Wednesday, June 25, 2014

Petrol Excise. How the Greens blew it.

Now I've seen everything. The Greens used to be numerate and they used to be smart about the use of price signals.

They are now neither. They are no longer numerate, because they've fallen for one of the oldest tricks in the book. They are no longer smart, because they are prepared to let petrol excise shrink.

Greens leader Christine Milne says she will block the budget move to index fuel excise in line with inflation. It's been shrinking in effectiveness ever since former prime minister John Howard froze it at 38.1¢ per litre.

Back then, in 2001, petrol was $1 a litre, making the excise 38.1¢ in the dollar. Petrol is now nearer 154¢, meaning the rate has collapsed to 25¢ in the dollar.

All through that decade the Greens had been arguing for a price on pollution.

If the petrol excise stays stuck at 38.1¢ per litre as a result of Milne's decision, the rate will slide to 19¢ in the dollar by the time petrol hits $2 a litre. Beyond that it will slide closer to zero.

Do the nine Greens in the Senate really want to be the people who could have revived Australia's sole long-standing pollution tax but decided not to?

That's how it seems.

They're fired up about the way Tony Abbott has tied the indexation of petrol excise to road funding. Which means they have fallen for one of the oldest tricks in the book...

The government says the extra revenue raised from indexing fuel excise will be set aside for building new roads and upgrading existing ones. Note the use of the word “extra”. The Greens have not.

Indexation will raise $112.5 million next financial year, $370 million in 2015-16, and $860 million by 2017-18.

The totals are tiny. Far lower than the $19.5 billion or so each year the Bureau of Infrastructure, Transport and Regional Economics says is spent on roads by all levels of government.

It's entirely possible - even likely - that the extra income from the excise wouldn't have been spent on extra roads at all. The bill the Greens intend to reject does indeed establish “a special account to ensure that the net additional revenue from the reintroduction of fuel indexation is used for road infrastructure funding”. But it doesn't ensure it will be used for extra road funding. It may simply be spent on road work that was going to be done in any event.

Announcing the decision on Tuesday, Milne said: “The package that is going to be put to the Parliament on fuel excise would see revenue raised to go purely to roads, purely to add more congestion to our cities, more pollution from vehicles, and not do a thing for public transport, for getting people to be able to drive less and, when they do drive, to drive more efficiently.”

She is wrong. There is nothing in the legislation she will reject that will add more congestion to our cities, nothing that will add more pollution from motor vehicles, and nothing that would take funding away from public transport.

The Greens were once carbon savvy, numerate and economically literate.

They've fallen for one of the oldest tricks in the book.

In The Age and Sydney Morning Herald

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