Christine Milne (Tasmania, Australian Greens) Share this | Hansard source

I rise today in this debate on the Tax Laws Amendment (Luxury Car Tax) Bill 2008 to say that the Greens have long argued that Australian car manufacturing cannot be globally competitive if it continues to build large gas-guzzling cars when consumers worldwide are choosing smaller fuel-efficient vehicles in the face of peak oil and climate change. I am not surprised by the contributions I have heard from the opposition, because they are climate change sceptics and they do not believe in peak oil either. But what is interesting is that they are prepared to give endless subsidies to the fossil fuel industry and to subsidise the price of fuel even though their small subsidy is going to go nowhere in the face of peak oil, with oil prices destined to be $150 or $200 a barrel. I would also point out to Senator Macdonald that a standard diesel Nissan Patrol is $51,000. There are plenty of four-wheel drives on the market that come in under this threshold that the government has set. People living around Australia do not have to buy a luxury car in order to have four-wheel-drive, if that is the issue.

Why do we have a tax system? What is the purpose of the tax system? It is to raise revenue to deliver for the public good, whatever the government of the day might perceive the public good to be. In this case, we have an income tax system which ought to be a system for the redistribution of wealth, and that is why the Greens opposed the cut to the highest income tax rate. We argued that there should be a more equitable Australia. It does not serve our democracy well for the gap between rich and poor to be increasing. Hence, we have argued that if you want to focus on the redistribution of wealth then do it through the income tax system and we will absolutely support you.

What we want to see is a vehicle manufacturing sector in Australia which is globally competitive and can continue to employ people. I remind the Senate that, in 2006, when I made a speech in the debate on the Costello budget of that time, I pointed out how stupid it was for the then Treasurer to give $52 million to Ford without tying it to vehicle fuel efficiency design. The coalition gave plenty of subsidies to the car manufacturing industry to make cars that nobody wants to buy. The people who have propped up the gas guzzlers in Australia are governments through their procurement processes, their fleet vehicles and the fringe benefits tax concessions. If governments were not buying large six-cylinder cars and suggesting to people that they tool up to send V8s to the United States or V8s into the Saudi Arabian market under a proposed free trade agreement with the Middle East, for example, we would not have such an inefficient industry.

Let us look at China and the Europeans, for example. The Europeans have moved fast on climate change, and they have recognised that not only is moving fast on climate change a good thing for the environment but it is a good thing in terms of affordability and oil and energy sources. It also builds competitiveness in their car manufacturing sector at the luxury end of the market, which is what we are talking about. They brought in a directive for the European Union which said that they could not manufacture cars to be driven in the European Union that did not meet stringent fuel efficiency standards. In 2006, China adopted a mandatory fuel efficiency target of 6.8 litres per 100 kilometres. Just recently, China has gone even further, imposing a 40 per cent sales tax on vehicles with an engine size of four litres or greater, and a 25 per cent sales tax on vehicles with a two to four litre engine size. Why? They want to protect the Chinese car manufacturing sector and drive it to produce the world’s most fuel efficient, small, cheap, affordable car. Not only will that be good for China in terms of its transport emissions sector but it will also be good for China in terms of its global dominance of that market. We should learn from that.

Propping up Australian car manufacturers to build cars that the world does not want to buy, and then propping them up further through government procurement and fringe benefits tax concessions that encourage people to drive more, is ridiculous in a climate constrained world and it will lead to job losses and collapse. There will not be a sufficient market for the critical mass of cars we are talking about. So if you are interested in building innovation in the Australian car manufacturing industry and using the innovation that is coming out of our universities and our design schools and if we are interested in building a competitive car manufacturing sector in Australia so that jobs are sustainable in the long term then we ought to be tying any subsidy to vehicle manufacturers in Australia to green cars, to fuel efficient design and to keeping an eye out for what the rest of the world is doing.

I heard the opposition talking a moment ago about being smart financial managers. Anyone who manages an economy without seeing the trends that are emerging around the world is not a smart financial manager. You cannot be a good manager if you do not see the trends around you. What we ought to be looking at and thinking about is that China has put on a vehicle fuel efficiency standard of 6.8 litres and has just imposed a 40 per cent sales tax. China is going for that market and the Europeans are going for the luxury vehicle fuel efficiency market. The Europeans and the Chinese between them will have stitched it up and put the Americans and Australians completely out of business unless we recognise the trend and decide now that we are going to rebuild Australian manufacturing and build ourselves competitive advantage with a fuel efficient vehicle manufactured in Australia, that we are going to drive the uptake of that vehicle through the tax system and that we are going to procure those vehicles through government procurement policies and through getting rid of the perverse incentives in the fringe benefits tax concessions that make it desirable to drive more—under which we end up with the ‘March rally’ every year, with people driving up and down the country to get down to a new tax threshold.

The best thing about what we are trying to do here is getting some rationale, some consistency and a whole-of-government approach to the government’s and the community’s task of reducing greenhouse gas emissions, of reducing the transport effort in terms of greenhouse gas emissions and of building resilience in the Australian economy to increased oil prices, because the more fuel efficient the vehicle the less it is going to cost you to fill it up in the context of the higher fuel prices. What we are hearing from the coalition is, ‘Subsidise Australians to build gas guzzlers, then buy gas guzzlers and then subsidise the community to put the petrol into the gas guzzlers’—blow out the current account and have an appalling current account deficit in relation to the import of foreign oil. That is what I call absolute economic mismanagement. That is why when the government decided to move on an increase in the luxury vehicle tax we saw it as an opportunity to start talking to the government about the idea of taxing the bad and rewarding the good in the economy. So you start taxing resource use and emissions and drive change of behaviour whilst not blowing a hole in the government’s forward estimates for the budget.

That surely should be the task of everybody in the community, and there is a huge interest in the community in wanting to buy fuel efficient vehicles. People would love to buy an Australian fuel efficient vehicle. But, either way, they are going to move to buy those fuel efficient vehicles because of the underlying price driver of oil, and that is why Australian manufacturers are struggling. It is because Australians are moving to imported vehicles, and you cannot blame them for that in the context of how much it is costing them to fill up their car each week. We are arguing that the government’s role in terms of reducing greenhouse gas emissions and making transport more affordable in the long term is for the government to enable the community to make the choices it wants to make. Firstly, we need to be encouraging people to drive less. Not only will that be cheaper for them but it will improve the amenity of our cities, it will reduce congestion and it will make air quality so much better. The only way they can drive less, though, is if we have a huge investment in public transport systems, in cycleways and in making cities more pedestrian-friendly. This goes to the heart of the issue of urban design, but it also goes to the heart of Infrastructure Australia.

I have endorsed the idea of Infrastructure Australia and of developing a blueprint for Australia’s infrastructure into the future, and I welcome the fact that Infrastructure Australia has identified environmental sustainability and climate change as two of its goals and as part of its strategic direction. That is the first move towards enabling the community to drive less: by looking at an infrastructure priority list. We will certainly be arguing for a massive reallocation of funds to public transport to enable people to make that decision. We would also argue on the fringe benefits tax concession end that there be a fringe benefits tax concession for public transport use so that employers can package a public transport benefit for employees in cities. If you look at Sydney, for example, where traffic congestion is a real problem, you would find at least half the vehicles on the Sydney Harbour Bridge on any day are transport fleet vehicles and you would find that they are there benefiting from the fringe benefits tax concession on motor vehicle use. So, to be able to package a fringe benefits tax concession on public transport and take away the perverse incentive would help change driver behaviour.

The first thing which needs encouragement is driving less and the second thing is driving more efficiently. That is why the Greens have welcomed the government’s green car fund investment. We also welcome the Bracks review’s recommendation that it be doubled to a billion dollars. We want it brought forward and doubled. We are very happy with that recommendation of the Bracks tax review, but we are not happy with the tax review recommending another $2½ billion go to car manufacturing and not making it clear that it is also tied to vehicle fuel efficiency. If it is tied to a free trade agreement with the Middle East to build gas guzzlers, it is simply undermining the effort that the government is going to make to try and switch the car fleet to vehicles that are more fuel efficient. We certainly welcome the green car fund. In terms of this tax, we have argued for and negotiated with the government for it to recognise that we want to make every car on Australian roads more affordable and more fuel efficient. We want to send a signal into the community that drives people to purchase fuel efficient cars.

Interestingly, with the Europeans having focused on higher standards of vehicle fuel efficiency, they have also focused on the top end of safety features. So, whilst you are getting high levels of fuel efficiency, you are also getting a very safe car. They are expensive cars. They have the innovation and the technology in those cars which can then trickle down, and that has been the case in other, cheaper vehicles. So we are arguing that fuel efficient vehicles be exempted from the luxury car tax up to a $75,000 threshold, thereby sending a signal that we are shifting the focus of the tax system to start looking at these issues. We have also negotiated with the government for it to refer the Greens preferred option of phasing out the luxury car tax altogether and phasing in a tax on vehicle fuel efficiency. Clearly, it would take a while to work out what the thresholds would need to be, and the government has agreed to refer that to the Henry tax review to look at this bigger picture issue of how we are going to use the financial levers available to government to drive behaviour that reduces emissions and reduces dependence on foreign oil and is a win-win all round for Australian manufacturing.

The next part of that internally consistent series of things we would like the government to consider is the procurement issue. If you are going to give car manufacturers $500 million to start designing these cars then, if you have a procurement system which says that the government will only procure cars that are seven litres or better per 100 kilometres in fuel efficiency, there is a major market there and that translates to fleet cars as well. But that would require Australia to have actually produced a car that is available for that market. As we know, it is a substantial market.

It is an internally consistent position that the Greens have brought to the table—ranging from the subsidies provided to car manufacturers, using the tax system to drive a change of behaviour, using procurement to encourage the uptake and get it into the second-hand market, and the reference to the Henry tax review to look at how we can shift taxation onto achieving government outcomes, particularly in relation to climate change and peak oil.

Climate change is the greatest emergency the planet is facing and we are going to see a desperate need to get our transport emissions down. The current trajectory on transport emissions is out of control; it is very high and we desperately need to do something about it. But, equally, we have seen what happened in the Australian community when oil reached almost $150 a barrel. It is going to go higher than that; it is likely to go to $200 a barrel in the foreseeable future. When that happens the community is going to start screaming about what the government is going to do about subsidising them so they can afford to run their cars. Wouldn’t it be better to say: ‘We want to build resilience in the Australian economy. We want to reduce our dependence on imported foreign oil’—that is a sensible energy security initiative—‘but we also want to make it affordable for people to drive their cars when they need to.’ I fully understand that there are large areas of Australia where there is not an adequate public transport system and where there is not a critical mass to enable a public transport system to work effectively. That is the reality; I understand that. That is why we need to make sure that, instead of thinking simply in terms of subsidies for people who depend on car use, we are enabling them to access vehicles that reduce their consumption of energy and therefore have cheaper prices.

The ultimate, of course, is to build an Australian-made fully electric vehicle which is fuelled by photovoltaics or renewable energy. Then you are not even going to have your dependence on foreign oil. Because Europe set high standards to deal with climate change, they are already at the point of plug-in hybrids. In London and Paris there are several plug-in stations in the cities. That is an urban solution at this point, but we are nowhere near that because there is not the innovation in the Australian car manufacturing sector that there ought to be. That is because for a decade the coalition did not see the global trend of climate change and its effect on consumer behaviour. It simply looked to the Americans, to Ford, and watched them fall on their faces, with the consequent falling of the dominoes here and the loss of jobs. The loss of those jobs in the car industry in the last decade would have been avoided if Australia had seen far enough ahead, imposed high mandatory vehicle fuel efficiency standards and tied all subsidies to the production of cars to meet them. Then we would have built ourselves into a globally competitive position.

To summarise: we are grateful for the negotiations with the government around this issue; we think it is consistent with the government’s policy on reducing emissions; and we are pleased to be able to get to a point where the Henry tax review is going to look at this phase-out of luxury cars and phase-in of fuel efficient ones and, at the same time, get exemptions from the luxury car tax for vehicles that have a seven-litre or better vehicle fuel efficiency. It is a win for the climate; it is a win for the direction we need to take Australia in car manufacturing and jobs. I reiterate: this is a luxury car tax and there are a lot of vehicles on the market in Australia that come in under the threshold.