Grattan Institute plan would ‘devastate the trucking industry’

The Australian Trucking Association (ATA) has predicted the trucking industry would be decimated if the Grattan Institute’s proposal to dramatically increase the fuel tax on trucks succeeds.

If adopted, the report would increase the effective fuel tax paid by trucking businesses by 20.5 cents per litre, from 27.2 cents per litre to 47.7 cents per litre. “The effective fuel tax on trucks should be set to recover the cost of the roads we need, and not inflated by extra costs or poor state government spending decisions,” ATA Chair David Smith said.

The Grattan Institute’s report says the cost to the general public would be tiny: “The impact on households would be extremely small: prices at the supermarket would increase by an average of about 0.35 of 1 per cent – or 35 cents on a $100 grocery shop,” the report says.

However, the ATA repudiates this, saying: “The plan would impose higher costs on rural and remote communities. The Grattan Institute concluded that its tax hike would only have a small impact on consumer prices. Its modelling is based on an average figure, though. The tax hike would have a much greater impact on rural and remote communities, where the cost of transport is higher.”

The report implies that the cut in fuel tax credits would be more of a punitive measure against businesses that run big trucks, as they’re heavier and use more fuel.

“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 report says.

“Heavy on-road vehicles should pay the same rate as utes, vans, cars, and small trucks used by businesses.

“Off-road vehicles and machinery should still be eligible for fuel tax credits, but at a lower rate than now, to reflect the damage their carbon emissions cause to the environment and community.

“Cutting fuel tax credits would be a win-win: it would shrink the budget deficit and help Australia hit net-zero carbon emissions by 2050,” the Melbourne-based think-tank concludes.

David Smith says the Grattan Institute’s proposal would spell disaster for the trucking industry – and ultimately for consumers.

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“There is no way that any transport business could survive this,” Mr Smith said. “Diesel is our biggest cost. We’re already fighting ridiculous fuel prices [and] this would be straw that breaks the camel’s back.

“Ultimately, our customers would have to pay the extra cost. But on the way through, many trucking businesses would fold. And costs in rural and remote areas would go up even more.”

The ATA says that trucking is an industry of small and medium businesses. In June 2022, almost 58,000 of the industry’s 59,100 businesses had fewer than 20 employees, and 31,600 trucking businesses had no employees (ie: the only people working in the business were the owners). These businesses operate on tight margins.

The ATA’s research shows that only a third (34 per cent) of trucking businesses can pass on increased fuel costs (including reductions in fuel tax credits).

The businesses that can raise their charges are rarely able to increase charges by more than CPI.??

If the fuel tax credits were abolished, many trucking businesses would lose money and need to close.

You can read the Grattan Institute's report here.