Second Reading Speech
Senator CORMANN (Minister for Finance)I move:
That these bills be now read a second time.
I seek leave to have the second reading speeches incorporated in Hansard.
Leave granted.
The speeches read as follows
EXCISE TARIFF AMENDMENT (FUEL INDEXATION) BILL 2015
The Government is determined to build a stronger and more prosperous economy and repair the Budget.
That's why we are continuing to calmly and methodically implement our Budget measures.
Today I am pleased to say that the Government has successfully reached an agreement to re introduce the indexation of fuel excise to inflation.
Restoring the biannual indexation of fuel excise first introduced by the Hawke Labor government is a significant structural reform that will provide a stable and growing source of revenue.
All the revenue raised through this measure will be linked by law to funding roads.
It will provide a source of revenue to enable us to deliver our historic infrastructure growth package of over $50 billion, the biggest infrastructure spend in the history of the Commonwealth.
The agreement that has been reached today will see the Roads to Recovery programme receive a boost of $1.1 billion over the next two years; $300 million in 2015-16 and $805 million in 2016-17.
This funding builds on the additional $350 million provided under the program in the 2014-15 Budget and brings total Road to Recovery funding to $3.2 billion over the 5 years to 2018-19.
This investment will go straight to local councils around the nation to upgrade and repair local roads according to their own priorities. Allocated funding will be distributed according to a formula based on population and road length set by the Local Governments Grants Commissions in each state and territory.
Payments go directly to Councils and are made either on a reimbursement basis or based on the projected expenditure across the forward 6 months.
There are no shortages of good projects for the councils to fund, and under the Roads to Recovery programme councils will have to demonstrate they have not reduced their baseline funding allocation toward roads.
Excise has applied to domestically produced petrol since 1929.
Indexation of excise was first introduced by the Hawke Government in 1983 to ensure that excise continued to grow at the same rate as consumer prices, providing more stability to businesses and consumers.
From March 2001, the rate of excise was frozen at 38.143 cents per litre. This eroded the value of excise as a share of the price of fuel over time and, as a result, the real value of excise has decreased.
The policy announced in the 2014 Budget is for fuel excise to increase twice a year in February and August in line with movements of the Consumer Price Index.
Restoring this indexation is currently implemented by 12 month tariff proposals. These proposals took effect from 10 November 2014 and increased fuel excise from 38.143 cents per litre to 38.6 cents per litre. Fuel excise was then increased in line with Consumer Price Index to 38.9 cents per litre from 2 February 2015.
These two increases total less than a cent per litre and for a typical household consuming 50 litres of petrol a week, the estimated price impact of the indexation of fuel excise has been a modest 40 cents per week.
While the impact on households has been modest, the impact on the Budget is significant.
The indexation of fuel excise will raise approximately $3.6 billion over the five years to 2018-19 and over $23 billion over the next decade.
The reintroduction of fuel excise indexation will provide a predictable and growing source of revenue, which will be used to continue to deliver the vital road infrastructure that Australia needs.
The Bills will also establish the Fuel Indexation (Road Funding) special account.
This account will ensure that the net revenue raised through the reintroduction of fuel duty indexation is invested in road infrastructure through the States and Territories.
Importantly, this measure will not increase input costs for businesses using fuel in off road operations or operating a vehicle with a gross vehicle mass in excess of 4.5 tonnes. This is because these businesses are able to receive fuel tax credits to offset the increased fuel excise paid.
Consequential amendments will also be made to the Excise Tariff Act 1921 in order to simplify the burden on businesses by rounding the applicable duty rate of indexed fuels from three decimal places of a cent to one decimal place.
Madam Speaker, this agreement is a further step that demonstrates the Government is making significant progress in repairing the budget.
However, there is still more work that needs to be done to ensure we return the budget to surplus as soon as possible.
Full details of this Bill are contained in the explanatory memorandum.
CUSTOMS TARIFF AMENDMENT (FUEL INDEXATION) BILL 2015
This Bill is part of a package of Bills that will give effect to the Government's commitment to reintroduce biannual indexation of fuel excise and excise equivalent customs duties.
Specifically, this Bill amends the Customs Tariff Act 1995 so that the rate of excise equivalent customs duty applying to all imported fuels, with the exception of aviation fuel, crude oil and condensate, will be biannually indexed by reference to the Consumer Price Index.
The indexation of fuel excise and excise-equivalent customs duty will contribute to the Budget by raising approximately a net $3.6 billion over the five year period to 2018-19.
Consequential amendments will also be made to the Customs Tariff Act 1995 to simplify the burden on businesses by rounding the applicable duty rate of indexed fuels from three decimal places in the cent to one decimal place.
Full details of this Bill are contained in the explanatory memorandum.
FUEL INDEXATION (ROAD FUNDING) SPECIAL ACCOUNT BILL 2015
This Bill is part of a package of Bills that will give effect to the Government's commitment to reintroduce biannual indexation of fuel excise and excise equivalent customs duties.
Specifically, this Bill establishes the Fuel Indexation (Road Funding) special account for the purposes of the Public Governance, Performance and Accountability Act 2013.
The Treasurer will be responsible for making a determination to allocate funds to the special account. The Deputy Prime Minister and Minister for Infrastructure and Regional Development will then be able to direct that amounts be transferred from the special account in order to provide funding to the states and territories for road infrastructure investment.
This account will ensure that the net revenue raised through the reintroduction of fuel duty indexation is used to assist the Government continue to deliver the vital road infrastructure that Australia needs and will be reported in Budget Paper No. 4.
Full details of this Bill are contained in the explanatory memorandum.
FUEL INDEXATION (ROAD FUNDING) BILL 2015
This Bill is part of a package of Bills that will give effect to the Government's commitment to reintroduce biannual indexation of fuel excise and excise-equivalent customs duties.
This Bill makes consequential amendments to the COAG Reform Fund Act 2008, the Excise Act 1901 and the Fuel Tax Act 2006 as a result of the reintroduction of fuel indexation. These amendments include ensuring that the determination of future rates of the road user charge are made to one decimal place of a cent consistent with fuel duty rates.
Full details of this Bill are contained in the explanatory memorandum.