Rowan Ramsey (Grey, Liberal Party) Share this | Hansard source

I have long been of the opinion that all fuel excises should be hypothecated to road construction and, as long as we insist on the rail system paying the excise as well, so it should apply to rail in that sense, and that other transport based taxes like registration should in fact be wound back. Unfortunately, at this time in Australia we are a long way from that point. This is complicated by a number of factors that go back decades, including the states ceding their income taxation powers to the Commonwealth during World War II, the High Court decision in 1997 which revoked the states' rights to levy fuel excise, and the removal of about 8c of excise at the time of the introduction of the GST. That complexity and the voice of history add to the complexity of the historical taxing formulas that we now face in the Commonwealth.

As a result, only about half the money raised by the Commonwealth on fuel excise is actually spent on roads. The flip side of this, of course, is that about half is spent on services such as health, education and defence, and the erosion of the real value of fuel excise is not only affecting the money available for roads at Commonwealth level but also undermining the rest of the budget. This is not as I would prefer it. I would say this is an opaque system. A better system would be that all fuel excise was hypothecated to roads and that the structure of the Federation was reformed so that, where possible, you would have a user-pays system, just as you can with fuel excise, and governments would be more responsible for raising the money they spend.

It is worth remembering that the Commonwealth, while it only directs about 50 per cent of the moneys raised through fuel excise to the transport system, directly funds the states for their functions. For instance, it is worth remembering that, despite the South Australian Treasurer Koutsantonis's wild claims in his first state budget about federal cuts, for South Australia more than 50 per cent of the state budget is derived directly from Commonwealth grants.

It is inherently an unhealthy system where governments are responsible for spending money that they do not have any responsibility for raising. Effectively, they do not wear the political downside of raising the taxes but they get the pats on the back for spending the money. You could even go to the next level of government and look at local government, for instance. It relies on significant grants from the federal level. I recently looked at a fairly large local council in my area and looked down the list of donations and different bodies that it supported within its council area. It was an amazingly long list. I was given to reflect that the local councils were getting the pats on the back for spreading the largesse around, and yet the political pain was felt here in Canberra, where the taxes were raised. That is one of the things that should be looked at in the review of Federation that we will be dealing with in the next 12 months or so.

Because of this reliance on federal taxes, it is simply not viable for the Commonwealth to allow its tax base to be continually eroded. After a 13-year pause, in which the real value of fuel excise has been reduced by 22 per cent, it is inevitable that, if indexation is not reintroduced at some stage, eventually the excise will become virtually worthless as a major component of government funding. It seems to me that, sooner or later, one side of politics or the other would have to face this issue of unfreezing indexation and reinstating fuel taxes as one of the core components of raising government finance.

Of course, this has been brought about and forced upon us by the financial time bomb left to us by the former Labor government. Despite Labor inheriting more than $50 billion in the bank and a surplus of $20 billion, after six years of their spendthrift government we are faced with a current budget—which I might point out is Labor's last—delivering a $50 billion deficit. We have a net debt around $200 billion and a projected debt—without policy changes—of $667 billion. As a consequence, the nation now borrows $1 billion a month—mostly from overseas, it must be said—just to pay the interest on the debt.

Because of the ageing of the population, which means the ratio of taxpayers to welfare recipients is likely to halve by 2050, and the expectations of the previous government that somehow the huge increases in government expenditure would just magically pay for themselves, the budgetary position simply has to be addressed. It falls upon this side of politics to do it, to shoulder up to the wheel. We have seen a number of bills pass through the House even this morning which are the tough side of politics. It is about trying to curtail government expenditure.

This bill, of course, looks at the revenue side. It is about reinstating an excise arrangement that was first put in place by the Labor Party and was suspended, under John Howard, at the time of the introduction of the GST, when there was a major reform of Australian taxation. It was not intended at the time that fuel excise would just drift into irrelevance and go to the point where it is of no value at all to the Australian government and, by extension, the Australian taxpayer.

Like everyone else, I do not like seeing taxes go up, even if they are only keeping pace with inflation. I concede the point that, when you live in the country, you travel further and, when we raise taxes on fuel, it does inflict a greater impact on country people's budgets. This brings me back to the point I was making earlier: that is why fuel taxes should be hypothecated to road repairs and construction around the nation.

I think we can understand that if we want better roads we have to pay a bit more tax—tax that is directly linked. It is a much harder argument to say to the country people, 'You have to pay a higher rate of tax to support the education system, the health system, Defence and the range of other government expenditures that we have.'

So, for the first time, this increase twice a year will be hypothecated to roads. I think that is a good first step, and should be a marker for what future governments should do with taxation in this area. As we go through that period of revisiting the federation, I, for one, will continue to advocate for reform in this area and to more closely link fuel excise to transport expenditure, and to find other ways of funding the states and the federal government outside this fuel tax arrangement. The very essence of this return to six-monthly fuel indexation is in the fact that Australia faces very difficult times in the near future. If we do not make the reforms now the reforms in the future will become much harder.

To finish I will use a little parable—that is what I call it—about the state of Greece and how that country came to find itself where it is. In 1985, the Greek national debt was about 50 per cent of GDP. In Australia, when you include the Commonwealth and state debt, we are at about half that level—about 25 per cent of GDP. In the eight years following 1985, Greece went from 50 per cent of GDP to 100 per cent. You would think that was a bit of a crisis. But in 1993 the economies of the world began to grow again. In that time, right through to 2008, there were relatively good times, and Greece managed to hold the line. They did not borrow any more money. They were probably patting themselves on the back and saying, 'We're managing this budget well.' But then in 2008 the GFC hit, and within seven years their debt had blown out to 185 per cent of GDP.

The point of the parable is that in the good times they did not take the necessary steps to pay down the debt. If you do not do it when you can, democracies find it difficult to fix the problem when it is difficult.

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