Low petrol taxes hampering fuel efficiency: economist

It is a hard sell, but economists from the Australian National University say Australians would be better off with a higher tax on petrol.

They have compared petrol prices around the world and say if consumers had to pay more at the pump here we would use less fuel and buy more efficient cars.

One economist says if the petrol excise was again linked to inflation it would also generate almost enough money to pay for the Gonski education reforms.

Many drivers would already say they have been feeling some pain at the pump, but now economist Dr Paul Burke from the Australian National University says that pain should be taken up a notch to force motorists to change their ways.

He was one of the authors of a study looking at the effect of petrol prices on the take-up of fuel efficient vehicles in 132 countries around the world over a 13-year period.

"Higher prices lead to consumers using less petrol and also consumers deciding to purchase cars that are more fuel efficient," Dr Burke said.

"We expect that to happen, but we worked out how big the effect is in our study." Burke says there are some lessons for Australia.

Specifically, he examined the impact of the 2001 decision by former prime minister John Howard to stop the automatic indexation of the petrol tax, which 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 per cent worse than it would have been," he said.

"We're using now probably about 3 per cent more petrol as a result of that decision." "I think we all want to see less reliance on fuel.

We want to use less petrol for a whole bunch of reasons, but there are ways of getting people to do that other than just taxing them even more," countered the president of NRMA Motoring and Services, Wendy Machin.

She says it would be better to offer rewards to motorists with more fuel efficient vehicles, like 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," Wendy Machin added.

"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 taxing them to death." As far as world petrol prices go, Dr Burke says Australia is in the middle of the pack.

We are charged less at the bowser than in Europe or Japan, but more than in the US or oil-rich nations.

He wants to see the petrol excise duty once again rise with the rate of inflation, which he calculates would generate more than $5 billion of extra revenue every year.

"Returning to that now or sometime soon would make sense.

If we don't do that, then the revenue that we're raising will be falling in real terms and the Government will have to look elsewhere for raising the revenue that it needs," he said.

"Government revenue would be more than $5 billion more, which could fund a lot of things of course.

It could fund Gonski reforms, for example." Dr Burke says one of the cheapest places to fill up around the world is oil-rich Venezuela where a full tank costs less than $2.

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