Wednesday, September 21, 2005
Aussies count the pifling cost of petrol
Long suffering Aussie motorists will be spared a devastating petrol price rise at the bowser resulting from escalating fuel taxes.

John Howard’s government has decided to shelve its plans to increase the fuel excise duty by 0.06c in a bid to relieve the pressure on motorists’ pockets, thanks to rising oil prices.

The federal excise rate will stay at 38.143c per litre, plus 10% GST.

Revenue from the excise duty increase had been earmarked to encourage oil companies to produce more environmentally friendly fuels, which would make motoring more petrol efficient. Now it will be used as a financial sop to the voter-cum-motorist, to treat the symptoms rather than get to grips with the cause.

“Australian motorists are already suffering,” Howard has claimed and rises, no matter how small, would not be welcome.

Opposition Leader, Kim Beazley, has agreed with Howard that there should be no tax increase at this time.

Howard’s easy political score epitomises the sorry state of the debate over rising fuel prices. Motorists are an electorally powerful constituency, rather than an effective lobby group. They are difficult to oppose, yet are easy to appease. In Queensland, the State government even subsidises the price at the pump to a tune of 8.354c per litre.

Though Australian bowser prices have increased significantly in the past 12 months in response to higher oil prices, the Aussie motorist still cruises around in a relatively benign fiscal environment, particularly when compared to Europe. This low motoring tax culture is born of the historically perceived tyranny of distance: Australia is a big country and everyone else lives a very, very long way away.

This fiscal environment has failed to encourage efficient petrol consumption. Inordinately large engines are de rigour and high levels of car ownership has allowed a car dependent urban form to develop. Australia has a car obsessed youth rivalled only by the USA.

In reality, Australia is the most urbanised developed nation outside Singapore and Monaco. Its SUVs and 6 cylinder saloons spend much of their time guzzling fuel between the suburbs and shopping malls, work and schools, as urban sprawl has pushed services and amenities far away from our front yards.

Driver-friendly Australia manifests itself on many levels. Road funding and infrastructure expansion is robust and then conversely, on a local scale, pedestrians are made to feel unwelcome when crossing roads, encouraged to clear off as quickly as possible, lest the traffic flow be delayed a moment longer. Rarely would you expect to park your vehicle. In general, the Aussie motorist is struggling no more than the Aussie ‘battler’ is fighting to make ends meet, despite 25 years of income growth.

But there is an apparent conundrum associated with taxing fuel, which is a result of the political cowardice of our leaders when faced with angry petrol users.

Petrol is taxed (twice, even) to discourage its consumption. This is a legitimate instrument of social policy. Both tobacco and alcohol are taxed heavily, to discourage us from enjoying too much of a debauched life.

Another role of taxation is to raise revenue for public goods. The taxation of tobacco and alcohol will in part fund the provision of health care to treat symptoms of their excessive use. The direct hypothecation is not made - and for good reason (as we can’t have people picking and choosing which parts of the social contract they fund) - but the revenue raised from petrol excise will go some way to funding the provision of ever more road infrastructure.

An indirect user pays system is hence in place for motorists. But where alcohol and tobacco revenues will be spent on amelioration of the worst aspects of their consumption, funding more road infrastructure actually encourages the use of the car, through the phenomena of induced demand, thus nullifying one reason for taxing it in the first place. More car use leads to a louder political voice for motorists which leads to greater provision of roads and hence more use.

Governments therefore find themselves locked into spiralling provision of road infrastructure to the benefit of the motorist and oil companies, paid for out of burgeoning revenues from its taxation. Governments yet have the courage to stand up to the motorist electoral block and restrict spending on roads and/or tax petrol correctly in an attempt to reflect the true costs of its consumption.

---