Annette Hurley (SA, Australian Labor Party) Share this | Hansard source

I want to respond briefly to Senator Abetz’s point about inflation and his point that the government senators and I, the chair of the economics committee, admitted in the committee report that there would be an increase in inflation as a result of this measure. There was indeed a section of the report on these bills under the heading ‘The impact on the LCT rate increase on car prices and the CPI’. One of the relevant points was:

As the LCT only applies to the value in excess of the threshold, the price increases for cars affected by the LCT are much less than the 8 per cent increase in the tax rate.

Another point was:

A simple calculation suggests the overall impact on the consumer price index will be negligible. Motor vehicle purchase has a weight of around 5 per cent in the CPI, so if the price of 10 per cent of cars sold were to increase by around 2 per cent as a result of the LCT rate increase, the total CPI might have a one-off increase of 0.01 per cent.

This negligible increase of 0.01 percent is interpreted by Senator Abetz as an increase in the inflation rate. I must say that is fairly typical of the way that Senator Abetz will take a piece of information and twist it around and verbal the person responsible. That is why I point it out, and it was a habit of Senator Abetz with a number of the witnesses at our hearings as well. So it is hard to take Senator Abetz’s statements at face value, and I think that is very relevant to this debate. In fact, the conclusion to the report in chapter 3 says:

The currently high inflation rate is a reason for tighter fiscal policy. Given that high income earners have got significant income tax cuts, and are probably benefiting more from the resources boom than are low income earners, the committee regards it as reasonable for them to bear the burden of higher prices for luxury imported goods, whose prices have in many cases fallen due to the stronger Australian dollar.

The committee findings were indeed that there would be a negligible effect on inflation and that these luxury car tax measures are well in line with government policy. I would urge the crossbench senators to take the rest of Senator Abetz’s commentary on this legislation in the same way as his commentary on its inflationary effect.