Electric vehicle plan puts brake on fuel tax revenue

The PM’s electric car policy will punch a $2bn budget hole each year by 2030, prompting calls to explain how the reduction in fuel excise will be offset.

Scott Morrison drives a hydrogen-powered car around a test track in Melbourne after launching the government’s Future Fuels strategy. Picture: AFP

Scott Morrison’s electric car policy will punch a $2bn hole each year in the federal budget by 2030, prompting demands from the ­nation’s peak automobile body for the government to explain how the sharp reduction in fuel excise revenue will be offset.

With the Prime Minister predicting there would be 1.7 million electric cars on the road by 2030, the Australian Automobile Association said fuel excise revenue would drop from $13bn a year to below $11bn by 2030.

AAA managing director ­Michael Bradley said a failure to offset the reductions would lead to lower levels of spending on roads and other transport infrastructure.

“Genuine tax reform is needed to ensure revenue is in future collected from all the different vehicles on our roads,” Mr Bradley said. “We need a sustainable revenue model to fund land transport into the future.”

Mr Morrison’s electric vehicle strategy did not outline any measures to offset the reduction in tax revenue, stating instead a “strong economy” would be enough to make up for the shortfall.

But ahead of the 2019 election, Mr Morrison demanded Bill Shorten outline how Labor would make up for the decline in fuel ­excise revenue under a target for electric vehicles to account for 50 per cent of new car sales by 2030.

“He still has not explained what will be the impact of the petrol and diesel excise over the next decade,” Mr Morrison said ahead of the election. “Bill, what is the bill?”

Senior government sources have said the government will not implement road user charges for electric vehicles, despite the measure being pursued in NSW, Victoria and South Australia.

In 2018, Deputy Prime Minister Barnaby Joyce said it was “bleeding obvious” electric vehicle owners must start to pay their way. “You can’t say, ‘I want the roads but I don’t want to pay’,” said Mr Joyce, who was transport minister at the time. Mr Morrison, who in 2019 claimed Labor’s policy for electric vehicles to make up to half of new car sales by 2030 would “end the weekend”, said his plan allowed Australians to make their own choice.

Launching his strategy in Melbourne alongside Liberal MP Katie Allen, who holds the marginal seat of Higgins, he defended his criticism of Mr Shorten’s 2019 policy because it told “everybody what to do”. “I think Australians have had enough of governments telling them what to do. We’ve just been through two years of governments having to tell people what to do … and it’s not something I think Australians want to see more of,” Mr Morrison said.

With fuel excise revenue ­already down as carmakers produce greener and more efficient cars, Mr Morrison said petrol vehicles would not “shut down and electric vehicles start up the next day”. “I know the one thing that ensures that Australians can rely on the essentials that are provided by the governments is a strong economy. What drives your revenues is that you have an economic plan that sees your economy grow and it sees people in work,” he said.

Anthony Albanese, whose electric vehicle policy exempts electric vehicles from import tariffs and fringe benefits tax, said Labor would not take an electric vehicle target to the election, saying Australians “would make their choice”. “I think people will look at Scott Morrison today and this announcement and just shake their head and say, ‘what’s changed?’,” the Opposition Leader said.

“The truth is that all of the auto manufacturers are phasing out internal combustion engines. There is a shift around the world to electric vehicles. Australia’s uptake last year was under 2 per cent. In Norway it was 70 per cent. In the UK it was 15 per cent and rising.

“We are falling way behind. And this is once again a government that was in denial about change, rather than shaping change in the interests of people.”

Mr Albanese would not outline any proposals to make up for the predicted reduction in fuel excise. “We’ll deal with those issues in the fullness of time. But that’s something that will have to be dealt with by all governments,” he said.

The government’s strategy, which rejects European-style subsidies to drive the uptake of electric vehicles, focuses on investment in charging and hydrogen refuelling stations. Mr Morrison said the strategy, headlined by more than $500m in private and public co-investment to build the charging infrastructure, household smart charging and electric vehicle fleets, was a “key part of the overall plan to achieve net-zero emissions by 2050”.

Energy Minister Angus Taylor said Labor’s policy on electric ­vehicles would have “close to zero impact on prices or uptake”.

Electric Vehicle Council chief Behyad Jafari said the strategy was too little, too late. “We’ve got a ­government doing the reverse of everyone else. Fuel efficiency standards and rebates have been in place in the rest of the world for over a decade,” Mr Jafari said.