Senate debates

Tuesday, 23 September 2008

Tax Laws Amendment (Luxury Car Tax) Bill 2008; a New Tax System (Luxury Car Tax Imposition — General) Amendment Bill 2008; a New Tax System (Luxury Car Tax Imposition — Customs) Amendment Bill 2008; a New Tax System (Luxury Car Tax Imposition — Excise) Amendment Bill 2008

In Committee

Consideration resumed from 22 September.


Photo of Alan FergusonAlan Ferguson (SA, Deputy-President) Share this | | Hansard source

The committee is considering opposition requests for amendments (1) to (3) on sheet 5590.

12:33 pm

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

The committee is considering opposition requests for amendments to the luxury car tax suite of bills. This luxury car tax was introduced on the basis of the need to fight inflation. The government’s own senators on the Senate Standing Committee on Economics find that this legislation will be inflationary. It will hit the Australian car industry. It is going to hit innovation and safety. It is going to increase all car prices. And, of course, this is at a time when the Australian car industry is in deep trouble.

We have seen just today, again, car sales collapsing. Indeed, the latest figures show that new vehicle sales fell for a second straight month in August. They fell by 3.5 per cent. New vehicle sales fell by 7.2 per cent in the 12 months to August—the weakest annual growth rate in about seven years. Consumers have cut back on spending on big ticket items, the Economist told us. In that environment, we have the Labor government and, I understand, some of the crossbenchers agreeing to put an increased tax on motor vehicles to make them all the more expensive, to make them all the more out of reach for our fellow Australians. But what they do want to do is give a tax break to about two dozen imported vehicles—two dozen imported models. I traverse the topic of the other requests for amendments because ours are coming first and, if ours are passed, I suggest the others would be negated. What I am putting to the Senate as clearly as I possibly can is that the Greens requests for amendments have problems and the Family First requests for amendments have real problems and the opposition’s solution, if you are going to have this punitive tax, is in fact the best option.

Let us have a look, first of all, at the Greens requests for amendments. They say that if you have a low-emission vehicle between the price bracket of $57,180 and $75,000 you will be completely exempt from the luxury car tax—and somehow that is going to save the world. We are talking about 1,500 motor vehicles; it is window-dressing at its worst. What happens to all those buyers who have bought low-emission vehicles that cost below $57,180? There is no tax relief for them in any way, shape or form. What about those who buy motor vehicles above $75,000 and seek a low-emission motor vehicle? There is no tax relief for them at all. So the Greens-Labor accord view of the world is that we are somehow going to save the environment by providing a tax exemption for 1,500 motor vehicles between the price bracket of $57,180 and $75,000.

Quite frankly, I do not believe that that will have any genuine environmental impact, but it will have very genuine impacts on the purchase choice of motor vehicle buyers. We will have the removal of not only the proposed eight per cent increase but also the current 25 per cent luxury car tax as well. So, with the removal of that 33 per cent cut luxury car tax in comparison to Australian made cars, there will now be a price differential of literally thousands of dollars. So a loyal Australian who might want to buy a Holden Commodore HSV is confronted with the fact that a BMW may well now be thousands of dollars cheaper. And yet we are told somehow that this is a tax on the rich people. I think it is a greater status symbol to be driving around in a beemer than in a Holden Commodore. If that is what is motivating those opposite, they have undone their argument by doing this silly deal with the Greens.

What concerns me most of all is that I think Family First and the Greens may have come to an arrangement where they in fact support each other’s amendments. If that is the case, they will be supporting contradictory positions. The vehicles that Senator Fielding is trying to support are the gas-guzzling four-wheel drives. I happen to agree that they do need an exemption for the reasons that I have previously outlined. But how can the Greens support such a motion and then, on the other hand, support a motion dealing with vehicles that have low emissions? They are contradictory positions. Of course, it is not for us in the opposition to determine how they justify that, but it is a matter of some concern for us to try to make some headway in relation to the thinking on this.

In relation to Family First’s amendment—and there are lots of problems with theirs—if you are a primary producer you get the exemption for one vehicle per annum, whereas if you are a tourism operator you can get it for a hundred vehicles or more per annum. There is no limit. The only stipulation is that you use that vehicle solely for tourism purposes in the course of your business. So, if you happen to have bought that vehicle for tourism purposes but then allow a staff member to take it via the milk bar to buy milk on the way home, it will no longer be purchased solely for that purpose and therefore the tax exemption will evaporate.

In relation to the definition of ‘primary producer’, I invite the Greens to have a look at what the definition is. Under the Income Tax Assessment Act it includes—now wait for this!—people that fell trees in the forest, including, of course, old-growth forests. So we will have the spectre of the Australian Greens voting for a tax exemption for those good, hard-working forest workers who harvest old-growth forests.

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern Australia) Share this | | Hansard source

Senator Ian Macdonald interjecting

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

I say to the former Minister for Fisheries, Forestry and Conservation: I believe they do deserve it. We are completely consistent in this regard, unlike the Greens. In a desperate bid to get their amendments through, they are willing to vote for tax subsidies for people involved in the forest industry, something that I thought they were so vehemently opposed to.

If we have a look at the actual details of the Greens amendment, we realise that people who will be exempted are those that will be buying the Audis, the Saabs, the Alfa Romeos and Mercedes-Benzes, including the European sports car, which of course is very unpractical for the Australian family. I hope Family First realises that. I also hope that Family First realises that a lot of these low-emission vehicles are in fact turbocharged. Some states have laws against learner drivers and P-platers driving these turbocharged cars. As a result, if you want a family car in which to teach your child to drive or get the child to pick up some younger children, you will not be able to buy these vehicles, because they are outlawed for younger persons driving. As a result it will be very anti-family because most families do not have the luxury of deciding to have three or four cars parked in the garage and then picking and choosing the one that might be convenient for the day or for the particular purpose. They have the one motor vehicle that has to suit all the purposes that the family might engage in. That is something which I think—with great respect—Family First has overlooked.

Also, these vehicles that are going to be exempted under the Greens amendments are diesel powered. The cost of diesel is significantly higher than other fuels, including LPG. We should be looking, I would have thought, at trying to save family budgets some money. Of course, LPG is not necessarily all that fuel-efficient by the very narrow definition of seven litres per 100 kilometres, but it is so much cleaner per 100 kilometres and per seven litres. So, once again, we have these artificial criteria created by the Australian Greens in a bid to get their legislation through.

The diesel engine, in a comparison over 100 kilometres, produces 184 grams of CO2, or carbon dioxide, whereas petrol engines produce only about 166 grams. Therefore, what they are doing is providing a benefit to diesel engines, which in fact emit more than petrol engines. You have to ask: how does that assist the environment? You really do start to think that the Greens get a substantial number of their votes from that cohort of the community that can afford imported luxury vehicles in the price bracket of $57,180 up to $75,000, because there is no other logical explanation for them to have picked these considerations. Of course, there are a number of hybrid vehicles over $75,000, but not a single Australian made car will be exempted under their proposals.

This legislation, as we in the opposition have said right from the beginning, is bad. It is flawed. It was brought in on the basis of fighting inflation. The crossbenchers have now had the opportunity of reading the Labor report into this bill. In paragraph 2.19, the Senate Standing Committee on Economics, chaired by a Labor senator, acknowledges that this measure will be inflationary. I say to those on the crossbenches, those who assert that they are there to keep the government honest: how can you assert to the Australian people that you are here to keep the government honest? The government says that this measure is to fight inflation, yet we know for a fact it will be inflationary, but you say: ‘We are not going to hold the government to account. We have done some sort of deal with the government in relation to pet projects or particular measures, so we will allow the government to misrepresent this legislation to the Australian people.’

In relation to Senator Fielding’s proposal for the tourism sector, all that will be allowed are four-wheel drives and ‘other vehicles’, as may be determined by the regulations from time to time. Where is the openness and transparency of the deal that is being done? Do Senator Fielding and Family First actually know what the government will regulate if this legislation is passed—which vehicles will be allowed and which vehicles will not? I think he has bought a pig in a poke. He has no idea, with great respect, what is actually going to be delivered to the people of Australia with that exemption.

It is the same with his primary producer exemption. Somehow there is a view by the government, the Greens and Family First, it appears, that those people who live in rural and regional Australia are only primary producers, are only farmers. But of course there is the local vet, there is the Australia Post contractor, there is the mechanic, there is the fencing contractor and there is the local general practitioner, and they need exactly the same sort of vehicle to exist out in regional and rural Australia as the primary producers do. But according to Family First it would appear that not all families are equal. Some are more equal than others, or some are more ‘first’ than others.

If you are a primary producing family, you will get an exemption, but woe betide if you happen to be a veterinary family, an Australia Post contractor family or a plumbing family. You will not get that exemption. I would invite those who are supporting the other amendments to come up with their rationale for why our requested opposition amendments, which are so clear, cohesive and simple to administer, should not be carried.

12:48 pm

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern Australia) Share this | | Hansard source

Senator Abetz has convinced me of the need to support the opposition’s requests for amendments, because they are very sensible. They address the issues that I raised in my speech in the second reading debate on this issue. They allow those people who live in rural and remote Australia to have the safety and usefulness of four-wheel drive vehicles, which are not luxury cars by the standards that one might normally determine luxury cars to be—that is, the Rolls Royces, the BMWs, the big Audis and those sorts of things. As I said in the second reading debate, these four-wheel drive vehicles in rural and regional Australia are indeed workhorses. They are essential for safety and for getting around roads which most people who live in the capital cities would not understand. The roads that these vehicles drive on are very often dirt or poor gravel roads because of a lack of government investment, at state government level principally, over the last 10 years.

In all of my driving out in these parts of the world—and, as I have mentioned, I have just come back from a 10-day, 4,000-kilometre road trip through the Gulf of Carpentaria, the Gulf Country and western Queensland. More than half the roads I travelled on were dirt roads. If you took a Holden or any ordinary family sedan on them—or an Audi or a Rolls Royce, for example—it would be rattled apart in a small number of months. So four-wheel drives are essential. If the rains come, the roads turn into quagmires and you will not get through those in ordinary vehicles. In the dry seasons, they turn into bulldust, and again an ordinary sedan vehicle will not get through it. So you do need a four-wheel drive vehicle. Up in the north and in the west, you need a vehicle with air conditioning—that is not a luxury—and you do need a vehicle with bullbars, spotlights, Shoo Roos and all those things. They are not luxury enhancements; they are enhancements to keep the occupants safe.

As I mentioned before, it is not just the primary production vehicle that you have to look at. It is the vehicle that is used by, for example, the mother taking young children the 40 or 50 kilometres they need to go to get to school. It is okay if you live in the capital city—the school is down the end of the block or you go to the nearest bus stop and the bus drops you at the school. But out in some of these areas where these four-wheel drive vehicles are absolutely essential, mothers take their children 40 or 50 kilometres each day to school, drop them off in the morning, drive home and come back in the afternoon to pick them up.

Those are the sorts of vehicles; they are not the farm vehicles, because the hubby is doing work on the farm with the farm vehicle. This is mum taking the kids to school or mum going to the provisioning store in the closest town, which in many instances could be 100 kilometres away. These things are not considered by those who draft these laws. Senator Abetz’s requests will cover all of those sorts of things. If we are going to have an increased luxury car tax then we should take it to $90,000 and you will cover all of that.

I want to ask Senator Fielding before he moves his request: is it in fact only the vehicle used on the farm that is the subject of your request or is it any vehicle? Is it just one vehicle a year? On big farms—and some of the properties I have seen in the last few months have been hundreds of thousands of hectares—they would not have just one four-wheel drive. At the place I was at—I will not mention the name—they had a fleet of Toyota vehicles. I would like to know from Senator Fielding what exactly his proposal is? Is it one vehicle a year or is it as many vehicles as you need to run primary production? Or is it as many vehicles as you need to service the primary production, not the ones that you would be throwing your shovel in the back of but the ones that you drive to town to get spare parts, pick up fuel and do things like that?

They are the essential things that need to be addressed. I understand the government is assisting Senator Fielding with his request. Since Senator Fielding is not here perhaps the government could answer just how far that request might go.

12:54 pm

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

Another great fault of the government amendment in relation to emission standards is the fact that there will be no exemption for vehicles that run on biofuels, such as ethanol, that are considered to be zero-emission vehicles. When you do policy on the run and you try to stitch up a deal on flawed legislation you make it even worse. That is exactly what has happened in this situation.

We have interesting excerpts from Senator Fielding’s speech during the second reading debate, when this bill was first before us. It is interesting to reflect on some of these things. Senator Fielding quite rightly acknowledged ‘this tax increase is a blatant tax grab’. It is and it is inflationary. Why would you bother going any further in considering it? It is a blatant tax grab, it is inflationary and it is going to hurt the Australian car industry. Why would you even consider it? These are some of the comments that Senator Fielding, I think quite rightly, made during his first contribution. He said:

... there are also small businesses that depend on their cars as a tool of trade but their vehicles do not fall into those exemptions. Small tourism operators and farmers are two important groups who will get slugged by this tax increase.

Note the words ‘two important groups’. What about all of the other groups, all of which I have recounted previously and Senator Fielding must have had in his mind? They are to be forgotten. They are the second-class of families and small businesses. They are now to be junked, dumped overboard, for this deal. Senator Fielding went on to say:

Family First also wants to see an exemption or some other way for four-wheel drive vehicles that are registered in rural areas, in recognition that families in rural and regional Australia are doing it tough.

We happen to agree with him that families in rural and regional Australia are doing it tough. Now, all of a sudden, it is only farmers, primary producers and tourism operators who are doing it tough. It is no longer the vets, the stock agents, the plumbers and the mechanics—all of these people are doing miraculously well all of a sudden since 3 September. Then, according to Senator Fielding:

There is also a question of whether the extra tax should be applied to the most fuel-efficient cars, but the same argument could be used for safer cars.

One consequence if this legislation gets through will be that motor vehicle manufacturers will design vehicles to be as light as possible. What do all of the road safety people tell us? In general terms, the heavier the vehicle, the safer it is. As a result, in the name of environmentalism we are going to be sacrificing road safety. That is what the engineers and all the innovators will tell you. You really have to ask why we are pursuing this when we know what the results will be.

The opposition also reminds the Australian Greens that the definition of ‘primary production’ includes:

felling trees in a plantation or forest; or
transporting trees, or parts of trees, that you felled in a plantation or forest to the place:
where they are first to be milled or processed; or
from which they are to be transported to the place where they are first to be milled or processed.

Of course, the word ‘processed’ could even include, dare I say it, woodchipping. The Greens, I understand, will be supporting this in complete contradistinction to that which they continually say. This is the sort of policy inconsistency that you get when you make policy on the run. By creating exemptions you make the legislation even worse.

If you want to engage in the politics of envy, if you want to talk about luxury cars and people who are filthy rich, I simply say, to the Labor Party in particular, that somebody who buys a $60,000 Toyota Tarago does not do so as some sort of status symbol, to show everybody down the street: ‘Hey, I’m rich! I’m a millionaire.’ For people who drive a Bentley, that might be the case. For people buying LandCruisers with a bullbar, with spotlights and all the optional extras required in rural and regional Australia, to slug them and say that they drive around in a LandCruiser to promote themselves as millionaires would be news to every plumber or mechanic in rural and regional Australia—and especially to every farmer and tree harvester in rural and regional Australia. They need these vehicles for their businesses. That is why we as an opposition are saying, ‘Let’s just increase the threshold from $57,180 up to $90,000 and then apply your punitive 33 per cent luxury car tax but leave the others where they are between the $57,000 and the $90,000 threshold.’

As I have said before, here we have a very unfortunate engagement in the politics of envy. We see that from the utterances of Senator Carr and indeed from the Prime Minister himself when, at question time, he waves around a picture of a Porsche. Five per cent of the luxury car tax is obtained from the Porsches and Bentleys of this world. The overwhelming majority of the tax is ripped out of the Australian community for those who buy the LandCruiser, the Toyota Tarago or indeed the Holden Commodore HSV. If you want to have a luxury car tax then have a super luxury car tax applying as of $90,000.

There is the story of the Porsche, the Ferrari and the Lamborghini that Messrs Swan and Rudd are so happy to parade in the public arena, but how many Bentleys or Porsches can you buy at $57,180? None, unless, as Senator Joyce says, ‘It’s hot.’ You cannot buy cars at that price. Mr Rudd and Mr Swan know that to be the fact, yet they deliberately seek to portray our concern for middle Australia, for the small business sector, as somehow doing the bidding of the rich. Indeed, this government sponsored amendment—which is, if I might say, in direct opposition to the opposition’s amendment—is all about championing, but not the Australian car industry or the 34,000 families who depend on breadwinners in the Australian car industry. If I were a member of the AMWU, I would be asking the trade union leadership, ‘What on earth were you doing at the last election giving donations to the Australian Greens, who are now forcing the government into making amendments that will add another nail to the coffin of the Australian car industry?’ We on this side are busily trying to pull those nails out to give true life to the Australian car industry, yet Labor and the Greens are busily trying to drive in that extra nail. I ask workers in the Australian car industry to check up on their union bosses, to check what they have been doing and why they are supporting the Australian Greens in this very unfortunate amendment.

There are many other matters that I will canvass but, once again, I say that this is inflationary. It hurts the Australian car industry, it hurts innovation and, what is more, it is doing all this at a time when the Australian car industry is suffering very badly. Even at this very late moment, I invite the government and the Greens to reconsider their opposition to our amendment and their support for their own government sponsored amendment.

1:04 pm

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern Australia) Share this | | Hansard source

In this committee stage of the bill, I want to ask a couple of questions of the minister at the table, the Minister for Broadband, Communications and the Digital Economy, Senator Conroy, who is a former official of the Transport Workers Union.

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

And proud of it!

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern Australia) Share this | | Hansard source

Good on you, Senator Conroy. You will have the answer to my question then, as someone who is an expert. What number of Australian manufacturing workers will lose their jobs, as a result of the reduction in sales of Australian cars in favour of imported cars, if the Greens amendment gets up? As I understand it, the Greens amendment will favour the flash, imported luxury and other vehicles, none of which are manufactured in Australia. We know from Senator Carr that there is great concern about manufacturing workers’ jobs, particularly in the motor vehicle manufacturing industry, which has come under some pressure in recent times. Ford have laid off a great number of workers, Mitsubishi had to close their Adelaide plant and General Motors are struggling. The numbers of workers being thrown out of jobs are difficult to know at the moment. I ask Senator Conroy, as a former Transport Workers Union official: what work has the government done, what modelling has been done to identify the numbers of manufacturing workers, working families, that will be without a breadwinner as a result? Senator Conroy, you laugh. On this side of the chamber, we have a concern for working families who are looking at losing their jobs in the motor manufacturing industry. I thought that would be something that you in particular would treat very seriously.

I do not know; you may have done the work. That is the purpose of my question. What work has the government done? What modelling has been done that will indicate how the tax proposed by the Greens will favour those imported vehicles—non-Australian manufactured vehicles—and, accordingly, be to the detriment of the Australian manufacturing industry? The question is, Minister: what modelling has been done; what assessment has been done; what numbers do you expect Australian manufactured vehicles to fall by as a result of this incentive for imported vehicles; and what will that do to the industry? That is one question.

There is another question, while you are at it, Minister. Senator Fielding’s motion, which I understand the government have assisted with, provides for one vehicle per year for a primary production family. On family farms in western and Northern Queensland, in Northern Australia, in the area where I come from, there is always more than one four-wheel drive vehicle. On a recent trip out west I visited a property which had a fleet of Toyota four-wheel drives with bullbars, spotlights and all the other safety features.

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


Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern Australia) Share this | | Hansard source

Indeed. Thank you, Senator Abetz. There was a fleet of them. Is this amendment going to deal with only one of those 12 vehicles or all of the 12 vehicles? If it is only one, why is that? It is a bit like the uranium policy: ‘Three mines, good uranium; fourth mine, bad uranium!’ That seems to be what this might be. One Toyota vehicle is okay but not 12. You need 12 because they are big properties and they are a long way away. They do not buy them just for the fun of buying them, I can assure you, and they are not cheap. They are there as essential vehicles. So what happens to the other 11? They get the luxury car tax added for work vehicles in that particular area. I would be very interested to hear the answer to those two questions, particularly the second one on why one vehicle should be exempt but others should not.

Senator Conroy, take my word for it. I know you are not a regular visitor out in the country, but most farms would have at least two four-wheel drive vehicles and in some cases there are many of them. They are not just used for work on the farm; they are used for taking the kids to school, picking up provisions, getting fuel and bringing the mechanic out. The vet has to get out. There would be very few vets in the more remote parts of Australia that would only have one vehicle, but then the vet is not going to get it anyhow. I am just curious about that. I find that the amendments are moved with all the best intentions but they just do not seem to make sense to me. I am hoping the minister might be able to help me.

1:10 pm

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

Could I indicate at the beginning of my contribution that the government will not support the opposition’s amendments. Unlike Senator Macdonald, I have not been convinced by Senator Abetz’s oratory. This is just another part of the raid on the budget surplus. It is further fiscal vandalism. This is what the Leader of the Opposition said in relation to the size of the budget measures that the opposition is blocking:

Clearly, $6 billion is a gigantic amount of money in anyone’s terms ...

It’s a huge amount of money ...

So they admit it is a gigantic amount of money, but they plan to block it anyway. The raid on the surplus continues, with the opposition last night trying to exempt more cars and reduce the tax paid for cars over the threshold. They say they want to exempt Toyota Taragos, but only one model will pay the tax anyway. It is only one model, despite their attempts to continually misrepresent the impact of this tax.

What they forgot and they are a little bit embarrassed by—and we have already seen a little bit of dissembling by Senator Abetz on this—is that by lifting the threshold they are giving a tax break to Porsche drivers. This is because the 33 per cent rate is only payable on amounts above the new threshold. They bleat about people in the bush, but at heart we know that their new threshold is just another tax break for Porsche drivers. It is the same old reckless spending.

I note that our trading partners will take a very close interest in any changes to the luxury car tax. It is therefore important that we observe our international trade obligations in any amendments. These obligations require nondiscrimination between domestic and imported vehicles. For those opposite to continue to try and misrepresent the impact of this measure just shows that they have learnt nothing from the last election. They have learned nothing from the 20 warnings from the Reserve Bank that they all chose to ignore—which led to the highest inflation rate in 16 years. It put upward pressure on interest rates to the extent—

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

This is inflationary! Your own chairman said it.

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

The economics 101 lecture can come later, Senator Abetz. A one-off price movement in a tax level does not necessarily equate to what you are trying to describe, but we can come to that at considerable length, if you want. A one-off movement in a price level—

Photo of Alan FergusonAlan Ferguson (SA, Deputy-President) Share this | | Hansard source

Order! Senator Conroy, I suggest you address your remarks to the chair, not to the senator sitting opposite.

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

My apologies, Mr Chairman. I accept your admonishment. Based on the former government’s own rhetoric, the GST must have been massively inflationary because it was a huge one-off change in the price rates. You actually argued back then that it was not inflationary; it was a one-off movement. But let us not worry about the hypocrisy of your argument backwards and forwards, because you are on that side of the chamber now. I suggest you look up your own rhetoric at the time on every single one of those taxes that you increased over the many years you were in government. Have a look at your own rhetoric.

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

Senator Abetz interjecting

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

It is called the GST. You introduced it and you argued at the time that it would not be inflationary. You argued at the time that it would be a one-off movement. So why don’t you go off and re-read your own rhetoric from the time of the introduction of the new tax? You did not just move a threshold, which is what this measure does; you introduced a new tax. So if you want to sit there and make these arguments then at least try and be consistent with that which you have argued previously. I appreciate that you did not have personal responsibility for these measures back then, Senator Abetz. I do understand that.

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

This is irrelevant to Senator Macdonald’s questions. Why don’t you have a crack at answering them?

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

I am actually speaking on your amendments, which is exactly relevant to this part of the committee stage. Senator Macdonald has asked a couple of questions. I am seeking some information for him at the moment.

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

So he’s filibustering until he gets the answer.

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern Australia) Share this | | Hansard source

Senator Ian Macdonald interjecting

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

No, I am actually doing the job of the government spokesman in the chamber—which is to outline our position on your amendments. This is the committee stage of the bill and we are dealing with your amendments. So I am seeking some information and I am sure I will get another chance to contribute to the debate, Senator Macdonald, and answer your questions.

On the second one of the two questions you were seeking information on, Senator Macdonald—and I know that you are actually genuinely interested in the answers, unlike some members opposite who are interjecting extensively rather than actually joining the debate—you are allowed one vehicle per year per primary producer. The amendment will apply to new taxable supplies of luxury cars after the amendment comes into effect on 1 July 2008. It will not apply to cars already owned by primary producers before 1 July 2008. So that deals with that question.

On the other question, you were seeking any information that was available. I suspect that there is no information along the lines of what you are describing. It is a little hard, again, to take claims about job losses, particularly in the car industry and the car parts industry, from those opposite seriously when they allowed the Australian car manufacturing industry and car parts industry to completely unwind on their watch. We saw a continual reduction in Australian production on their watch. What we are seeing now are crocodile tears to try and hide the fact that what they are actually doing is giving those who want to purchase a Porsche a tax cut.

1:17 pm

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern Australia) Share this | | Hansard source

Thank you, Minister, for the answer to at least one of my questions. I reject your statement that the previous government ran down the car industry. Even accepting your argument, which I do not, the question would be: so why are you making it worse? Why are you adding to it? I thought yours was the party of the Australian Manufacturing Workers Union. It was not long ago that Minister Carr was lamenting the number of working families who would not have a breadwinner because of the slowdown in the motor vehicle manufacturing industry, and here you are exacerbating it—taxing Australian cars and giving breaks to imported cars. You did answer my question—you have done no modelling and you have made no assessment. I could add to that that you do not seem to be terribly interested in those who might lose their jobs as a result of this. Thank you for answering it anyhow. Thank you for your answer on the one vehicle per year. But you did not answer the other part of my question: why is one car per year good but two cars per year bad, three cars per year bad or 12 vehicles per year bad?

These vehicles are fairly expensive when you buy them in these areas up in the north-west—for all the right reasons; I am not suggesting that sellers are making a bigger profit, but there are a lot of costs in getting the vehicles there. So a lot of farmers do a deal on a bulk purchase. Those vehicles get fairly well used—a lot of them would do over 100,000 kilometres in one year. Many farmers—and farmers are businessman—make the assessment that it is better to trade them in at 100,000 kilometres rather than wait till 500,000 kilometres, when perhaps you would not get much of a trade-in. So they trade them in. They also do deals with the dealer. They may say, ‘If we buy one, what is the cost; if we buy three, what is the cost; if we buy five, what is the cost?’

I again emphasise that if you are running a farm in some of these remote areas then having one vehicle is just a joke—in many instances, five vehicles is the norm. I have seen upwards of 12 just on the farm area when I happened to be there, and half of them would have been out somewhere else. They are a sort of workhorse—in fact, they replaced horses. In the old days you would probably ride a horse out to see what was happening. Now you need these vehicles with all of these enhancements. The Labor Party has an answer on why uranium from three mines is good but from four mines is bad. You have an answer on that—it is not very convincing. But I do not want to mix the subject matter here. Can you just tell me why it is okay for one primary production vehicle but for any more you pay this huge tax rip-off?

1:20 pm

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

The first part of Senator Macdonald’s contribution referred to the state of the car industry. It has probably escaped your attention, but this government is actually very committed to the manufacturing sector, and the car industry in particular. In fact we are so committed that we commissioned the Bracks report, which has now been completed and has been passed to government.

So let us be very clear: the government, those of us on this side of the chamber, are very committed to this industry—unlike those opposite, who stood back, washed their hands of it and watched what happened. We are in the process of putting together a government response to the Bracks report. The Bracks report was a comprehensive look at the industry. All those on the opposite side of the chamber have done is complain and make fun of it, as usual, because they have no commitment whatsoever to the car industry. They have a commitment to Porsche drivers but not to the car industry. So let us be clear about that.

On the second matter that you raised, let me be very clear: this is not a government amendment; this is a Family First amendment which we are supporting. In terms of the construct of that amendment, it is a Family First amendment.

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party, Shadow Parliamentary Secretary for Northern Australia) Share this | | Hansard source

You have got all the public servants to do your work for you—

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

It is a Family First amendment, Senator Macdonald, that we have, after consideration—

Photo of Alan FergusonAlan Ferguson (SA, Deputy-President) Share this | | Hansard source

Order! Could you please conduct this debate through the chair.

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

Sorry, I apologise again. As I said, this is not a government amendment. It is in actual fact a Family First amendment which we have considered and are supporting. I can only suggest to those opposite who want to debate the detail of the Family First amendment that they might want to consider posing their questions to the government slightly differently.

1:22 pm

Photo of Christine MilneChristine Milne (Tasmania, Australian Greens) Share this | | Hansard source

I rise to discuss this issue of the Australian car-manufacturing industry in relation to the amendments before us. I would suggest that the state of the Australian car-manufacturing industry is an absolute classic example of where a total failure to have an industry policy and a total failure to recognise the trends in climate change and peak oil have led to government failure in relation to manufacturing—and that is exactly what occurred under the Howard government. I think it is absolutely critical that people understand that, because the Howard government never believed in peak oil and, as far as I know, the coalition still does not.

The coalition was committed to Australia building V8s for the American market and big cars for the Australian fleet vehicles. They refused to tie subsidies to the car-manufacturing industry to developing fuel efficient cars. At exactly the same time, the whole world recognised the importance of reducing emissions and the fact that petrol was going to get more expensive as the underlying price of oil increased, so consumers were moving to smaller, more fuel efficient vehicles at the time that the Australian car industry was being encouraged by the government to build big gas guzzlers and was being subsidised not only with direct dollars but also with government purchasing power to buy these cars for the Australian Public Service, for the government fleets. The fringe benefit tax concession was also encouraging exactly the same—more car use for their corporate fleets around the country. So, at a time when the whole world was moving in one direction, Australia was positioning itself to go out of business and out the back door.

What a surprise then that car manufacturers were saying they could not cut it in global competition, they could no longer sell their vehicles and they were putting people out of work. That is directly attributable to former Prime Minister Howard’s climate scepticism, peak oil scepticism and belief in the American dream of bigger, better and faster cars all over more and more freeways. So the rest of the world moved on and Australia was stuck. In 2006 in my budget reply speech in here I said that another $60 million into the car industry not tied to fuel efficient vehicles was a guarantee for disaster. Not long after that, we had the government celebrating a new contract for V8s into the US.

I would like to read for the benefit of the coalition senators, who do not seem to know about global trends, a recent article from the Economist. It shows how China, on the other hand, got very smart about this. China recognised that the competitive advantage for China was building the cheapest, smallest, lightest, most fuel efficient vehicles in the world for the mainstream market, whilst the Europeans moved to European Union new standards of not only fuel efficiency but also emissions intensity, recognising that they would capture the world’s global luxury market and the Chinese would try to displace the Japanese and everybody else out of the mainstream market. How did the Chinese proceed? By doing exactly what the Greens are proposing for the Australian manufacturing industry. The Chinese realised that the only way you are going to be cutting edge in the world is to set yourself high standards, get your manufacturing industry to produce to those standards and then go out onto the world market.

China has just lost its first legal dispute with the World Trade Organisation and it has introduced a new tax that will achieve much of what it originally wanted with the measures it had taken previously—and it is a green tax. China imposed a special 25 per cent tariff on imported car parts rather than the usual 10 per cent if the parts made up more than half of the value of the vehicle. Included in that, imported new cars were also subject to the 25 per cent tariff. This was to encourage foreign car manufacturers to use more local suppliers and reduce imports. America, the European Union and Canada argued that the tariff was against World Trade Organisation rules and the WTO agreed, so China lost its first court case in the WTO on the basis that its imposing a tax on imported car parts was against free trade.

Not to be outsmarted, what the Chinese then did was announce a new green tax. It came into effect on 1 September. It was designed to reduce fuel consumption and fight pollution. Then China imposed a 25 per cent tax on vehicles with an engine size of two to four litres and a 40 per cent sales tax on cars of 4.1 litres or above. The article in the Economist said:

The government says the new tax will encourage a shift to more fuel-efficient cars. It will also help Chinese carmakers, as they tend to make cars with engines smaller than 2.5 litres. Foreign carmakers, which make most of the cars with larger engines, will suffer.

I hope the coalition is listening to this, because the Chinese have set a policy deliberately to make those people who manufacture large cars suffer. That is the result of the coalition’s policy for insisting that Australian car makers make the cars that the Chinese have set themselves the ambition of making sure do not cut it in the world market. How stupid is that for a coalition policy on manufacturing? To be a global manufacturer, you need to be cutting edge yourself and then go out to the global market, not make things that you think people ought to buy when there is not a market for them.

So the Chinese have gone on to try and introduce greater import tariffs so that they reduce the size of vehicles, which is good for that country in terms of their pollution and their emissions strategy. Their new tax is canny because it cuts fuel use, reduces imports, benefits local car makers and will improve air quality and get around the WTO rules. So, wait for China! Here comes China, with cheap, efficient, light, safe, mainstream vehicles.

What gives the coalition any idea that some sort of patriotism about buying big gas guzzlers simply because they are made in Australia will give enough Australian families the incentive to buy a more expensive, less safe, less efficient vehicle? Let us get much more sensible than that and make cars here which can compete with the kinds of vehicles that China is going to turn out. And we can do that. That is why the government has introduced a green car tax initiative. I support that. The initiative is for $500 million, and the Bracks review has said, ‘Increase it to $1 billion,’ and I agree. If we are going to keep an Australian car manufacturing industry and keep people employed in it we have to convert that industry rapidly to being green and fuel efficient, and we have to reduce the emissions intensity of those vehicles in order to compete.

That is the first part of the process. The second part of the process is changing the tax system so that we get rid of the notion of luxury cars—we phase it out altogether—and, instead of that, we phase in a tax regime which taxes all vehicles on their fuel inefficiency and their emissions. So, if you buy an inefficient car which emits huge amounts of greenhouses gases, you pay a higher tax on that; if, on the other hand, you buy a car which is highly fuel efficient and has low emissions then you will not pay much tax—right down to zero if you buy a car which runs on electricity made from renewable energy. That is the kind of tax system that we want to phase in. The amendment which I will speak to in a minute, when Senator Conroy moves it, takes us a first step on that journey.

The third part of the process is in government procurement. If you are going to give the car manufacturing industry money to make these green cars, you have to purchase them. So I agree that government procurement policy should be to buy Australian low-emission, fuel efficient vehicles, and then get rid of the fringe benefits tax concession for motor vehicles, which is a perverse incentive for people to drive more. We need to subsidise the industry to make the right cars that fit the global trend on efficiencies and emissions, and then set up a tax and registration system to favour those cars which are doing the right thing in an environmental and peak oil context.

Let’s be aware that the oil price jumped yet again today and it is only a matter of time before it goes through US$150 a barrel. And let’s be aware of what will happen if the Middle Eastern countries succeed in changing the way that they represent the fuel price. If they change to the euro, away from the US dollar—which is currently under suggestion in the Middle East—then in OPEC you will see a massive shift in fuel prices. So the most sensible thing to do, if you are really serious about protecting motorists from the vagaries of the global fuel market, is to invest in public transport and in fuel efficient cars. Then you need to drive the market, through your procurement policies.

That is a sensible, internally consistent policy. So I find hypocrisy in the way the coalition in opposition harp on about how they wanted to support the car industry. Every move they made was to undermine the industry by throwing good money at the wall, and watch the industry go out the back door because their climate scepticism and their peak oil scepticism blinded them to the fact that the rest of the world had moved and they were stuck in the past and trying to keep Australian industry in the past. In so doing they were driving the industry out the back door. So, if there is one classic example you could put in the textbooks of a government that did not have an industry policy, that was out of step with global trends and that drove an industry out the back door, it would be the history of the Australian car industry under the coalition government.

That is why I am trying to work very hard with the government to drive a shift in policy so that we rebuild the car manufacturing sector, we rebuild competitiveness and we shift the tax burden onto the ‘bads’ and reward the ‘goods’. That is where we should go in a world where you have carbon constraints and fuel constraints. I look forward to the day when we roll out of Australian car manufacturers a plug-in electric vehicle which we can run from the renewable energy which we are deriving from our own rooftops or our own solar-thermal or wind stations around the place.

It is not beyond the realms of possibility. Germany has just rolled off its first plug-in electrics. One of the German ministers was here recently and was going home to collect his. In Paris and London now you have centres—up to 1,000 of them in the centre of the cities—where they are setting up electric plug-in stations in anticipation of this shift to fully electric vehicles powered by renewable energy. So to hear the coalition still raving on about Hummers and V8s and gas guzzlers, and suggesting that roaring around in those is somehow a national pastime, suggests that they are well left behind. I remind them that a Nissan Patrol costs $51,000. There are many four-wheel drives under the $57,000 threshold. There is no reason for anyone who wants a four-wheel drive to have to buy a luxury four-wheel drive. There are plenty on the market they can get for under $57,000.

1:36 pm

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

I hope that I might be in a position to sum up in relation to the opposition’s amendment. I have raised a lot of matters. I note that they have not been engaged with by other honourable senators, and I assume that is because there is no logical response to them. I will briefly respond to Senator Milne’s suggestions. Once again, we see the Greens talking down the Australian car industry. We actually live in a society where car companies can make their own decisions. If private enterprise has somehow misinterpreted the market trends, that is something for private enterprise to bear. It is not something that you would visit on the Australian government. It is interesting, isn’t it, that Senator Milne took great comfort in what country? In China—with a command economy, where the government determines everything and where human rights are, I think, in a somewhat lesser state of repair than they are in Australia. But that is the country that she takes succour and comfort from in relation to this debate. This is a country with a one-child policy and penalties if you have more than one child. Guess what? A lot of people in China can deal with very small cars. You try and fit three baby seats across the back seat of some of those small cars. I confess I speak from personal experience, having used a booster and two car seats for my three children at one stage. You try to fit them into the sorts of vehicles that Senator Milne talked about—and, of course, for safety reasons you would not.

In relation to her comments about the Australian car industry, in fact the Australian car industry took a decision that there would be some very real opportunities in export markets with their vehicles—and they have been successful. The Holden ute has been exported into the United States; in the Middle East our vehicles are being very well received. The problem in the Australian car market is not that people are deserting the family six for smaller vehicles or more fuel efficient vehicles; they are in fact buying four-wheel drives and cars that are less fuel efficient.

I will sum up in this way: what the Greens say always sounds good until you start injecting the facts. Once you start injecting the facts, their arguments crumble and are unsubstantiated. One thing I would like to respond to is Senator Milne’s comment that countries such as Germany, France and England are now getting plug-in stations where you can take your electric car. In inner-city and suburban areas, this is a great thing. That is why we were against the government’s $35 million deal with Toyota, because we are getting old technology and, if we were going to use government money, we should have been investing in the newer technology. But do you know where those plug-in stations source their power from? I had better not mention it, because the Greens might hear; I will keep my voice low. In France, for instance, 87 per cent of the plug-in power is generated by nuclear energy. Of course, that is another debate that I will not go into now. Having said all that, I commend the opposition amendments to the committee.

Question put:

That the requests (Senator Abetz’s) be agreed to.

Photo of Judith TroethJudith Troeth (Victoria, Liberal Party) Share this | | Hansard source

Order! Would senators please resume their seats or leave the chamber.

1:49 pm

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

Thank you, Madam Temporary Chair, and can I wish you luck for the weekend.

The Temporary Chairman:

Thank you.

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

I move:

That the House of Representatives be requested to make the following amendment:

(1)    Schedule 1, page 3 (after line 27), at the end of the Schedule, add:

4  Before subsection 25-1(3)


Luxury car tax threshold—general

5  Subsection 25-1(3)

Omit “The”, substitute “Subject to subsection (4), the”.

6  At the end of section 25-1


Luxury car tax threshold—fuel efficient cars

        (4)    If the *car has a fuel consumption not exceeding 7 litres per 100 kilometres as a combined rating under vehicle standards in force under section 7 of the Motor Vehicle Standards Act 1989, the luxury car tax threshold is the *fuel-efficient car limit for the year in which the supply of the car occurred or the car was *entered for home consumption.

        (5)    The fuel-efficient car limit for the 2008-09 *financial year is $75,000. The limit is indexed annually using Subdivision 960-M of the *ITAA 1997.

        (6)    In indexing the *fuel-efficient car limit, Subdivision 960-M of the *ITAA 1997 applies as if:

             (a)    the table in section 960-265 of that Act included an item referring to the fuel-efficient car limit and to subsection (5) of this section; and

             (b)    the reference in subsection 960-270(1) of that Act to provisions of that Act included a reference to subsection (5) of this section; and

             (c)    section 960-270 of that Act applied, and section 960-285 of that Act did not apply, in relation to the fuel-efficient car limit; and

             (d)    the reference in subsection 960-280(2) of that Act to the car limit included a reference to the fuel-efficient car limit.

7  Section 27-1


financial year has the meaning given by section 995-1 of the *ITAA 1997.

8  Section 27-1


fuel-efficient car limit has the meaning given by subsection 25-1(5).

9  Section 27-1 (definition of luxury car tax threshold)

After “subsection 25-1(3)”, insert “or (4)”.

10  Application

(1)    The amendments made by items 1 to 3 of this Schedule apply to taxable supplies of luxury cars and taxable importations of luxury cars on or after 1 July 2008.

(2)    The amendments made by items 4 to 9 of this Schedule apply to taxable supplies of luxury cars and taxable importations of luxury cars on or after the day on which this Act receives the Royal Assent.

Statement by the Clerk of the Senate pursuant to the order of the Senate of 26 June 2000

Amendment (1)

As this is a bill imposing taxation within the meaning of section 53 of the Constitution, any Senate amendment to the bill must be moved as a request. This is in accordance with the precedents of the Senate.

I have moved this request for amendment following agreement between the government and the Greens. The amendment will establish a new threshold of $75,000 for fuel efficient luxury cars in the luxury car tax law—that is, fuel efficient vehicles up to $75,000 will pay no luxury car tax. The vehicles eligible for the higher threshold will be those with a fuel consumption not exceeding seven litres per 100 kilometres. The fuel consumption rating refers to the combined rating defined under the motor vehicle standards enforced under the Motor Vehicle Standards Act 1989.

The Senate committee noted that the average fuel consumption of vehicles under the existing luxury car tax threshold is around nine litres per 100 kilometres. The fuel efficient car limit will only apply to luxury vehicles that are more fuel efficient than these. The fuel efficient car limit will be indexed in the same way as the existing luxury car tax threshold, and the threshold increase will reduce the amount of luxury car tax payable on these fuel efficient vehicles. For cars that are currently on the market, in most cases the effect will be to reduce the luxury car tax payable to zero. Most cars that currently meet the fuel consumption requirement do not pay luxury car tax. However, the fuel efficient car limit will act, over time, as an incentive to car manufacturers and importers to get very fuel efficient cars into the Australian market.

The government would like to acknowledge the cooperation of the Greens, Senator Xenophon and Senator Fielding on these bills. These bills are an important part of the government’s measures to ensure there is a strong budget surplus. Since the Senate last debated these bills, the government has engaged with the Greens and Independent senators in good faith and in order to allow a proper consideration of a key part of the government’s budget. I would like to thank the Greens, Senator Xenophon and Senator Fielding for the positive and constructive discussions on their concerns.

1:52 pm

Photo of Christine MilneChristine Milne (Tasmania, Australian Greens) Share this | | Hansard source

I rise to support this amendment. When this matter of the luxury car tax was first raised, I made it very clear that it is my view that income redistribution should occur through the income tax system. I wish to remind the Senate that the Greens opposed the tax cuts for the wealthiest people in Australia and argued that in a just society, where we are trying to reduce the gap between the rich and the poor, we should have an income tax system whereby we collect the money from those who can afford it in order to provide public education, public health, pensions and all the things we need to do to make sure we look after our whole community and so that we are the equitable country, the country of the fair go, that we say we are. I think it is internally inconsistent that we should have a situation where we reduce the income tax paid by the highest income earners and then turn around and, in an ad hoc way, put a tax on goods on the basis that they are luxury items. Rather, the income tax system should deal with wealth redistribution, and a car tax should drive other outcomes: reducing our greenhouse gas emissions and reducing our dependence on foreign oil.

As the Senate would be aware, in 2006 I moved for an inquiry into Australia’s future oil supplies and our dependence on imported oil. I pointed out at the time that the current account deficit would be in a mess in future years because of our importation of foreign oil and how expensive that is going to be—and Australians have had a taste of that. Something that we foresaw years ago is happening, and it is unrealistic to expect governments to subsidise that in the longer run. What we have to do is reduce people’s dependence on petrol vehicles and, in particular, get our fuel efficiency up and gradually get off running our cars on petroleum based fuels and instead move to electric vehicles or hydrogen-powered vehicles. Other countries have recognised that the move to some biofuels has caused a problem in terms of food security, so we need to increase our research into the biofuels as well—second-generation lignocellulose biofuels.

I am arguing that what we should be doing in terms of vehicles is tax them on their fuel consumption, tax them on their emissions and actually try and drive a change in community behaviour towards driving less and, when people do drive, driving more efficiently. That should be the headline that we have: ‘Drive less and drive more efficiently when you do drive.’ Of course, in order to do that you have to have a public transport system that is adequate to the task, which we do not have either. So we should be using some of the money that we have got in the surplus and some of the money from the sale of permits under an emissions trading scheme to invest heavily in alternative public transport because, again, that assists people who cannot afford motor vehicles to move around cities. Ideally, we will also change the design of our cities over time to respond to climate change and peak oil so that we will have, if you like, urban villages linked by rapid transit.

It was with that perspective that we came to the government and said, ‘We want to put a signal into this legislation that there will be a change of view in the tax system to start driving people’s behaviour to reduce emissions and our dependence on foreign oil and at the same time build competitiveness in the Australian car manufacturing industry’—start rebuilding the car manufacturing industry instead of seeing it further hollowed out as it has been under the Howard government. That is why we put it to the government that we should actually phase out the luxury car tax and instead phase in a tax on all vehicles based on fuel efficiency and greenhouse gas emissions. So you would get rid of the luxury car tax and instead phase in a tax across the board, as indeed they have done in Europe and everywhere else. If you are going to have a competitive industry, that is what you would do.

We recognised that you cannot get such a phase-out of one and a phase-in of the other in a matter of 12 months and so we secured an agreement from the government to refer the phase-out of the luxury car tax altogether and the phase-in of a tax on vehicle fuel efficiency and greenhouse gas emissions to the Henry tax review, which ought to be looking at the big picture: what is the purpose of taxation; how does taxation drive changes in behaviour; and isn’t it time that we started moving our tax system to drive changes in behaviour that will lead to competitiveness in a low-carbon economy, which is where we need to be heading within a very rapid time frame?

So, in negotiation with the government, we secured an agreement that vehicles with a fuel efficiency of better than seven litres per 100 kilometres would be exempt from the luxury car tax, which would cut in at $75,000. That means that cars with that fuel efficiency will actually pay no luxury vehicle tax if they cost under $75,000. It is a very strong market signal. This was not about how much money it would cost the government or otherwise; this was purely about signalling a shift in the tax system, to show that it is possible to change a tax system to start taxing ‘bads’—and the ‘bads’ in this case are carbon emissions and fuel dependence. Look at that oil price and ask yourself: what are we in Australia doing to get ourselves off foreign oil?

This is a really important shift and one that hopefully will be advanced through the Henry tax review. It is the beginning of a change to the tax system in terms of vehicle fuel efficiency, and that is why it is such a critical move. It is a symbolic move and it is a real move in terms of about 20 makes of motor vehicles, but in overall terms it is about taking us where we need to go for the future. I find it very difficult to imagine that there is an argument as to why you would not want to shift the Australian car fleet to a more fuel efficient and less emission dependent footing.

Progress reported.