Senate debates

Wednesday, 24 June 2015


Excise Tariff Amendment (Fuel Indexation) Bill 2015, Customs Tariff Amendment (Fuel Indexation) Bill 2015, Fuel Indexation (Road Funding) Special Account Bill 2015, Fuel Indexation (Road Funding) Bill 2015; Second Reading

11:56 am

Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Hansard source

I thank all those senators who have contributed to this debate. These bills validate the tariff proposals currently in operation and give effect to the government's 2014 budget measure to reintroduce biannual indexation of fuel excise.

Indexation of fuel excise was first introduced by the Hawke Labor government in August 1983 in order to maintain the real value of excise collections and to provide more stability for business and consumers. The rate of excise on most fuels was frozen between March 2001 and November 2014. Petrol maintained an excise rate of 38.143c per litre during that period, which meant that the real value of the excise duty was eroded by inflation.

The government have made significant progress in repairing the budget, however more work needs to be done to return the budget to surplus as soon as possible. The 2015-16 budget maintains a steady and credible trajectory towards surplus despite a significant write-down in tax receipts and the iron ore price having more than halved since we came into government.

The reintroduction of fuel excise indexation will provide a predictable and growing source of revenue, which will be used to deliver the vital road infrastructure that Australia needs. Indexation of fuel excise will raise approximately $3.6 billion over the 2015-16 forward estimates period and over $23 billion over the next decade. All the revenue raised through this measure will be linked by law to funding roads. Importantly, businesses using fuel in off-road operations or operating an on-road vehicle with a gross vehicle mass in excess of 4.5 tonnes will not face an increase in their business costs due to the continuing operation of the fuel tax credit arrangements.

These bills include consequential amendments to the Excise Tariff Act 1921 in order to simplify the burden on businesses by rounding the applicable duty rate of indexed fuels from three decimal places in the cent to one decimal place. The passage of this significant structural budget reform demonstrates how the government is continuing to methodically and progressively implement our budget repair measures.

In this context, I would like to pause and thank the Senate for its support over this past fortnight for the government's plan to strengthen growth, create more jobs and repair the budget. The Senate will be well aware that, when we came into government, we inherited a weakening economy, rising unemployment and a budget position which was rapidly deteriorating. That rapid deterioration, in the main, was as a result of unsustainable and unaffordable spending decisions in the period of the previous government. Yes, we had the global financial crisis and we at the time supported a level of fiscal response to that, but the fiscal response deployed by the government at that time was manifestly excessive. Furthermore, at a time when the terms of trade for Australia were starting to come off from their record levels and the price of our main export commodity, iron ore, was starting to come off, instead of trying to control expenditure moving forward, the previous government made a series of decisions to lock in permanent increases in spending, in particular in the period beyond the published forward estimates. That, of course, has put Australia on a more risky trajectory moving forward. These sorts of decisions have put our future economic growth opportunities and our future living standards at risk, which is why the government came into office with a plan for stronger growth, for more jobs and to repair the budget.

As I have been able to indicate to the Senate before, that plan is working—it is starting to have effect. Economic growth is now strengthening. Growth last year was better than the year before. Growth this year has started very strongly. Growth in the first quarter of 2015, at 0.9 per cent, was one of the strongest growth rates anywhere in the developed world. It was stronger than any of the G7 economies' growth in that same period. Our employment growth in 2015 is much, much stronger than the employment growth rates that we inherited on coming into government. In fact, employment growth in the first five months of this year is about six times the rate that it was in the last 12 months of the previous government. And so it goes on.

Budget repair is a very important part of our plan to strengthen growth and create more jobs, because we need to ensure that government is able to live within its means—that spending growth and spending overall do not exceed revenue. Our objective is to get the budget back into surplus as soon as possible, as we have articulated on many occasions. On that front also we are making progress. In this fortnight, we have been able to pass budget repair measures—measures to improve the budget bottom line—to the tune of nearly $11 billion over the forward estimates. Many of these measures, of course, will have a structural effect beyond the forward estimates, improving the budget bottom line in an ever-increasing way in the period over the medium to long term. That is excellent progress.

We still have more work to do. We cannot rest on our laurels. When we come back after the winter break, we do hope that the constructive approach taken by the Senate in recent weeks will be continued and that we will continue to be able to get some of the very important reforms through the parliament. In this fortnight, we were able to get the small business and jobs package through the parliament. We would like to think that, when we come back, we will be able to get the jobs for families package through the parliament, with, at its core, our proposals to make access to more affordable child care simpler and more flexible. We understand that simpler, more affordable and more flexible access to childcare arrangements is a very important part of helping families get into work, stay in work and be in work.

Getting back to the issue of fuel excise indexation, the government always said that our intention was to reinvest the additional revenue raised through this measure into our road infrastructure. At various times over the past year, as we were working through the issues and seeking a majority in this chamber, we explored the option—and we offered this to the Greens—to potentially decouple that hypothecation to road funding if it would help secure the Greens' support. We also made an offer to the Greens in August last year that we would be prepared to make an additional investment in public transport infrastructure if it helped facilitate passage of this measure. But, of course, the Greens were not prepared at that time to properly engage with us and made various demands of the government that, clearly, they would have known were never able to be accepted by the government as responsible economic managers. It is true that, with the election of Senator Di Natale as leader of the Greens, we felt that there was a better prospect of perhaps reaching a consensus, understanding that we have different policy perspectives on the matters at hand but, obviously, working in the pursuit of the national interest and, hopefully, being able to find common ground.

But then, of course, the Labor Party came in with an offer that was too good to refuse. The Labor Party offered to support this very important structural reform, which helps us repair the budget, and asked in return for us to boost the investment in road infrastructure through our own Roads to Recovery Program. Given that we well understand on this side of the chamber the excellent contribution the Roads to Recovery Program makes to our road network, to local governments and to our communities across Australia, we of course were only too happy to enter into that understanding and that agreement with the Labor Party. I heard today from Senator Rice during the debate that she also, as a former local councillor, understands the value of the Roads to Recovery Program—and so there is a tripartisan consensus that the Roads to Recovery Program is a very good program. I am very pleased that Senator Rice supports our additional investment in our Roads to Recovery Program as a very important initiative.

During the debate, various people have raised the question of the implications for rural and regional Australia in particular. I thought I would place on the record that the majority of Commonwealth investment on road infrastructure has been directed to rural areas in recent years. On a per capita basis it is very significant. Even in absolute terms, if you look at Commonwealth spending on roads, overall, more than 60 per cent of Commonwealth investment in road infrastructure, over the last three years, has been invested in regional areas.

In the years 2010-11 to 2012-13 spending per capita in rural areas has been significantly in excess of that of urban areas. In relative terms, rural funding per capita has been at least three times that of urban areas. It stands to reason. They have a lower population but there are significantly larger road networks. From that point of view, we do understand that people in rural areas have to drive longer distances. There is also a commitment by the government to continue to invest, very strongly, in the necessary road infrastructure that regional Australia needs.

With few those remarks I am pleased to commend this bill to the Senate.


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