Greens’ fuel excise hypocrisy deepens

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By Leith van Onselen

The Greens’ and Labor’s claim that re-indexing fuel excise would unfairly punish lower paid Australians has been called into doubt by government analysis uncovered by The Australian:

The Australian can reveal that the increase in fuel excise would raise about $21bn over a decade and the heaviest load would fall on areas with the highest incomes, despite claims from Labor and the Greens that it would be unfair to the poor.

The government analysis shows that the wealthiest households paid three times as much fuel excise as the poorest, countering assumptions that a small increase in the excise was an unjust burden on those who could least afford it.

Households in the lowest 20 per cent of the country by income spend $16.36 a week on petrol while those in the top 20 per cent spend $53.87, according to the government conclusions, based on official statistics.

However, the figures do not take into account that the impost would be a greater share of household income for those in the lowest-income brackets.

The Howard Government’s freezing of fuel excise in 2001 was arguably one of the worst budgetary decisions this century. Because of it, the real net revenue from fuel excise has been falling (see next chart), which now costs the Budget some $5 billion in foregone revenue.

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Re-indexing fuel excise would ensure that it keeps pace with inflation and maintains its share of total taxation revenue. In turn, re-indexation would broaden the tax base away from income tax and improving overall taxation efficiency.

There would also be obvious environmental benefits of re-indexing fuel excise, since it would act as a defacto pollution tax that discourages car use and/or encourages the use of more efficient vehicles. That the Greens can block such a measure – given their vocal championing of an emissions trading scheme and/or a carbon tax, as well as lobbying to reduce Australia’s dependence on fossil fuels – is the height of hypocrisy and incoherent policy making.

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Let’s hope that enough of the opposition members soften their stance and allow through this important and sensible Budget measure.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.