We have a modern trend of putting in brackets the attributes of a bill—the talking points, if you like, or the government’s propaganda. This bill is called the Treasury Laws Amendment (Electric Car Discount) Bill 2022. Sometimes there are more accurate parenthetical descriptions of bills. Instead of having ‘electric car discount’ in the brackets, this one should have ‘tax cuts for the rich’ in the brackets. That’s really what this bill is about. The government provided no evidence to the Senate inquiry on this bill that this bill will lower greenhouse gas emissions—nothing at all. I will come to why they haven’t been able to provide that evidence.
As Senator Cadell has outlined, this bill will make it harder to fund our road network in the decades to come. By God, we need investment in our roads. In the last sitting period I drove from Rockhampton through Senator Cadell’s patch in the Hunter—I went down the New England Highway—to get here. Then I had to drive all the way back. We need a lot of investment in our roads, especially rural roads. This bill will make that harder.
As I said, the primary effect of this bill will be a massive tax cut for people on very high incomes, without any real evidence that it’s actually going to generate much. I think it’s important to go through the figures here to let people know exactly what we’re talking about—the size of the tax cut we’re talking about for people of very good means. The Australian Taxation Office website has a fringe benefits tax calculator. This bill effectively exempts purchases of electric cars from fringe benefits tax. So when you go and use that calculator, if you bought an electric car worth $50,000—that’s a pretty cheap electric car; they start at about $40,000 and most of them would set you back $60,000 or $70,000, sometimes even more, but let’s be generous to the government and say a $50,000 electric car—that would provide an annual fringe benefit of $9,972.60. That would come off and be deducted from your taxable income under this bill. You don’t get all that saving; that’s what your taxable income would fall by, so then the benefit to you depends on your marginal tax rate.
Of course, the more money you earn, the higher your marginal tax rate is and the greater that exemption from fringe benefit will be to you. If you’re on $200,000 a year, that’s a very good wage, not uncommon—as I’m aware, I’m on about that amount of money—here in this place. This would be a very good bill for politicians, I should say, for those listening out there. Politicians will do very well out of this bill. But if you’re on $200,000 a year—as I said, that’s a well above average wage, about double the average full-time wage in Australia—you’ll be on a 50 per cent marginal rate, roughly, so that $9,900 deduction will actually help you out $5,000 a year. You’ll be $5,000 a year better off thanks to a Labor government. In this country the Labor Party is giving a rich person, someone on that sort of money, a $5,000 free kick a year. Amazing. If you’re in the lowest tax bracket, if you’re earning only 50 grand a year out there—not the lowest tax bracket but the lowest one above which you pay tax—your benefit will be just $1,000 a year.
We hear lectures often from the Labor Party about how they try and represent the poor. They accuse us of giving tax cuts to the rich and of cutting services to the poor, and here we have a bill, one of the very first bills that this Labor government have introduced, which is all about giving massive tax cuts to the rich. You have to wonder how many extra electric cars will be bought thanks to this bill. We don’t know. There has been no evidence provided by Treasury, the government or the committee. I know people, some friends of mine, who do very well and earn very good wages. They are rubbing their hands with glee because they’re going to get these multiple-thousand dollar tax deductions when they’ve already bought Teslas. Keep in mind this bill is backdated to 1 July this year, so anyone who has bought a Tesla in the last few months, even if they didn’t know they were going to get the deduction, just gets a free kick. ‘Here you go. Thank you for electing a Labor government. Here’s 5,000 bucks a year,’ to a rich person. That’s a year. Over the life of the car it’ll be tens of thousands of dollars, as Senator Rennick pointed out.
This bill, if nothing else, will go through this place, because they’ve got partners in the Greens here. The average income of Greens voters is way higher than any other political party in this place, so they have that constituency. They have an excuse, the Greens. Their voters are on $200,000 a year, quite often, so we know they’ve got to look after their voters. The Labor Party’s voters are still about the average income, but I don’t think they’ve even realised yet—they’re going to find out, especially in this term of government—that the Labor Party aren’t really for the working class anymore; they are for the rich, well-educated, tertiary-educated professional classes in this country. Good luck to those people. A lot of my friends are those people, but the Labor Party are out to protect their interests, not the working class in this country, who cannot afford to buy even a $50,000 Tesla—I don’t think you can buy Teslas for that price, but a $50,000 electric car—let alone a $60,000, $70,000 or $80,000 electric car. That’s just beyond those people who are struggling right now with higher living costs. They will get no benefit from this particular bill.
As I foreshadowed earlier too, on top of all that, on top of the regressive nature of this bill, it’s not even clear that this bill will lower carbon emissions at all. As I mentioned, there has been no evidence provided by the government that this will encourage additional electric vehicles to be purchased, and actually there are very large questions about how much electric cars themselves will lower carbon emissions, because the basic problem here is that the manufacture of electric vehicles is extremely energy intensive and by being energy intensive is therefore carbon-emissions intensive. In fact in a recent study by Volvo on one of their vehicles, on the equivalent of the XC40 for their electric fleet, that car actually created 70 per cent more carbon emissions in its manufacture than a traditional internal combustion engine vehicle. So the electric car has 70 per cent higher emissions when it comes off the lot than the internal combustion engine car. So there are higher emissions, and from day one of this bill coming into effect—if it does mean that additional electric cars are purchased and more are produced—then there’s no doubt that it will actually increase carbon emissions over the next few years.
Of course, electric cars don’t use petrol and therefore, potentially, have lower carbon emissions in their use, but they do need electricity to be charged. So what’s crucial to the carbon emissions calculations are what types of electricity electric cars use to charge. This Volvo report had some very good analysis of that. It showed that if the electricity you source for your electric vehicle came from the global average of different fuel types, then coal accounts for about 40 per cent of that and gas is about 15 per cent. So you would be looking at close to half of your electricity probably coming from fossil fuels. If that’s the electricity grid that you charge your car from then you’d have to drive the car 110,000 kilometres before it became carbon neutral. That’s just to be at the same amount as the internal combustion engine—not better! It would just break even with the internal combustion engine after you had driven 110,000 kilometres.
The average Australian drives 13,300 kilometres in a year. So the average Australian would need to drive the car for eight years—eight years!—before they could break even. There wouldn’t be any savings, they would just break even. The Labor Party came to government saying that they’re going to reduce carbon emissions by 43 per cent by 2030. By my maths, that’s in how many years? Eight years! That will be in eight years time. So this bill will actually increase carbon emissions from now—global carbon emissions, because of course these cars will be built overseas—over the next eight years. That’s because all these electric cars will be carbon positive for the first eight years of their lives, on average.
Why are we doing this? What’s the point of this? I should add, as a bit of a footnote to this, that that analysis is based on the global fuel electricity mix, as I said, but in fact Australia has a more carbon-intensive electricity system than the rest of the globe. We get about 60 per cent of our electricity from coal and another 20-odd per cent from gas, so our particular break-even number is different. I don’t have access to the modelling to do my own figures on it, but you’d actually have to drive one for longer. So I’m being generous to the government here; it would probably be 10 or maybe 12 years of driving here in Australia before you got to carbon neutrality.
Really, we have to wonder what this is all about. If we’re serious about reducing carbon emissions, why are we spending so much money on cars that are much more carbon intensive? You have to wonder—and you have to come back to the money. That’s what this is about. It’s about the money and it’s about giving people a tax break to buy a new car. If they can afford it, good luck to them—
Senator Rennick: It’s ideology.
Senator CANAVAN: Well, I don’t know if it’s ideology, Senator Rennick. I think it just comes down to money. It’s just that people want to have a subsidised vehicle. Good luck to them, but we’re approaching a trillion dollars in debt and we have to get our house in order—and we’re coming out of the coronavirus period. I don’t think we have the money to provide very, very rich people in this country with a subsidy for a new car. I don’t think that should be a fundamental priority of this nation.
I also want to come back to Senator Cadell’s excellent point about the fact that electric vehicles are already subsidised, in a sense, or, at least they get favoured treatment in our overall tax system. Electric cars are not subject to any kind of fuel excise. We don’t hype that fuel excise. I think it’s almost 40c now on petrol or diesel when you go to fill up your car. About 40c of that comes back to Canberra here. It doesn’t directly go back to roads, but the basic system is that we put that tax on fuel so that we can have funds to invest back into roads, and especially into rural roads that aren’t doing so well. We spend about the same amount of money that’s raised from car registration at the state level and the fuel excise on roads every year.
As electric cars continue to be in demand, that revenue source will dry up and we won’t get that fuel excise anymore. So there is a real question here about how we fund our roads. Of course, those people buying electric cars already get that benefit. They already get that now. They don’t have to pay a fuel excise to drive and run their car. It’s an open question how we will tackle this issue going forward, but there actually already is an in-built subsidy to electric cars right now. This bill just perpetuates that subsidy and not in ways that seem as if they will progress any particular public good.
I think we also need to understand here how these electric cars are made. I said before that they’re very carbon intensive, but the other issue here is that the minerals and techniques that are used to create batteries have potentially other environmental downsides as well. It’s something that goes complete unremarked, especially by the renewable energy industry, that production of cobalt, nickel and lithium in some countries can be extremely environmentally hazardous. There are ways of doing this properly—and I would argue our mining industry in this country does generally do things properly—but that comes at a certain cost. The production right now of especially minerals like cobalt is done largely in developing countries. Cobalt is produced largely in the Democratic Republic of the Congo, where there are terrible labour standards and also shocking environmental outcomes.
The reason for this is that those minerals that go into batteries—unlike fossil fuels like petrol, oil, gas and coal—aren’t easily obtained in the natural environment. Coal, oil and gas, generally speaking, are contained in large deposits and are quite easily extracted without having to do too much to them—maybe a bit of washing with water in the case of coal. In the case of these hard rock minerals, like nickel and cobalt, you have to engage in serious use of chemicals to extract the somewhat rare ores within the overall rock that you’ve mined. There’s a huge amount of waste, a huge amount of energy and, yes, a huge amount chemical use. As I say, if you do that properly, you can protect the environment—but it’s costly and it takes significant regulation. However, in countries like Congo, you don’t have those regulations and you have terrible environmental pollution of rivers and environmental wastelands.
This bill does nothing to set any standards. While we are doing this, why don’t we set standards? Why don’t we say we’ll subsidise only cars that have ethical standards for the sourcing of cobalt and nickel? Again, it comes back to the money. That’s what this is about. We won’t set those standards because that would interrupt the money flows that are going to people in the renewable energy industry from the Greens and their voters, and of course the rich people will get a massive big tax cut thanks to this so-called Labor bill.
