Fuel tax promise is ‘meaningless’ and ‘pathetic’ say motoring groups

“Completely meaningless figure”: Andrew McKellar of the Australian Automobile Association. Photo: Melissa AdamsMotoring groups have dismissed as “meaningless” and “pathetic” the federal government’s promise to spend higher fuel taxes on roads.

In the first four years after petrol taxes are increased by about 1 cent a litre, the government plans to salt away at least $2.2 billion for road funding.

But that amount is short of the $4.8 billion the federal government is already planning to spend on roads next financial year, angering motoring groups who say that people will be forced to pay more for petrol while getting little benefit from it.

In his budget speech on Tuesday night, Joe Hockey said that every dollar raised by re-introducing indexation of fuel excise would “be linked by law to the road-building budget”.

“This will ensure that there is a stable and growing source of funds to support long-term investment in Australia’s roads,” the Treasurer said.

But the amount raised by the measure – which means that fuel taxes will rise in line with inflation – will be less, because the government will also increase the  rebate amount given to farmers, miners and trucking companies for their fuel costs.

Budget figures show that re-introducing the indexation of fuel excise would raise about $4.13 billion in the next four years. But because the government is also increase the value of the fuel tax credit largely available to heavy vehicle users, only $2.2 billion will be available for road funding.

“It is highway robbery, I reckon,” said Wendy Machin, the president of the NRMA.

“We are really, really cranky about this idea we should be grateful about the notion they are going to hypothecate 1 cent a litre for roads.

“I think it is pathetic. ‘Big deal,’ is my response.”

Andrew McKellar, the executive director at the Australian Automobile Association, said the allocated funds from the higher petrol taxes would initially be a “completely meaningless figure”, because governments already spend more than that amount on roads.

“It appears to be a rather artificial construct that probably doesn’t deliver any real benefit in the short term,” Mr McKellar said.

That could change, however, when the volumes raised by the extra taxes start to increase.

“At some point in the future – it might not be for 20 years – it is going to become unsustainable,” he said. “At some point, that number will overtake what would have been the level of spending.”

Former prime minister John Howard froze the rate of fuel excise in 2001, meaning fuel taxes started to become a smaller proportion of the government’s overall tax take.

According to calculations by the Australia Institute, that decision cost the budget about $30 billion in the 13 years that followed.

The executive director of the Australia Institute, Richard Denniss, said lifting the excise rate was a “good idea”.

“It is just long overdue,” Dr Denniss said. “I hope the Greens and Labor support it.”

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