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Federal election blog: Electric vehicle boogaloo on fuel excise

Thursday 11 April 2019

Opposition Leader Bill Shorten’s promise of a target of electric vehicles to comprise 50 percent of all new sales in Australia by 2030 touched off a heated, and sometimes silly, debate, much of which centred on whether such a policy could be achievable without dramatic changes in the way the nation gets around.

The febrile atmosphere of an election campaign (still unofficial at this stage) is not that ideal for a constructive debate on the implications of such a policy. But while the two major parties are going at each other hammer and tongs about the virtues or pitfalls of encouraging such a big increase in electric vehicles in such a short time, neither of them is keen to get involved in what it means for the future of road funding in Australia.

For a sector like local government, which will go into this campaign demanding that a minimum of $800 million a year be spent on the successful Roads to Recovery program, these things matter a lot.

Whatever the pros and cons of electric vehicles, they cannot be relied on as a future source of revenue to improve and maintain the nation’s road network, at least under current regulations.  While not nearly enough of the revenue from federal fuel excise levied on fossil fuel powered vehicles goes back into roads, it does shoulder a lot of this burden.

The problem is that fuel excise revenue is falling already, even without a troublesome rise in electric-powered vehicles. A recent Senate committee investigation into electric vehicles heard that fuel excise had fallen from 1.6 percent of GDP in 2001-02 to just 1 percent in 2016-17.

Infrastructure Partnerships Australia chief executive Adrian Dwyer told the committee that more electric vehicles would “drive a rapid and terminal decline in the major funding base for Australia's road network”.

“In short, revenue is going down while consumption is going up. This is the exact opposite of a good funding model. While fuel excise is not directly hypothecated, it's clear that a declining revenue base will not support the investment required to meet increasing demand for our road networks,” he said. 

What is clear is that, unless regulations and funding sources change, a big fleet of electric vehicles would make repeats of the Morrison Government’s big announcement on road safety funding last month increasingly difficult to accomplish. 

What to do?

There have been attempts to try and head off a collapse in fuel excise revenue caused by any rapid take up of electric vehicles. These have usually involved the introduction of a road user charge to replace the funds lost through a drop in the use of fuel.

Interestingly, the Australian Financial Review reported this week that the Government recently decided to scrap moves to impose a road user charge on electric vehicles to avoid any risk of political backlash.

While the major parties are unlikely to relish such a debate during this election campaign, it is one that will not go away, whether or not voters buy into an electric vehicle bonanza.

 

Local Government Association of Queensland
LG House, 25 Evelyn Street, Newstead Qld 4006


 

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