Senator the Hon Mathias Cormann
Minister for Finance
MATHIAS CORMANN: Good morning everyone. The Government has decided to give practical effect to our fuel excise indexation Budget measure by way of tariff proposals which will need to be validated by Parliament within 12 months.
That is the same methodology the previous government used to give effect to their increases back in 2008 to the excise and the customs duty on 'alcopops'.
In relation to the fuel excise indexation measure, you would be aware that the 1 August effective date in the Budget has come and gone. We are now revising the implementation date to 10 November.
Those tariff proposals will be tabled in the House of Representatives this week to have effect from 10 November. From 10 November the excise on fuel will be 38.6 cents up from the 38.143 cents which is where it would have been if the Budget measure had passed the Parliament prior to 1 August. There will be a further increase in the usual biannual indexation way on 1 February 2015 and on 1 August 2015.
The impact on households will be modest, but the impact on our capacity to build a stronger, more prosperous economy will be significant. Your typical household using about 50 litres of fuel a week will only pay about 40 cents a week more for their fuel. But of course for the Government, this measure means $2.2 billion in additional revenue over the forward estimates and around $19 billion in additional revenue over the next decade to 2024/25.
As we have indicated, it is our intention that additional revenue will be invested in job creating productivity enhancing road infrastructure and legislation to give effect to that commitment will be part of the legislation to validate the tariff proposals within 12 months.
Just a final point that I would make, obviously, there is interaction between any increases in the excise and various other arrangements such as the fuel tax credit scheme, the Clean Fuels Grant Scheme and the Ethanol Production Grants Scheme. The Government will move to legislate to ensure that there is no negative cash flow effect, there is no negative financial impact on those individuals and businesses that are eligible for the Fuel Tax Credit or for Fuels Grant and Ethanol Production Grants. That legislation will be put to the Parliament with a view of having it passed by the end of the spring session of Parliament. Happy to take questions.
JOURNALIST: Senator, if you aren't able to validate this in the next 12 months, with the revenue, will you refund the fuel companies or the motorists?
MATHIAS CORMANN: Well we are very confident that it will be validated within 12 months. However, the question for Bill Shorten and the question for Christine Milne is whether in 12 months time they want the additional revenue collected through this measure to be refunded to fuel manufacturers and fuel importers or whether they want to see this additional revenue invested in job creating, productivity enhancing road infrastructure, which will help us build a stronger, more prosperous economy, which will help us repair the Budget by helping to achieve over time increases in Government revenue on the back of stronger economic growth.
JOURNALIST: Isn't the practical effect that in a year's time, if you haven't had this validated, you could have millions of motorists presenting the ATO with shoeboxes full of receipts which they expect to be recouped?
MATHIAS CORMANN: No Andrew, that is not the practical effect. In the first year, if you look at the Budget, the revenue from this measure was expected to be $167.5 million in the first year. It will be a little bit less than that because of the later start date. If the measure is not validated within 12 months, and we are very confident that it will be by the way, but if it wasn't validated by the Parliament within 12 months, the money would have to go back to those that have paid the duty, that have paid the excise; it will go back to fuel manufacturers and to fuel importers who would essentially have a windfall gain. There is no obligation on those fuel importers or fuel manufacturers to remit that money to users.
JOURNALIST: Senator Cormann isn't this just a mechanism because you don't have the numbers for it now. You're hoping that end of that at the end of those 12 months because the money is now in the Treasury, that the other parties will just simply [inaudible].
MATHIAS CORMANN: Well this is a very important structural reform. It is a structural reform that will help us put our Budget on a more sustainable foundation for the future. It will help us build a stronger, more prosperous economy. We believe that having collected the revenue over a period of up to 12 months that even the Labor party and the Greens will finally see sense. If I see Craig Emerson, former Labor Cabinet Minister one more time singing the praises and singing the virtues of what a sensible public policy reform fuel excise indexation is, I am going to start throwing things at the television. But the serious point here though is this is that this is a very important structural reform. It is a measure that is long overdue. Back in 2001 when fuel excise indexation was removed, the value of the fuel excise as a proportion of your average fuel pump price was about 42 per cent, it has fallen down to 25 per cent today. We have got to remind ourselves of what the objective is of the measure. The objective of the measure is to ensure that the real value of the excise on fuel keeps pace with inflation, that it doesn't continue to erode moving forward. It is quite unbelievable that Christine Milne as the leader of the Greens would have taken a position in favour of regular reductions in the real value of the excise on fuel. It seems to us to be quite inconsistent with their stated public policy position. Today the Government has made a decision to proceed in this way. We are hopeful that with the benefit of another 12 months, that both Labor and the Greens will see the merit of what we are doing. In a year's time, maybe just maybe, Bill Shorten will start to think about his pre-election costings and maybe, just maybe he will start to think that maybe it is not such a good idea to give that money away.
JOURNALIST: Isn't this really an effort to get around the Senate? Really just a signal to voters that you're prepared to ignore the upper house that they elected?
MATHIAS CORMANN: This is not an effort to get around the Senate. This is using the legislation as it currently stands. This is using the powers and authority that the Government has, courtesy of relevant legislation and of course, as is required by that legislation, the Senate and the House of Representatives will have the opportunity to validate the decision that we have taken within 12 months. The important point here is that the effect of those tariff proposals, the effect of tabling those tariff proposals in the House of Representatives this week is that the tax office and the customs service will be able to start collecting the adjusted rate of fuel excise and duty. And of course, consistent with all of the relevant legal requirements, it will be up to the Parliament within 12 months to make a decision on whether or not to validate that. We are very confident that the Parliament will validate.
JOURNALIST: How much money have you lost through the delay? And the $2.2 billion that you have got here that takes into account the lost doesn't it?
MATHIAS CORMANN: It is about $2.2 billion in fiscal terms. The money that we have lost so far, it is a measure that starts low and slow and builds over time, $35 million is what we have lost as a result of not having the measure passed in time for the 1 August implementation date. But given the revenue that this measure will collect over the next decade, $19 billion or there abouts, that is really just a rounding error.
JOURNALIST: So it is $35 million lost and it will collect the $2.2 billion?
MATHIAS CORMANN: Well the $35 million is obviously a very small figure. It is expected to collect about $2.2 billion over the forward estimates.
JOURNALIST: This is essentially a game of chicken with Labor and the Greens. You are saying back us or next year we will say you handed $160 billion to oil?
MATHIAS CORMANN: This is the Government giving effect to our Budget measures. We said that we delivered the Budget Australia needed to protect our living standards, to build opportunity and prosperity into the future. We said that we would continue to implement all of the Budget measures in an orderly and methodical fashion. This is doing exactly that. We are using the authority that the Government has in the relevant legislation to give effect to this Budget measure. The Parliament will have the opportunity to validate our decision within 12 months.
JOURNALIST: Did you inform the other parties that you are going to be making this announcement and are you considering implementing other Budget measures in a similar way to get around the Senate?
MATHIAS CORMANN: It is no secret that the Government has been having ongoing conversations with crossbench Senators about progressing outstanding Budget measures. I am not going to go into the detail of those conversations and I will let them talk for themselves. In terms of other Budget measures, we will continue to work on how best to implement all of the important outstanding structural reforms that Australia needs in order to put ourselves on a sound foundation for the future and in order to repair the Budget mess that the Labor party left behind. Thank you very much.