Grattan Institute fuel tax credit cut proposal would be economic disaster: NFF

Beef Central, 06/02/2023

Melbourne-based public policy ‘think-tank’ the Grattan Insitute has released a report stating that the $8 billion a year in fuel tax credits given to businesses should be cut in half, to help repair the budget and reduce carbon emissions.

However National Farmers Federation president Fiona Simson has warned that slashing the scheme would be “economically disastrous”, and would “light the fuse on a multi-billion dollar tax bomb” that would send a cost of living shockwave down the supply chain.

“Farmers are already battling a cost of farming crisis, with fuel, fertiliser and other inputs at historically high levels. We’re seeing this reflected in the food price inflation causing pain for families at the supermarket checkout.

“Levelling billions in new taxes on the supply chain is a recipe for further inflation,” Ms Simson said.

The Grattan Institute report says winding back the credits could reduce the structural budget deficit by about 10 per cent, or $4 billion a year.

It would also help Australia hit its target of net-zero emissions by 2050, because burning diesel contributes about 17 per cent of Australia’s total carbon emissions.

“There is no business reason why larger vehicles should pay less than smaller vehicles – in fact quite the reverse, since heavy vehicles do far more damage to roads,” the Institute states.

A road tax on tractors

The NFF said that as a road tax, it made no sense to extend fuel excise to off-road vehicles.

“Imposing a road tax on vehicles that don’t use roads just doesn’t stack up. Tractors and boats don’t drive on roads, so they shouldn’t pay road tax. It’s pretty simple.
“Should we also start paying tolls on toll roads we don’t drive on?” Ms Simson asked.

Climate solution a false promise

Perhaps most alarming of all, the Grattan Institute report released yesterday claims that by increasing the cost of diesel for farmers, they will simply use less or switch to alternatives – lowering Australia’s greenhouse gas emissions.

“The Albanese Government has a climate policy. It took a considered plan to the election to ensure Australia meets its climate targets,” Ms Simson said.

“The idea that we start levelling ad-hoc taxes on emissions sources is incredibly reckless.

“It shows us this proposal is driven by ideology, with no regard for economic or practical realities.”

No substitute for diesel

Ms Simson said that there is currently no viable alternative to diesel when it comes to growing and transporting food and fibre.

“Alternate fuels or even small electric tractors are still years from commercial viability,” Ms Simson warned.

“The idea that we’ll simply switch away from diesel is a dangerous fantasy. The only way to use less diesel is to grow less food.

“The report released by the Grattan institute glosses over this inconvenient truth, instead pointing to future technologies not available at commercial scale.

“We have no idea what these might cost, so the cost of living impacts modelled by Grattan are clearly undercooked. We have no idea what this dangerous proposal would cost Aussie households in the long run.

The NFF said its advocacy on this issue would intensify in the lead up to the Budget.

“We’ll be reaching out to all politicians on this issue as the Budget draws closer to ensure the risks of this proposal are fully understood. No politician who understands farming or basic economics could say this is the right thing to do.

“The Treasurer would be wise to rule this out today and give certainty to rural industries,” Ms Simson concluded.

Farmer reaction: David Jochinke

Farming in the Wimmera region in north western Victoria, grain farmer David Jochinke says the proposal to pay fuel excise for off road use would cost his business dearly.

“We use around 80,000 litres of diesel each year to plant and harvest crops,” Mr Jochinke said.

“On a typical farm like mine, the proposal that’s been floated would equate to an annual tax of nearly $18,000.

“That’s on top of high prices for fuel, fertiliser and power that have really pinched in recent years.

“And there’s nothing I could do about this. There’s just no alternative to diesel.”

Source: National Farmers Federation, Grattan Institute


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  1. Peter Dunn, 06/02/2023

    If I can offer a helpful hint, anyone seeking more information on the Grattan Institute should use their binoculars to scan the horizon over their left shoulder.

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