Matt Smith: Was the $1m levy on electric cars in the State Budget intended to be a distraction?

Hidden among the sea of red in the stuff-of-nightmares State Budget was strange $1m levy on electric cars – so why did the Treasurer do it?

Treasurer Rob Lucas this week handed down a State Budget that was the stuff of nightmares for people in his position.

Even he described it as “eye-watering” and “drowning in red ink”.

The budget predicts a $2.59bn deficit for this year – and debt ballooning out to $33.2bn in the forward estimates. They are numbers no one could have ever predicted before 2020. Historic and – that word again – unprecedented.

But he has got away with it, in the main because almost everyone agrees – including equally thrifty Reserve Bank governor Philip Lowe – that debt and deficits are needed to drag the country out of the economic crisis unleashed by the pandemic.

The budget still left some unanswered questions, most notably about what was going to replace the Adelaide’s V8 street race, Superloop.

It was also criticised by some, including outgoing Master Builders Association state chief Ian Markos, who argued it was missing an “opportunity to announce major new commercial building projects that would protect jobs and drive South Australia’s social and economic recovery.”

SA Treasurer Rob Lucas hands down the 2020-21 Star Budget. Picture: NCA NewsWire / Kelly Barnes

But, in the main, it was warmly received, with the caveats that economic growth forecasts are bold and the entire document needs a rewrite if Australia does not have a population-wide vaccine for COVID-19 by the end of next year.

But for a budget with years of historic deficits and debt that dwarfs levels even seen at the time of the State Bank collapse, it was a $1m revenue raiser that appears to have attracted the most interest, including leading the Opposition’s question time attack this week.

If one was to be overly generous, it could be suggested Mr Lucas had placed a proposed road-use tax on electric vehicles into the budget as the ultimate distraction, a sleight of hand if you like. It is one of the only reasons it seems to make sense.

Only last week, Premier Steven Marshall and Energy Minister Dan van Holst Pellekaan were spruiking the benefits of electric vehicles, “allocating $18.3m in the upcoming Budget 2020-21 to jump-start the uptake of electric vehicles in SA”.

The pair announced additional charging stations and a bid to move the government fleet to electric.

Mr van Holst Pellekan said there were two main barriers to electric vehicles that the policy would target – a lack of charging infrastructure and the availability of affordable models.

The State Government could now add a third – a road-use tax, unlike any other in the country. Mr Lucas’s argument for the tax is that electric vehicles don’t use petrol, which attracts a fuel excise tax that creates billions of dollars in revenue.

An estimated $10bn is generated by the tax each year across the country, but the figure is slipping annually as vehicles become more efficient.

A combination of the GST and the excise means owners of Australia’s estimated 17 million cars pay about 40c in tax for every litre of petrol they buy.

It seems like a pretty good argument to buy an electric vehicle.

And there is a clear question for Australia about how this revenue is going to be replaced.

But it does not seem to be a question that South Australians really need to answer. It should be done at a federal level, with consistency.

On Tuesday, Mr Lucas suggested the other treasurers would follow his lead, but by the end of the week NSW was only considering it and Tasmania went hard the other way, amping up subsidies.

But if you’re wondering why the Liberals have gone down this path, it’s also worth questioning the motives behind Labor’s opposition to the policy.

Drivers of older inefficient vehicles are the hardest hit by the tax. SA has the reputation for owning the second-oldest vehicles, on average, in the nation. Many traditional Labor voters live in the outer suburbs and would spend a much greater proportion of their income on petrol.

Electric vehicle drivers are getting a free ride – for the benefit of the environment. But, it’s a free ride, nevertheless, and it’s the way many South Australians, who could only dream of being able to afford one, would see it.

An industry website this week estimated about 50 electric vehicles have been reported as sold in SA so far this year (about 7 per cent of the 800 electric cars reported as sold nationally).

Labor is right in pointing out the lack of detail in the Liberals’ policy that does not even have legislation underpinning it yet.

And Mr van Holst Pellekan’s suggestion that GPS devices could be used to track electric vehicles is bordering on ludicrous.

There is little doubt electric vehicles are the future for Australia – and they should be.

But in the context of a once-in-a-lifetime, post-pandemic budget, it is difficult to see it as little more than a handy distraction, which will have little or no impact on mainstream voters, or those outside the political bubble.