Finance Alan Kohler: Australia is placing its recovery hopes on the trays of utes — and it’s idiotic

Alan Kohler: Australia is placing its recovery hopes on the trays of utes — and it’s idiotic

Tax write-offs for utes
Tax write-offs for utes has done little, really, for Australia's economy, Alan Kohler writes. Photo: Getty/TND
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Join the dots:

  • The biggest item in the federal budget in May was the $18.1 billion in business tax write-offs for capital expenditure
  • The biggest increase by far in last week’s March quarter GDP was capital expenditure – on machinery and equipment, up 10.3 per cent
  • Eight of the top 10 vehicles sold in Australia in May were utes or SUVs, and sales rose by an average 90 per cent.

You might say that it’s a magnificently successful effort to engineer a ute-led recovery.

When you’ve got no population growth, you just use the tax system to get tradies to buy utes and up goes GDP.

But it’s more complicated and less intelligent than that.

For a start, none of them are made here.

In fact, very little of the machinery and equipment that underpinned GDP growth in March quarter is the result of local manufacturing.

We don’t do much of that kind of thing any more.

And second, while the rest of the world is encouraging greater take-up of electric vehicles to help meet demanding carbon emission targets, Australia is spending a fortune to encourage the take-up of diesel vehicles.

In May there were close to 80,000 utes and SUVs sold in Australia, close to double the number of last May, four times the number of passenger cars sold and four times the total number of electric cars sold in Australia in the past 10 years. Just in May.

Obviously, the increase in ute sales in May was not responsible for the March quarter increase of 10.3 per cent in business investment in machinery and equipment: That was down to the first introduction of the tax write-off in the previous budget in October.

So we can expect something similar in the June quarter National Accounts, with the boom in utes once again offsetting the absence of population growth.

But the question is, how many jobs will this subsidy create, and how much will the jobs cost the taxpayer?

Richard Denniss of The Australia Institute has had a go at figuring it out.

Last year’s budget estimated 50,000 jobs from the scheme by 2021-22; this year’s budget increased that to 60,000 by 2022-23, so an extra 10,000 jobs.

Dr Denniss estimates the cost of each job is somewhere between $307,000 and $690,000.

So the government would be much better off employing those people to do anything other than sell imported vehicles.

As Dr Denniss points out, if the same amount of money was spent in the health, education and arts sectors it would generate close to 54,000 jobs.

Instead, university funding cutbacks have resulted in at least 17,000 job losses in tertiary education, according to Universities Australia.

And these are the sort of skilled jobs Australia arguably needs, not car sales.

One argument in favour of upgrading the national ute fleet with newer vehicles is that it will mean less maintenance and more productivity.

Maybe, except tradies already turn their vehicles over every couple of years to avoid costly maintenance – and having a new one won’t get them to work any quicker or allow them to carry more tools.

Meanwhile this week, Minister for Emissions Reduction Angus Taylor explained why the government is not going to subsidise electric vehicles.

“We’re not into subsidising luxury cars. It’s not something we’re going to do as a government,” Mr Taylor told 7.30.

“People who have the money to buy a luxury car are welcome to go out and do that. And we are seeing people buying, you know, expensive electric vehicles, and that’s up to them. That’s their choice, good on them.”

That is simply idiotic, especially when they’re subsidising expensive imported diesel utes at great expense instead.

Teslas are expensive luxury cars, it’s true, but a new Nissan Leaf, for example sells for between $53,000 and $65,000.

A Nissan ute costs the same as that, and a Ram 1500 will set you back as much as a Tesla.

It apparently doesn’t occur to the Minister for Emissions Reduction that subsidising EVs instead of utes might make his task, and that of the Prime Minister, of meeting the new international standard of net-zero emissions by 2050 a bit easier.

But they are the generals fighting the previous political war, which they won while scorching the earth of Australia’s energy policies.

They might even win the next one with the help of tradies still enjoying that new car smell thanks to taxpayers, but the one after that – the one where Australia is forced to transition in a hurry to renewable energy – will be much harder to win.

Alan Kohler writes twice a week for The New Daily. He is also editor in chief of Eureka Report and finance presenter on ABC news

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