David Bushby (Tasmania, Liberal Party) Share this | Link to this | Hansard source

When I was last speaking on the Tax Laws Amendment (Luxury Car Tax) Bill 2008 and related bills I was saying to the Senate that you would think that a Labor government, of all flavours of governments, would want to see more people able to afford cars that are well equipped with safety and technological features; that they would be looking to bring the price of such vehicles down so that more Australian working families could afford them. But, no, here we have the government saying, ‘No, let only the rich have them.’ What happened to equity in the Labor Party?

The simple fact is that the only rationale the Rudd Labor government has for pursuing this tax is to hit the rich. This was confirmed in Senate estimates on Monday, 2 June 2008, when the Minister for Innovation, Industry, Science and Research, Senator Kim Carr, confirmed that the tax was a reintroduction of class warfare. The irony is that by increasing the tax the government is putting those cars they refer to as ‘luxury’ further out of the reach of many Australians. And to claim that the tax hike will curb inflation when the proposed luxury car tax will increase the price of 12 per cent of cars sold in Australia, including the most common luxury car, the Toyota LandCruiser wagon, is innovative if nothing else. Economics 101 tells us that if you put the price up it is not deflationary but inflationary. The March discussion paper by Labor’s own ex-Premier and special appointee to conduct an inquiry into the car industry, Mr Bracks, itself contains evidence that Mr Bracks was minded to reduce, not increase, the luxury car tax. The paper commented on:

... the increasing number of Australian-made models now subject to the LCT as the threshold has not kept pace with price increases for upper-end vehicles. In addition, the inclusion of more safety and other features in upper and luxury vehicles is also increasing their price.

Post the budget, it appears that any motivation to address this observation has conveniently disappeared.

It is also worth noting that no other comparable country has a luxury car tax. British Columbia, a province of Canada, has a two to three per cent luxury car tax, but not in the same sense that we do and it does not call it a luxury car tax. Pakistan has a two per cent tax on luxury vehicles but, again, it does not refer to it in the same way. In 2007, socialist Venezuelan leader Hugo Chavez was quoted as having plans to impose a tax on luxury items such as Hummers, so maybe Venezuela will join us soon and become the only other country in the world that has this type of luxury car tax.

Mr McKellar of the Federal Chamber of Automotive Industries noted in his evidence to the Senate Economics Committee that, in his view, a Toyota LandCruiser was not a luxury vehicle, despite being classified as one under the luxury car tax threshold. I would like to quote the comments he made to the committee because I think they are quite illuminating:

This vehicle retails at a price of around $54,000 or $55,000, but with the addition of a few options and accessories, such as air-conditioning, a bullbar and a winch, it incurs luxury car tax. For those driving on rural roads, unsealed roads, frequently having to dodge wildlife and so on, the addition of these sorts of features is quite normal. Equally, operating in high temperatures, the use of an air-conditioning system in a vehicle like that also makes good sense. It would hardly, in this day and age, be considered to be a luxury. I must say that that vehicle, which incurs increasing amounts of luxury car tax, comes standard without carpet. The interior is fitted out in vinyl as standard so that you can hose out the inside. That was the vehicle that introduced Australians to the Toyota brand back in the 1950s. The LandCruiser earned a reputation for reliability and versatility during the construction of the iconic Snowy Mountains scheme, but today, according to the definitions of the luxury car tax, it is a luxury vehicle.

The Toyota LandCruiser is Australia’s best-selling so-called luxury car, with just over 6,000 sold in Australia in 2007. This and many other four-wheel-drive vehicles are predominantly driven either by people in rural and regional Australia or by those with a need for a people mover—not by the rich, as the Labor government would have us believe.

It is also very important to note that the percentage of Australian made cars subject to the luxury car tax has increased over time. As such, this measure will affect the Australian car industry. In 1979, when the threshold was originally introduced, only the Holden Caprice and the Ford LTD were above the threshold. Today, variants of Commodores, Ford Falcons, the Ford Territory, HSVs, FPVs and even Toyotas all get caught under the luxury car tax. As noted over and again in the hearings, without meaningful indexation of the threshold we could see midrange and even base model Falcons and Commodores being defined as luxury cars in coming years.

The percentage of locally made cars caught by the tax has increased dramatically, as noted by the Victorian Automobile Chamber of Commerce. It said that while sales of the Holden Commodore in the $35,000 to $45,000 price bracket have fallen from 60,658 in 2005 to 41,331 in 2007—a period of just two years—sales of models over $55,000 have doubled, from 6,073 in 2005 to 11,990 in 2007. I make the point again: the percentage of locally made cars caught by the tax is increasing dramatically. So the effect of this tax on locally made cars is becoming far more pointed.

Similarly, while Ford has seen a fall of around 25 per cent of sales in the $35,000 to $45,000 bracket, sales in the $55,000-plus bracket have remained constant. Again, the percentage is increasing for those cars manufactured in Australia by Ford that actually fall within the threshold range. As such the proposed tax hike will hit that part of the local vehicle manufacturing sector that is still growing or maintaining sales. It currently applies to six per cent of locally made cars and that only stands to increase. Shamefully, we hear today that the government has done a deal with the Greens that will see 24 imported cars exempted, but not one of the Australian cars currently falling over the threshold will be. Cars like BMWs, Mercedes and Alfa Romeos will all be exempted but Fords, Holdens and Australian-made Toyotas—not one. The arguments put by the government about taxing luxury sound very empty when you look at the deals that are being done.

Mr McKellar from the Federal Chamber of Automotive Industries provided an insight into the original purpose of the tax and how it is now counterproductive to that original purpose. He stated:

When this tax was originally introduced it was a thinly veiled protectionist measure for the local industry. These days it actually adversely impacts the industry, because it means the level of competition that those local brands are facing is more and more intense.

I do not believe that my contribution today will cover the field in terms of the detrimental impacts of passing this bill. But I would like to note another aspect of concern: the impact of the proposed tax hike on the tourism industry. The Australian Tourism Export Council estimates that some 8,000 vehicles that are subject to the tax are sold to small businesses operating tours and car hire businesses in the tourism industry each year. These small businesses are already struggling with high fuel prices and softening conditions, in part caused by other taxes imposed on the industry by the Rudd government. Their customers demand high quality and near new cars, which requires a regular turnover of vehicles. Given that the global tourism industry operates on a 1 April year and prices are already set for the coming year, Australian tourism companies that have already put their prices into the market cannot pass on the unforeseen cost of this tax to customers. This tax hike, if passed, will represent another challenge facing them that they did not need.

For these and a whole host of other reasons this legislation is clearly ill-conceived, distortionary, unlikely to achieve any of the government’s aims, whether they be raising additional taxes or hitting the rich, and will decrease and delay the availability of new innovations in vehicle safety, efficiency and environmental friendliness. It will put cars with new innovations further out of reach of ordinary Australians and will harm the viability of Australian manufacturers and retailers. This legislation should be opposed in this place.

Ian Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary Assisting the Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

I join with my colleagues in opposing the Tax Laws Amendment (Luxury Car Tax) Bill 2008 and related bills before the chamber at the present time. Previous speakers from this side have raised in very precise and persuasive ways arguments on why this latest tax grab from a high-taxing Labor government should be opposed.

In my contribution I want to concentrate on the impact that this tax will have, yet again, on the bush in Australia. Labor we all know is renowned for being a high-taxing government. I have just come out of an inquiry looking at state government financial management. That inquiry shows that all of the state governments, as well currently held by Labor, are governments that believe they know best what to do with our money. They want to tax the money so they can spend it on ideas that have originated in the capital cities, in the union movement and in the backrooms of the Labor organisations. You only have to look back from Whitlam to Hawke to Keating to understand that Labor are simply incompetent financial managers and cannot be trusted with money.

In this last budget Labor hugely increased the tax take from the Australian public. That in itself puts the obvious lie to Labor’s claim that they had to address a perceived inflationary problem. The real inflationary problem, of course, was that both the Prime Minister and the Treasurer kept talking up an inflation problem when really it was not there. But having criticised former governments for having an impact on inflation they then brought in this hugely inflationary budget which substantially increased taxes. We remember that the last time Labor was in power they left government with a $96 billion debt costing the Australian public almost $10 billion a year simply in interest payments. It took Peter Costello and John Howard almost nine years to pay off Labor’s $96 billion debt. That demonstrates—and we must keep reminding the Australian public—that Labor simply cannot be trusted with money. That alone is one reason why this particular tax bill should be opposed.

I am concerned about the impact this bill will have on country and regional Australia and on small businesses that operate in the northern and more remote parts of Australia. If the Labor government need a bit more money, I wonder why they do not tax the real luxury items like Rolex watches or jewellery—the sorts of things that wealthy prime ministers and millionaire environment ministers might spend their money on. They are the luxury goods that people in the city tend to be more interested in. People in the country these days cannot of course afford jewellery or Rolex watches, but they do have to have, of necessity, four-wheel-drive passenger vehicles.

What I want to highlight in this debate is that this bill is simply another attack by the Labor government on small business and people in country Australia. Labor is already, in its short term in office, clearly showing its antirural bias: the Regional Partnerships program and the Growing Regions program have gone, with no new money until next year—perhaps—at the earliest; the Agriculture Advancing Australia program was axed; Farmbis and Farm Help have gone; there have been cuts to rural health services, regional arts programs and rural financial counselling services; and it has cancelled the Optus-Elders broadband joint venture, which might have given us decent broadband in rural and regional Australia, which is so essential these days.

On top of that we have this tax, which impacts more heavily on rural and regional Australians than it does on those living in the city. The bill, I would submit, should be renamed. Rather than the Tax Law Amendment (Luxury Car Tax) Bill, it should be called the ‘tax law amendment (stuff the bush) bill’. That is what it seems that this bill has the effect of doing. I am concerned at these impacts on rural and regional Australia.

We saw in the paper the other day that the rural town of Coleambally was offering to sell itself completely because of the inefficiency of the Labor government in dealing with the water problem. That shows that that small country town has absolutely no confidence in the Labor government and what it might do for rural and regional Australia.

Up in my area in the state of Queensland the little town of Aramac was being promoted only a couple of months ago by the Queensland Labor government as a good place to live. They have an interesting land sale arrangement. But part of the advertising for this small town of Aramac was that they had good health facilities and a hospital. The Queensland state Labor government just last week shut the Aramac hospital down. It is a country town. There are not many votes there, so who cares about the health needs of people in small country towns like Aramac!

George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

What about Cloncurry?

Ian Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary Assisting the Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Indeed, Senator Brandis. You and I were there talking to the medical profession in Cloncurry just a couple of weeks ago. We understand these problems. We realised again that, if it were not for private industry, the bustling mining town—it is only a small country town, but it is a bustling mining town—of Cloncurry would be without adequate health services if you left it to a Labor state government.

Why would anyone expect any better from this Labor government when you look at the ministers—good men, no doubt—who are in charge of everything rural and regional in Australia? We have Mr Albanese, a union official in days gone by from the bush areas next to the Sydney Kingsford Smith Airport! The agriculture minister—a minister who we hoped might have had some empathy with the bush—represents the adjoining seat in the leafy, bushy suburbs adjacent to Kingsford Smith Airport! The Parliamentary Secretary for Regional Development and Northern Australia, someone who supposedly has carriage of all things good for the bush from the Labor government, comes from the leafy suburbs of Perth. His background is not in the bush; it is in running the Labor Party. That certainly does not give one any understanding of the needs and requirements of rural and regional Australia—that part of Australia which, I might say, produces more than 30 per cent of Australia’s export earnings.

As Senator Brandis adverted to, a couple of weeks ago I—and Senator Brandis joined me for some of it—spent 10 days driving 4,000 kilometres around north-west Queensland. As the opposition spokesman for Northern Australia, I like to get out there and talk to people on the ground.

While I was up in Normanton, Karumba and Mount Isa, they were all rather excited in those areas because Mr Gary Gray was going to come in and make things good for the bush a few days after I was there. He popped in—flew in in his chartered aircraft—spent a few hours talking to a few people and could not get out of the place quickly enough. He left them with no real confidence as to what might happen in the future. He said to them, as I have been saying for many years, that the Office of Northern Australia, established with such fanfare by Labor following the election, was more of a coordination unit—downgrading their expectations. What it really is is an office of the department of regional services rebadged as the Office of Northern Australia. Northern Australians will not be fooled by this, although they and I were hoping that Mr Gray was coming to the north-west of Queensland with some good news. Regrettably, we were all disappointed.

Next week, I and a number of colleagues will be travelling to the north-west of Western Australia and to the Northern Territory to talk to people to try to understand their problems and to look at the opportunities that there are in Northern Australia and indeed in rural and regional Australia. In my 10 days driving over 4,000 kilometres in those remote areas, much of it on unsealed gravel roads—and I suggest that the ministers and indeed most of the senators on the other side of this chamber would not know what an unsealed dirt or gravel road was—I saw four-wheel-drive vehicles all the time.

They are not luxury vehicles. They are not purchased because people like the kudos or reputation of driving a four-wheel-drive vehicle. They are used in Northern Australia and in country and rural and regional Australia because they are essential vehicles. Very often the roads are such—and I have mentioned the gravel and dirt roads—that you need a four-wheel-drive vehicle to get through the bulldust or, when it rains, through the mud and slush. You cannot do that in a Holden or Falcon or a Ghia—

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

Or a Rolls-Royce!

Ian Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary Assisting the Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

or a Rolls-Royce, indeed, that many in the cities would have. But these are essential vehicles. I have to declare an interest here of course. I was driving a Nissan Patrol vehicle on this 4,000-kilometre journey, and it is one of the vehicles that will cost $1,000 to $1,500 more should this bill become law.

If people out in those areas want to take their kids to the doctor—that is, if they are able to do it; if the kid happens fortuitously to be sick on the fortnight that the flying doctor happens to be coming into town—then they cannot get there very often in a Holden or some other ordinary vehicle. They need a four-wheel-drive vehicle, the sort of vehicle that the Labor Party is calling a ‘luxury’ vehicle. If you drive on those roads anywhere after 4.30 pm and you do not have a bulbar, it is almost tantamount to thinking about committing suicide. The wildlife in those areas at dusk is a danger and the way to keep yourself, your family and all those you love safe is to get a vehicle that does have some protection against wildlife on the roads and against the holes in the dirt roads. These vehicles in those parts of the world are not a luxury; they are essential.

I am told that there were about 30,000 four-wheel-drives sold in the year 2007. They comprised not just the Nissan Patrol, which I have mentioned, but the Toyota LandCruiser, a vehicle that is synonymous with the Australian bush. They also included other four-wheel-drives by other car manufacturers—the Mitsubishi Pajero, the Ford Territory, the Toyota Prado, as well as the LandCruiser and the Nissan Patrol. These are the sorts of vehicles you see out in country Australia. These are the sorts of vehicles that this particular bill will attack.

I appreciate that commercial vehicles are not part of the tax—they have been previously exempted—but many of the vehicles that you see out in these areas are passenger vehicles that families particularly—and, I might say, mothers—use to take their children to school and to the doctor, and to get around. So there were 30,000 sold in 2007. If they were all subject to the luxury car tax, that would provide something like $50 million of the $130 million the government hopes to grab as a tax this year, and I would venture to say that a large proportion of those 30,000 four-wheel-drive vehicles are vehicles purchased by those Australians who do not live in the capital cities.

Again, this Labor government—typical of all Labor governments—is attacking country people. While I was out driving around in the north-west, I saw that Mr Rudd announced for the hardworking public servants who live in Canberra an increase of $1,400 a week in their pay packets. The Labor government, whilst urging restraint everywhere else, gives the top public servants an increase of $1,400 in their pay packets. How do we pay for that, one might ask? Perhaps we get those silly buggers that live out in the bush to pay an extra $1,200 to $1,500 for their four-wheel-drive motor vehicles! That would give them the money to enable them to pay senior public servants in Canberra an extra $1,400 a week. You have got to ask yourself: what does this say about this high-taxing Labor government?

I ask of the Greens: why do they hate the bush? They have some influence here in what bills are allowed through the parliament and what are not. I read in the paper that they have done a deal with the government on imported vehicles that have less fuel efficiency. I do not know the details of that; I can only go on what is written in the paper. I see Senator Milne is sitting there and perhaps she will be able to tell us what deal she has done with the Labor Party yet again. I ask Senator Milne: why could you not have done the same sort of deal for people who live in the country, people who live 4,000 and 5,000 kilometres from the capital city? These are people who only get a doctor once a fortnight when the flying doctor comes in, people who drive on gravel roads, people whose hospitals are shut down by state Labor governments. These are people who provide the wealth for our country, the food that we eat, the clothes that we wear and the minerals that make Australia such a prosperous country at the moment. Why don’t we help them? So I ask the Greens: if you are going to do a deal with this dealing government, why not help people from rural and regional Australia? Why not help those who labour away in the more remote areas under difficult circumstances? Why didn’t you help them rather than looking after the privileged who might live in the leafy suburbs of the capital cities and drive these fuel-efficient vehicles? If you take the fuel-efficient vehicles out where I have been in the last couple of weeks they would probably rattle apart in a small period of time. But no, this government—and it seems the Greens—are not interested in country people—in those who must have four-wheel-drive vehicles as an essential part of their lives. This government—with, it seems, the support of the Greens—is going to tax them again so that the privileged people in the city can have a better life.

Christine Milne (Tasmania, Australian Greens) Share this | Link to 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.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

Mr Acting Deputy President, this is becoming a habit, my talking in the chamber. I have just been to the senators’ car park and this is a very two-faced, false debate we are having here on this bill because no-one is putting their money where their mouth is. Down in the senators’ car park at the present time there are 22 vehicles. Eight of them are ACT registered guzzler four-wheel drive vehicles. We know who the people in this building are who have entitlements to cars. They are the officials and ministers and various people. So amongst the government there are some guzzlers down there. To the credit of the senators’ car park, there are three Priuses. Those people should get a tick. Senator Wong, I am not too sure whether you are one of them or not. If you are, take a bow.

Penny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Link to this | Hansard source

I have a Prius; it’s in the ministerial wing.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

Take a bow! There is one New South Wales registered four-wheel drive that has a few bumps on it and a fair bit of mud on it, and it has obviously been to the bush. I declare an interest; it is mine. Every other vehicle down there that is a four-wheel drive never, ever gets out of Canberra by the look of it, unless someone goes for a trip down the coast at the weekend to do a bit of fishing. There were one or two people who used to do that instead of going back to Tassie.

What is the definition of a luxury car? I am sure that the bureaucrats who, in good faith, drew up this dream that has to be lost, because the government most surely has to rethink this legislation, were probably like a former minister for the environment who lived in the inner city suburbs of Sydney and thought the bush was the two trees in his backyard—and you cannot blame him for that; that is where he was born and bred. These bureaucrats probably thought, ‘Oh well, four-wheel drives are a luxury car, they are 70 grand.’

I agree with every word that Senator Macdonald said—that I heard him say, that is; I do not know what he said that I did not hear. But four-wheel drives are a tool for the bush. They are an occupational health and safety item on every farm that does not have a tarred road from the mailbox to the homestead. I can give you instances of tragedies that have occurred. I declare an interest: I have a place where the last 35 miles into my place is a black soil road and when it rains 30 points you cannot drive a two-wheel drive on it. If you have an accident of some sort you do not get out unless you have a four-wheel drive—so it is an occupational hazard not to have a four-wheel drive; it is not a luxury.

You can see by the look of my vehicle downstairs that it is a workhorse. I do not drive it because I feel good in it—as a matter of fact, the seat is crook and I get a sore neck. It is a tool. Just as Senator Macdonald gave his experiences in Queensland, it is no different in the bush in New South Wales, South Australia, Western Australia or anywhere else. It is not a given that there are all-weather roads in the bush. If you are going to get your kids out to the school bus—and they usually follow the tar road and that is all they follow—in the middle of winter you will not do it in a two-wheel drive car when there is rain about. And I wish there was more rain about.

Does the government expect we cockies—and I am one of them, worn out, cranky and grumpy as I am—to go back to the bloody horse and sulky? When I was a kid, my sisters used to ride a horse to school. Do they expect us to go back to that? There is a logical argument that these vehicles are a work tool. There is a solution. At the present time in the bush, if you have an ABN and are registered as a primary producer, you get a rebate on your insurance and you get a different registration schedule. That is because you are not driving in the city where it is actuarial sum insurance, where there is likely to be someone running into you at the next set of lights. Those things are doable. But then you have to go to the contractor. Senator Hutchins, you would understand this on behalf of your people in your union: a lot of people use a four-wheel drive as part of their work model because, if you are going to back into a building site and it is full of mud and rock and rubbish, you will not do it in a car.

The best example—and the message I have for the bureaucrats who dreamt this rubbish up—is some years ago I argued that we should have four-wheel drives for people, like me, in the Senate, and there was an objection. We were not allowed to do that originally; we had to have a car because it was all to do with the price of the car. Some government officials came out to our district that year—they were Landcare people, as I recall—in a car in the middle of summer to go onto a farm for a farm inspection. You can guess what happened, because they had a catalytic converter: not only did they burn the farm but they burnt the car. Cars that are petrol driven are a fire hazard off-road in the middle of summer. That is why these things down in the car park are pretend vehicles. I do not want to dob in whomever drives those eight ACT registered, petrol four-wheel drives, but they are proper gas guzzlers, and I do not care what the government does for four-wheel drives that are registered to people who run their kids down to the soccer at Woollahra or out to wherever in the city. Obviously the future of the household budget is going to be the contest between what is in the fridge and what is in the garage, because the fridge is going to become very important.

My plea to the government is to either chuck it out, go back to the bureaucrats and start again or figure out a rebate which will pick up people whose four-wheel drives—so-called luxury vehicles—are a tool of trade and a safety vehicle for the farm and the family. We can have a signal on efficiency. I agree with Senator Milne and I think most people agree and I am sure the minister agrees that we ought to put a price signal into the market to say that if you are prepared to drive a Prius—and my congratulations to the minister for driving a Prius—then perhaps there ought to be a little reward by way of a price signal in the market. You can give them a rebate on their rego or something like that because they are driving an efficient car.

Can I also talk to the Senate as a whole. If you go out there to the front, there is that big, long line of Ford and GMH vehicles that probably do about 10 or 12 litres to 100 kilometres. Mostly one or two people get in, generally with one or two suitcases, and drive a short distance. There is absolutely no reason that we should not show an example to the Australian people by having a lot more fuel-efficient cars. It might feel good to be in a big vehicle but, if we are fair dinkum about the future of the planet, we will do away with that ego trip. We really should give consideration to calling up one of the bigger vehicles where there is a necessity for more luggage room or, for example, there are three passengers. But generally there is absolutely no reason why we should not have fuel-efficient cars in the Comcar fleet. By the way, there is only one pushbike down in the car park at the present time in the Senate. So my congratulations go to whomever is on the pushbike.

It just does not make sense. There are a lot of things that do not make sense. I was out at Broken Hill recently and a mate of mine lobbed out there in a Peugeot. It was a diesel. I said: ‘What the hell are you doing driving that thing? It’s a bit alternative.’ He was sticking to the tar and he said, ‘Mate, I’m driving it because it does 80 miles to the gallon.’ And it was a diesel. It makes a bit of sense, doesn’t it? We have seen the hypocrisy of ‘do not do as I do, but do as I say’. There is a really good example of that in the car park.

Why we continue to sell liquid natural gas to China and not put it into some of our cars here is a mystery to me. I suppose it is to shore up the financial plan for the early contracts from the North West Shelf gas field. Why GMH in America had the coal liquefaction licence for 15 years and did not use it because they wanted to exhaust the world’s oil supplies is a mystery to me. The licence is now back in Australia. I do not understand why we cannot go to more energy efficient car fuels. I do not know why, when you drive into Sydney, every light in every office building is burning brightly at three o’clock in the morning; it is a mystery to me. I asked that question in a conference one day. It was a climate change conference and it was the middle of the day and the place was full of sunshine, and I said, ‘Why are all the lights on?’ They said, ‘Because the building’s engineered in such a way that you cannot turn them off.’

So we have a long way to go, but my plea, Minister, to the government is to not consider a four-wheel-drive which is a workhorse as a luxury car. I was in Rose Bay the other day and a bloke rocked up in front of me in a brand spanker Rolls Royce. Generally people who drive Rolls Royces do not want you to say g’day to them—although John Symond drives a Daimler and he does not mind if you say g’day to him—but this bloke was a bit surprised when he got out of the car and I said, ‘G’day, mate; how are you? How does she run? This is a brand spanker.’ He said, ‘Oh, it runs pretty well, thanks.’ I said, ‘How much would that car cost?’ I said, ‘Would it have cost between $480,000 and $500,000?’ thinking that was a pretty good shot at it. He scratched his head for a while and said, ‘No, by the time I put all the extras on it, it was $1.2 million.’ That is a luxury car and that bloke, I dare say, could afford to pay the tax.

But for a mother of four kids on the road between One Tree and Booligal, who has to drive 30 miles to pick up the school bus in the middle of winter, a $70,000 or $75,000 LandCruiser or a Nissan Patrol or something is not a luxury vehicle. Anyone who is awake does not drive petrol cars in the bush anymore, because they light fires. A turbocharged diesel has rewritten the rule book in the bush for getting about. I would have thought there were mechanisms that the bureaucrats probably already know about but have not presented to the government as to how you could overcome that. I am not going to repeat myself. This is stupid, and it is unfair to the bush. I have to say that maybe the government did not think it through; I do not know. I do not think there is actually anyone in the government at the present time who lives and makes a living in the bush. There are one or two people who have a home in the bush but they do not actually live or make a living there. I am pleading for the ordinary old mums and dads who live down all the weather-beaten tracks in the bush—that we do not penalise them because they live where they are and do such a fantastic job for Australia. When you go to Woolies and Coles and see the bananas and oranges and everything there, these are the people who put them there. We are saying, ‘Not only have we trebled the price of fertiliser on you and doubled the price of fuel; we’re also going to tax you extra for driving a four-wheel drive because we think it is a luxury vehicle.’ What sort of rubbish is that? Thanks very much!

Nick Minchin (SA, Liberal Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

I rise to speak on the Tax Laws Amendment (Luxury Car Tax) Bill 2008 and related bills. I am wearing a number of hats, most particularly my hat as a South Australian senator—and proudly so—but also as a former industry minister and a former finance minister. So I take a particular interest in a bill which proposes to increase by no less than 30 per cent the existing 25 per cent luxury car tax. I rise because I have had a long and profound interest in sustaining the Australian car industry. I do so from both an economic and a security point of view, as well as from the point of view of the manufacturing industry in Australia and the importance of jobs and employment in my home state of South Australia.

The fact is that the Australian car industry is focused on the two states of Victoria and South Australia. It is critical to our manufacturing base. As shadow defence minister, I think it is critical that Australia retains the capacity and capability to compete internationally in the Australian car industry. The Australian car industry, over many, many years, has developed a profile which is based on large rear-wheel-drive vehicles of six or eight cylinders. By the very nature of this country—the size of the country and the distances we have to travel—that is the sort of vehicle which Australian industry specialises in and, in my view, is the best in the world at producing: efficient, capable six-cylinder, rear-wheel-drive vehicles. That is reflected in the outstanding export success which our Australian car industry has. So I am a champion of that industry and that is reflected by the fact that—and I refer to Senator Heffernan’s speech—one of the Ford Territorys in the Senate basement car park is one I drive. I do so quite deliberately because I want to demonstrate my support for Australian workers, the Australians who make those vehicles, and the Australians in my home state of South Australia who supply components to Ford for those vehicles. I publicly criticised Mr Rudd last year when he proclaimed in the most politically correct fashion he possibly could that he was going to change his Australian car for a foreign-made hybrid vehicle. I thought that was an insult to the Australian workers who make such fantastic vehicles for Australia. That is the background to my remarks.

The coalition does oppose this tax increase. Our position is that we do oppose tax rises or new taxes unless the government of the day can make an absolutely overwhelming case that such a tax increase or new tax should be put in place. So the question in this case is: has the government made any case whatsoever for this very dramatic increase in the tax on vehicles above the threshold of $57,000? In our submission the government has made no such case whatsoever. There are two grounds on which you could make such a case. One would be a policy ground in relation to the car industry; the other might be in relation to fiscal policy overall. In relation to the car industry, no case has been made whatsoever, and the Australian car industry has united—that is, foreign importers and Australian manufacturers have united—to oppose this tax; and, frankly, any senator, from any party, from the states of South Australia or Victoria should be joining with the car industry to vote against this tax. I look forward to both Senator Xenophon from the state of South Australia and Senator Fielding from the state of Victoria showing their support for the Australian car industry by rejecting this tax. There is no case whatsoever from a car industry point of view. The existing 25 per cent tax, which is a massive hike on motor vehicles which are already taxed through the GST and various stamp duties and registration et cetera applied at state level, already distorts the Australian car market quite significantly, with manufacturers, both domestic and foreign, seeking to ensure that their vehicles are kept below the threshold, whatever that may be at the relevant time. At the moment it is $57,000 approximately. Various options are stripped out of vehicles in order to keep the vehicles below this threshold. So it is a major distortion of the market already, and it would be even more of a distortion were it to go to 33 per cent. There is absolutely no public policy ground for this very significant increase in the so-called luxury tax on motor vehicles.

Is there a case in relation to the fiscal policy and the budget? Again, as we have been saying repeatedly, there is absolutely no case for this tax grab based on fiscal policy. This government is probably the most fortunate government in the history of this country in terms of the fiscal policy settings that it inherited. No government has been in a situation like this one, inheriting a government that is absolutely debt free, that has no interest payments whatsoever in its budget, that has $60-odd billion in the Future Fund and that has the unfunded superannuation liabilities provided for through the Future Fund. This government is more fortunate than any in inheriting fiscal settings which provided for surpluses into the future.

The government’s argument in relation to those taxes that we are opposing is that it must have a $21½ billion surplus in the current financial year and that a $20 billion surplus apparently is irresponsible. There is no economist in the country who agrees with that argument. What clearly happened—and it is from my six years experience as finance minister that I can see this happening—was that Mr Swan and Mr Tanner came up with a list of savings which they wanted the Prime Minister to sign off on in order to produce a certain level of surplus which would go to their argument about inflation. Of course Mr Rudd then said, ‘I’m not going to sign off on any of these,’ so they did a mad scramble through Treasury to find a whole lot of tax measures that would make up for their deficiency caused by their failure to persuade their Prime Minister to sign off on their savings. So the failure of Mr Swan and Mr Tanner has led to this ridiculous tax increase.

I can see the Treasury bureaucrats now running into ERC and saying: ‘We have this 25 per cent luxury tax on cars. I guess if you wanted to you could whack it up to 33 per cent and then we could put in the budget a figure of $130 million a year of revenue.’ May I say—and I think this will be reflected in car sales—that that revenue figure is very dodgy in itself because of the behavioural impact on the purchase of these vehicles that will result from this tax. We may well not see the revenue effect in any event.

This is a bad tax without any policy justification in relation to the car industry and without any justification with respect to the government’s fiscal position. So why on earth are Labor doing it? They are scrambling to find revenue to justify their case for being able to tax now in order to spend later. What we are seeing with their fiscal policy arrangements is clearly that they want to tax now to put it into their slush funds so that they can buy their way back into office in 2010. This is a tax now, spend later approach to fiscal policy. It also confirms that, for all the bluff and bluster, the Labor Party are no friend whatsoever of the Australian car industry. After all, it was the coalition government which sought to and successfully removed from the Australian car industry the worst possible impost that had ever been imposed on it, which was the wholesale sales tax.

The Australian car industry bore the burden of that wholesale sales tax more than any other industry. It completely distorted the manufacturing sector in this country, with the car industry paying the overwhelming proportion of that tax. The greatest beneficiary of the removal of the wholesale sales tax and its replacement with a GST—a move that the Labor Party, to their shame, opposed all the way—was the Australian car industry. It was the best thing that had ever been done for the Australian car industry, and the Labor Party opposed it at every step. May it be printed on their tombstone that they are no friend of the car industry. What they are trying to do with this luxury car tax confirms that, for all the bluster that we hear from them, they are no friends of the Australian car industry.

I turn my attention to the proposition that has come from the Australian Greens which they are postulating as a deal with the government, although Mr Swan suggests that no such deal has been entered into. We wait with bated breath for what the outcome of these discussions will be. But can I place clearly on the record our total opposition to the proposition that has come from the Greens and that we will be voting against it. This proposition from the Greens again reveals that they have absolutely no interest in the Australian car industry or in the Australians who work in that industry. This would be even a more manifest and destructive distortion of the Australian car industry than currently exists.

The Australian Greens are proposing that there be an exemption for vehicles up to a value of $75,000 that have a fuel consumption of seven litres or less per 100 kilometres but that all other vehicles from a value of $57,000 would continue to pay this horrendous increased luxury car tax. The immediate impact of that is to ensure that vehicles such as the following would not pay this new luxury car tax. Exempt from this tax, by dint of the Australian Greens and possibly the Australian Labor Party, would be vehicles like the Alfa Romeo 159 Sportswagon, the BMW X3, the Jaguar X-Type, the BMW 3 Series, the Mercedes-Benz C Class, the SAAB 9-3, the SAAB 9-3 Sport, and the Audi A4. So, as a result of what we are told is a deal between the Greens and the Labor Party, a whole range of very cute little European manufactured sports sedans would be exempt from this tax—in contrast with vehicles made by Australians which would be subject to this outrageous 33 per cent so-called luxury car tax. The vehicles, made by Australians in Victoria and South Australia, that would be subject to this tax include products of the Ford factory and the Holden factory in my state. The Holden Commodore, the Holden Caprice, the Holden Statesman, the Ford Territory, the Ford Fairlane, certain Ford Falcon models and the Ford LTD would all continue to be subject to this 33 per cent luxury car tax, while all these spiffy little European sports cars would be exempt from the tax.

This is an absolutely outrageous proposal. I hope that the Labor Party will have nothing to do with this. But what it does reveal is that the Australian Greens, who are of course running in the federal seat of Mayo in the state of South Australia in the by-election this weekend, have no regard for the people of Mayo or for anyone who either wants to support the Australian car industry by buying an Australian product or has need for a product of this kind or has need for an imported product like a Toyota LandCruiser or a Nissan Patrol for their work or for their pleasure—to tow horses, to tow boats.

Mayo contains some of the most scenic and beautiful country in the state of South Australia. There are many residents of the federal seat of Mayo who enjoy boating and horse-riding on weekends and need these sorts of vehicles—Ford Territories, Toyota LandCruisers, Nissan Patrols—if they are to pursue those commercial, work related or pleasure activities. The Australian Greens have declared today by this deal that they want those people to be hit by this tax. But if you are someone who likes to drive around the electorate in a little Audi sports car—‘Okay, you can have an exemption, but if you want to tow your horse or your boat around we are going to whack you with this tax.’

I hope the people of Mayo will pay very close attention to what the Australian Greens have now proposed. I hope that anybody who has any connection to the Australian car industry who lives in Mayo will note very carefully what the Australian Greens are now proposing. They want to protect jobs for Europeans in the factories of BMW and Audi. They have no regard for the people working in the factories of Ford, Holden and their component manufacturers.

The Greens’ proposed amendments are a disgrace. I hope and pray that the Labor Party will have nothing to do with them, but we wait, as I say, to see what the Labor Party comes up with. I hope very much and earnestly that all South Australians will take note of what is being proposed. I hope that Senator Xenophon, who has a big decision to make in representing the state of South Australia, also takes note. The Holden factory and all the component makers who make parts for Toyota, Ford and Holden in the state of South Australia will be watching with keen interest Senator Xenophon’s vote on this issue. I urge him to support Australian workers and the Australian car industry by voting down this legislation altogether.

This legislation is not warranted on any public policy grounds. It is certainly not warranted on fiscal grounds. There is no justification for it, and the Australian Greens’ propositions only compound the mischief that is inherent in this outrageous legislation, which I hope the Senate will reject.

Helen Polley (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

I rise in the Senate on this occasion to comment on the Tax Laws Amendment (Luxury Car Tax) Bill 2008 and related bills that comprise the government’s budget measures on the luxury car tax. The increase in the luxury car tax was announced in the 2008-09 budget as part of a package of measures to enhance fairness in the tax system. This measure will create an estimated $130 million in revenue for the government in this financial year and $555 million over the forward estimates. It is estimated that around 10 per cent of all new car sales made in Australia in 2007 were subject to the luxury car tax.

The Rudd Labor government believes that Australians who can afford luxury vehicles have the capacity to contribute to the revenue at a higher rate than other car buyers. The Australian people understand that the Rudd Labor government is acting now for Australia’s long-term future. We are preparing Australia for a stronger future, in contrast to the Liberal Party. We witness in this chamber regularly how divided they are on so many issues. They simply do not have the long-term leadership that Australia needs. They need a reality check.

The Rudd Labor government is making sure our economy emerges in strong shape from these tough international times so that we can provide quality jobs and security for working families in the future. The Liberal Party neglected the big long-term challenges Australia faces, such as climate change, our hospitals, our schools and our infrastructure. They foolishly ignored 20 Reserve Bank warnings on inflation.

It is pleasing to note that yesterday the Reserve Bank actually cut interest rates. This was a decision that working families deserved. I am sure it was applauded by families who are doing it tough. For the average mortgage, yesterday’s cut will put more than $500 a year back into the family budget—and, for many Australians, much more than that. This is some initial relief from the 10 interest rate rises that occurred under Peter Costello and the Liberal-National coalition which have cost Australian families on an average mortgage $400 every month. This is the first time families have had a rate cut from the Reserve Bank in seven years.

Ron Boswell (Queensland, National Party) Share this | Link to this | Hansard source

Mr Acting Deputy President, on a point of order: I have a high regard for Senator Polley, but she has been going for about five minutes now and she has not mentioned the car tax. She is giving us a diatribe on the economy.

Steve Hutchins (NSW, Australian Labor Party) Share this | Link to this | Hansard source

There is no point of order.

Helen Polley (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

I always know that I am making a good speech when I get interrupted. I have sat through this debate and have been lectured many times in this chamber, and the opposition always seem to be a little bit touchy when it comes to reminding them that Australian families, working families in this country, know what the Liberal-National coalition did to them for 11 long years. That is why we need to protect our $22 billion budget surplus. To protect our budget surplus those opposite need to be responsible and accept our budget measures.

We are a fiscally conservative government. We are preparing for the future. That is why this budget measure is so important. Ultimately, this is not a tax on ordinary Australians, as Senator Minchin has been suggesting. The tax applies only to vehicles that cost more than $57,180. There is no evidence that the luxury car tax increase will increase car prices or that it will disadvantage people with disabilities. The tax law already provides exemptions for people with disabilities from luxury car tax. Treasury has also consulted with disabled groups to ensure they are not adversely impacted by this measure. It is just scaremongering to assert that this measure will hurt working families. I might add that it is amazing that for over 11 years the opposition did not know what a working family was and all of a sudden they are trying to imply that they have a heart.

Mr Brendan Nelson and his colleagues on the other side of the chamber had been spruiking that these measures will hamper families in buying people-moving vehicles such as the Toyota Tarago. In fact, they have even gone so far as to call this measure the Tarago tax. The fact of the matter is only one of the five models of the Toyota Tarago will incur a luxury car tax. Of the 20 top-selling cars in Australia, less than four per cent of those sold are subject to luxury car tax. We do not think it is unreasonable that people who have done well in recent years, particularly from government decisions in terms of tax cuts, pay a little more for a luxury car. As Senator Carr stated in Senate question time on Wednesday, 24 August:

The luxury car tax on the Ford Territory Ghia will increase by some $500 while the tax on the Porsche 911, currently retailing at over $300,000, will increase by around $14,600. None of this stands in the way of motorists looking for a good alternative.

In the Financial Review of Friday, 28 August, an article detailed how 14 Rolls Royces have been handed over to Australian millionaires so far this year—that is, double the number delivered last year. Sales of luxury cars continue to improve despite the luxury car tax increase. The article features the quote, ‘People we sell these cars to are very entrepreneurial people that are making the economy work in many ways.’ While customers may complain of the tax, they are still coming through the doors and buying the cars. Maybe, just maybe, the Liberals have got it wrong. It would not be the first time. The opposition keeps telling the chamber that the introduction of a luxury car tax will raise the price of all cars. That is completely wrong. Competition itself will keep down the prices of non-luxury cars. This measure is part of a responsible, integrated budget strategy that delivers a $22 billion surplus. That surplus is essential to our efforts to tackle the high-inflation legacy of the Howard-Costello government.

The simple proposition that is before the chamber at the moment is that the opposition are seeking to destroy the government’s surplus. They are seeking to score cheap political points. They are seeking to undermine the government’s efforts to tackle the high inflationary legacy to this country of the Howard-Costello government. Yet this is not the only budgetary bill those opposite are planning to block. The raising of the Medicare threshold, and the alcopops tax are also measures that those opposite are threatening to oppose. Mr Brendan Nelson told Fairfax Radio on 16 May 2008 that the Liberals were not going to block the budget. His exact words were:

It would be completely irresponsible to do so.

Yet here we are just a few months down the track and a whole range of budget measures are being blocked. We should not be so shocked. As the Australian people very well remember, the Liberals have a history of core and non-core promises. The Rudd Labor government delivered an economically responsible budget that struck the right balance, given the difficult global and domestic conditions that we now face. We built a strong surplus to fight inflation and to buffer our economy against global turmoil. As Treasurer Wayne Swan said in his budget night speech:

Inflation is a drag on growth. It saps confidence, and hurts families and businesses throughout Australia. We are working to put downward pressure on inflation so that we can ease the cost of living and interest rate pressures on working families.

This surplus also acts as the foundation for responsible investment in nation-building infrastructure. The Rudd government are committed to ensuring Australia’s future long-term economic prosperity. We set up the Building Australia Fund to finance critical investment in infrastructure that will lay the foundation for future economic growth and productivity—something that was neglected over the 11 long years of the Howard-Costello government, I might add. The irresponsible opposition wants to blow a $6.7 billion hole in the surplus, a surplus that will help secure Australia’s future.

While we are working hard to protect the interests of working families, the opposition—as usual—are fighting for the rich, the wealthy. This tax is an important measure to ensure that we deliver the surplus the Australian economy needs in these challenging times. Those opposite are only interested in short-term political tactics. That is the real reason why the opposition are threatening to block this measure. This reminds us of the depth to which their economic credibility has sunk. Rather than protect the surplus in order to fight inflation and secure future investment, they propose to vandalise the surplus. The Rudd Labor government recognises that, if everyone pays their fair share of tax and we plug the gaps in the system, we can reduce the overall burden imposed on all working families. That is our objective. The Rudd Labor government are providing a $55 billion Working Families Support Package, meeting our commitments in education, health, infrastructure, defence and climate change and investing in the future with three new nation-building funds.

Our budget was designed to meet the challenges of the future, and those on the other side of the chamber know we need a strong surplus to anchor a strong economy. We need a strong budget surplus to build a buffer against international turbulence. We need a strong budget surplus so we can fund ongoing, long-term investment in our ports, roads, railways, hospitals, universities and vocational education, which we need to deliver growth with low inflation into the future. I commend this tax bill to the Senate, and I find it most disappointing that those on the other side of the chamber are not willing to support this measure and, as usual, are looking to score quick political points.

Don Farrell (SA, Australian Labor Party) Share this | Link to this | Hansard source

I seek leave to incorporate Senator McEwen’s speech.

Leave granted.

Anne McEwen (SA, Australian Labor Party) Share this | Link to this | Hansard source

The incorporated speech read as follows—

The Tax Laws Amendment (Luxury Car Tax) Bill 2008 and the three subsequent pieces of legislation will increase the luxury car tax from 25 per cent to 33 per cent and is part of Labor’s first Budget.

This increase is part of the government’s package of measures to enhance fairness in the tax system. The government believes that Australians who can afford luxury vehicles have the capacity to contribute to revenue at a higher rate than other car buyers. Additionally it is expected that this measure will contribute to the necessary task of ensuring that the budget relieves pressure on inflation. The measure is expected to raise $555 million in additional revenue over the forward estimates.

Since 1979, successive Australian governments have imposed an additional tax on luxury vehicles. The luxury car tax was introduced on 1 July 2000 when the GST was introduced and the wholesale sales tax abolished. The tax is generally payable when a car is sold or imported at the retail level. It is additional to any goods and services tax (GST) payable. Luxury car tax applies to cars whose price, including GST, exceeds the luxury car tax threshold, which is currently $57,123.

The formula used to calculate the value of the luxury car tax is:

the luxury car tax threshold is indexed using the motor vehicle purchase component of the consumer price index which includes both imported and domestically produced vehicle sales. The threshold also represents the car limit. The car limit is used in a calculation to limit the maximum amount of depreciation deductions allowed on the car under the income tax law for the relevant financial year.

The luxury car tax applies to both domestically produced and imported vehicles, though certain types of cars are exempt from the tax. This includes most commercial vehicles, most second hand cars, motor homes, campervans, and prescribed emergency vehicles. We are not changing these arrangements.

There are existing exemptions in the law to ensure that GST and luxury car tax do not apply to modifications for transporting the disabled. A car which is specially fitted out for transporting a person with a disability, seated in a wheelchair, is excluded from the definition of ‘luxury car’ and is not subject to luxury car tax, provided the car is not GST-free under GST law.

This concession is available to any person, including a carer that modifies a car they purchase for a person with a disability, seated in a wheelchair, before the time of taxable supply by the dealer—that is, before the sale of the car. GST and luxury car tax do not apply to the value of any modifications made to a car solely for the purpose of adapting the car for driving by, or transporting, a person with a disability. Again, this concession is available to any person, including a carer that purchases a car and modifies it accordingly. However, if the value of the unmodified car exceeds the Luxury Car Tax threshold then the value of the unmodified car will be subject to the tax.

A disabled veteran or eligible person with a disability can purchase a car GST-free up to a value of the luxury car tax threshold. GST and luxury car tax is payable beyond that amount, which is currently $57,123. This treatment would apply to a vehicle that is not modified but has been purchased to meet the needs of a disabled person because of the vehicle’s size or height. To qualify for this concession the disabled veteran must intend to use the car for personal transportation for two years or until the car has travelled 40,000 kilometres. To qualify for this concession the eligible person with a disability must intend to use the car for their personal transportation to travel to and from gainful employment for two years or until the car has travelled 40,000 kilometres.

Where the cost of a conversion pack is included in the cost of the car, when the value of the car exceeds $57,123—inclusive of the conversion pack—then LCT would normally be payable on the amount above the threshold. However, if the conversion pack is used to make modifications before the taxable supply then the cost of the modifications, including the cost of the conversion pack, may not be subject to LCT. If the conversion pack is purchased after the car is purchased from the dealer and then used to convert the car, the conversion pack is LCT and GST free.

There is no evidence that the luxury car tax will increase car prices more generally. Nor will it disadvantage people with disabilities. The tax laws already provide exemptions for people with a disability from the luxury car tax. The Opposition claim that this legislation will disadvantage those living with a disability, a claim which has no substance. Treasury has consulted with disability groups to ensure they are not adversely impacted by the measure.

It is estimated that around ten per cent or around 100,000 of all new car sales made in Australia in 2007 were subject to luxury car tax. Of the top 20 selling cars in 2007, which covers more than 50 per cent of the car market, less than four per cent of those sold are subject to luxury car tax. At the lower end, the increase is in the hundreds, not thousands, of dollars. The increase in the luxury car tax for the lowest cost Toyota Prado models are $39 and $98. For the Ford Territory Ghia, the increase is $496.

Labor has developed a Budget that will deliver to working families. A budget that protects Australia at a time of global economic instability. A Budget that invests in our nation’s future. A Budget that has been attacked by the Coalition since day one.

We have come into office in difficult economic circumstances. Not only have we inherited a mess from the high-spending Howard Government, we are in a time of global financial turbulence.

The global credit crunch and the global oil price shock have impacted on confidence right around the world. It has pushed up borrowing costs for households and businesses around the world. Global share markets have fallen by an average of around 20 per cent in developed economies since the global turmoil began. Stock markets around the world have been affected by the global financial crisis and a slowing world economy. And consumer confidence across the OECD economies has fallen to its lowest point in almost 30 years.

Fighting inflation is the central challenge facing our economy today. The Rudd Government has recognised this and unlike the previous Government, Labor is addressing the challenge. We have reigned in Government spending after the Howard Government’s spending sprees. When Labor came into Government, Government spending was running at between four and five per cent growth on the part of the Coalition. We have reduced that to just on one per cent.

If we had continued this irresponsible spending, at the same growth level that the Howard Government had it running at for the last several years, it would have cost taxpayers an extra $23 billion worth of outlays. Another $23 billion of taxpayers’ money would have been blown away. Those opposite spent recklessly with the money of the Australian public and the damage that recklessness has caused to this economy is still evident today.

Labor has taken a very different approach to the Howard Government, instead of going on spending sprees, we have focussed on savings. We generated $33 billion in savings to ensure that our new spending initiatives of $24.7 billion were met by savings.

The Budget provides for Australians and plans for the future, something the Howard Government never did. The budget contained a $40 billion investment in Australia’s future to build new and improved roads, hospitals and schools. The budget is the first step towards a new, more modern Australia, with a first-class economic and social infrastructure. By making Australia’s finances more sustainable, we can now start investing in the schools, hospitals, roads, rail and communication projects that were neglected by our predecessors for more than a decade. This has only been made possible because we have had the courage to take the tough decisions that may cause some pain, but in the longer term will make Australia stronger.

Productivity growth has declined sharply in recent years. From average annual growth of 3.3 per cent during the productivity cycle of the mid-1990s, to just 1.1 per cent in the current cycle. That productivity slowdown reflects the long-term neglect of investing in the drivers of productivity – our workforce and our infrastructure.

On Monday the Prime Minister Kevin Rudd outlined Labor’s plan to turn this around at the AI Group Annual National Dinner. “The Government is committed to building our long-term prosperity by investing in five key platforms for future productivity growth – education, infrastructure, innovation, business deregulation and taxation reform.” This is all part of Labor’s commitment to nation building. This Government is committed to implementing the single largest infrastructure program in the history of the Commonwealth, a program of some $76 billion.

We have already begun investing in infrastructure through the establishment of Infrastructure Australia. This organisation will help drive investment in critical national infrastructure such as road, rail, ports and high speed broadband.

We have invested a significant amount into communications infrastructure, committing up to $4.7 billion for the new broadband network to reach 98% of Australian homes and businesses.

Other planned investments into infrastructure include $26 billion in roads and rail infrastructure through 2008-09 to the end of AusLink II. In addition, the Labor Government will invest $20 billion through the Building Australia Fund in transport, energy and water priorities.

On innovation, the Prime Minister explained that the Government is building a 21^st century innovation-driven industry policy—not the old industry policy based on protection and resisting change, but the 21^st century innovation policy that embraces change, productivity and global markets.

We have developed a $55 billion Working Families Support Package. Part of this package is lifting the Child Care Tax Rebate. Labor proposes to increase child care assistance by lifting the rebate from 30 per cent to 50 per cent of out-of-pocket costs and increasing the annual cap frm $4354 to $7500 per child. We understand that the cost of childcare isn’t the only obstacle faced by parents, availability is a big problem. For this reason, the Government, over the long term, has committed to ensure 260 child care centres are built in priority areas.

Another important part of the Working Families Support Package in respect to raising children, is the $4.4 billion education tax refund. This refund will mean that parents who are entitled to family tax benefit A or whose children receive the youth allowance, can claim a 50% tax refund of up to $750 in education expenses for each child in primary school, that’s a refund of up to $375 per year, and up to $1500 in expenses for every child in secondary schools, a refund of up to $750 per year.

Working families as well as singles will benefit from the changes to the Medicare levy surcharge thresholds. While the cost of living and incomes have changed over the last 11 years, the income thresholds haven’t. This has resulted in people on average wages by today’s standards, becoming liable for the surcharge. The Government are increasing the thresholds to bring them in line with today’s wages so that the Medicare levy surcharge is only placed on higher income earners. From 1 July 2008, singles with incomes up to $100 000 and families with incomes up to $150 000 will no longer have to pay the surcharge. These are both increases of $50 000 from the current thresholds. The Government is increasing the thresholds to bring them in line with today’s wages so that the Medicare levy surcharge is only placed on higher income earners.

We are creating a fairer, more balanced tax system; this bill is part of that.

The Government’s tax reforms outlined in the Budget will provide 46.7 billion of personal income tax cuts over the next four years. For a taxpayer earning $50 000 a year the tax cuts will deliver an additional $19.23 per week from 1 July 2008. This will increase to $25 a week from 1 July 2009 and $33.65 a week from 1 July 2010. When fully implemented they amount to almost a 20 per cent reduction in their tax bill. These tax cuts will provide significant relief for people battling the rising cost of living, but the Coalition are standing in the way.

To deliver all these fantastic initiatives, we need our budget passed in full. The Liberals are intent on opposing key budget measures which would blow a $6.2 billion hole in that surplus we need. Along with the Medicare Surcharge Levy, the Luxury Car Tax is one of those key budget measures being blocked.

By blowing such a gaping whole in our Budget surplus, the Opposition is limiting our ability to put downward pressure on inflation. Having a strong Budget surplus is an important buffer against international economic uncertainty.

Those opposite always talk about being economically responsible, but they continually show us otherwise. Blocking our budget is the pinnacle of economic irresponsibility. No responsible economic manager would choose to increase uncertainty at home at a time when we face significant uncertainties from abroad. They need to ensure that the Government has got the ability to put downward pressure on interest rates, and to help the Reserve Bank do its job.

The reality is that the Coalition wants higher taxes for working families and lower taxes for luxury cars. They want to ensure that the rich can get luxury cars cheaper while those on lower incomes struggle to fill their cars with petrol. Those are the twisted priorities of the Opposition that have hurt Australian families for over a decade.

The Government wants to deliver to deliver its budget in full so that it can roll out its $55 billion Working Families Support Package to support Australians and provide a significant surplus to fight inflation. It’s time that the Coalition let us do it.

Ron Boswell (Queensland, National Party) Share this | Link to this | Hansard source

I listened very carefully to Senator Polley’s expose and diatribe on the car industry. Unfortunately, the speech was not about the car industry; it was a speech on the economy. She was repeating all the natural spin that the Prime Minister and the Treasurer, Mr Swan, have been saying for the last three or four weeks. Where I see the Labor Party coming unstuck—and I have seen them come unstuck before—is that they do not know whether they are a green party that represents the green interests of Australia or a party that represents the unions and the workers. They are continually torn. Today we see it again.

Steve Hutchins (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Mr Acting Deputy President, I rise on a point of order. Senator Boswell is not talking about the luxury car tax at all. I ask you to remind him to refer to that.

Stephen Parry (Tasmania, Liberal Party) Share this | Link to this | Hansard source

There is no point of order.

Ron Boswell (Queensland, National Party) Share this | Link to this | Hansard source

We have seen Doug Cameron, the unionist, rally and condemn the Labor Party and the coalition so much so that he drove Senator George Campbell out of office. When he came down he was going to play merry hell with a big stick. I would be interested to hear him say what he believes this luxury tax on the car industry is going to do to the workers of South Australia and the workers of Victoria. That was the platform he used to get into this place and he went right over the top of his colleague from the Left Senator Campbell. Senator Campbell was driven out of this place. You can run in this place but you cannot hide. This place will find you out. You can talk one way but, in the end, you have got to face the music.

You do not have to be Einstein, you do not have to be a student of the car industry and you do not even have to live in South Australia or Victoria to know the car industry is doing it tough. It is doing it immensely tough as we allow cars to come in from overseas. We see the sales of Ford and GMH go down. They are in a critical mess. If they lose anything more, they are going to be in real trouble.

The car industry has begged the Labor Party and the two Independents not to go down this path. Senator Fielding is just walking in here and, presumably, he will have some structure to try and get around this. But I say to Senator Fielding: whatever you do, whatever your amendment is, it is not going to get the car industry out of trouble. I was just saying before you walked in, Senator Fielding, and will repeat it for you, that the car industry in South Australia and Victoria is in terrible trouble. They are losing sales hand over fist to imports. This could be the tipping point for them.

The car industry has begged the Labor Party—I assume they have spoken to Senator Fielding and Senator Xenophon; I do not know. We cannot go around this issue with amendments. The amendments are not going to address the problem. If the Labor Party people are concerned about jobs in the car industry, they cannot have it both ways. They have to support the workers and the unionists who pay their fees to the Labor Party, the unionists who work hard 38 or 40 hours a week and then pay the $400-$500 to the Labor Party. What are they getting out of this? They are going to lose their jobs—some of them are going to be put off. You are not going to be able to pass this without having a result. The complication will be that you are going to lose a lot of good unionists that support the Labor Party.

I do not know how you can do this. I do not know how Senator Carr can sit here and let this sort of legislation go through. I do not know what he does in cabinet. Doesn’t he put his hand up and say, ‘If this happens, the repercussions of this will be so many jobs lost’? An industry minister is supposed to say, ‘If we are going to import more of these little roadsters, these imported sports cars, we are going to put our good unionists out of work.’

There is another aspect to this piece of legislation. Approximately eight, nine or 10 years ago the National Party lost two wives in car accidents. And then John Anderson’s wife spun the car over seven times. She was very fortunate and she and the kids got out of it. Tim Fisher had an accident, and two people were killed. The Labor Party at the time, to their credit, said: ‘We do not want any more of this. People with huge electorates have to have cars that are safe, and we will let them drive four-wheel drives.’ That is what you are going to take away from all the people in the bush—the right to drive safely in a car that has got a bit of substance under it. For the two reasons: safety and workers, I urge the Senate to drop this bill like a hotcake.

Steve Fielding (Victoria, Family First Party) Share this | Link to this | Hansard source

This debate is not about whether there should be a luxury car tax. There already is a luxury car tax and there is bipartisan support for that tax. The question is whether there should be an increase in the luxury car tax rate and whether some people should be exempt from the increase. This tax increase is a blatant tax grab, but at least the government has made that abundantly clear, unlike with the alcopops tax. It is a tax grab for an extra $555 million over four years by increasing the rate of the luxury car tax from 25 per cent to 33 per cent for cars that cost more than $57,180.

The debate on the Tax Laws Amendment (Luxury Car Tax) Bill 2008 and related bills has centred on whether we should be asking people, who can afford expensive cars, to contribute more in tax and whether this tax hike will damage the car market in Australia. However, Family First is concerned about putting taxes up at a time when families are struggling to make ends meet and when the economy appears to be slowing. In my state of Victoria, the car industry is a significant employer but, last month, Ford said it would cut 350 jobs in Melbourne and Geelong. In June, Holden said it would stop making four-cylinder engines in Melbourne. The industry is feeling the pinch.

But the tax is on cars that are worth more than the average income of Australians. The proposed increase in the luxury car tax would see a new $65,000 car have an extra $483 tax bill, which to many may seem fair enough. For those who can afford a Porsche 911 at more than $240,000, the extra tax is $13,660. If you look at the top 10 cars sold in Australia in July—Commodore, Corolla, Falcon, Mazda, Yaris and so on—you would find that none of them fall into the luxury car bracket. They are all good quality cars but with a much lower price tag. So, looking at the direct impact of the tax, I think most Australians would think it is fair enough that those people with the disposable income to buy such expensive cars are asked to pay just a little bit more in tax. But policy is seldom that simple. The difficult part is to work out the indirect effects of the tax and whether this tax, which the government expects will raise an extra $555 million over four years, will have any important unintended consequences.

Family First’s question was: are there community groups that will see this increase as a kick in the guts? Carers and people with a disability are some of the most deserving people in the community and actually need a helping hand. In the act, there is a reference to cars not being defined as luxury if they have the facility for a wheelchair, and that is well and good; however, there are also small businesses that depend on their cars as tools of their trade but their vehicles are not covered by those exemptions. Small tourism operators and farmers are two important groups who will get slugged by this tax increase. The tourism industry is heavily dependent on the seven- and eight-seater diesel Toyota LandCruisers and similar vehicles that are used by tour operators, particularly in rural and regional Australia. While there is a tax exemption for commercial passenger vehicles with nine or more seats, vehicles with seven or eight seats are unfairly captured by this increase.

Ron Boswell (Queensland, National Party) Share this | Link to this | Hansard source

What about five seats?

Steve Fielding (Victoria, Family First Party) Share this | Link to this | Hansard source

Five seats, someone else mentions. Small businesses in tourism are struggling with high petrol prices, which are also impacting on tourist numbers with the increasing price of aeroplane flights, but now they also have to deal with an increase in capital costs for their business. One tourism operator has a fleet of 30 vehicles and buys five a year. Under the new tax, that business will have to find another $40,000 to cover the extra luxury car tax. Family First wants to help small businesses in the tourism industry by exempting the commercial vehicles or by sitting down with the government and discussing, as we have been, how to overcome the problem for tourism operators. Family First is also concerned that the tax might hit rural and regional people with extra costs because it increases the price of some four-wheel drive vehicles. City based people buy more four-wheel drive cars than rural and regional people, but people in the rural and regional areas are more dependent on their off-road vehicles to deal with difficult conditions. Family First also wants to see an exemption or some other way for four-wheel drive vehicles that are registered in rural areas, in recognition that families in rural and regional Australia are doing it tough. These are two issues on which we are still in discussion with the government.

Another concern is that increasing the tax on the top end of the market may encourage car prices up across the board. Increasing the tax take might change some of the relativities between different types of cars so that prices are dragged upwards. Increasing the tax might also increase demand for lower priced cars and drive up the cost of cars in that bracket. If there are price hikes in the new car market, these might also flow through to the second-hand market. Second-hand cars might end up more expensive, both because the prices of some new cars are higher and because higher prices might mean that people look to the second-hand market for luxury cars instead.

There is also a question of whether the extra tax should be applied to the most fuel-efficient cars, but the same argument could be used for safer cars. Family First is sympathetic to the concerns raised that this tax may be slapped onto the most fuel-efficient cars in the market, and that is an issue to be considered, but, as I was saying, that could also be said for the safer cars. It is also necessary to look at how fuel efficiency tax would affect Australia’s car market. Family First wants higher efficiency standards for new cars, including European fuel efficiency standards, and would support assistance for the Australian car industry to help meet those standards. It is important to consider the best way to encourage and support families to buy more environmentally friendly vehicles, considering things such as rebates for cars that meet efficiency standards. Family First will be considering all these issues when making a final decision on the luxury car tax bill. Family First is really concerned—underlined—about passing a tax that slugs small tourism operators and farmers.

Debate interrupted.