Buzz kill

The few who can afford electric vehicles may get a buzz out of driving them, but it is the poor who will be shouldering a greater burden of paying for our roads. By Nick Cater.

Not everybody would have winced at prices at the bowser this weekend, which nudged $2.50 a litre in parts of Sydney. Mike ­Cannon-Brookes took time to tweet: “Kudos to the Moss Vale Services Club for having an NRMA double EV charger in the carpark.

“Charging my car while getting a schnitzel at the RSL with the kids felt like a new future for ­Australia, one that was nicely ­connected with our past.”

Free electricity is just one of the perks electric vehicle owners enjoy. The operators of public charging stations hint that they will one day be monetised, but for now the cost of most of them is zero.

EV drivers pay nothing directly for the use of roads either, except in Victoria where a 2.5c-per-kilometre levy was imposed last year, about half as much as an average petrol vehicle driver will pay in fuel tax. In most states, EV stamp duty is waived or heavily discounted, ditto vehicle registration charges. The ACT government offers interest-free $15,000 loans for EV purchasers.

It is the kind of inter-jurisdictional omni-shambles to which we have become accustomed in climate policy: inefficient, confusing and prone to unintended ­consequences. The overall effect, however, is a transfer of wealth from the poor to the rich that will grow larger over time if left ­unimpeded.

The Albanese government has pledged to add to the implicit and explicit subsidies. It plans to exempt EVs from the 5 per cent import tariff that applies to some electric cars, knocking $2000 off the price of a $50,000 Nissan Leaf. It will waive the 47 per cent fringe benefit tax on electric cars that are provided through work for private use.

Which will be nice for some, since EVs are apparently a buzz to drive. A Tesla Model 3, for example, can outsprint a V8 Maserati Ghibli off the lights going from 0-100km/h in 3.3 seconds. Yet they will remain out of the reach for now for most middle-class Australians, particularly those out of the cities where infrastructure is sparse. Electric dual-cab utes are on the way, we are told, but for now the range of available models is pitifully small.

EVs account for about 2 per cent of the market but, as the ­proportion grows, drivers of diesel and petrol vehicles will shoulder a greater share of the cost of maintaining and building roads. The burden of fuel excise falls more heavily on drivers of older, less ­efficient vehicles, and those with long commutes. EVs, meanwhile, have initial high costs which deter low-income purchasers. An 18-year-old on the Central Coast of NSW driving a 10-year-old Ford Falcon, for example, pays 22.2c per litre of fuel to upkeep roads that Tesla drivers use for free.

In September, this will rise to 44.2c when the temporary cut in the levy introduced in Josh Frydenberg’s April budget expires. Labor has made it clear that it will not extend the cut, taking us ­further to the era of $3 a litre.

There was a time when the Labor Party would have leapt upon social and economic injustices like this. Yet its zeal over climate change has largely eclipsed concerns about equity with scant regard for the disproportionate burden that rising energy prices place on the poor. Domestic electricity and gas account for as much as 5 per cent of disposable income for families in the lowest quintile, compared with a little more than 1 per cent for those in the highest.

Yet Labor remains evasive about these regressive consequences, insisting its 43 per cent 2030 emissions reduction target will somehow make power bills lower. Yet, with average wholesale prices in NSW averaging $407 per megawatt hour in June, 150 per cent higher than the same period last year, larger power bills are inevitable.

The Coalition’s spell in opposition gives it the luxury of being able to start from scratch in ­designing a pragmatic response to climate and energy, free from the short-term thinking and kneejerk rejoinders that has characterised this policy domain for the past decade and a half.

It should begin where the party of Robert Menzies must, by considering the lot of the forgotten people, those outside the fashionable suburbs, unburdened by undue wealth or influence, who pay a disproportionate part of the cost for reordering the world in line with the moral sensitivities of the vocal elite.

Equity must be the principle that animates the centre-right’s thinking. It must be honest about the cost of emissions reduction, ending the mindset that insists that a fundamental shift in the economy requiring untold billions in investment can be achieved for free. Social and economic justice demand that the burden is equally shared.

Rather than restore excise duty, the opposition might consider what steps could be taken to replace it with a fairer method of taxing the cost of road use. Road pricing reform has been talked about for years, but the imagined political cost has prevented its pursuit.

The Victorian government’s decision to tax electric vehicles per kilometre based on a compulsory annual odometer check provides the chance to consider it again. NSW will introduce a 2.5c-a-kilometre charge in 2027, and other states may follow.

It begs the question of why all vehicles might not be taxed this way, through an annual odometer return in its simplest form and through the introduction of more complex road pricing based on time and location once the technology allows. If EVs or hybrid ­vehicles are to be subsidised in the form of a lower charge per kilometres, those handouts should be ­explicit and justified.

Introducing a fairer way of charging for road use would rival John Howard’s GST for complexity, requiring the co-operation of state governments and a willingness to make trade-offs.

Yet an opposition that is not prepared to countenance serious reform will have little to offer the electorate in 2025 except a continuation of the same sub-prime, jerry-built, focus-grouped responses to the sentiments of the day. The opposition must remember that the Liberal Party wasn’t put on earth just to win elections, but to win something for the country.