The Abbott Government’s sensible bid to have fuel excise indexation restored hit another road block yesterday when Treasurer Joe Hockey claimed in a radio interview that the measure would not have much impact on the poor, since “the poorest people either don’t have cars or actually don’t drive very far in many cases”.
The comments have been seized upon by Labor, who have used them as more evidence that Hockey is ‘out-of-touch’ and that the Budget is fundamentally unfair.
What Hockey was obviously referring to was Government analysis showing that wealthy families pay three times as much fuel excise as poor families. From The Australian:
…the increase in fuel excise would raise about $21bn over a decade and the heaviest load would fall on areas with the highest incomes…
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.
Of course, Hockey failed to mention that the impost from re-indexing fuel excise would be a greater share of household income for those in the lowest-income brackets, which is what gave Labor cause to attack his comments.
What Hockey should have argued instead is the fact that Aussie petrol taxes are the fourth lowest in the OECD (see next chart).
And that the freezing of fuel excise in 2001 has meant that taxes on automotive fuel have been falling in real terms and relative to other taxes, and have failed to keep up with expenditure on roads (see next chart).
Re-indexing fuel excise would, therefore, merely 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.
Hockey could also have stressed the 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; although such an admission would appear at odds with the Government’s decision to “axe the carbon tax”.
More broadly, that the Greens (and to a lesser extent Labor) can block fuel excise re-indexation – 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.
There were a lot of bad measures in the May Budget, by fuel excise re-indexation certainly was not one of them.
