Economists call for petrol tax hikes

Laine Gordon

By Laine Gordon

4 min read

Many drivers will tell you they are feeling the pain of rising petrol costs, but economists at the Australian National University say motorists would benefit from a higher tax on petrol.

It’s a tough call but, after comparing global petrol prices, they say if consumers were forced to pay more at pump we would use less petrol and buy more efficient cars.

The study spanned 13 years and 132 countries looking at the effect of petrol prices on the take up of fuel-efficient vehicles.

One of the authors of the study, economist Dr Paul Burke said: “Higher prices lead to consumers using less petrol and also consumers deciding to purchase cars that are more fuel efficient”

“We expect that to happen, but we worked out how big the effect is in our study.”

The study also looked at the impact of the 2001 decision by former Prime Minister John Howard to stop the automatic indexation of the petrol tax which, he says, effectively froze petrol excise duty at 38.1 cents a litre. 

“Across the economy the effect is quite big. So we estimate that the fuel economy of new vehicles now sold in 2013 is about 2 percent worse that it would have been,” he said. “We’re using, now, probably about 3 percent more petrol as a result of that decision.”

He wants to see the petrol excise duty once again rise with the rate of inflations, which he says would generate more than $5 billion of extra revenue annually.

Critics have hit back at the findings, claiming there are other ways to encourage motorists to reduce their reliance on petrol.

Among those is Wendy Machin, the president of NRMA Motoring and Services, who said it would be better to reward motorists who opt for fuel-efficient vehicles such as with access to transit lanes or the best parking spots.

“I think you go out and ask a lot of families if they want to pay increasing amounts for their fuel, they’ll say no,” she told the ABC.

“People I don’t think feel it is their responsibility to pay for these changes. I think they are looking to their leaders and to public policy to come up with some better solutions other than just taking them to death.”

Tips to slash car costs

  • Shop around: finding the cheapest petrol price in your neighbourhood is now as easy as downloading a smartphone app or comparing online. For instance, MotorMouth’s Petrol Price Finder enables motorists to search by suburb or postcode online or sign up to receive email alerts as petrol prices move.
  • Drive more economically: the federal government’s Green Vehicle Guide offers tips for motorists to reduce running costs. These include driving at a safe distance from the car in front so as to anticipate traffic movements and avoid sudden breaking and accelerating, which can use more fuel. Removing excess weight from the car, removing roof racks when not in use and keeping tyres correctly inflated can all help to reduce petrol consumption.
  • Save $1000 on your loan: while it won’t reduce your petrol consumption, refinancing to a lower rate car loan will likely give you the biggest bang for your buck. For example, on a $10,000 personal loan RateCity shows that switching from the average interest rate of around 12.73 percent to one of the lowest rates at 6.34 percent, could save borrowers more than $1000 over three years. The savings are even greater if you’re switching from one of the highest rates of interest at around 18 percent, which is why it pays to compare personal loans using a site like RateCity.
  • Go green: before driving away in your new or used car consider the vehicle’s fuel economy. All new light vehicles sold in Australia are required to display a Fuel Consumption Label to help motorists makes informed choices about the environmental impact and running costs. Or check out RateCity’s recent story about the cheapest new cars to run.
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