on beneficiaries would generate a significant sum towards better public transport.</p>
<h2>Council levies</h2>
<p>Fourth, the states should also impose a low rate metropolitan improvement levy on residential properties within 400 metres of a frequent public transport service. Councils could collect this with rate payments. New Halifax (Nova Scotia) has a very effective scheme of this sort. In turn, councils should be given a formal role, along with the state government, in determining public transport improvement priorities.</p>
<h2>Property levies</h2>
<p>Fifth, there should be project specific value capture charges for big public transport (and road) projects, like CBD rail, airport rail and light rail extensions, levied on properties close to the project, as Melbourne did 50 years ago for the Underground Rail Loop. London’s CrossRail project is a good current example.</p>
<h2>Increased fares</h2>
<p>Sixth, public transport fares could increase as services are improved, particularly on premium trunk services, but only if the other revenue measures are in place to reduce risks of patronage loss. These premium services tend to be used by higher income people, so equity arguments support looking at fare levels.</p>
<p>A likely objection to some of these proposals, particularly increasing fuel tax, is that they will adversely impact people with few transport options. This can be overcome by improving public transport service levels where these people live, particularly in those outer suburbs where services have lagged well behind population growth.</p>
<p>Now for the hissing.</p><img src="https://counter.theconversation.com/content/32672/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Stanley is a policy adviser to the Australian Bus Industry Confederation and to Bus Association Victoria. He receives funding support from these organisations.</span></em></p>Although Australia’s tax-to-GDP ratio is low by international standards, no-one wants to discuss how we might pay for the improvements needed to public transport, and even less the need for taxation to…John Stanley, Adjunct Professor, Institute of Transport and Logistics Studies, The Business School, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/305092014-08-15T04:55:19Z2014-08-15T04:55:19ZFactCheck: do poor people drive less?<figure><img src="https://images.theconversation.com/files/56569/original/kjj4tz3s-1408069821.jpg?ixlib=rb-1.1.0&rect=15%2C57%2C2545%2C1600&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Rich or poor, being stuck in traffic is always annoying.</span> <span class="attribution"><span class="source">Shultz6/Wikimedia Commons</span>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><blockquote>
<p>“The people that actually pay the most are higher income people, with an increase in fuel excise… The poorest people either don’t have cars or actually don’t drive very far in many cases.” – Treasurer Joe Hockey, <a href="http://www.abc.net.au/lateline/content/2014/s4066736.htm">ABC Radio</a>, August 13</p>
</blockquote>
<h2>Do rich people pay more?</h2>
<p>The first proposition here is that the people who pay the most fuel excise are those on higher incomes.</p>
<p>This statement can be interpreted in different ways. Excise is not income-related, so higher-income households do not pay more tax per litre for their fuel. But in terms of absolute expenditure, data show that higher-income households spend more, on average, on petrol than lower-income households. </p>
<p><a href="http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/6530.0Media%20Release12009-10?opendocument&tabname=Summary&prodno=6530.0&issue=2009-10&num=&view=">Australian Bureau of Statistics (ABS) Household Expenditure Survey Data from 2010</a> reports that households in the lowest 20% of income spent an average of A$16.36 on petrol per week, whereas those in the highest 20% spent an average of A$53.87. </p>
<p>But those figures relate to households, whereas the Treasurer referred to people, so the household survey data aren’t capable of supporting or refuting the Treasurer’s claim if we take his statement literally. A per-person calculation of fuel excise would be very complex, and we probably don’t have data sets that are detailed enough to answer this question. </p>
<p>The other factor is the degree of discretion in spending. Wealthier households are, all else being equal, more likely to use their car for discretionary rather than essential trips.</p>
<h2>Do poor people own fewer cars?</h2>
<p>The Treasurer’s second main proposition is that the poorest people don’t have cars. </p>
<p>This statement is verifiable against motor vehicle ownership data, the best source being the ABS Census. The Minister’s Office <a href="http://www.abs.gov.au/websitedbs/censushome.nsf/home/data">has provided ABS data on car ownership</a> relative to the <a href="http://www.abs.gov.au/websitedbs/censushome.nsf/home/seifa">Socio-Economic Indexes for Areas (SIEFA)</a>, which measures relative household disadvantage. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/56579/original/frn7gjtd-1408070412.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/56579/original/frn7gjtd-1408070412.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/56579/original/frn7gjtd-1408070412.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=322&fit=crop&dpr=1 600w, https://images.theconversation.com/files/56579/original/frn7gjtd-1408070412.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=322&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/56579/original/frn7gjtd-1408070412.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=322&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/56579/original/frn7gjtd-1408070412.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=404&fit=crop&dpr=1 754w, https://images.theconversation.com/files/56579/original/frn7gjtd-1408070412.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=404&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/56579/original/frn7gjtd-1408070412.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=404&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Car ownership broken down by relative household advantage. Red portions indicate households with no cars.</span>
<span class="attribution"><span class="source">Treasury estimates based on ABS 2011 Census of Population and Housing tables from ABS 2033.0 Socio-economic Indexes for Areas (SEIFA) and www.censusdata.abs.gov.au</span></span>
</figcaption>
</figure>
<p>Assuming these data are accurate, they show that roughly 65% of households in the lowest 10% on the SEIFA index own cars, in contrast to 83% of households in the highest 10%. Lower-income households thus own fewer cars, on average, than higher income-households. But note that even among these poorest 10% of households, a majority nonetheless own at least one car. </p>
<p>Furthermore, SEIFA primarily measures income and indicators of disadvantage, rather than “wealth”. A household or individual may have low income but not necessarily be poor if they own large assets. So SEIFA is not an ideal data set to directly compare poor and wealthy households. In a <a href="http://www.atrf.info/papers/2007/2007_Currie_Senbergs.pdf">Melbourne study</a> that considered “forced” car ownership among low-income households in Melbourne, the data showed that 72% of low-income households own at least one motor vehicle. </p>
<p>Finally, car ownership does not equate to use, and is thus only a very indirect indicator of fuel cost.</p>
<h2>Do poor people drive shorter distances?</h2>
<p>The Treasurer went on to claim that poor people “don’t drive very far in many cases”. This is much harder to ascertain, as there is no survey that measures national travel patterns. It is also not clear whether these shorter distances are defined as overall kilometres, or kilometres per trip undertaken. </p>
<p>Metropolitan household travel survey data are not generally provided by state transport departments in terms of income categories, if they collect such data at all. Moreover, there have been few recent Australian studies that have appraised this relationship using such information. The Melbourne survey cited above <a href="http://www.atrf.info/papers/2007/2007_Currie_Senbergs.pdf">also noted that</a> “low-income households make less trips than equivalent middle- and higher-income households”, but that “travel distance per trip generally increases with the number of cars owned per household, regardless of income group”.</p>
<p>Plenty of studies have also linked lower-income households with a range of disadvantageous travel circumstances, mainly because of the geographical locations of suburbs where poorer people tend to live. </p>
<p>In Sydney, for example, people in areas with higher proportions of lower-income households generally make more and longer trips than those in more affluent areas. Also, the bias towards cars over other forms of transport tends to be greater in less affluent areas. </p>
<p>As <a href="http://onlinelibrary.wiley.com/doi/10.1111/1745-5871.12001/abstract">this Brisbane study shows</a>, people living in areas with lower average incomes tend to drive more and further (principally for work), own older and less efficient cars, and face relatively higher costs for operating motor vehicles. </p>
<p>In terms of options to offset higher fuel costs by switching to other forms of transport, the distribution of high-quality public transport typically favours wealthier households within Australian cities.</p>
<p>A survey of the <a href="https://www.propertyoz.com.au/library/Energy%20Requirements%20of%20Sydney%20Households%20Jan%202004.pdf">energy requirements of Sydney households</a> showed that lower-income households have very high automobile energy use due to their high car dependence, but that higher-income households generate greater carbon emissions, because of higher overall consumption. In this context the government’s shift in energy taxation from carbon emissions to taxing petrol use seems to be socially regressive – many less wealthy motorists have no option but to take the hit.</p>
<h2>In summary</h2>
<p>So, what to make of the Treasurer’s statement? The terms he used are loosely defined, which makes them difficult to assess against the data. At a basic level, Mr Hockey didn’t say where the threshold is when considering who are “the poorest” people.</p>
<p>At a national scale his statement contains some verifiable truth. But at the scale of regions or cities, spatial factors such as the suburbs where people live and the transport links they use are much more important. </p>
<p>Finally, it is better to think of fuel costs in proportion to disposable income, rather than as absolute costs. We should also consider people’s access to alternative options such as buying a more fuel-efficient vehicle, or switching to public transport, walking or cycling. People with high discretionary income or who live in areas well served by public transport (and there is a significant overlap between these groups) will obviously have more options open to them, whereas poorer households who lack access to public transport might simply have to cut back on travel.</p>
<h2>Verdict</h2>
<p>“Higher-income people pay the most fuel excise”: conditionally true in absolute terms and as a general category, but not necessarily true as a proportion of income or of discretionary spending.</p>
<p>“Poorer people either don’t own cars or don’t drive very far”: unverifiable in any meaningful way. Car ownership is marginally lower in poorer households, but is nevertheless high right across the board, with reason to believe many poorer people are forced into driving long distances (mainly for work) by their geographical circumstances.</p>
<hr>
<h2>Review</h2>
<p>This is a good breakdown of the Treasurer’s statement and provides evidence to both verify and refute it.</p>
<p>It would be useful to describe the characteristics of the geographical locations that underpin the relationship between low income and disadvantageous travel circumstances. For example, why do people living in areas with lower average incomes make more and longer trips by car? Is it because these areas are traditionally in the middle to outer suburban ring and are comparatively poorly served by public transport and employment opportunities and services?</p>
<p>Another aspect to this issue is the socio-economic gradient across the rural-regional-urban divide. Much of the focus has been on cities, but low incomes and car dependence are also important issues in rural and regional areas. – <strong>Jennifer Kent</strong></p>
<p><div class="callout"> Have you ever seen a “fact” that doesn’t look quite right? The Conversation’s FactCheck asks academic experts to test claims and see how true they really are. We then ask a second academic to review an anonymous copy of the article. You can request a check at checkit@theconversation.edu.au. Please include the statement you would like us to check, the date it was made, and a link if possible.</div></p><img src="https://counter.theconversation.com/content/30509/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jago Dodson receives funding from the Australian Research Council, the Australian Urban Research Infrastructure Network, Logan City Council, Springfield Land Corporation and Lend Lease Communities.</span></em></p><p class="fine-print"><em><span>Jennifer L. Kent does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>“The people that actually pay the most are higher income people, with an increase in fuel excise… The poorest people either don’t have cars or actually don’t drive very far in many cases.” – Treasurer…Jago Dodson, Professor of Urban Policy, School of Global, Urban and Social Studies, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/304902014-08-13T12:48:59Z2014-08-13T12:48:59ZJoe Hockey gets outnumbered in the battle of the stats<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/56399/original/568g63sw-1407931764.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/56399/original/568g63sw-1407931764.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/56399/original/568g63sw-1407931764.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/56399/original/568g63sw-1407931764.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/56399/original/568g63sw-1407931764.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/56399/original/568g63sw-1407931764.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/56399/original/568g63sw-1407931764.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Treasurer Joe Hockey has been in begging mode, flying around the country to meet crossbenchers.</span>
<span class="attribution"><span class="source">AAP/Paul Miller</span></span>
</figcaption>
</figure>
<p>When a government has to negotiate with crossbenchers there is often an element of humiliation involved, especially if that government suffers from a touch of “born to rule”.</p>
<p>Governments think of themselves as having the right to get on with what they want to do, only to often find they need to kowtow to those who received just a fraction of the vote.</p>
<p>With so much of this year’s budget up for grabs and the Senate crossbench packed with players enjoying both profile and power, the wheeling and dealing is a circus for the public and a high-wire act for Treasurer Joe Hockey.</p>
<p>How ministers must (in private) curse having to go as supplicants to Clive Palmer. Hockey turned up for dinner with the PUP leader on Tuesday. Education Minister Christopher Pyne had lunch on Wednesday. Health Minister Peter Dutton will see him on Thursday.</p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/56400/original/ch73v4sr-1407933326.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/56400/original/ch73v4sr-1407933326.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/56400/original/ch73v4sr-1407933326.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=800&fit=crop&dpr=1 600w, https://images.theconversation.com/files/56400/original/ch73v4sr-1407933326.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=800&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/56400/original/ch73v4sr-1407933326.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=800&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/56400/original/ch73v4sr-1407933326.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1005&fit=crop&dpr=1 754w, https://images.theconversation.com/files/56400/original/ch73v4sr-1407933326.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1005&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/56400/original/ch73v4sr-1407933326.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1005&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Education Minister Christopher Pyne spent his birthday lunching with PUP leader Clive Palmer.</span>
<span class="attribution"><a class="source" href="https://twitter.com/cpyne/status/499408204262948864">Twitter</a></span>
</figcaption>
</figure>
<p>Is progress being made? Reading the Palmer signals doesn’t get any easier over time. He seemed to be hinting at some flexibility over the Medicare co-payment plan on Wednesday; on other occasions he’d said the Palmer United Party senators would not vote for it under any circumstances.</p>
<p>Hockey – coming to the task late and figuratively speaking holding his nose much of the time – has, in begging mode, done his rounds of the crossbenchers, travelling the length and breadth of the country. There’ll be more work ahead. In a few weeks, the results can be audited.</p>
<p>But on Wednesday the Treasurer was in trouble with a clanger as he tried to mount an argument for the proposed restoration of the indexation of fuel excise in equity terms.</p>
<p>“The people that actually pay the most are higher-income people,” he said. “Yet the Labor Party and the Greens are opposing it. They say you’ve got to have wealthier people or middle-income people pay more. Well, change to the fuel excise does exactly that. The poorest people either don’t have cars or actually don’t drive very far in many cases. But they are opposing what is meant to be, according to the Treasury, a progressive tax.”</p>
<p>This was dismissive politics; an inaccurate description of the tax; and a use of numbers that doesn’t reflect the full picture.</p>
<p>After howls of outrage Hockey put out a note to back his argument. It showed average weekly household expenditure on petrol in absolute terms increasing with household income thus: lowest quintile, $16.36; second $27.60; third $38.55; fourth $47, and highest $53.87.</p>
<p>“Based on census data, households in relatively disadvantaged areas are less likely to own motor vehicles than those in relatively advantaged areas. Where motor vehicles are owned, households in relatively disadvantaged areas are most likely to own only one car whereas households in relatively advantaged areas are more likely to have two or more motor vehicles,” the note said.</p>
<p>But these figures don’t tell us the relative burden of petrol costs, and Hockey was quickly challenged on Twitter by more relevant figures.</p>
<p>News Corp’s national economics editor <a href="https://twitter.com/Jess_Irvine">Jessica Irvine tweeted</a> the numbers for spending on petrol as a percentage of household income, by quintile, showing that poor households spent more of their income on it than those better off: Q1- 4.5%; Q2-3.5%; Q3-2.9%; Q4-2.3%; Q5-1.3%.</p>
<p>Greg Jericho, who writes for Guardian Australia, <a href="http://pic.twitter.com/L4GFVwyplk">tweeted a graph</a> showing the percentage of annual household expenditure spent on petrol: it was higher for the poor than for the top income bracket. Also, and significantly, the second-lowest income quintile (that is, relatively modest earners) had the highest percentage.</p>
<p>In its submission to the Senate inquiry on the legislation the Australian Automobile Association said: “Research indicates that the people who use their cars most frequently are in the outer metropolitan areas and rural and regional areas where there are lower incomes, less jobs and little or no access to public transport.</p>
<p>"The AAA is concerned that individuals in these areas will bear the highest cost increases of indexation changes.”</p>
<p>There are sound arguments for restoring the indexation of fuel excise, not least environmental ones, as well as the need for a source of revenue that grows. Also, the slugs to households will be small, although mounting up over time.</p>
<p>It will be unfortunate if the Senate refuses to pass the measure. Indexation was abolished only because John Howard was politically embattled in 2001.</p>
<p>For all that, there is no getting away from the fact that it is a regressive tax, and Hockey’s blunt-edged defence was just another misstep in a budget sales job that has been full of them.</p><img src="https://counter.theconversation.com/content/30490/count.gif" alt="The Conversation" width="1" height="1" />
When a government has to negotiate with crossbenchers there is often an element of humiliation involved, especially if that government suffers from a touch of “born to rule”. Governments think of themselves…Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/292642014-07-17T19:59:47Z2014-07-17T19:59:47ZFactCheck: do Australians pay high petrol taxes?<p><em>UPDATED ON TUESDAY 22 JULY: See editor’s note below for details on the updates.</em></p>
<p>In this year’s federal budget, the Abbott government moved to <a href="http://www.abc.net.au/news/2014-05-11/fuel-excise-to-increase-in-line-with-inflation/5445170">restart automatically increasing the fuel excise</a> in line with inflation twice each year, hoping to start from August 1 this year. </p>
<p>For motorists, that would have meant a slight rise of just over 1 cent a litre (in Australian currency) in the first year.</p>
<p>The <a href="http://www.abc.net.au/news/2014-07-16/hockey-appeals-for-compromise-on-budget-cuts/5600064">proposed petrol tax increase isn’t going ahead</a> for now, because the government doesn’t have enough senators onside to pass its plan. <a href="http://www.abc.net.au/worldtoday/content/2014/s4031852.htm">To many people’s surprise, three weeks ago the Greens</a> declared they wouldn’t even try to negotiate a deal over the fuel tax hike – worth A$2.2 billion over the next four years – because the government had signalled all of the money raised would go to roads, with nothing for public transport.</p>
<p>But <a href="http://www.afr.com/p/national/fuel_excise_delay_keeps_greens_on_OTMCsFwRhvZsAljbxL5XVP">the government isn’t giving up on the Greens</a> changing their minds, amid renewed <a href="https://theconversation.com/greens-miss-the-chance-of-a-victory-on-fuel-policy-28401">reports of internal tensions</a> over the issue.</p>
<p>So when it comes to petrol taxes, what are the facts? When ranked against other nations, do Australians pay high, low or average petrol taxes?</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/53943/original/m5hxp2cm-1405472295.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/53943/original/m5hxp2cm-1405472295.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/53943/original/m5hxp2cm-1405472295.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=412&fit=crop&dpr=1 600w, https://images.theconversation.com/files/53943/original/m5hxp2cm-1405472295.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=412&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/53943/original/m5hxp2cm-1405472295.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=412&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/53943/original/m5hxp2cm-1405472295.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=517&fit=crop&dpr=1 754w, https://images.theconversation.com/files/53943/original/m5hxp2cm-1405472295.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=517&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/53943/original/m5hxp2cm-1405472295.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=517&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">How much tax motorists around the world pay per litre of fuel. Prices shown are in US dollars.</span>
<span class="attribution"><a class="source" href="http://www.iea.org/newsroomandevents/graphics/2014-07-15-unleaded-gasoline-prices-and-taxes-1q2014.html">International Energy Agency quarterly Energy Prices & Taxes report</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>The International Energy Agency publishes quarterly reports on unleaded petrol prices and taxes. The latest report surveyed petrol prices in the first quarter of 2014 in 32 countries. As you can see above, the report found that only three countries – Mexico, the United States and Canada – have lower petrol taxes than Australia.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/54067/original/xtcx2pvz-1405564250.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/54067/original/xtcx2pvz-1405564250.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/54067/original/xtcx2pvz-1405564250.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=721&fit=crop&dpr=1 600w, https://images.theconversation.com/files/54067/original/xtcx2pvz-1405564250.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=721&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/54067/original/xtcx2pvz-1405564250.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=721&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/54067/original/xtcx2pvz-1405564250.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=906&fit=crop&dpr=1 754w, https://images.theconversation.com/files/54067/original/xtcx2pvz-1405564250.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=906&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/54067/original/xtcx2pvz-1405564250.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=906&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Bureau of Resource & Energy Economics (Australian Petroleum Statistics) and the International Energy Agency (IEA) figures, compiled by the Australian Institute of Petroleum. Prices shown are in Australian dollars.</span>
<span class="attribution"><a class="source" href="http://www.aip.com.au/pricing/internationalprices.htm">Australian Institute of Petroleum</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>In fact, Australia is one of only ten countries surveyed where taxes make up less than 50% of the price. While the figure for Australia stands at 34%, in some European countries taxes account for 60% of the cost of petrol at the bowser.</p>
<p>Australia’s fuel excise has been frozen at <a href="http://law.ato.gov.au/atolaw/view.htm?Docid=PAC/BL030002/1&PiT=99991231235958">A38.143 cents per litre</a> since 2001, when John Howard’s Coalition government ditched indexation to offset the price hike caused by the introduction of the goods and services tax (GST).</p>
<p>If the excise had remained indexed to the annual inflation rate, by 2013 it would have stood at approximately A52.9 cents per litre. (Note: I calculated this using <a href="http://www.rba.gov.au/calculator/annualDecimal.html">the Reserve Bank of Australia’s calculator</a>). Without the fuel excise freeze, taxes in 2013 would have accounted for about 40% of the petrol price – which would have meant Australia’s petrol taxes were still among the lowest in the developed world.</p>
<p>As <a href="https://theconversation.com/petrol-prices-are-on-the-way-up-but-dont-blame-the-fuel-excise-26494">I have explained on The Conversation before, other factors</a> including the value of the Australian dollar and global oil prices will matter far more to how much you pay, rather than the fuel excise.</p>
<h2>Verdict</h2>
<p>Australians are not paying high petrol taxes when compared to other developed countries. <strong>– Vlado Vivoda</strong></p>
<hr>
<h2>Review</h2>
<p>The author’s analysis is on the money: most other developed countries have higher taxes on their gasoline.</p>
<p>Alternative data sources could be used for this exercise. The international gasoline pump-price data of <a href="http://www.giz.de/expertise/html/4317.html">GIZ</a> also indicate that Australia’s petrol prices are lower than those in most developed countries. <strong>– Paul Burke</strong></p>
<p><div class="callout"> Have you ever seen a “fact” that doesn’t look quite right? The Conversation’s FactCheck asks academic experts to test claims and see how true they really are. We then ask a second academic to review an anonymous copy of the article. You can request a check at checkit@theconversation.edu.au. Please include the statement you would like us to check, the date it was made, and a link if possible.</div></p>
<hr>
<p><em>Editor’s note: The verdict and review in this article have not changed. However, it previously began with a quote from the Australian Automobile Association, drawn from this <a href="http://www.abc.net.au/worldtoday/content/2014/s4000385.htm">ABC Radio story “Motorists’ fury at petrol tax rise”</a>, stating: “There’s no justification for an increase in tax on motorists in this budget. Motorists are already paying too much tax and they’re not getting fair value for the money that they currently pay.” The AAA has since clarified that their position is that while motorists do pay too much tax, they were referring to all taxes, not fuel taxes specifically. Plus, following a question from reader Ron Purss below, we have also put in additional petrol and diesel charts showing international tax comparisons in Australian dollars.</em></p><img src="https://counter.theconversation.com/content/29264/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Vlado Vivoda receives Australian Research Council funding.</span></em></p><p class="fine-print"><em><span>Paul Burke does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>UPDATED ON TUESDAY 22 JULY: See editor’s note below for details on the updates. In this year’s federal budget, the Abbott government moved to restart automatically increasing the fuel excise in line with…Vlado Vivoda, Research Fellow DECRA, Centre for Social Responsibility in Mining, The University of QueenslandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/284012014-06-24T07:28:32Z2014-06-24T07:28:32ZGreens miss the chance of a victory on fuel policy<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/52050/original/cyvndc55-1403595062.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/52050/original/cyvndc55-1403595062.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/52050/original/cyvndc55-1403595062.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/52050/original/cyvndc55-1403595062.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/52050/original/cyvndc55-1403595062.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/52050/original/cyvndc55-1403595062.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/52050/original/cyvndc55-1403595062.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Greens leader Christine Milne has sounded unconvincing on the reasons for her party opposing the return of fuel excise indexation.</span>
<span class="attribution"><span class="source">AAP/Alan Porritt</span></span>
</figcaption>
</figure>
<p>In deciding to vote against the restoration of fuel excise indexation, the Greens have let the perfect be the enemy of the good. They’ve gone against their own policy, and appeared to be all over the place in the process.</p>
<p>The handling of the measure will reinforce the criticism of Christine Milne’s leadership, both inside and outside the Greens.</p>
<p>Milne had flagged initially that the Greens would support the indexation - worth about $2.2 billion over the forward estimates - although it was quickly obvious they objected to the funds all being used for road building.</p>
<p>They could have sought to knock out the hypothecation. It is surely likely that at the end of the day the government would have worn that, given significant money is involved, so many of its budget measures are under threat, and Clive Palmer is opposed (meaning there is no other dancing partner).</p>
<p>Milne sounds unconvincing about why the Greens would not have a try, saying Tony Abbott and Joe Hockey had indicated they were taking an all-or-nothing approach. Of course they would say that – it doesn’t mean it would be their final stand.</p>
<p>She also says the government would put the money into roads anyway, whatever the fate of the hypothecation provision. Perhaps, but even without the excise funds, the spending on roads may remain the same.</p>
<p>One reason Milne looked weak in her post-party meeting news conference is that the Greens have been ambivalent and divided over the issue – whether to seek a compromise or oppose outright. Milne’s initial inclination towards the measure became untenable as time passed and internal opposition firmed.</p>
<p>The party meeting debated both options but the mood was obvious.</p>
<p>The Greens are obsessively anti-Abbott at the moment, reluctant to give him anything. This may be popular with their base. But the cost is their own credibility, especially with more centrist supporters or potential supporters, who want a party that can actually deliver on something - particularly, when it gets the chance, policies it believes in.</p>
<p>Bringing back indexation on fuel is quite a big deal. It is not the substantial anti-carbon measure that Abbott tried to make out in his talks with President Obama, and certainly the motive for it was money, not climate change, as Abbott made clear in Parliament on Tuesday.</p>
<p>But it is worth having in the suite of climate policies. For the Greens to lose the chance to do something to which they were committed is to suggest they are more interested in gestures than achievements.</p>
<p>It was the same story with emissions trading. If the Greens had been willing to play ball, the Rudd government’s ETS legislation could have been passed when in 2009 dissident Liberals crossed the floor in the Senate. But the Greens stayed pure (they argue it was Rudd who wouldn’t play ball).</p>
<p>If the ETS had been legislated then, and carbon pricing established, the debate would have changed and there would have been a good chance the scheme would have remained in place.</p>
<p>The next test for the Greens will be paid parental leave. Abbott has been forced to pare his plan back; it is now close to the Greens policy. But as with fuel excise, there are internal differences, with some Greens not wanting to facilitate it for Abbott, and probably there will be pain ahead. (As with fuel, Abbott doesn’t have any other potential Senate support for PPL.)</p>
<p>Tuesday’s <a href="http://essentialvision.com.au/category/essentialreport">Essential poll</a> contained some sobering figures for the Greens.</p>
<p>Fewer than three in ten (28%) of voters believe the Greens holding the balance of power in the Senate has been good for Australia, while 37% think it has been bad.</p>
<p>It might be argued that when a small party gets in a position to do something (as the Greens were in spades during the hung parliament) it inevitably makes enemies – which is all the more reason to score runs when possible.</p>
<p>The Greens like to claim a victory in forcing Julia Gillard’s hand over carbon taxing. But this is a pyrrhic win – because it is about to be dismantled.</p>
<p>The poll also asked people their opinions of Milne (and Clive Palmer, but that’s another story). Some of the findings are a wake up call. Only 41% think she understands the problems facing Australia; just 30% say she is visionary. Nearly half (48%) think she is narrow minded; more than half (51%) believe she is out of touch with ordinary people.</p>
<p>While she is seen as (and is) intelligent and hard working, Milne is not cutting through as sufficiently strong on the nation’s needs or the people’s concerns.</p><img src="https://counter.theconversation.com/content/28401/count.gif" alt="The Conversation" width="1" height="1" />
In deciding to vote against the restoration of fuel excise indexation, the Greens have let the perfect be the enemy of the good. They’ve gone against their own policy, and appeared to be all over the place…Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.