15 January 2018
Topics: Road user charges
Question: Do you believe that owners of low emission cars are paying their fair share of excise at the moment?
Paul Fletcher: We have a system in Australia of funding roads where we collect—in 2014–15—around $28 billion of revenue; $24 billion of that was spent on roads, on building new roads, maintaining roads, operating roads, and a significant part of that revenue comes from fuel excise. Now what that means is that vehicles that don't use fuel don't pay through the excise system. Of course they do pay other kinds of taxes, but as we look at the future which could well involve a higher percentage of electric cars on the roads and more fuel efficient cars on the roads—and those are good things—we need to think about how do we ensure that our system for funding our roads remains sustainable?
Question: And what sort of changes are you contemplating to road funding? Will you embrace something like road user charges?
Paul Fletcher: What we have said we're going to do is kick off a review to be chaired by an eminent Australian to look at the whole question of how we fund and pay for roads in Australia. Now that's something that was recommended by Infrastructure Australia in its 15 year plan. It was also recommended by the Productivity Commission. And so these are important questions to have a look at. Now, any change in this area is a 10 to 15 year journey and what we need to start doing first of all is getting a very clear, detailed understanding of how we collect the funds that pay for roads today and some of the fairness issues. For example, people in rural Australia, people in outer suburban Australia, are typically driving much bigger distances. So they're paying more because they're paying a fuel charge that relates to distance.
But another fairness issue is that if you drive an older, less fuel efficient car—for example a 10 or 15 year old Holden Commodore—in effect, through the fuel excise system, you're paying about 4.5 cents a kilometre to use our roads. If you drive an electric vehicle through the fuel excise system then you're not paying anything. So these are all questions we need to have a look at. And if, as seems very likely, the proportion of electric cars and certainly more fuel efficient cars on the roads increases—and that's a good thing—we need to make sure our system of funding roads remains sustainable as we have those changes. Now this is a longer term reform process, it's not about any immediate change but it is something the Turnbull Government wants to have a look at.
Question: When do you expect to make a decision on this funding overhaul and will it happen in this Turnbull Government?
Paul Fletcher: You certainly won't be seeing any decisions in this Turnbull Government. What we will be doing is kicking off a review which will be taking a very careful, fact-based look at all of this. It'll be coming forward in due course with some recommendations. But this is a 10 to 15 year reform journey. It's something that's been recommended extensively that we look at this—and we are prepared to have a look at it—but we won't be making any changes unless we can be satisfied that what it produces is roads that are better, it's a fairer system and has other benefit. Of course it will only happen if state and territory governments also agree with the Federal Government. So this is a long-term reform journey but it is a question worth examining.
Question: The latest data showing pollution from cars and trucks is still the main drivers of Australia's increasing carbon emissions. We've committed to cutting our emissions and if you embrace road user charging, for example, aren't you abandoning one of those price signals which can be used to encourage people to take up low emission technology and drive down emissions?
Paul Fletcher: Oh look, not at all. And in fact, if you visit, as I have, California and Oregon to understand some of the reforms they're looking at where they're also looking at different approaches to funding the road system as an alternative to their equivalent of a fuel excise system. One of the reasons they're looking at it is precisely because they expect and they're seeing an increase in the uptake of electric vehicles and they certainly want to encourage that.
Here in Australia, my colleague Josh Frydenberg, Energy and Environment Minister, and I form what's called the Ministerial Emissions Forum and we're having a close look at policy measures to do with vehicle emissions. We've issued a number of papers over the last 18 months and there's more work underway on that front.
Question: Do you agree with Josh Frydenberg who's predicted that electric cars will begin to flood the market within the next five years or so; do you think that's likely?
Paul Fletcher: Certainly what we are starting to see in the global market is indications of a quite significant change and I think it's very likely that if we see a much increased take-up of electric cars globally that the same pattern will be reflected in Australia. We're not there yet, but I think it certainly looks like that's a direction we'll be heading in.
Question: Shouldn't people be rewarded though for embracing low emission technology rather than being slugged with extra charges?
Paul Fletcher: Well what is very important is that we have a system to fund and pay for roads that is sustainable and also one that makes sense and adapts to the changes that we can expect. And certainly what we are seeing is more fuel efficient vehicles—that's a very good thing—and what is likely to have happen is an increase in the proportion of electric vehicles—also a good thing. But of course at the moment what we need to recognise is that of the $24 billion a year we spend to build, maintain and operate roads in Australia, a large proportion of that comes from the fuel excise. So if we're going to shift to a system—over time, not immediately, but over 10, 20, 30 years, where a much larger proportion of vehicles are electric vehicles—it's important we're also having a look at our system of how we fund roads so that it's consistent with that and sustainable. So there are changes coming over time and certainly we want to have a look at the way that we fund and pay for roads, but this, I emphasize, a long-term reform journey and we're going to establish a review chaired by an eminent Australian to have a very thorough and careful look at these issues.