Nick Xenophon (SA, Independent) Share this | Hansard source

Thank you, Mr Chairman. I am still not used to Senator Conroy’s looks of horror, but I will be immune to them sooner rather than later. In relation to this issue, to me the dilemma from a policy point of view is this: the CPIMV is a standard which has been used for many years and it does not reflect ordinary cost of living increases as evidenced by the CPI. The problem is, as I understand it, that the CPIMV works on the basis that there are technological advances to vehicles. The CPIMV takes that into account. But the contrary argument is that it does not keep pace with inflation, and one of my concerns has been—and I am referring to the Senate committee report on this—that in 1986 the luxury car tax applied to 4.5 per cent of light vehicles and in 2007 it applied to 12 per cent.

I did receive a comprehensive response yesterday from the Treasurer’s office which I would like to share with my fellow senators. I think it is appropriate to basically precis it quite thoroughly. The response from the Treasurer’s office says:

While we do not have data to verify the 1986 figure—

that is, of around 4.5 per cent—

we can verify that the percentage of luxury cars, as a percentage of all passenger cars sold, was around 12 per cent in 2007.

There is a break in the data series which means that numbers in recent years are probably not comparable to those before 2003 because of a change in FCAI methodology. It is also not clear to us whether the past industry statistics upon which the claims above are based have a definition consistent with the luxury car tax threshold.

The data we do have is based on the proportion of cars purchased that are above the threshold.

There are a number of reasons why the percentage of luxury cars purchased may have increased over time other than because of movements in the luxury car tax threshold. These include:

• As incomes rise, there is likely to be an increase in demand for luxury goods, including cars. For example, in 1979 it took 1.6 years of Male Total Average Weekly Earnings to purchase a car that was priced at the threshold. Today it takes only one year.
• The price of vehicles relative to other goods has fallen significantly as a result of tariff cuts for cars and the introduction of the GST in 2000.

That is something that I think Senator Abetz can take some partial credit for.