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

I wish to support the Tax Laws Amendment (Luxury Car Tax) Bill 2008 and associated bills. The government proposes in these bills to increase the luxury car tax from 25 per cent to 33 per cent. There will be no changes to the luxury car tax threshold, which is currently $57,180. There has been no change to the rate of the luxury car tax since it was introduced with the GST taxation system in 2000, and it is important in this debate to note that the tax is only paid on the cost that is in excess of $57,180. This is quite important, as quite a few of the vehicles that have been listed and spoken about in this debate are only marginally above that threshold amount and therefore the additional cost of the tax is fairly small. The opposition have in fact accused Labor of hurting large families and people with disabilities who require large people-movers to get around. That is not so. The debate seems to have shifted somewhat since then, but the opposition seem to have relied on misinformation and exaggeration to support their case. The proposed tax is on the price of cars before the retail price, so it does not include the GST and is not a straight tax on whatever is the listed retail price of the car. That also changes the debate that we have heard.

Senator Abetz asked: what is a luxury car? I think it is worth going into a bit of discussion on this because the opposition was initially calling this ‘the Tarago tax’ and claiming that it did affect people who had large families or who needed large cars. That is an example of how the opposition has misrepresented the facts. I have the range of prices for the Tarago range. There are five models of Tarago, starting at the four-cylinder GLi model from $50,000. There is the four-cylinder GLX model, which is $53,000—and that is the retail price. There is the Tarago V6 GLi, which is a 3.5-litre V6 six-speed auto, from $55,240. There is the VX GLX, which is described as having new levels of luxury. It is a 3.5-litre V6 six-speed auto from $56,990. Those four models are below the luxury car tax threshold. The only model of Tarago that is above the luxury car tax threshold is the V6 Ultima, which is $73,384. So it is perfectly possible to buy a Tarago under the luxury car tax threshold.

I do not particularly want to be an advertisement for Tarago, but I want to go a little into the V6 GLX, which is under the luxury car tax threshold. It has power steering, cruise control, power windows, all of the safety features: ABS, electronic brake force distribution, break assist, traction control, vehicle stability, vehicle swerve control, driver airbags, front passenger airbags, front seat side airbags, seat mounted front seat airbags, front seat side curtain airbags, rear second-row airbags and rear second-row seat side curtain airbags. It has a six-disc CD changer. There are other smaller, and all standard, features on the V6 GLX, which is under the luxury car tax threshold.

We have also heard how dreadful it was that people on farms would have their utes taxed if they managed to put a bull bar or other optional extras on. On the Holden website—and, since it is made in South Australia, I am much happier about publicising Holden—there is the SS Ute, which many would call a luxury ute. Even with every single one of the options selected, including satellite navigation, Bluetooth, reverse parking sensors, towing packages, headlamp protector, bonnet protector, floor mats and roo bar, the total price is $49,330. It is under the luxury car tax threshold.

We have heard also about how people in the country require 4WDs to get around. I have spent a reasonable amount of time in country and outback Australia, and I do not see many people driving around in 4WDs that are $60,000-plus. Indeed, in the Senate Standing Committee on Economics report into the bills, table 1.1 lists 4WDs that are under the luxury car tax threshold, the Ford Territory TS Wagon and the Subaru Forrester, and one that is above, the Nissan Patrol Wagon five-speed manual, which is $58,490. You would pay an increase under this proposed luxury car tax increase of $241 on that.

So there has been a great deal of exaggeration of the effects of this luxury car tax by the opposition. They have needed to gee up their case to complain about the luxury car tax because they are trying to portray it as a tax on—and I have even heard this word—battlers. That is, battlers who buy cars worth $60,000-plus. It is just absurd. Most people are struggling to buy a second-hand car for around $20,000. They could not aspire to buy a car of over $60,000. So we are not dealing with vehicles that battlers are buying, that people who are struggling are buying. We are increasing a tax that has not been increased since the year 2000. It is a tax that will affect people who can afford to pay a little extra. And the more expensive you go of course the higher the tax is and the wealthier is the person who is about to buy the car.

If the opposition oppose a tax on luxury cars, fair enough—argue that on ideological grounds—but do not distort the facts in order to bolster the argument. Another fact which has been very much distorted by Senator Abetz is the claim that Labor senators on the Standing Committee on Economics admitted that it would increase inflation. I will read out to the Senate the facts of this matter. The paragraph referred to, paragraph 2.19, says:

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.

I will just repeat that: ‘a one-off increase of 0.01 per cent’. That, according to Senator Abetz, is an admission by Labor senators that inflation is going to increase. This is the level the opposition has to descend to in order to justify their opposition to this tax. This is the sort of mangling of truth that is required in order to build up any kind of case against this luxury car tax—a luxury car tax that has been in place for the entire time that the former Howard government was in office and which they did nothing to redress. Yet somehow it has now become an outrage that needs to be fixed. We also need to fix the threshold at which it is set, again something that the Howard government did not do in the 11 years or so that it was in office. Suddenly it has become a matter that affects country people, tourism operators and buyers of large cars for their large families.

The opposition’s case rings extremely hollow. The economic grounds on which they argue are also extremely hollow. They are saying that the government cannot introduce a tax increase that has a one-off inflation factor of 0.01 per cent in order to increase the surplus. They say that they spent all their time in government paying off a debt from the former Labor government. We are going to spend all of our time in office making up for the deficiencies of the Howard government in the infrastructure that is now required in this country and in catching up on education and productivity. The opposition proposes to block the government measures which will allow this to happen. They say that the surplus should be returned to investors. I do not know whether they claim that that will not increase inflation but clearly it will, and we are battling to fight inflation in this current climate. We are battling inflation and interest rate increases and this opposition is playing sheer politics. In its voting record it is playing sheer politics in the way it frames its arguments and uses the facts. It is arguing on quite small grounds in order to justify its position.

No-one likes a tax increase, and certainly we on the Senate economics committee heard a lot of evidence from dealers in luxury cars and people associated with the motor industry saying that they did not like the tax increase and that they should have been consulted. The government’s view that it does not consult on budget measures is a very common one. I am not decrying the evidence of any of those dealers or motor associations. Clearly these are difficult times. The economy is slowing down and they will struggle to sell more expensive cars. So it is a problem for them and it is a difficulty. But the government did foreshadow that this would be a tough budget. Those luxury car dealers are no more than anyone else exempt from the fact that we all have to tighten up and make sure that we get this country and this economy through a very difficult global time.

Is the opposition not going to allow a duly elected government, a government which has only been elected a few months, to fight inflation and interest rate rises in its own way by putting a tax on luxury cars which is not going to affect the battlers and those working families that are struggling to pay childcare fees, mortgages and increased grocery prices? It is not going to affect those families; it is going to affect families that can afford to pay $60,000-plus for a new car. I would suggest that those people are in a better situation than battling middle-class working families to pay a little increased tax. If the opposition care to call that the politics of envy then that is the opposition’s point of view; it is certainly not the Labor Party’s point of view and not a view to which I would subscribe.

It is a matter of finding ways to rein in our economy, to rein in inflation and to reduce interest rates. Those macroeconomic goals will assist every one in the economy. Wild claims that it will affect the safety of vehicles—that Mercedes-Benz or Volvo or Audi or Lamborghini will stop putting safety features on their cars because Australia is putting in a luxury tax—really show the desperation of the opposition’s argument in this instance to justify a position where they are not allowing through measures in the budget that will allow this government to govern in an orderly, responsible and reasoned manner.

The opposition should go away and get positive policies for a way to run this country, not work away at a government budget that is reasonable, balanced and responsible. I have had no representations from the battlers in Elizabeth or anywhere else in Australia saying that they are going to struggle to pay the luxury car tax. The battlers in South Australia would not dream of paying anywhere near those prices for cars. I think this is a reasonable and responsible measure in a reasonable and responsible budget, and I urge members to read the report of the committee and to support this bill.

Simon Birmingham (SA, Liberal Party) Share this | Link to this | Hansard source

Oh, what a feeling! Senator Hurley, we have just heard a wonderful advert for Toyota and a great description of some of their vehicles on offer. You heard Senator Hurley speak about the four-cylinder Tarago and I know she lives on the Adelaide plains near where I grew up. It is pretty flat driving there but think of the four-cylinder Tarago going up those hills to Mount Barker fully laden. I am not sure that Senator Hurley’s description of the four-cylinder Tarago quite does justice to the arguments that the government has been putting in relation to the luxury car tax and its impact on working families and on so many others.

You get the impression that the government and Senator Hurley will not be content until we go to some kind of Flintstonesque sort of world where everybody has to use their feet to pedal the cars along. That seems to be the desire they have. I know we had the trial of the Priuses outside here but you get the impression that the government want us to go the Flintstone route. You can imagine the families in Adelaide with their zero-cylinder Toyota Taragos going up to Mount Barker and trying to pedal their way up the freeway. It would be quite amazing.

The Tax Laws Amendment (Luxury Car Tax) Bill 2008 really is just a plain, simple, old-fashioned tax slug. That is all we are talking about tonight. It is a $555 million tax slug over the forward estimates. It is a tax slug that hits at the much talked about and much lauded working families and at small businesses, at our tourism industry, at farmers and primary producers, at those who wish to be environmentally conscious and at parts of an Australian industry—an industry which Senator Hurley, Senator Bernardi and I represent which is important to our home state of South Australia.

It is remarkable to see the government going down this path. You can picture, back when the budget was being developed, the razor gang sitting there thinking that it was a bit too hard to curtail some of the things they wanted to spend money on which were not going to make a difference—Fuelwatch, grocery choice: some of those things that really wasted money. Of course to pay for those irrelevant promises they needed to put a few taxes up, so they looked around for the low-hanging fruit. They looked around for the easy targets, the things where they thought they could get away with an extra tax slug that people would not notice—condensate tax, ready to drink alcohol products and luxury car tax. They figured they could get away with all of those because they could find some other justification or hit particular interest groups. In the end they thought they could play on the politics of envy and that, because it is called a luxury car tax, people would say, ‘Oh well, I don’t drive a luxury car. I happen to only drive—’

Cory Bernardi (SA, Liberal Party, Shadow Parliamentary Secretary for Families and Community Services) Share this | Link to this | Hansard source

A Tarago.

Simon Birmingham (SA, Liberal Party) Share this | Link to this | Hansard source

‘a Tarago,’ Senator Bernardi, ‘or a Land Cruiser.’ There are numbers of other vehicles, some of which are produced in Australia, that actually get hit by this tax impost, by this tax slug of the new government. Senator Hurley wanted to argue that because it only has a minor impact on inflation the tax slug is not inflationary. I am quite sure that during one of his answers at question time Senator Conroy would admit that even a minor tax increase that is recognised as inflationary is actually inflationary. If it is going to increase inflation then it is an inflationary measure, no matter how small that may be and no matter how much you want to argue over the semantics of it.

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

Senator Conroy interjecting—

Simon Birmingham (SA, Liberal Party) Share this | Link to this | Hansard source

Senator Conroy can sit there shaking his head, trying to look confused. Senator Hurley’s argument was, ‘We recognise there is an increase but it is not very much.’ It may not in itself be very much but, of course, it is not the only tax slug the government is trying to enact. That is why their budget itself is inflationary—through driving up taxes in areas like this. We have the inflation argument and we also have, of course, the impact on the automotive industry.

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Link to this | Hansard source

You should be embarrassed about what you are saying.

Simon Birmingham (SA, Liberal Party) Share this | Link to this | Hansard source

Senator Conroy, you should be embarrassed. You should be embarrassed as senator for Victoria. Your state relies on the automotive industry just as much as South Australia does. It is amazing that you are happy to sit back and let them take this slug. It is little wonder that Ford has decided to stop making a Fairlane in Victoria, Senator Conroy. They know that, under the politics of envy, in your government those types of cars are going to be put out of business anyway.

That brings me on to the damage the luxury car tax will do to the Australian automotive industry. They came in quite clearly to the inquiry by the Senate Standing Committee on Economics and made their views known. In your own state, Senator Conroy, the Victorian Automobile Chamber of Commerce said:

... this tax hits a segment of the local vehicle manufacturing industry that has been growing ... or maintaining sales ... while sales in other segments have been falling, and any increase in this tax will simply exacerbate that situation.

Senator Conroy, you were slammed by the Victorian Automobile Chamber of Commerce. Representing the Federal Chamber of Automotive Industries, Mr Andrew McKellar told the inquiry:

When this tax was originally introduced it was a thinly veiled protectionist measure for the local industry. These days it actually adversely impacts the industry, because it means the level of competition that those local brands are facing is more and more intense.

The industry recognises that this tax rise will actually do them harm. As they make premium vehicles they are trying to compete with imported vehicles and others, but the tax rise that pushes up the price of the premium vehicles that Australian industry is making in Victoria and South Australia will do them very clear damage.

Senator Hurley wanted to talk about the vehicles that are affected. The truth is there are a number of vehicles affected. She used every different example in relation to a Tarago and tried to sweep off the one that is actually affected. Of course, she did not go anywhere near the LandCruisers that are important to our rural communities; she did not go anywhere near some of the other vehicles that are important in those rural sectors; she wanted to talk about utes. Utes are important, certainly, but in our country communities, in agricultural communities, four-wheel-drives are particularly important and they are nearly all hit by this tax measure.

Unlike Senator Hurley, I receive very strong representations from people who are concerned about this. In South Australia, the local member for Stuart, Graham Gunn, representing a large part of the state, has made very clear to me that this tax impost will hurt local communities in his remote and regional areas. It will hurt farmers and those living in remote areas. It is an unnecessary tax impost directed very much at them. He has been supported in those representations by the new candidate for Stuart, Dan van Holst Pellekaan, who has actually made it very clear to me, in very strong and passionate terms, the number of people in areas like Port Augusta and elsewhere in rural and regional South Australia who have raised the tax rise with him. They have raised it with him because they are concerned that they are not going to be able to afford the types of vehicles they need to run their businesses, get their children to school and actually do the day-to-day things that are required when you are living in a remote or regional area.

The tourism industry in particular has highlighted this to me. Michael Pengilly, our state member for Finniss in South Australia, has put me in touch with Paul Brown from Kangaroo Island Wilderness Tours. In Kangaroo Island, the Flinders Ranges and many other regional tourism centres, a large part of the tourist product is actually four-wheel-drive tours. They are four-wheel-drive tours that are trying to cater to high-yield tourism markets and are trying to actually deliver a quality product to people coming to Australia, spending tourism dollars and generating economic activity in these areas. They need to upgrade their vehicles every couple of years to ensure, firstly, that the wear and tear is not too great on them and, secondly, that they are maintaining the high standards of quality product that consumers in their industry expect. What is going to happen now? They are going to face an even higher tax slug when they upgrade those vehicles. They will probably have to upgrade them less frequently. Tourists are going to get a lesser-quality experience as a result of that, or the operators’ profit margins are going to be hit. It is a direct hit on those types of tourism business.

It is a direct hit on larger families, as I said before, but it is also an amazing hit from this government on environmentally-friendly cars. A lot of the cars on the market that are hybrid cars or use low-emissions technologies are hit by this luxury car tax. Those cars are now going to cost more as a result of this. This was one of those little hidden whammies for the environment and for the government’s so-called ambitions to tackle climate change that were buried away in the budget. Their means-testing on the solar panels rebate clearly hit the solar industry hard and was a negative impact on measures to tackle climate change, and this tax measure, which will hit hybrid vehicles and those using low-emissions technologies, is another hit to climate change—another whack from the government out of this budget.

You do wonder, as they were constructing this budget, whether they were thinking at all about the overall objectives the government had in areas like climate change or whether they were ignoring it altogether. Of course, we know they were not thinking in a large, strategic context, because well before the budget was handed down they had commenced the Bracks review into the automotive industry. So they had a review looking at factors impacting on the automotive industry well underway before bringing down the budget, but, when considering the luxury car tax increase, did they say, ‘Hang on a minute, we’ve got the Bracks review happening. We might just wait until it reports to see whether or not we should consider this tax rise’?

Cory Bernardi (SA, Liberal Party, Shadow Parliamentary Secretary for Families and Community Services) Share this | Link to this | Hansard source

No.

Simon Birmingham (SA, Liberal Party) Share this | Link to this | Hansard source

No, indeed, Senator Bernardi. Of course, they did not wait for the highly-paid consultant, the former Labor Premier of Victoria Mr Bracks, to hand down his report. No, they decided instead to just go ahead and raise this tax without any consideration of the Bracks report.

Cory Bernardi (SA, Liberal Party, Shadow Parliamentary Secretary for Families and Community Services) Share this | Link to this | Hansard source

She’ll be right, Bracksie!

Simon Birmingham (SA, Liberal Party) Share this | Link to this | Hansard source

Yes. Mr Bracks kind of managed to negotiate his way around the government’s decision by noting in his final report that the tax rise was before the parliament. That is the only comment that he made in his fearless report into the automotive industry! He did note that states and territories should consider the harmonisation and reduction of stamp duties, vehicle registration and compulsory third-party insurance to facilitate the purchase of new or newer, second-hand vehicles. So he seemed to think that every other impost on vehicles should go down—that anything that actually encouraged people to purchase new vehicles was a positive for the automotive sector and that lower prices were a key part of that. He seemed to recognise that. Somehow, though, he conveniently left out the luxury car tax from that list of taxes, imposts and charges that should be curtailed.

Senator Hurley commented that there had been no change to the rate since its introduction. Those are the words she used at the beginning of her remarks. The luxury car tax rate was set at 25 per cent when it was introduced and there has been no change to it. Well, nor should there be a change to it. That is the contention of this side. When you set a rate, a percentage, you do not need to jack it up to take into account inflation or other factors; it is a percentage. It takes into account inflationary aspects along the way and growth in the dollar value of cars. The argument that somehow this should occur because there has been no change in the rate since its introduction is quite amazing. Are we expecting to hear the government say the same thing about the GST or other percentage based taxes along the way? Are we expecting to hear them say, ‘There has been no change since their introduction so maybe we should increase those too’? It is, of course, a foolish argument and approach.

Finally, can I tackle the idea from the government that the opposition should not vote against measures like this. This is the ultimate case of, ‘Do as we say, not as we did,’ coming from the government. Anybody in this place who is being honest knows just how much the now government stood in the way of measures the previous government introduced over the years. Anybody who is being honest knows how much they stood in the way of true tax reform—not tax hikes, not tax slugs like this, but true tax reform—and efforts to reign in the enormous budget deficit left to the Howard government when it took office. This government have been left a fabulous prize, a fabulous windfall, an enormous budget surplus. Not satisfied with that, they have to put this slug onto ordinary families. Then, when the Liberal Party and the National Party stand up for those working families, for those small businesses, for those farmers and for others and actually say, ‘No, we don’t think this tax slug is acceptable and we’re going to vote against it,’ the government have the gall to say that somehow that is irresponsible.

What is irresponsible is slugging all of those hardworking Australians more than is necessary when the budget has an extremely healthy surplus, regardless of this tax measure. Future budgets, thanks to the hard work of the previous government, will all have extremely healthy budget surpluses—and the government inherited that. The government, if it were being honest, would take this proposal off the table. It is a proposal that will hurt too many parts of the Australian economy, will hurt too many people and is totally unnecessary. Instead, they are hell bent on persevering with it, without recognising the pain that it will cause. The Liberal and National parties will not stand for that. We are proud to stand up for ordinary Australians, for all Australians, with measures like that, and that is exactly what we are doing with our opposition to this measure.

Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

I rise in support of the Tax Laws Amendment (Luxury Car Tax) Bill 2008 and other associated bills. As we have all heard ad nauseam, the intent of these bills is to increase the luxury car tax from 25 per cent to 33 per cent, effective on and from 1 July this year. At the outset, we need to be mindful of the fact that there has been a luxury car tax in place in this country since at least 1979. It has been supported by every successive government since that time. It has been a fact of life, accepted across the political divide for very sound policy reasons. As we also know, the current act was introduced by the previous government. It was introduced some five or six years ago as part of the goods and services tax and it replaced the wholesale sales tax, which had previously applied to this market segment. Since 2000 the rate of tax has remained the same, although the threshold for the tax has increased.

This measure, it needs to be stated front and centre, will have somewhere between an absolutely limited and an absolutely minimal impact on Australia’s domestic car manufacturing industry. Australian made luxury cars represent less than one per cent of all new car sales in this country. It will in fact have a limited impact, a minimal impact, on Australian families purchasing a new car. The luxury car tax threshold currently stands at around $57,000. The previous government, in its wisdom, saw fit to index that threshold annually. That view, I note in passing, is very different from their view on the Medicare levy surcharge threshold, which they chose year in year out not to index. Apparently it was quite satisfactory to index and increase the luxury car tax threshold. It is clear that the luxury car tax did not affect the budgets of working families in the same way as the Medicare surcharge did, and therein lies the explanation as to why one was indexed and increased every year and one was ignored for many years.

As the Senate report indicates, over one million cars were sold in this country in the year just passed, 2007. I understand that that was an industry record and represented, in 2007, an increase in new car sales of nine per cent over the previous year. Only 10 per cent of those one million units sold—or 100,000 new cars purchased—incurred the impost of the luxury car tax. So it had minimal application. Despite recent comments by members opposite, these vehicles are predominantly if not universally by European car manufacturers and have highly recognisable, prestige brand names. But, of the top 20 selling cars in Australia, less than four per cent—I think about that—are subject to the luxury car tax. In 2007 the median price of a family car was approximately $34,000. That is almost $23,000 per unit less than the threshold where the luxury car tax kicks in.

As we all know, this government is greatly mindful of the pressure on the budgets of working families. Changes to the tax rate will not affect people with disabilities as existing exemptions will continue to apply. That includes the GST exemption on the purchase of a car by a disabled veteran or an individual up to the value of the luxury car tax threshold. Exemptions to the tax will continue to apply to emergency vehicles, motor homes and campervans. And the farming community and the rural community should be relatively unaffected by the luxury car tax as it does not apply to commercial vehicles.

However, the bills upfront will increase the cost of luxury imported cars. Isn’t that a terrible thing? If you want to purchase a vehicle such as an Audi Q7, a BMW X5, a Range Rover Sport or sedans such as BMW 3, 5 or 7 series or a Porsche 911, you will pay more. Isn’t that a terrible encumbrance? For cars from $57,000 up to $300,000 a luxury car tax will be imposed, and isn’t that a terrible, woeful situation? On the other hand most of the Toyota Tarago range, for example, is not subject to the luxury car tax, so working families again have been looked after and protected by this government.

I find it ironic that in the debate about the luxury car tax senators have been urged to increase thresholds so as not to capture vehicles not considered luxurious. The Motor Traders Association of New South Wales actually advocated that the threshold should be raised to $100,000. So not only do they not have a problem in principle with the luxury car tax but they seek that it be applied widely and be increased up to $100,000. By contrast, at a recent public hearing down in Melbourne, on hearing changes to the Medicare levy surcharge almost universally senators were urged not to increase thresholds to $100,000. This is despite the fact that an additional 30 per cent of Australians have now been captured by a measure originally intended to target high-income earners.

This measure is about one thing: it is about the budget bottom line. Treasury estimates it will provide an additional $555 million over the next four years. It is part of a package of measures which are designed to do what? They are designed to put the fairness back into our tax system. They are also part of the mix that underpins and provides support for a strong budget surplus that will put downward pressure on inflation and interest rates—and I will return to that shortly. That, if it should turn out to be economically successful, is a most worthwhile objective.

Having introduced the fact that this budget bill is part of a package of half a dozen bills and part of a set of bills that are designed to introduce something in the order of almost $6 billion in additional revenue, it is useful to consider why the government wants to do that, why this bill and these imposts are critical, why the Senate should in no way oppose them and why all parties should combine to give urgent and speedy passage to this entire set of bills that affect the budget bottom line. Let us talk about the government’s election mandate. Let us talk about the government’s budget. Let us talk about economic responsibility and let us then talk about the opposite of economic responsibility—that is, deliberate vandalism by the opposition.

As you well know, Madam Acting Deputy President, this government was elected to implement, principally through the budget process, the commitments that we went to the Australian people on all last year and particularly in the period August-September-October-November, as we released our policies, policies taken to the Australian people on tax, income support and childcare to help those under financial pressure—that is, working families with huge, ongoing expenses. Nothing was hidden. Nothing was covered up. The policies were put out repeatedly in August-September-October-November, and we received an overwhelming swing and an overwhelming mandate to bring these sorts of budget measures before the parliament and to have them passed as a matter of principle and as a matter of urgency.

As part of that package, we said to the Australian people: ‘We are going to be fiscal conservatives. We are going to manage the economy of this country responsibly and that is going to involve significant budget surpluses over time.’ What did we do in May of this year? The Treasurer brought down his first budget—the first of many, we hope. It had a strong surplus of some $22 billion. That figure was designed to put maximum downward pressure on inflation, because the government had inherited inflation at 16-year highs after 10 consecutive interest rate rises and the second-highest interest rates in the developed world. That budget surplus is about the future. It is about going forward. It is about protection for the Australian economy. It is about protection for working families in Australia. That surplus is a buffer against international turmoil that we see every day in the papers around Australia and it will fund investment into the future when the dark times come.

The opposition, in threatening to torpedo this set of luxury car tax bills and a range of other bills that go to other matters, is not only acting irresponsibly but also deliberately seeking to torpedo, to hurt, to harm, to wreck budget measures brought before the parliament in the interests of working families—to whom the Australian Labor Party put out its policies, which were overwhelmingly endorsed in late November of last year. In these difficult, changing and varying economic times, the worst thing that could occur is that the opposition might—for no reason apart from a little bit of topical gain—deliberately blow a hole in the government’s budget bottom line.

The government is committed to ensuring we have a strong fiscal buffer for the future. The government is laying the foundations of a program of responsible economic management in the face of increasing global economic uncertainty. With increasing global economic uncertainty, the worst thing you can do is to send a message of uncertainty, a message of irresponsibility, a message of change without reason, a message of vandalism without purpose, about whether or not the surplus is going to remain intact. Either you are economically responsible managers, having concern for the economic welfare of this country, or you are not.

The opposition, for reasons that it has not yet bothered to explain, for reasons that are unclear to any observer, simply seeks to make momentary political gain in an economically populist fashion that does not have any appeal to or any impact on working families or even those on middle incomes. At a threshold of $57,000, where the luxury car tax comes in, we know who the beneficiaries are, even though the opposition chooses to portray otherwise. The opposition, for reasons of its own irrelevance, is seeking to become centre stage, and its vehicle for driving itself onto centre stage is destroying the surplus that this government, through hard measures and hard decisions, through reductions in spending, has managed to create and that will go into investments into the future. Those in the opposition are political vandals and economic opportunists.

Let us talk about the government’s election mandate and the long term—how you build, how you maintain and how you create a strong economy, one that benefits working families. It relates not just to the immediate bill before the chair in terms of the luxury car tax but to the whole package of bills that the opposition has indicated it intends to wreck, vandalise and turn over, hence driving down the budget surplus from something in the order of $22 billion to something over $15 billion. A whole package of measures are going to be coming to this chamber in due course, measures that will affect the health of the Australian economy for the long term, that will benefit working families in this country and that will go not only to the matters in the bill that is before the chair but to matters of climate change, the education revolution and long-term returns on investment in hospitals and the health system.

It is clear to everyone who is listening to this debate that the Rudd Labor government is acting now for Australia’s long-term future. We are preparing Australia for a stronger future, a sounder future, where interest rates come down and stay down, where inflation comes down and stays down and where there are jobs on the east coast and the west coast and opportunity for all. The absolutely critical and pivotal part of being able to establish those sorts of strong economic trends now and into the future is the large budget surplus that this government took to the people last year and that was overwhelmingly endorsed by them.

The Australian people are not fools. They understand that a budget surplus has the effect of reducing pressure on interest rates and reducing the impact of inflation and bringing both down and keeping both down over time. It is a struggle worth fighting for. But what do we get from the opposition? We get a mob who are shallow and divided. They do not have any long-term plans. They do not have any long-term leadership. All they know is to come in here and say, ‘We oppose, we oppose, we oppose.’ That is not good enough.

The measures that are behind this bill will result in the economy emerging in strong shape from these tough international times so that we can provide jobs in this country for all those who want them—quality jobs on both the east coast and the west coast, well-paid jobs, well-rewarded jobs. But that can only occur if there is a sustained commitment by all parties in this place to responsible economic management—the same commitment that the Australian Labor Party gave repeatedly and continuously from 1996 to 2007. Responsible economic management was always a hallmark of our time in opposition. It did not change then and it will not change now.

Why are we saying that that is important? We are saying that is important in providing for working families, making sure our economy emerges in a strong shape from these difficult global economic times, providing, as I said, quality jobs and security for all those who seek those things in this life. It is about scrapping the Liberal’s unfair Work Choices laws which stripped away penalty rates and overtime and reduced the take-home pay for Australian working families. It is about making workplace laws fair and balanced through Fair Work Australia and preparing Australia’s workforce for the real changes that are going to occur and for the real challenges that are emerging in our economy that will provide worthwhile, well-paid, high-reward jobs over the long term. In that context, the Australian people made it unequivocal what their decision was. They voted out Work Choices, and that is what the government will be doing in due course.

But, of course, the opposition have demonstrated in this debate and have foreshadowed in a range of other debates the position they will be taking on a range of budget measures the government is going to bring into this place in due course. The Liberal Party and the National Party still believe in Work Choices. They introduced Work Choices laws that stripped the take-home pay of Australian working families, and they would reintroduce them as quickly as they could if they had the opportunity. If the worst should happen and the government should fall tomorrow, you could bet that within a month we would have a revised package of Work Choices laws that in substance and in principle would be identical to those brought in by the former Howard government some two or three years ago.

What did that package of measures leave us with? It left us with 10 interest rate rises over the last three years and the highest inflation rate in 16 years. There is nothing more harmful to living standards, investments and returns than the insidious effect of inflation eating away at the value of wealth that people, firms and companies have accumulated over time. Again, we know that is on the agenda and coming to a chamber near you. In that context, do we get any sensible position from the opposition on climate change, on one of the most critical features pressing on this country, with its resource dependency and its energy intensive— (Time expired)

Gavin Marshall (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

I will start by commending Senator Bishop for a very valuable contribution to this debate. The Tax Laws Amendment (Luxury Car Tax) Bill 2008 increases the luxury car tax rate from 25 per cent to 33 per cent to apply on and from 1 July 2008. Let me be clear from the outset that this bill is about Australians contributing their fair share. I have heard some members of the opposition flippantly refer to this measure as simply a grab for tax. Maybe they ought to consider what has happened in tax since the Labor government have been elected. We are delivering, in our first nine months and with our very first budget, $46.7 billion in tax cuts over the next four years, which will mean more money in the budgets of working families. Let me be specific as to what that $46.7 billion in tax cuts over the next four years means to working families. A family on a single income of $40,000 will be $20.19 per week better off, or $1,050 over the course of a year. A family on a single income of $80,000 will be $21.15 a week better off, or $1,100 a year, and families with a combined income of $100,000 where the primary earner’s income is $60,000 will be $31.73 a week better off, or $1,650 a year. The government have now delivered massive tax cuts and will continue to deliver significant tax cuts to working Australians over the course of the forward estimates.

With this bill we are at the same time plugging the gaps in the system and reducing the overall tax burden on working families. This increase was announced in the 2008-09 budget as part of the government’s package of measures to enhance fairness in the tax system. The government believe that Australians who can afford luxury vehicles have the capacity to contribute to revenue at a higher rate than other car buyers. Let us appreciate from the outset that the budget the Labor Party brought down last May was a tough budget. It had to be a tough budget because we were left with a 16-year high inflation rate. It had to be a tough budget to address the legacy left to us by the Howard government. Some hard decisions had to be made, and we would have preferred not to have had to make some of the decisions, but at the required time we delivered significant personal income tax to working families and we are making some adjustments to the taxation rates in other areas. These are necessary to deliver the significant surplus that we have to address inflation, to keep downward pressure on inflation, and, consequently, downward pressure on interest rates. These are responsible measures.

The measure is expected to raise $555 million in additional revenue over the forward estimates. Since 1979, successive Australian governments have imposed an additional tax on luxury vehicles. The luxury car tax was introduced on 1 July 2000 when the GST was introduced and the wholesale sales tax was abolished. Luxury car tax applies to cars whose price, including the GST, exceeds the luxury car tax threshold. This is currently $57,123. Certain types of cars are exempt from the tax. This includes most commercial vehicles, most second-hand cars, motor homes, campervans and prescribed emergency vehicles. We are not changing the arrangements to those categories of cars. A car specifically fitted out for transporting a person with a disability who uses a wheelchair is excluded from the definition of a ‘luxury car’ provided the car is not also GST free under the GST laws. It is estimated that around 10 per cent, or around 100,000, of all new car sales made in Australia in 2007 were subject to luxury car tax. The tax is applied to both imported vehicles and domestically manufactured cars. Of the top 20 selling cars in 2007, which cover more than 50 per cent of the car market, fewer than four per cent are subject to the luxury car tax. Of the five Toyota Tarago models, only one attracts the luxury car tax. Of the three largest selling people-mover brands, this is the only model that will be impacted by the tax increase. In real terms, the price increase for the vehicle is just over one per cent.

Let me make the point again, because the opposition seems to be unable to understand the point of the bill: this bill is about all Australians contributing their fair share. This is about the government recognising the need to reduce the overall tax burden on working families. That is why the opposition are opposed to this bill. They do not want to make this contribution. We recognise that there are some opposite who do not want to pay more for their luxury cars. While those opposite do not want to pay more for their luxury vehicles, the legacy they have created from over a decade of financial mismanagement is hurting working Australian families. When you combine this with active targeting of working Australians through Work Choices, Australians have had it tough. Not only are those opposite unwilling to pay more for their luxury vehicles; they do not seem to notice that the very same working families that suffered dramatic increases in the cost of living voted them out. They are still trying to govern from opposition. In doing so they are vandalising the budget: cherry picking pieces of legislation that they choose to support or oppose based on crass short-term populism geared towards grabbing headlines. This is nothing more than political opportunism, and it is political opportunism that we have experienced consistently since the conservatives have been in opposition. They left this government with a legacy of the highest inflation in 16 years. It is us who have had to make the hard decisions about putting pressure on inflation and therefore downward pressure on interest rates in the interests of all Australians. It leaves you wondering what position they are going to take next. Is the opposition to this legislation coming from Brendan Nelson’s office or that of Malcolm Turnbull? We will never know.

Jacinta Collins (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

Or Peter Costello!

Gavin Marshall (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

Yes—or is it from Peter Costello? I heard Mr Swan mention the difficulty that the opposition now have in the three stooges approach to their leadership. You have Brendan Nelson, who cannot do the job; Malcolm Turnbull, who cannot get the job; and of course Peter Costello, who will not do the job—or maybe he will? We will see in the future. As those opposite continue to play games with our economic future, going for the cheap media grab, they refuse to take any responsibility for the chaos that they are responsible for in the first place. I wonder whether or not the Australian people will take them seriously, given the situation they are in.

This government is fighting to make sure that this country is on a sound economic platform. The 2008 budget, delivered by Treasurer Swan, set out the government’s agenda very clearly. We must remember that, in negotiating our way through the current economic climate, we are in fact negotiating our way out of the Howard government’s inflationary legacy. It is a legacy marked by reckless spending and characterised by largesse and short-term investments. This government is not about that; this government is about making the hard decisions for the long-term prosperity of this country.

We have shown the opposition how to actually deliver on election promises. In doing so, we are breaking away from the Howard government’s legacy of financial mismanagement and broken promises. The 2008 budget has put working Australians and their families at the centre of the Rudd government’s commitment to tackle inflation. We are laying the building blocks for a stronger and more modern Australia. The centre of the budget is the $55 billion Working Families Support Package, which delivers on tax cuts the government committed to during the election. These tax cuts will help Australian families with childcare and education costs.

The Australian people rejected the coalition’s Work Choices laws and its policies of division. The Australian people embraced a team that was more concerned with their issues—concerned with the bread and butter issues that Australians know are the most important. The budget contained a $40 billion investment in Australia’s future to build new and improved roads, hospitals and schools. The budget is the first step towards a new, more modern Australia with first-class economic and social infrastructure. We can now start investing in the schools, hospitals, roads, railways and communication projects that working families rely on every day. These projects were neglected by our predecessors for more than a decade.

We have had the courage to make the tough decisions. We have had the courage to make the tough decisions in the budget. These decisions are hard in the short term, but they are the decisions that will make Australia stronger in the long term. That includes delivering a surplus of $21.7 billion in our first budget. We have done away with $7 billion worth of the Liberal’s reckless spending. Additionally, we have invested $55 billion in our Working Families Support Package. By investing in infrastructure, water, child care, GP superclinics and an education revolution, we are telling these families that they now have a government which have them at the forefront of their minds.

We have been asked to ensure working Australians’ future quality of life. We have been asked to provide working Australians with quality opportunities both now and into the future. We have been asked to ensure fairness. That is why we recognise that it is important that we enhance fairness in the tax system. This legislation will do just that. While we are engaged in a program of delivering on our election promises and building a stronger Australia, the Liberals have their eyes firmly set on a Pagani Zonda, a so-called supercar. There are a lot of people doing it tough out there, and inflation is hurting them at the checkout. By increasing the luxury car tax from 25 per cent to 33 per cent from 1 July 2008, we are not just being economically responsible, we are also working hard to ease the pressure on working Australians and their families and to make the tax system fairer.

Jacinta Collins (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

In speaking on the Tax Laws Amendment (Luxury Car Tax) Bill 2008, the A New Tax System (Luxury Car Tax Imposition—Excise) Amendment Bill 2008, the A New Tax System (Luxury Car Tax Imposition—Customs) Amendment Bill 2008 and the A New Tax System (Luxury Car Tax Imposition—General) Amendment Bill 2008, I would like to commence by placing these measures in their broader economic context. As other senators have highlighted, the global economy is in a difficult position. It faces some of the biggest challenges that it has seen for quite a number of years. The world simultaneously faces a global credit crunch and steep rises in oil prices; either of these on their own would create instability and threaten growth. This is pushing up borrowing costs and impacting on consumer confidence right around the world. In the March quarter, Japan’s economy contracted by 0.6 per cent, Germany’s economy contracted by 0.5 per cent and France’s economy contracted by 0.3 per cent, and there have been negative impacts on many other countries. Australia is in good shape compared to most other economies due to our strong underlying economic fundamentals.

Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

After 11 years of Howard-Costello stewardship!

Jacinta Collins (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

The robustness of the Australian economy, contrary to what Senator Abetz would suggest, is in large part due to the wide-ranging economic reforms implemented by the Hawke-Keating governments. This government aims to build on those reforms. So, Senator Abetz, look forward to more sensible amendments to how we organise tax law in this country.

There are some aspects of the macroeconomic environment that we cannot control. But there are many things that the government can influence. What we have to ensure is that we do as much as possible in relation to the things that we can control to reinforce Australia’s economic position. One thing we have control over is our fiscal position. That is why in its most recent budget the government put in place a $22 billion surplus. This surplus will put downward pressure on inflation and in turn downward pressure on interest rates.

In their political opportunism the opposition is playing a very dangerous game. They are threatening to oppose a series of measures that could reduce government revenue by more than $6 billion. Blocking measures such as those contained in these bills would reduce the size of the surplus and put upward pressure on inflation—and we know this opposition’s record on inflation. This in turn would place upward pressure on interest rates—and we know this opposition’s record on interest rates. By reducing the surplus, the opposition not only threatens to create upward pressure on interest rates but also to reduce the capacity of the three funds set up in the budget to support much needed investment in infrastructure and the health and education sector—that is, the Building Australia Fund, the Education Investment Fund, and the Health and Hospitals Fund. Together, these funds will be used to invest $40 billion in nation building in our longer term future.

The luxury car tax increase is a balanced approach to dealing with the difficult economic challenges we face. It will raise over $500 million over four years. Therefore, it constitutes an important component of the government’s fiscally responsible position. Furthermore, the opposition’s attacks on this measure are important in that they are part of a broader range of attacks on the surplus totalling, as I said, more than $6 billion. By blocking the measures contained in the luxury car tax bills—and indeed, in a number of other measures contained in the budget—the opposition is taking a hatchet to the surplus. The luxury car tax bill will impose a moderate cost on the sector. Further, it will impose it on those most able to bear it.

There is no evidence that the luxury car tax increase will increase car prices more generally. It is just scaremongering to assert that this measure will hurt working families. Of the 20 top-selling cars in Australia less than four per cent of those sold are subject to the luxury car tax and, for the lower end, the increase is in the hundreds of dollars and not the thousands of dollars that the opposition might suggest by their rhetoric. The so-called Tarago tax only applies to one Tarago model, and the price increase is just over one per cent. The entire Tarago category, including the four other models that are well below the luxury car tax threshold, is less than half a per cent of the passenger vehicle market. Nor will the tax disadvantage people with disabilities. The tax law already provides exemptions for people with a disability from the luxury car tax. Treasury has also consulted with disabled groups to ensure that they are not adversely impacted by these measures. As I have already stated, this is a balanced approach. We do not think it is unreasonable that people who have done well in recent years pay a little more for a luxury car. If everyone pays their fair share and we plug the gaps in the system we can reduce the overall tax burden imposed on working families.

These bills sit well within the goals of a tax system. Two of the key objectives of any tax system are equity and simplicity. This measure satisfies both of these criteria. First, it satisfies equity in that it is progressive. Everyone in our community is shouldering the burden of ensuring that our economy is well positioned to withstand the current global economic uncertainty. That is why the surplus in this year’s budget is built on spending cuts across a range of areas. But surely it makes sense that the wealthiest in our community should bear more of the burden than those struggling to make ends meet. That is why a tax on items that are clearly a luxury makes sense.

We apply progressivity in many areas of taxation. The most obvious is income tax, where the tax rate on a marginal dollar earned rises with income. Consider the tax rates on income. The tax rate on income is zero for taxable income up to $6,000; 15 per cent for income between $6,000 and $34,000; 30 per cent for income between $34,000 and $80,000; 40 per cent for income between $80,000 and $180,000; and 45 per cent for income above $180,000.

We also apply this principle to the major purchase in most people’s lives—their house. In most jurisdictions, land tax and stamp duty are progressive. For instance, I looked up the situation in Victoria to make this comparison. Both land tax and stamp duty are progressive. Consider the general land tax schedule. In Victoria it applies at a rate of 0.2 per cent on each dollar over $250,000 and less than $600,000; 0.5 per cent on each dollar over $600,000 and less than $1 million; 0.8 per cent on each dollar over $1 million and less than $1.8 million; 1.3 per cent on each dollar over $1.8 million and less than $3 million; and 2.25 per cent on each dollar over $3 million.

What about stamp duty on a principal place of residence? Again, let us look at the Victorian example. The rate is 1.4 per cent of the value of the property up to $25,000; 2.4 per cent of the value in excess of $25,000 and less than $130,000; five per cent of the value in excess of $130,000 and less than $440,000; six per cent of the value in excess of $440,000 and less than $960,000; and 5.5 per cent on the entire value of the property if the transaction is greater than $960,000.

Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

So what is it on a yacht?

Jacinta Collins (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

This measure also satisfies the criteria of simplicity. Senator Abetz raises yachts now. He might easily have been observing my speaking notes, because that is indeed the next point I come to. Some critics of the bill have argued: ‘Why stop at luxury cars? Why not also tax luxury yachts and expensive watches?’ While we want a system that is progressive, we do not want to introduce a myriad of new taxes. That is why we are focusing on cars—one of the major purchases in most people’s lives. Like houses, which I have already mentioned, cars are purchased by almost everyone. This means that there is scope to differentiate between different people based on their financial means. Also, like houses, cars are one of the biggest purchases in most people’s lives, so tax rates do not need to be high in order to achieve the government’s revenue needs.

To expand this tax to a whole range of other minor transactions would add a raft of complications: it would add multiple new taxes, each of which would raise much revenue; it would add administrative complexity for many businesses, and it would require separate assessments of what is a luxury good for each and every category. When one considers the objectives of equity and simplicity, it would not make sense to expand the approach across a range of other expenditures.

Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Senator Abetz interjecting—

Jacinta Collins (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

Let me address again, as Senator Abetz interjects, the issue of opposition hypocrisy. Given that this measure satisfies these criteria, it comes as some surprise to see the opposition so opposed to this tax measure. It is even more surprising given that they introduced the very idea, as much as they have sought to hide that. Since 1979, when John Howard was Treasurer, Australian governments have taxed luxury vehicles more heavily than other vehicles.

Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Wrong!

Jacinta Collins (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

Yes indeed, Senator Abetz. For those such as you who want to be pedantic, the measure introduced in 1979 was a depreciation limit on luxury cars. In effect it was a differential tax treatment.

Why the opposition has sought to hide its role in introducing differential tax treatments for luxury cars is beyond me. It is a fairly simple concept that is easily observed by anyone who understands the history in this area. If you looked at the report of the Senate committee you would be stunned at the success that the opposition had at trying to move away from their role in relation to luxury vehicles.

The differential treatment was continued, with different rates of wholesale sales tax. Indeed, the luxury car tax was introduced by the previous government on 1 July 2000 when the GST was introduced and the wholesale sales tax was abolished. The previous government did this to preserve the impact of a differential treatment under the wholesales sales tax. In 2000, the previous government thought it was appropriate to tax luxury cars at a higher rate than other cars. Now that they are in opposition, the temptation to wreak havoc seems to be all that lies behind their reversal of policy. Indeed, they have even sought to hide their role in the original introduction of such differential treatment of luxury cars.

With this bill we are not introducing a new tax; we are changing the tax rate on a tax that was introduced by the previous government. A change in the tax rate is appropriate given the economic conditions that we face. Let me revisit those economic conditions in case some of the senators need a reminder of the economic circumstances that Australian families are currently facing. The global economy is in a very difficult position. It faces some of the biggest challenges that have been seen for many years. The world simultaneously faces the global credit crunch and steep rises in oil prices. Either of those factors on its own would create instability and threaten growth.

Rather than work with the government of the day in a sensible approach to try to ensure long-term growth in our strategy with respect to the budget surplus, what does this opposition seek to do? It seeks to eat away at the very surplus we will be using to invest in our future. It seeks to eat away at our capacity to operate the Building Australia Fund for infrastructure, the Education Investment Fund and the Health and Hospitals Fund. This is very surprising given the former government’s position on a range of those areas. We know the difficulties we have had in establishing the appropriate infrastructure for our future and the contribution that that has made to our current economic circumstances. Limited investment in infrastructure is one of the problems of our current economic position in Australia. Similarly, industry getting access to skilled and trained workers is a significant problem in meeting our current economic circumstances. And if the Education Investment Fund is eaten away by this opposition’s attempt to sabotage the surplus, it will have a further negative impact on what we are able to do in this area.

As for the Health and Hospitals Fund, this opposition stands here and says, ‘We are out there for working families.’ Well, you tell those working families that we have limited capacity to roll out the Rudd government’s health and hospital measures, which working families around Australia desperately need, because you felt it was necessary to block a luxury car tax. That is the argument you need to put very clearly to the Australian population.

Then again, as I believe Senator Bishop said, this is an opposition that, when they got the numbers in the Senate and they could work the measures that they had been attempting to get through the Senate for many years, went the whole hog, and the Australian public did not like it. It is no surprise that working families did not like Work Choices. All and sundry could have explained that point to the now opposition, but they were blinded by the opportunity that had been presented to them and they went the whole hog.

Now we are in a different situation again. The opposition is seeking to contain the Rudd government’s capacity to deliver on a range of very important and significant areas: the Building Australia Fund for infrastructure, the Education Investment Fund for the skills and training necessary to boost industry and the Health and Hospitals Fund to provide those services desperately needed by Australian families.

And what rhetoric does this opposition come up with to sustain their argument? It is not really about the technical details of the luxury car tax. No, they cry about the politics of envy, old class warfare and a range of other rhetoric I had thought was long dead, but which has been revitalised in this debate and in the dissenting report from coalition senators. That is their first point.

Their second point is that we are pre-empting the Bracks review and the Henry review—this from the opposition that I have heard nothing else from in recent months than, ‘All you’re doing is reviewing, reviewing, reviewing, reviewing.’ I am sorry, Senator Abetz, but you cannot have it both ways. What the Rudd government clearly saw was the need to enhance our surplus, to improve revenue and to take more immediate action. Certainly we have triggered a longer term approach to dealing with longstanding difficulties and issues with our tax system, and I more than anyone look forward to the Henry review across a range of areas—many of the areas being addressed were subject to a Senate inquiry that I sought to progress some years ago, and it is very important that the Henry review deal with those issues and those matters—but to hold up a fairly simple, straightforward measure to improve the government’s overall revenue and surplus situation on the basis that we are pre-empting the Bracks review and the Henry review, from this opposition, is simply hypocritical.

Now let us look at the other factors that they raise in their report. Lack of consultation, I thought, was a really good one—lack of consultation on budget measures, from this opposition, the former government. Given the range of areas that this opposition has form in with respect to lack of consultation, I found that one particularly galling. In fact, I found most of the report from dissenting coalition senators on these bills somewhat galling, and I have not heard much in this debate now to enhance my assessment.

Let me conclude by summarising the position that I have covered today. In the face of difficult international economic conditions, the government is adopting a responsible, fiscally conservative position. The luxury car tax is part of the overall budget position. The tax is moderate and directed at those most able to bear it. It is reckless of the opposition to play politics with the budget in this matter. Interest rate relief, desperately needed by Australian working families, will come more quickly if this opposition responds more responsibly.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

I rise tonight to talk about what a complete and utter muddle the Labor Party’s position on this is. We have just heard the finale: that, in light of current economic conditions, in light of world macroeconomic conditions, the Labor Party is going to bring about a luxury car tax with the Tax Laws Amendment (Luxury Car Tax) Bill 2008. Let us just take this apart piece by piece, because I think that is what is needed. Let us start from the word go with the history of the luxury car tax, which has been espoused so many times but is completely and utterly wrong in what the Labor Party is putting forward. The luxury car tax was introduced by the Hawke Labor government in August 1986. It is extremely important to get that on the record.

Jacinta Collins (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

Senator Jacinta Collins interjecting—

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

What you had before that—what you are referring to, Senator Collins—was a change in depreciation rates by the Fraser government, but there was no tax. Let us just get it right from the word go. They were two completely separate measures.

Jacinta Collins (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

Senator Jacinta Collins interjecting—

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

Senator Collins, you should hang around because a lot of this speech is about you. This is the sense of it. We have also heard what Senator Collins talked about at the end. She changed tack halfway through. At the start she was saying that the concept of the luxury car tax and the impending Henry inquiry were disconnected, but then she changed tack towards the end and said they were connected. This is the Labor Party position which they are going to roll out into other areas of people’s lives—a tax on luxury. I find the whole term aggravating—the tax on luxury. Where the Labor Party always fail—they are always absolutely hopeless at it—is in their attention to detail. A typical one is, unfortunately, Senator Marshall saying that the luxury car tax applied to cars—and he was saying something like, ‘You’ve got to get your details right and you’ve got to know what you’re talking about’—worth more than $57,123, if I can remember it correctly, and you can check the Hansard. It is not $57,123; it is $57,180—$57,123 was the previous year.

Chris Evans (WA, Australian Labor Party, Leader of the Government in the Senate) Share this | Link to this | Hansard source

At the time of the budget; we all know that.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

No, it was not stated about the budget. It said that that was the tax, Senator Evans. So you got it wrong, as you get everything you do with detail wrong. You have not got your details right, and that is why your whole economic policy and economic program are so lacking: because you just do not have an eye to the detail. You just cannot get it right. As soon as you get it right, the future of this nation may be in better hands than it is under you. Until you get those finer details right, if you can march senators in here and have them espouse the wrong amount, it shows that you just have not got your finger on the pulse.

Chris Evans (WA, Australian Labor Party, Leader of the Government in the Senate) Share this | Link to this | Hansard source

So are you a member of the Liberal Party or the National Party now?

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

That is, of course, where you go, Senator Evans, because you are so lacking in acumen to find something substantial to pose in an argument. You are now running the nation, you are now the government and you cannot even clearly dictate your own government’s policy in the chamber here. You have to wait for a backbencher to correct you. What does it say about you and where you are? Let us go through a few of the other things. In a simple message, this so-called luxury car tax is actually attacking the cars that Australia produces. We have Senator Carr out there trying to build up the car industry—and rightly so—and, at the same time, your own government, Senator Evans, is inspiring a tax on the cars that we produce.

In the future, the Indians and the Chinese will produce the cheap cars. We will never compete with them. There is an inelasticity in demand, of over 120,000, in the cars the Europeans produce. You are taxing the cars that the Australian car manufacturing industry produces. And, for the life of me, I cannot work out why you would want to do that. For the life of me I cannot work out why you would want to tax the cars that are providing employment for Australian men and women and keeping them in jobs. There is almost pathos in your approach to this policy. Why would you inspire a tax on an area of demand in which people’s response will be to buy a car from another country? Why would you do that? Where did that seed of wisdom come from?

I notice that for every car that Australia produces there will be a version of it in the luxury car tax bracket. I am sure the people of Victoria are going to be absolutely fascinated to hear that the Labor Party is supporting putting them out of a job. This statement almost bowled me over: the tax is to combat inflation. So we are going to put the price of something up to bring inflation down. Who was the economic guru who came up with those words of wisdom? Where did that come from? The whole process is just so moronic. Why would you even bother saying something like that? It is so wrong. But it falls into line with Labor saying, ‘The luxury car tax threshold limits starts at $57,123,’ when it does not; it starts at $57,180. They do not even know their own policy.

But let us try and make some sense out of this onerous, ridiculous tax. Why on earth is the threshold at $57,180? Even if you wanted to keep to the scheme, to keep to the picture, I think you should have a look at what was presented at the Senate Standing Committee on Economics. The Federal Chamber of Automotive Industries gave some suggestions about what the tax might be moved to so as to keep some semblance of reality. The chamber presented evidence to the committee showing various indexing scenarios for the luxury car tax threshold since 2000. These showed that, while the luxury car tax has increased from $55,134 to $57,180 since 2000, during the same period the threshold would be $71,106 using the CPI, $79,950 using the average weekly earnings and $63,504 if indexed against the average price of the cheapest ‘family six’. The cheapest ‘family six’ is important to me because I have a family of six.

In a sense, the only thing that you can say is that it is a grab for money, and they are going about it in the most base and simplistic way. It is without any sort of rhyme or reason. This is the form of economic policy coming forth from Labor. People ask: ‘Why are you going to oppose the luxury car tax?’ I will because it is an anachronism. It is a farce. It is a ridiculous compilation of arbitrary ideas with no real purpose, no real meaning and no real substance. That is why I will oppose it. It is not because the Labor Party came up with it; it is because it is a stupid idea. What would be the reasonable approach? A reasonable approach would be for the government to come back and say, ‘We are looking at the CPI; we are looking at the average weekly earnings,’ or to say that they are looking at anything. But they are not. We just have this ridiculous figure plucked out the air that Labor have come up with.

Surely the government would understand that a car over $57,180 is hardly going to be perceived in the community at large today as being a luxury. Even when the term ‘luxury’ is used, it suggests the government are trying to gild the facts. If they just said, ‘This is a tax to help the Labor Party collect money when it cannot think of another idea,’ then they would probably have some sort of position to stand on. But unfortunately the luxury car tax starts to fall into the same realm as other parts of economic policy.

I will quote from the Labor Party’s recommendation 3.2 in the economics committee’s report. It is about how the Labor Party sees other things that it would possibly determine as a luxury. ‘Luxury! I used to live in a hole in the road! Luxury, son!’ This is the Labor Party’s position. Get ready, Australia; here it comes. This is envy; it is class war detritus being dragged back out. We thought it was dead and buried, but this is what they said:

The committee sees some merit in the argument that it is ‘unfair’ that luxury cars are taxed but not other luxury purchases—

There is something for the books: ‘but not other luxury purchases’; it is a value judgement to determine what they will be—

such as yachts or expensive artworks—

I would love to see their definition of an expensive artwork. There is something for the arts community; get ready—

and jewellery.

This is where they are off to. They continue:

However, as there is already a luxury cars tax, there are less administrative and compliance costs in increasing it ...

So we already have our finger on motor vehicles; we do not have to worry about the others—yet. That is the answer: we do not have to worry about the others yet. They are coming with the Henry review. It is because there is less compliance cost. They have already got their foot on this issue so they are going to give it a little bit of a kick. This is what it said:

... rather than introducing new taxes on other luxury goods.

So they are getting to the rest:

Introducing any more general luxury taxes should await the Henry review of the tax system.

So there it is. Men and women of Australia; they are coming! They are coming with more taxes for you—and they are going to determine them on a value statement of their belief of what you should and should not have. That will be the basis of it: ‘I believe you should have that; I believe you should not have that.’ Because the Labor Party believes you should not have that they are going to tax you. That is it. It is the inception of envy. It is, you know, the Mr Rudd statement, ‘I’m a fiscal conservative’ with, at the start, a semblance of envy and then a progression of envy and then the delivery of envy policy.

This is it. This is fact. This is what the government said. This is what they are going to do. They put it in their own report. They are going to deliver it to us. I will be honest: it does not matter whether you are talking to a shearer in Baradine, someone in town or a cane farmer up the north coast, they are over that argument. That is the government’s argument, not theirs. That is some sort of ridiculous positioning on what they think people are entitled to and what they are not entitled to. They are entitled to what they can pay for; they are not entitled to the government’s sort of idea: ‘That is beyond what is acceptable; you must come back to the pack; you must be one of us. We are going to tax people because they dare to spend more than $57,180 on a car.’ What sort of luxury tax are you going to put on houses? Have you got one of them coming up? Do you have a luxury tax on houses?

Chris Evans (WA, Australian Labor Party, Leader of the Government in the Senate) Share this | Link to this | Hansard source

Are you arguing that we should abolish the tax?

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

What do you think a luxury tax on houses should be, Senator Evans? What sort of house do you think is too good for somebody? What sort of jewellery do you think is too good for somebody, Senator Evans?

Gavin Marshall (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

Order! Senator Joyce, please direct your comments through the chair.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

I want to know what the Labor Party thinks is too good in jewellery. I want to know what the Labor Party thinks is too good in cars. I want to know what the Labor Party thinks is too good for somebody in art work. I want to know when they decide to make a value judgement on my life and other people’s lives that it is too good for me and that they should tax it. That is why this needs to be stopped. That is why this needs to be voted against—not only because it is ridiculous and stupid and not thought out, and not even because you cannot get your own details right; it is because it is an anachronism that goes back to Australian society and starts once more to divide people.

Chris Evans (WA, Australian Labor Party, Leader of the Government in the Senate) Share this | Link to this | Hansard source

Are you arguing against the rate or the tax? Are you going to abolish the tax? What is your position? Answer that question so I can understand your position.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

I can understand why you would be upset. And out they come! Oh, yes! When you touch the toothache they start yelling. You know where it is. It is all right! We will be looking around to see what support we get.

Chris Evans (WA, Australian Labor Party, Leader of the Government in the Senate) Share this | Link to this | Hansard source

Are you going to abolish the tax?

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

I can understand that you think we should—

The Acting Deputy President:

Order!

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

I will take the interjection.

The Acting Deputy President:

I ask that the chamber come to order!

Stephen Parry (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Particularly the Leader of the Government.

The Acting Deputy President:

No, I do not need your assistance there, Senator Parry. I ask that the Senate come to order.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

I can understand why, when we touch the toothache, the Labor Party yell. I can understand that. I can understand why they would get upset. I can understand why we get the interjections—

Chris Evans (WA, Australian Labor Party, Leader of the Government in the Senate) Share this | Link to this | Hansard source

Touch the toothache? I don’t think Hansard is going to make much sense out of this!

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

I will take the interjection. They will make more sense out of my statements than your analysis of your own policy, which you cannot get right. You are so unprofessional that you cannot get your own policy right. Nonetheless, this will be an interesting debate as you define what you believe is luxury and what you believe is applicable—that is acceptable, that you can have. The $57,179 car is all right; you can have that. You can drive it around. But don’t you dare aspire to anything; don’t you dare try to do something that might take you away from the group. You have to stay with the mob; you have to stay with the pack. That is what is so peculiar about this tax. Australia really and truly believed that we had left this sort of debate behind.

Let us look at some of the other issues. Out in regional Australia it is a matter of course that if you want to drive long distances there are a couple of things that you need. You need a long-range fuel tank. You need the capacity to carry your luggage with you. You need such things as a bull bar, driving lights and airbags. You have to take into account that you might break down so you need the other attachments that go with the car. That is not luxury; that is actually what you need to get around. If I went out to Charleville, to St George where I live, or to other areas, and I looked at people and I said, ‘I see you are driving around in a new Nissan Patrol; that’s luxury. That Toyota LandCruiser, that’s luxury. You must be rich. We don’t like rich people. You must be rich because you have a car worth over $57,180. We do not like that. We don’t like rich people; we are going to tax rich people’—

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

No choice, no bloody choice!

Chris Evans (WA, Australian Labor Party, Leader of the Government in the Senate) Share this | Link to this | Hansard source

What a combination: Bill and Barney!

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

This is what you are saying. This is your government’s policy.

Chris Evans (WA, Australian Labor Party, Leader of the Government in the Senate) Share this | Link to this | Hansard source

Senator Chris Evans interjecting—

The Acting Deputy President:

Order! Senator Joyce, resume your seat for a moment. I call the chamber to order.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

I can understand why, when you touch the toothache, the culprit yells. This is the thing: this crazy definition that you have now decided on of who is in and who is out. So I would like to ask the Labor Party: are they going to make exemptions for people who have to use these cars as a matter of course, as a standard fare? It is not a luxury but probably something that, under your own occupational health and safety standards, you would require people to drive around in. Is there going to be an exemption for that? Or what are we going to put the kids in? Are we going to stick them—like when I was a kid—in the back of the station wagon? Are we going to sit them in the back of a station wagon so we can get under the price? This is going to get voted down. This is going to get voted out I hope, not because the Labor Party came up with it but because it is such a ridiculous anachronistic step back into the past. (Time expired)

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

My position in this second reading debate is that I will support the Tax Laws Amendment (Luxury Car Tax) Bill 2008 and related bills but I will reserve my position in respect to the third reading. The Australian automotive manufacturing industry is a major part of the national economy, with exports growing to just under $5 billion in 2007. Last year over one million vehicles were sold in Australia with 19.1 per cent of the vehicles being produced locally. In my home state of South Australia, General Motors, GMH, is a significant contributor to the South Australian economy through not only revenue from vehicle sales but also employment for the communities around Elizabeth in Adelaide’s northern urban fringe. Consequently, I am keen to support the ongoing viability of the South Australian car industry by measures that might increase the sales of locally produced vehicles.

I note from the report of the Senate Standing Committee on Economics that, in 2007, the luxury car tax applied to 12 per cent of vehicles compared to 4.5 per cent of like vehicles in 1986. That probably reflects the fact that the tax has not been indexed in that time. I also note the concerns of the coalition in relation to this tax and would like to address some of those concerns. I had the benefit of further discussions with the government today in relation to this legislation and I raised my concerns. My first concern is the issue of the cut-off date and when it will apply. As I understand the bill in its current form, if there is a contract entered into on or before 7.30 pm on 13 May and the vehicle is not delivered until after 1 July, that vehicle will be caught by this proposed tax. I have serious concerns about the fairness of that. It is my view that if a bona fide contract was entered into in good faith prior to this budget announcement being made then it would be fundamentally unfair for an additional tax to be imposed when at the time you entered into that contract you had no knowledge that a new tax was going to be imposed. That is an initial concern that I raised with the government.

The second issue I raised relates to the issue of indexation. Currently the threshold for the luxury car tax is indexed according to the CPIMV, which is contentious. I think that was acknowledged in the Senate inquiry report. It involves the use of quality adjustment explained by the Australian Bureau of Statistics as:

Whenever a specification change is made to a vehicle that affects its motoring performance, economy, comfort level, safety or durability … an adjustment is made to the car’s reported price to allow for that portion of the price change that can be attributed to the quality change.

My concern in relation to that is that it does not reflect the actual prices paid by consumers, and I have raised with the government the whole issue of its being indexed according to the CPI, not according to the CPIMV as defined by the Australian Bureau of Statistics. I understand that the government will provide me with details of what the modelling shows the projected costs of that will be if the CPI—as distinct from the CPIMV—is applied prospectively or applied from 1 July of this year. When I receive that information I will be more than happy to share it with my colleagues.

The third issue that I raised—and it is something that Senator Milne has raised publicly—is the issue of low-emission vehicles. It is my view that if we are to set an example on reducing greenhouse gases and tackling climate change then placing an additional tax on low-emission, fuel-efficient vehicles sends a poor signal. That is something that I have raised with the government, and I understand it is also something that Senator Milne has raised and discussed with the government in some detail. We already have a luxury car tax and it is the question of increasing the rate by some eight per cent that is in contention. I do not think that those who oppose the tax are suggesting that we remove the luxury car tax; it is a question of the rate. It is important that we send some price signals about those vehicles that are ultra fuel-efficient—whether they be hybrid or non-hybrid and simply particularly fuel efficient—that will be an encouragement for the purchasers of those types of vehicles relative to, say, the Hummers. And I think that is something—

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

A LandCruiser is not a Hummer.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Senator Heffernan makes the point that a LandCruiser is not a Hummer. I was not suggesting in any way that the two should be compared. I am not suggesting that at all. I am talking about the gas-guzzling vehicles. I think the Hummer has fairly poor fuel economy for what it does and I believe that there ought to be some consideration given to the ultra fuel-efficient vehicles.

I can indicate that I will support the second reading stage of this bill, but I reserve my position with respect to the third reading. I look forward to hearing from the government as to the whole issue of indexation, which is a particular concern to me—as to what they say it will cost. In relation to that, could I just raise the whole issue of unintended consequences. I think that we should learn from the lessons. I think it was at the time of the Hawke government back in 1990, and the tax was introduced in the 1986 budget. It was increased, according to the dissenting report of the coalition, in May 1990, but by August 1990 the tax was dropped. My understanding is that it was dropped because there was an overall drop in revenue because sales of the vehicles that fitted into this category had plummeted. So I think it is important that, in the context of considering the consequences of this legislation, we bear that lesson in mind that occurred at the time of the Hawke government.

I can indicate that I did raise with the government—and I would be grateful if this could be placed on the record, in terms of the government’s response—the modelling that has been done in terms of the revenue forecasts for this luxury car tax, in terms of buyer behaviour, consumer behaviour. My understanding is—and the government can confirm this—that it has just been done on a pro rata basis. I guess that is one way of looking at it, but I think we need to learn from the lesson of 1990: if you push the rate up too high, you may have some unintended consequences. I am not suggesting that what is being proposed here is as high as the shock, if you like, of what occurred back in 1990, but it is a salutary lesson and that is why I am keen to hear from the government in relation to the whole issue of indexation. I look forward, should this bill pass the second reading stage, to the committee stage of this bill.

David Bushby (Tasmania, Liberal Party) Share this | Link to this | Hansard source

The Tax Laws Amendment (Luxury Car Tax) Bill 2008 and related bills are further clear examples of a government far more interested in trying to manage its public image than in getting on and governing the nation in the interests of its people. The fact is that if the government had made no policy changes in its budget in May this year the surplus would have been around $22 billion. That is right—no new taxes, no cuts in spending and the result would have been not too different to what we saw after all its dramatic ‘economically responsible’ cuts to vital services and all its new taxes. And I tell you, there are new taxes in the budget—some $19.7 billion of them over five years—and, interestingly, the only new tax cut included in the budget was for foreigners, with a reduction in the withholding tax for managed investment funds of $630 million over four years.

So what was the need for all these new taxes? They were needed because the Labor government also increased government spending—that is, new government spending—by a massive $34 billion over five years. That is $34 billion in new spending. For a government decrying the need to slash spending to keep the inflation rate cancer genie in a bottle, that seems a lot. But it is also the reason why it needed to slash existing programs by $18 million over five years, taking money away from the Auditor-General, the Ombudsman and the CSIRO, as well as funding for innovation and R&D programs. I can understand the ABS cuts. Their cuts to the labour market series will help obfuscate rising unemployment trends. And the list goes on. All the vital program cuts and new taxes are referred to by the government as ‘savings’.

One of these new government savings is the subject matter of the bills before us today. The government has budgeted $555 million over four years for the savings from this measure, but the evidence from the Senate inquiry into these bills and elsewhere has shown time and again that this figure is pure conjecture at best and, in all likelihood, unlikely to be realised. This is because it is based on first-round effects only. It is calculated on the basis of a pure change in the rate and assumes very little, if any, elasticity of demand for the vehicles priced above the threshold. But the reality is that buyers of cars around the threshold for this tax are highly price sensitive and that there is a high level of price elasticity. In fact, the sales evidence for July this year is clearly proving that the sales of cars above the threshold will fall dramatically as a result of this measure. The higher the price of the car the more likely that the buyers are people who have the means to pay the cost of the car plus any taxes that might be put on it. Certainly, when looking at Aston Martins and S-class Mercedes, which cost many hundreds of thousands of dollars, many of the buyers would be in a position to not be too concerned about the extra imposition of these bills—even more so, when looking at purchases of $1 million-plus Rolls-Royces.

But it is not in the Rolls-Royce price range that the government makes the bulk of its money on this tax. Indeed, the importers of Rolls-Royce in Australia were delighted to recently report a huge increase in sales in 2007-08—a total sales figure in that year of 12 cars. Between the threshold of $57,180 and around $75,000 is where the vast majority of the cars attracting this tax are sold and it is where the vast majority of tax takings are generated. Indeed, almost 60 per cent of all vehicles incurring the luxury car tax are priced below $70,000. So this price range is where the effect on sales figures needs to be examined. The sales figures for July and the advance orders being received by car retailers report a huge downturn in this very price range. If this trend is wholly or even in part due to the imposition of the higher car tax and it continues, the potential increase in the take by the government as a result of the tax increase could be far less than anticipated. Some car retailers even suggested during the Senate hearings that, based on their figures, it could even cost the government money as the sales fall to such a low that less tax is generated than was raised prior to its introduction.

But the problems with the measures contained in these bills extend further than just the likelihood or not of their achieving the budgeted tax increase. The new measures are likely to have quite perverse results for local car manufacturers, on incentives to fit and availability of safety equipment and on environmentally friendly technologies and will decrease the possibility for those with less income to access cars better equipped with safety and green technologies.

The reality is that most cars around the threshold and up to $100,000 are bought by people who would love to buy an S-class or another top of the range European luxury car but who do not have the means and who have to be careful with their money. They love the safety features of these cars and they love the efficient new environmentally friendly technology of these cars but they do not have unlimited resources. As such, they buy the best car they can afford, the car that comes with the most features that they desire and, again, can afford. The price of these cars is vital to their purchasing decision. Adding to the price of cars within this price range will seriously impact upon the purchasing decisions of those who buy them. They will either have to buy a lesser spec car at a price comparable to the pre-tax-hike figure or not buy the car at all. In making such a decision, they may be forced to abandon the choice to purchase additional airbags or the latest dynamic stability control or even be forced to purchase a non-hybrid version of the same or a different car.

It is a generally known rule of the business of car retailing that the base models, which turn over the highest volume, do so with a lower margin and that the viability of many retail operations depends on the much higher margins that are applied to the higher spec models. This was confirmed by questioning of car retailers in the Adelaide hearings of the inquiry. It was also noted that car manufacturers in Australia also rely on this sales principle—that is, the top end sales of Calais, Statesmans, Caprices, HSVs; fully loaded Toyota Aurions; and Ford G6Es, XR8s, Territories and FPVs contribute more to the viability of car manufacturers per car than do the sales of the base models. This is where this government is seeking to attack local car manufacturers and retailers of locally made cars—right where they make the margin that makes them viable.

The increase in the tax will also have a serious impact on the delivery of innovative safety options on new cars in Australia. History shows us that almost all new innovations in safety equipment have been developed at significant cost by major luxury brands. These include ABS brakes, airbags, electronic stability control and traction control. The manufacturers of these high-end cars need to price their cars accordingly to cover the substantial development cost of innovative safety features. As such, when first developed these features are not readily available on mass market cars. However, as the technology is proven and as economies of scale kick in, these technologies do become available in what is termed the trickle-down effect. Progressively, less expensive cars gain them as an option and then as standard until over a period of years these features are available on even the least expensive vehicles. The relevance of this to these bills is that their passing would work to delay the trickle-down effect on the introduction of this technology, thereby delaying the benefit of it to Australians at given pricepoints.

There is no doubt that the luxury car tax is a tax on innovation, even as it stands. But to increase it further makes it even more likely that it will be longer before we see such innovations in Australia on lower and middle priced cars. Quite clearly, I am not saying that the passing of the bills would lead to less safe cars being built or imported into Australia, as disingenuously and repeatedly suggested by one government senator at the hearings into these bills. On the contrary, what I am saying and what the evidence at the hearings supported is that Australians buying cars to a price will sacrifice some of these new features in order to be able to afford the car and the newly raised tax. Similarly, some manufacturers and importers will build and import cars without some of these features in order to remain competitive on price—all at a loss for Australian consumers.

A similar argument was supported on the evidence in relation to technological developments delivering more efficient and environmentally friendly vehicles. For trickle-down reasons and to cover high development costs, the cost of these cars can often be above the tax threshold. Or the cost of adding environmentally friendly options may push the cost of these cars over the threshold or render the purchase uneconomical when combined with the higher tax. Whether you are a climate change prophet or a heretic who dares to refuse to believe the gospel on climate change, you would think all would consider it advisable to promote vehicle technology that delivers less pollution and better efficiency. Yet here we see a government raising taxes and imposing a disincentive to buy cars and options which do just that. Further, you would think that a Labor government—all flavours of governments—would want to see more people able to afford cars that are well equipped with safety and technological features.

Debate interrupted.