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Federal

Jun 25, 2014

Green-Labor stupidity on fuel excise could be prevented with an X

Allowing at least part of the rise in fuel excise indexation through would be sensible long-term politics from Labor.

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The Greens’ opposition to fuel excise indexation is, in policy terms, one of the more bizarre decisions from any side since the election.

For a government that has talked incessantly about its readiness to take tough decisions, the restoration of fuel excise indexation was the real thing. It reversed a bad Howard government decision, and it exposed the government to criticism on a subject dear to the hearts of many voters — petrol prices. And it would have minimal impacts at first, with the big gains to be had beyond forward estimates — the real beneficiaries of the decision will be the governments of the 2020s. It was good policy and politically courageous from the Coalition, and if the Liberals were able to get it past the easily gulled Nationals by waving a shiny thing called “diesel fuel rebate”, all the better.

Labor, of course, wouldn’t pass up the opportunity to oppose it. If they’d introduced it in government, the Coalition and News Corporation would have gone bananas screaming about Labor’s attack on low-income earners. But Labor knows perfectly well how valuable the measure will be down the track once they’re back in government. They were privately hoping the Greens would wave the measure through, or Clive Palmer’s motley crew and another couple of crossbenchers would. That’s not going to happen.

The Greens, however, might have been expected to back increased taxation on a non-renewable fuel and source of greenhouse emissions. Transport currently yields 17% of our CO2-equivalent emissions and, unlike electricity-related emissions, their growth has shown no signs of tapering off in recent years. The excise increase would be a carbon tax: even Tony “great big new tax” Abbott himself admitted that increasing fuel excise was “at least on one level part of the price of carbon”.

Between the excise increase and the extent to which electricity companies have been allowed to gouge customers via overinvestment, half of our emissions would have been covered by a de facto carbon price even after the removal of the current carbon pricing regime — and an effective one: electricity generation emissions have fallen significantly in recent years as demand for electricity has fallen in response to gouging, so that the stationary electricity generation sector now produces 33% of our emissions.

The Greens’ substantive objections to increased excise — about hypothecation to road funding and the diesel fuel rebate for mining companies — don’t stack up. As Peter Martin has explained, the government’s hypothecation of revenue from the increase doesn’t guarantee any extra road funding — it’s a legislative sleight of hand designed to soften the political blow of higher fuel prices, though a cleverer one than the witless “medical research fund” being used to justify GP co-payments. And the diesel fuel rebate is intended to ensure that mining companies don’t pay the road user charge component of heavy vehicle diesel fuel excise for their off-road operations — why should companies not using roads pay for roads? I’m more ready to criticise the mining industry than most in the media, but on the diesel fuel rebate, their case is sound.

And if the Greens are concerned about the impact of higher fuel excise on people in outer suburbs poorly served by public transport who are heavily reliant on their vehicles, the way to address that is through transfer payments for low-income earners, not through simply blocking the measure altogether.

Fortunately there’s a way either the Greens or Labor could rescue the measure, albeit at some cost, but with honour intact. Rather than index excise according to the consumer price index, as proposed in the measure, it could be indexed at CPI-X, with X being whatever number takes your fancy — maybe 1%. So twice a year, excise would rise by the six-monthly CPI minus 0.5%, meaning excise would grow at a level below inflation — but still grow. Being able to argue that excise is growing more slowly than inflation would be a motorist-friendly argument, while still locking in most of revenue gains and maintaining its carbon pricing effect.

There’ll be plenty more opportunities for Labor to get revenge on Tony Abbott for his wrecking tactics in opposition. Letting through much of the fuel excise increase, however, would be a sensible long game.

Bernard Keane — Politics Editor

Bernard Keane

Politics Editor

Bernard Keane is Crikey’s political editor. Before that he was Crikey’s Canberra press gallery correspondent, covering politics, national security and economics.

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23 comments

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23 thoughts on “Green-Labor stupidity on fuel excise could be prevented with an X

  1. Robert Brown

    BK, have you seen http://www.tai.org.au/content/mining-age-entitlement which studies how much states spend in support or mining companies (among others)?

    Mining companies do use roads, and rail and ports, etc. Surely this weakens the case for them to be exempt from fuel excise?

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