Lindsay Tanner (Melbourne, Australian Labor Party, Shadow Minister for Finance) Share this | Hansard source

The Fuel Tax Bill 2006 and the Fuel Tax (Consequential and Transitional Provisions) Bill 2006 which are before the parliament tonight are built on a concept that is sound in its underlying terms. The legislation is about rationalising fuel taxation in Australia, partly based on a gradual increase in tax on alternative fuels, which does raise some concerns in my mind about the potential impact on the marketability of the kinds of fuels that we are increasingly going to have to rely on in the future to ensure that transport and energy needs are adequately provided for. It also involves a substantial realignment of the means of taxation of diesel and petrol for off-road business use and the abolition of the Fuel Sales Grants Scheme, which involved a small but significant subsidy to rural and remote petrol consumers.

All off-road business use will now be tax free and this is estimated by the government to cost in the vicinity of $300 million to $400 million per annum. It is interesting, though, that I have not been able to determine whether this includes an estimate of a clawback from company tax, because at the moment the various businesses concerned effectively get a tax offset or a tax deduction for the cost of the fuel tax that they are paying. That will no longer be the case and, therefore, I would assume that there would be a change over time in company tax. As far as I can see, there is no calculation made in the net cost to the taxpayer of these changes, reflecting the inevitability of some clawback in company tax. We do not know whether the estimated cost to the taxpayer from the change is a gross cost or a net cost—in other words, whether the company tax clawback is taken into account.

The loss of the Fuel Sales Grants Scheme is a very significant issue and will have an impact on many consumers in regional and rural Australia, particularly at a time when, as everybody knows, petrol prices have soared and are causing considerable financial pain for many families and many consumers, none more so than in country Australia. It is interesting that effectively the government is extending greater generosity to businesses in rural Australia through the extension of the capacity to get a here-and-now rebate to petrol but, at the same time, is slugging consumers in regional Australia. In other words, people who are its closest political base in regional Australia, particularly farmers and other businesses, will get the benefit but other people—ordinary workers, ordinary consumers—in rural and regional Australia will now lose the benefits of the Fuel Sales Grants Scheme subsidies.

It is true to say that the magnitude of the benefit flowing to ordinary motorists in rural and regional Australia from the Fuel Sales Grants Scheme has been questioned. Some allege that, in many cases, the benefits are not adequately passed through to consumers—they are just absorbed by producers and retailers. I am not really in a position to comment on the extent of that, but certainly it is an issue of some seriousness. It is rather odd that, at a time of very high petrol prices and when a lot of people in country Australia are suffering significant detriment as a result of those petrol prices, the government should choose to remove this scheme and at the same time increase the availability of immediate tax relief to businesses in country Australia.

I am particularly concerned about the prospect of increased rorting of these arrangements. Some time ago I asked the Parliamentary Library to provide me with details of the policing mechanisms for the successor to the Diesel Fuel Rebate Scheme, and the ability of people for off-road use, in effect, to get an immediate rebate of the tax. I found the information provided to me distinctly uninspiring and not reassuring. It certainly appeared to me that the degree of enforcement and rigorous approach to ensuring that only those who were legitimately entitled to claim the rebate were actually able to do so was hardly of the kind of magnitude that you would hope, particularly as there are substantial amounts of money involved. I would suggest that the ability of producers, of people running businesses, to include the private use of fuel within the rebatable or effectively tax-exempt use that is provided for in their productive activity is quite significant. The government is proposing to expand the fuel range that applies to and, therefore, to open up a new prospect of people rorting the system in order to gain a benefit.

I will give an example from my own family background. For many years my father used a Falcon ute as his primary vehicle, which was used largely on his farm but also as his personal vehicle. Because he was also an accountant, he drove the ute around town for a range of other activities. It was a petrol powered car, so it was not covered by what was then the diesel fuel rebate, but under the measures the government is proposing he would have the opportunity to effectively shift the cost that he otherwise would have to pay in tax and excise on his petrol back onto the taxpayer by massaging that into the category of use of a vehicle for business related purposes. Obviously, this is not an unlimited possibility, but there is certainly plenty of scope for people to effectively pad their business related use and minimise their personal use in order to claim the tax benefit. I am concerned that this legislation will actually expand that opportunity and I call on the government to thoroughly examine the extent to which the current enforcement is rigorous and meaningful and to ensure that the tax benefits that flow under both the existing scheme and the expanded arrangements that this legislation provides will apply only to the use for which the benefits are intended.

The bigger picture question, which I do not think this bill adequately deals with, is Australia’s interests in the area of energy in the longer term—in particular, the question of where affordable fuel is going to come from in 10 or 15 years time. This is not just an issue for regional Australia. In fact, it is interesting to note that average spending per household on petrol in this country is broadly very similar in the cities and the country. Although people tend to travel longer distances in country Australia, it is common for people to travel quite long distances commuting to work in the cities, while that occurs to a much lesser extent in many parts of country Australia. So, in aggregate, petrol use per household in metropolitan Australia is broadly very similar to that in country Australia. It is higher in country Australia, but we should not assume that the question of fuel needs is for rural Australia only. The question is also an important one for people in metropolitan areas.

We cannot escape the fact that the days of relatively cheap transport may well be over. Technological change can always deliver miracles—things that nobody could have predicted—and it is eminently possible that, in 10 or 15 years time, different fuels and technologies will enable us to continue to use transport options that, as a proportion of total productive activities, are as efficient and cheap as we have enjoyed for many years. But, Mr Deputy Speaker, you would have to say that that does not look particularly likely. If the effective cost of transport relative to the total economic activity of the nation increases substantially, it will have a profound impact on Australian society and our economy. A whole lot of production dynamics will be changed, and in positive as well as negative ways.

One of the reasons the Australian manufacturing industry is under ever-increasing pressure from imports is that, in the past 20 or 30 years, relative transport costs have plummeted and, therefore, the capacity to economically transport sometimes quite large items or items where the ratio of value to volume is not particularly high has been strong. A lot of those possibilities have been opened up through lower transport costs. If, through events that none of us can control, the relative cost of transport as compared with total production increases substantially, one of the offshoots will be that it will become more economic to produce products closer to the markets in which they are consumed. Also, it may mean, for example, that the importation of primary products from very distant parts of the world become significantly less economic. However, against those kinds of changes there will be a range of things that people will find far less positive. Of course, the overall additional cost that would be borne by consumers would increase and the ordinary living standards of Australian workers and the capacity of businesses to produce affordable goods and services would be significantly affected. It is a very serious issue that we need to pay a lot of attention to.

The shadow minister for human services and government accountability mentioned the question on notice I asked last year of the Minister for Industry, Tourism and Resources about the extent to which the government was seriously planning for the longer term and for the possibility of global oil production reaching a peak and declining thereafter. This is known in the trade as ‘Huppert’s peak’ after the geologist who first coined the idea. There is considerable debate about when that is likely to arise. Some pessimists suggest that we are on the verge of that peak in oil production already and that, after the next year or two, overall oil production will start declining. There are others who are far more optimistic and suspect that it is several decades away. One way or the other, it is going to happen. If we do not gradually reduce our dependence on oil, then when it does happen the implications for Australia and other countries in similar circumstances will be immense.

At that time you will see the interaction of the forces of supply and demand producing very dramatic increases in price. What we have recently experienced in Australia with petrol prices will look pretty trivial compared with the kind of price increases that we may see when we are dealing with a genuinely global market and an increasingly scarce resource attached to ever-mounting demand. It makes sense that a nation like Australia should do everything it can to plan and prepare for that prospect, to diminish our reliance on oil, to develop alternative fuels and to ensure that we are as well placed as possible to ride out any disruption that those changes may bring. Even it is 20 or 30 years away, we still need to be preparing for these things.

A variety of technological possibilities are emerging. Members would all be aware of hybrid cars, the development of hydrogen fuel cells and biofuels. The dynamics of oil may change as a result of things like tar sands, shale oil and so forth. None of them appears to constitute a magic bullet at this stage, but we cannot predict what they will ultimately produce. Barring the kinds of technological miracles that they may or may not entail, we need to prepare for the prospect of a society where the relative cost of transport is significantly higher than currently. This will have enormous implications for things like the design of cities. It will mean, for example, that that which is becoming increasingly common of people commuting from the other side of Geelong to work in Melbourne or from the Central Coast of New South Wales to work in Sydney will be uneconomic; it will be just too expensive. A whole lot of rearrangements of how we go about our lives and the production process will inevitably flow. That is why it is crucial for our nation that we plan now.

The answers that the minister gave to my questions on notice which the member for Wills read out before of no, no, no and no—in other words, ‘We have no idea and we don’t care’—are simply not adequate. In the interests of our nation, in the interests of all the producers of our nation, not least the primary producers, we need to be preparing for these changes and ensuring that Australia is best positioned to ride out any disruption which may flow. We do not know whether this is going to occur, we do not know what magnitude the negative consequences may be, but we have a responsibility to ourselves, to the nation and to our children to prepare for these things, and the government appears to have little interest in them.

There are some short-term things we ought to be doing, such as ensuring the ACCC has greater powers to police the various levels in the oil industry, ensuring that we do not do things like invade Iraq and therefore contribute to the inflation of global oil prices and particularly improving our approach to energy conservation, transport, buildings and a variety of other things. In the long term it is inevitable that our children are going to face a very different world. Instead of pretending that cheap oil is going to continue forever or that it will be replaced by equally cheap alternative fuel sources, we as a nation need to prepare now for the difficulties we will inevitably face, whether they are five or 25 years away.

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