2016-06-09
Mr BARBER (Northern Metropolitan) — I have been in this Parliament I think for 10 years, so this must be the 10th time I have made the speech I am about to make, and that is that this is another missed opportunity for state taxation reform.
[Speech was interrupted.]
Mr BARBER — Mr Mulino is about to hear me say it for the second time. I do not know if my speech gets better every year; I am sick of making this speech.
We are in the middle of a national election, where tax reform has been tossed around and even used as a political weapon by one party against another. There was talk of company tax cuts and income tax cuts. There is currently a debate, I believe, in the realm of superannuation about how that is to be treated. I believe there is the taxation regime of money both going into superannuation and coming out the other end, and both are up for debate. There is even a sort of fairly wacky proposal that the states with their vertical fiscal imbalance could take back and start levying their own state-based income taxes state by state.
Well, 'elephant in the room' is a bit of an overused term these days, but it is clear from every economist and many, many politicians who have spoken on this issue over the years as well as all those others who live in the real world — that is, the various industries and product markets which are taxed under state jurisdiction — that not only are state-based taxes incredibly inequitable and inefficient but, it is said, Victoria's particular tax mix is the worst of any state.
What this bill does is take stamp duty on property transactions — which is an incredibly inefficient and distorting tax — and gets the state even deeper into the hole, because now we are going to be even more dependent on it. Not only that, but the other particular tax — the foreigner tax, for shorthand purposes — then starts to distort further the way the property market operates. Under one version of the rationale, the Treasurer, Mr Pallas, thinks it improves things, but under other versions of the rationale that have been put forward, it is simply about soaking a group of people who do not vote. I cannot for the life of me see the economic merit in this tax. Its main merit appears to be that it is a tax on foreigners, and they do not vote, so ha-ha! Ten out of 10 for political cleverness.
Thirdly, in that same exercise the bill actually makes more complex the administration of stamp duty on property transactions, because now you have to work out who a foreigner is and what the share is of an entity that they might own and so on and so forth, so it actually adds a huge administrative burden on both the State Revenue Office and on those doing property transactions as well, so it makes things immeasurably worse on top of what is already a very bad, regressive and distorting tax. The reason it is so distorting is that when you tax something, people will try to avoid the tax by avoiding that thing. What we are talking about here today is taxing transactions on property — the buying and selling of houses and residences and commercial properties and even land and the other things that occur during the development process.
It is distorting for a range of reasons. First of all, people will invest less in that particular asset class than they might have otherwise because it is now a taxed asset class. That is the very reason why we want to tax carbon: we want people to produce it less. There are also the distortions that come from just the inability to upsize and downsize your house with your different stages of life or to pack up and move from one side of the state to the other; you have to get hit with a lick of, on average, around $30 000 of stamp duty every time you move to another part of the state. This has all been outlined at great length and in detail in numerous reports over the years, including one that was commissioned here in Victoria by Treasurer Brumby and of course the world's longest resignation letter in public sector history, the Henry review. They made it very clear that what we needed to be doing was shifting away from a tax on transactions and towards a tax on an asset itself — a broader based land tax.
Acting President Patten, you are already halfway to supporting me on that one, because you want churches to start paying land tax on their land. I just want to broaden it and remove some of the distortions that create different ownership structures or different land uses and that encourage people, yet again, to sort of shift around within the tax base and try to avoid the tax. That a lot of time and energy is being spent on avoiding paying a tax is itself another form of economic deadweight loss, and I am pretty sure that the government, in passing the bill today, is going to make that situation worse.
However, I am not seeking a whole range of amendments to the bill, because frankly there is no support for that. I have seen it time and again with Labor and Liberal members, and here it was again this morning. By interjection I asked Mr Rich-Phillips from the Liberals if he was going to move any amendments in relation to the stamp duty changes, and the answer was no. He colourfully illustrated what he called the 'Premier's broken promise'. Maybe someone should have asked the Liberal Party during that same election campaign, 'If Dan tries to break his promise and lift taxes, will you back him?', because that is exactly what it is doing here today. He might not like what the Premier is doing, but Mr Rich-Phillips is the guy who is actually providing the votes to give Mr Andrews his broken-promise tax and his extra $485 million or so, I think it is, from the foreigner tax.
So much for economic rationality. There is one small piece of economic rationality in this bill, apart from the administrative bits and pieces, which of course we will be supporting — that is, the coal tax itself. Whatever Mr Rich-Phillips and his friends have said about this tax, let us make it very clear. It is levied on coal, and coal royalties are calculated not by how many tonnes of coal but in fact by how much energy content there is within the coal, because our coal has a lot of water and a lot of variability, depending on where you mine it. It is calculated on the gigajoule, and they have to work out how to measure that. Effectively this is going to wash through the energy market at around about $2 a tonne of CO2, because in Victoria the average megawatt hour of electricity probably causes about 1.1 tonnes of CO2 to be emitted.
It is not always the average but the marginal megawatt hour of electricity that is most important here. If we are adding $2 a tonne of CO2, we are probably adding something like, roughly, $2 a megawatt hour. The average megawatt hour might sell at about $40 in wholesale markets. You are putting about $2 on top of that, and it is on coal. It is not on other fuels that are going to fuel our energy system. They have not worked out a way to tax the sun or the wind yet. It is not going on natural gas and it is not going on biomass or even emissions from landfill gas or other forms of waste, but it is going on coal, and coal is the bulk of the pollution coming out of the energy sector here in Victoria.
Mr Rich-Phillips is absolute convinced, because he needs to be, that the Victorian brown coal Latrobe Valley generators will pass this directly through to the consumer. There are some real problems with the way the energy market operates in Victoria. There are problems in the retail part. There are problems in the distribution part. There are problems in the sense that there are a whole range of regulatory barriers to entry that mean it is not really a level playing field in terms of the transformation of the energy market. But in relation to those generators that are currently hooked into the grid, it is actually a pretty competitive market. Just look back over the last few months. This data is available for anybody to download through the Australian Energy Market Operator. With the wind blowing like hell, the wind farms here and in interconnected systems, such as in South Australia, have been going so flat out for so long they have managed to drive the electricity price in the wholesale traded market down to zero when the wind blows — and wind, as a fuel, is use it or lose it; your generator is turning, and you just have to dump the electricity into the grid at whatever price you can get for it. On multiple occasions in the last few months the Victorian wholesale electricity price has actually dropped to zero.
In those conditions, with solar and wind growing, with households getting smart, with energy consumption overall declining and with a massive subsidy being taken out when the smelter levy for the Portland smelter ends in October this year, you tell me how you get to just simply say, 'We're a coal-fired generator and we've got this new tax, so we're going to pass it on into the market'. There are people like me now who have not only got solar panels on the roof — I think it is about 14 per cent of Victorian homes and businesses that now have that — but are also able to capture spare electrons into a battery and put them back into the grid at a time that suits them. I am making those electrons at around 13 cents a kilowatt hour. That is about the same cost as it takes to deliver electrons to my house, never mind what the Latrobe Valley generators might like to actually earn for the ones that they themselves generate. So while it can be very uncompetitive at the retail end, largely because the big three retailer generators are trying every trick in the book to manipulate customers, in terms of the wholesale market with four big coal-fired power stations but hundreds of little power stations, including large-scale wind and, if you like, millions of solar generators now connected to the grid and the fuel being free — sun and wind — how is it that they believe this is going to be passed on?
In fact every other time we have brought in anything like a carbon tax the story from those same people who Mr Rich-Phillips quoted and from the generators themselves is, 'This will destroy our financial viability. We'll collapse. Banks will withdraw their funds, and the lights will go out because our power stations won't be operating'. The total opposite argument in every other case is that any kind of tax on carbon — and this is, crudely, a carbon-based tax — is basically going to destroy the financial viability of the generators, leading to a loss of energy security. This time they are totally talking out of the other side of the mouth because the Liberals thought they had a bit of a cost of living campaign going in the first part of this year and this proposed tax seem to fit the bill. I say good luck, because as soon as it is enacted — and I notice that it does not actually start until 1 January in terms of that section of the bill — if that is the case, we would expect to see an immediate rise in the wholesale price of electricity, most of which is still, unfortunately, produced by coal-fired generators. But I do not know how you do that when you are competing in an interconnected system, with generators in New South Wales and Victoria and maybe even by January Tasmania if they get the big long extension cord under Bass Strait fixed again by then. It is just simply against all rationality.
Generators are price takers, and therefore they cannot pass it on to their consumers. They cannot pass it on to anybody they have locked in long-term contracts with either, and there is a lot of that in this market. For that reason we will not be supporting the Liberals' amendments, which as Mr Rich-Phillips told us are solely directed at the additional royalties under the Mineral Resources (Sustainable Development) Act 1990.
We did find out one other useful and pertinent fact during the Public Accounts and Estimates Committee process looking at this and other budget bills, and that is that the government expects to be getting just as much revenue from this new coal tax in four years time as it is now. Therefore by definition — and the Treasurer confirmed it — the government intends to be burning just as much coal in four years time post the next state election as it is today. I am aware that the Premier made some sort of announcement about climate change policy out there this morning, but in fact he made it when he introduced this bill, and that is that we are going to be burning coal at the same rate four years from now — it is in the forward estimates of the budget. In fact when he announced out there, if I can rely on his own press release, is that he wants zero emissions by 2050.
He was surrounded by what looked like a group of young primary school students when he made that announcement. They will be in their late 30s when 2050 comes around; Mr Andrews and I will be in a nursing home, probably; and the planet will be cooked — under this policy that Labor has announced today. There is a significant gap between the aspirations that were set down by the nations of the world in Paris and the announced target that Australia has out there for consideration. There is an even further gap between Australia's announced target and the actual policies that have been implemented by the Australian government, and there is a massive amount of work to be done to close that gap.
What the announcement from the Premier says today is, 'You can go and log onto a website and make your own personal pledge to cut your emissions'. How about a personal pledge from Daniel Andrews that he might actually use the powers that he has got? As a state Premier he has got pretty much all the legislation and other tools needed to make deep cuts to emissions regardless of what the federal Liberal government might do, not banking — as he seems to be — on Bill Shorten winning the election and then Bill Shorten somehow coming out with a policy once he is in government. Our state premiers literally control, through this Parliament if they choose and with our support, the structure of the electricity industry, all the poles and wires that link it up and the individual generators which are licensed under it.
The Premier certainly could make deep and immediate cuts to emissions by ending native forest logging overnight. It is pretty clear that is not going to happen, the way this task force is going. He could up the energy efficiency target. He could use multiple mechanisms to build in a Victorian renewable energy target. He could, if he wanted, follow the example of the ACT Greens-Labor government, that has actually decided that its own energy consumption and the energy consumption of its jurisdiction is going to come from renewables, and then simply run a reverse auction. The Minister for Energy, Environment and Climate Change, Ms D'Ambrosio, raced off to Ararat with her silver shovel to launch a new wind farm that is proposed to be built up there. It is being built because the Greens-Labor government of the ACT commissioned it, with permits already being on issue.
For the Premier to come out and say, 'Well, we'll be carbon neutral by 2050', sounds very much like a case of saying, 'Give me chastity and sobriety, but not quite yet'. Secondly, it does not tell us anything about what the total emissions from Victoria will be between now and 2049. Deep cuts now create less work later but actually mean that overall less emissions are put into the atmosphere — and that is the thing that matters. Imagine an alternative scenario where we keep polluting at current levels all the way up to 2049 and then just stop dead in that year. A lot more actual CO2 will be emitted under that trajectory than under 'Do the hard work during your time in power, Premier' — and you never know how short that time is going to be. Those CO2 emissions actually matter. It is not just about the destination and how fast we get there; it is how deep we cut in the earliest years of that trajectory that matters, because once that CO2 is in the atmosphere, it is there for a very long time to come.
It is not like the climate starts to repair itself or reverse its previous change on the day that we reach carbon neutral in Mr Andrews's mythical 2050, if he and I are lucky enough to be there to see it. Whatever climate we have then, that is our new climate; we are stuck with it. We have seen just in the last few months how hostile that new climate can be, with already just a small amount of warming built in, somewhere under 1 degree. The Premier has a website that is now called 'take2.vic.gov' or something — something to do with 2 degrees of warming — but you cannot achieve that by saying, 'We're going to keep polluting all the way up to 2050'. And the voters do not buy it.
The voters do not buy politicians talking about things that are going to happen decades from now. That just looks like yet another attempt to dodge accountability. They should go to the voters and say, 'This is what I believe I can do if I'm Premier for this next period of government'. Unfortunately the Premier did not say that in his last term in opposition. He had four years in opposition and he has had 18 months with access to the levers of government, and what he has delivered us today is a website where we can all pledge to do our little bit for the planet. If you read this bill and the associated documents, what you learn is that he intends to keep burning coal at the same rate all the way through to the next election and for a year the other side of it as well. That is the announcement of his climate change policy.
Every little bit is going to help in terms of reforming this energy market, and for that reason we are going to support the section of this bill that creates the additional royalties on brown coal. What is needed here really are some regulatory measures — dare I say direct action — and to actually set closing dates for those brown coal generators. Let the communities, let the other players in the energy market and let those who would like to enter through renewables have a bit of warning so that they can invest and make plans accordingly.
Making plans does not seem to be a strong suit for members of this government. They came to government with a very limited and very small number of promises and as a result a pretty small amount of political capital — because they have only got the political capital to implement the things they said they were going to do. If they do not start dealing with the crises when they come to them, they will have no political capital before they know it. We are not headed for an environmental crisis; we are in an environmental crisis. The Greens are the only ones with a plan.
[Speech was interrupted.]
Mr BARBER — Absolutely, Mr Bourman, we could debate the merits of the Greens plan. The point is that we have a plan — and in a crisis people will turn to the person who has actually got a plan any day over the person who has not got one, and it is pretty clear that this government has no plan. It has no plan for tax reform, for that matter. It is a very important area in terms of economic efficiency. If we are going to argue about tax reform in the middle of a national election when the real economic benefits from reform are actually right here in the reform of state taxes, it is a great shame that we have not been able to line up the federal and state jurisdictions over this reform. Victoria will have to go it alone. Unfortunately for another year we have just missed our best opportunity.
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