Winter 2000 I s s u e 1 Vo l u m e 6 - Australian Automobile Association

Winter 2000 I s s u e 1 Vo l u m e 6 - Australian Automobile Association

MOTORING DIRECTIONSRoad funding has been fairly static over the past decade,not even keeping pace with inflation, let aloneproviding the resources necessary to improve the roadnetwork. It should therefore come as no surprise thatthe community is unhappy about the deteriorating stateof roads at a time when motorists are paying record levelsof revenue through fuel excise.drivers under 25 and those over 65. However, whileblaming other drivers for many road safety problems, astaggering 90% of respondents rated their own drivingperformance as good, very good, or excellent. Only 1%rated their driving ability as below average.6. Concern About Road SafetyOne way governments have sought to defray the cost ofroad construction is through tollways. Melbourne hasCitylink, Sydney the Eastern Distributor and M5, andBrisbane the Gateway Bridge. All function well, butdespite this, respondents made it clear they were notwilling to give governments a blank cheque on thequestion of tollways, and their views are hardening.35%23%19%16%6%In 1995 a majority of motorists (51%) supported tollways,but in the latest research that support had fallen to 45%.As for the suggestion of putting tolls on existing roads,81% were opposed. Clearly people do want better roadsbut they are not willing to pay more than they alreadyare for them.Building NewTollways5. TollwaysIntroducing Tolls onExisting Roads7 6 5 4 Midway 1-3 NotConcernedTotal Concerned = 77%In response to an open-ended question about how to tackleroad safety issues involving younger drivers, 41% calledfor tougher restrictions and enforcement, with 30%wanting more education and training. Respondents clearlysaw motoring clubs playing a role in the education andtraining of young drivers.81%1995 199951%52%46%45%19997. How to Reduce Road AccidentsAmong Young Drivers23%18%44%In Not InFavour FavourIn Not In1Favour FavourIn Not InFavour FavourRoad safety was another important issue for respondentswith 77% expressing some concern. Most respondentsexpressed negative views about the behaviour of33%Tougher Restrictions, EnforcementMore Education & TrainingReview Licensing6Motoring Directions WINTER 2000 ISSUE 1 VOLUME 1

MOTORING DIRECTIONSEnvironmental concerns also featured in the research,with 75% of people expressing some concern about theimpact of motor vehicles on the environment. Despitethis high level of concern, only 12% named greenhousegases and the ozone layer as being of concern. Importantly,respondents indicated they were willing to takepractical steps to limit the environmental impact of theirvehicles.Governments and others need to factor in the view of theend user as a crucial element in the development oftransport policy. It is something that has often been ignoredin the past. Policy with little or no support in the communityis unlikely to succeed, while policy taking account ofcommunity views and aspirations will always have agreater chance of successfully achieving its goals.8. Main Concerns About the Effect ofMotor Vehicles on the EnvironmentFull details of the ANOP70%61%Urbanresearch are available onRegionalthe AAA web Pollution Ozone / GreenhouseRespondents believed that the best ways to reduce environmentalproblems caused by cars was better vehiclemaintenance and by having cleaner emissions and fuel.Very few people agreed with the suggestions thatgovernments should increase petrol prices so that peopledrive less to reduce environmental impact.9. How to Reduce Environmental Impact765432106.1 6 6CarsWellMaintainedCleanerFuelsImproveFuelEfficiency5.6 5.6VehiclesUsingAlternativeFuelsStricterEmissionControls2.4MakePeopleDriveLessMotoring Directions WINTER 2000 ISSUE 1 VOLUME 17

MOTORING DIRECTIONSThe Need For Increased RoadFundingRoads are our single most important nationalinfrastructure, providing a transport, communicationsand travel network essential to people and industryacross the country. The network is a major national assetwhich needs to be maintained and expanded to ensurethat it is internationally competitive and contributes toAustralia’s economic growth.The Prime Minister, in his Federation Address 1 in January2000, acknowledged the need for infrastructure renewaland stated that:The Government finally responded to the Inquiry’srecommendations in April 2000 and, in response to theissue of funding roads of national importance (RONIs) atthe expense of the national highway system (NHS), theGovernment simply noted that the allocation of fundingbetween the NHS and RONI programs will be determinedin the light of Commonwealth priorities.Unfortunately, funding of roads of national importancecontinues to be at the expense of the national highwaysystem. This is highlighted by the figures in Table 1.“There are aspects of our intellectualand physical infrastructure where it issimply not possible or appropriate for theprivate sector to take a lead role andwhere governments must provideleadership and resources”.Neville road funding inquiryIn 1997 a House of Representatives Committee held aninquiry into Federal Road Funding 2 . The inquiry addresseda number of issues including the adequacy of funding. Inthe report, the committee stated, inter alia, that:Table 1: Funding of national highway systemand roads of national importanceNationalhighwaysystemRoads ofnationalimportanceTotal1996-97 1997-98($m)1998-99 1999-00736 703 745 68787 109 122 166823 812 867 803* Estimate Source: Budget papersThis siphoning of funds away from the national highwaysystem has occurred despite the Inquiry’s own views that:“The Commonwealth should continue toprovide specific purpose (tied) paymentsfor the national highway system, roadsof national importance and the blackspot program. Increased funding ofroads of national importance should notbe at the expense of the nationalhighway system”.“….[for the national highway system]there are linkage problems includingsections of some roads, access to portsand areas of major production. Inaddition, the linkages in urban centresconnecting highways are a significantproblem. Deficiencies in bridge infrastructureare emerging as a major weaklink in Australia’s road network”.8 Motoring Directions WINTER 2000 ISSUE 1 VOLUME 1

MOTORING DIRECTIONSFunding for the NHS is estimated to be only $687 millionin 1999-2000 (of which only $284 million is formaintenance), yet according to the Department ofTransport and Regional Services’ submission to the NevilleInquiry 3 , an indicative annual funding level for the NHSshould be $950 million.Apart from the shift away from funding the nationalhighway system, there has been little overall increase inFederal road funding over the past few years (see Table2).Table 2: Federal road funding 11996-97 1997-98 1998-99 1999-00*($m)Federal roadfunding 1625 1614 1687 1652* EstimateAccording to Budget estimates, Federal funding for roadswill increase by only $27 million (1.7%) in the 4 yearsbetween 1996-97 to 1999-2000. In the same period,inflation, as measured by the CPI, will increase by 3.2%.Thus Federal funding will decline, in real terms, in thisperiod.In 2000-01 the Commonwealth’s commitment to roadfunding will decline to $1.3 billion, while at the sametime revenue from petroleum product excise is expectedto increase by $1.5 billion.This decline has occurred despite calls from a number ofstakeholders of the need for increased funding.The Neville Inquiry 4 heard evidence from the Departmentof Transport and Regional Services that:The NSW Government was reported as placing theconstruction of the Western Sydney Orbital, which is theproposed national highway alignment linking the nationalhighway north and south of Sydney, as its highest priorityin meeting national highway objectives. The total cost ofthe Western Sydney Orbital is estimated at $920 million.According to the same report, the Victorian Governmentand a number of community and business organisationssaw the absence of a full metropolitan ring road inMelbourne as a major deficiency in Victoria’s roadnetwork and the national highway system.The estimated cost of a full metropolitan ring road isbetween $600 million and $1 billion.The Inquiry also heard evidence of the inadequacy of thenational highway in rural areas and the committee concluded“that it is somewhat premature to consider thatthe rural national highway is completed”.Further evidence of underinvestment in roadsApart from evidence presented to the Neville Inquiry, therehave been many reports (including by EPAC and theBCA) released over the past few years which highlightthe deficiency of our road network, the backlog of projectsand the inadequacy of funding.A recent ‘Report Card’ on the nation’s infrastructure bythe Institution of Engineers 5 gave national roads a ‘C’,noting that they vary in quality from good to poor. Stateroads were given a ‘C minus’ and were rated as averageto poor. Local roads were given a ‘D’ and were rated nobetter than poor because they lacked funding. The ‘ReportCard’ gave bridges a ‘D’ noting major deficiencies inState and local road bridges.“the indicative cost of undertakingimportant national highway urbanprojects was approximately $3.6 billion.To satisfy the increasing demand on thenational highway in urban areas wouldrequire an investment of between $1.5and $2 billion during the next 10 years”.Motoring Directions WINTER 2000 ISSUE 1 VOLUME 19

MOTORING DIRECTIONSThis inadequacy should be seen against a background ofincreasing travel as the economy grows. The latest surveyof motor vehicle use 6 reveals that total distance travelledby passenger vehicles increased from 116,640 millionkilometres in 1988 to 134,261 million in 1998 (an increaseof 15% over the decade). The increase is even morepronounced for articulated trucks where total distancetravelled has increased from 3,836 million kilometres to4,921 million kilometres over the same period. Thisrepresents an increase of 28 per cent.Investment in roads has simply not kept pace with thisgrowth in traffic and the associated damage to roads,particularly from heavy vehicles.ANOP researchIt should also be pointed out that fuel excise continues tobe indexed to the CPI with the result that over time,revenue has increased significantly while road investmenthas remained relatively static. The situation for motoristswill worsen after July when the GST is introduced as it isexpected excise will rise by 2.3 cents a litre by February2001. Due to indexation this would rise $690 million in afull year. It is AAA’s view that indexation of fuel exciseshould be abolished.Table 3: Revenue from IndexationAdditional Revenue to the CommonwealthGovernment due to Excise Indexation from March1996 to December 1999Recent research conducted by ANOP for AAA 7 revealedthat motorists expect more of their petrol taxes to be spenton roads. Motorists currently tend to underestimate howmany cents per litre the fuel tax is and overestimate howmuch of it is spent on roads. When informed of the actualamount (6.9 out of every 36 cents collected Federally),motorists were outraged!Year($ million)Leaded PetrolAdditional GovtRevenueANOP research reveals that the strongest call for agreater allocation of the fuel excise to roads came fromregional Australia.39%Reaction to Amount of Federal GovernmentPetrol Tax Spent on Roads91% of Urban Motoristssay “should be higher”23%18%6 46% 5%47%96% of Regional Motoristssay “should be higher”24%16%5% 4%1996 11.301997 31.631998 32.761999 47.78Total 123.47YearUnleaded PetrolAdditional GovtRevenue1996 17.521997 60.231998 77.461999 138.19Total 293.40Source: AAA calculations.7 6 5 4 1-37 6 5 4 1-3Extremely Midway NotExtremely Midway NotConcerned ConcernedConcerned Concerned10 Motoring Directions WINTER 2000 ISSUE 1 VOLUME 1

MOTORING DIRECTIONSBenefits of road investmentA good road transport system can reduce the cost ofgoods and services (through greater freight efficiency),cut the nation’s emissions of greenhouse gases and lowerpollution (through an improvement in travel times) andhelp reduce the social cost associated with road crashes(through improvements to intersection design and lighting,widening shoulders, building overtaking lanes and providingrest areas).Research undertaken by the Allen Consulting Group forAAA 8 revealed that there can be very high returns frominvestment in roads. For example, a one-off investmentin urban arterial roads of $1 billion could produce an annualbenefit of 0.2% growth in GDP. The study notedthe potential wide-ranging effects of such an investment,including an increase in export volumes and improvementsin the balance of trade which would arise because of theinvestments’ effects in improving the productivity ofindustry.Importantly, the study also showed that in the case ofurban arterial investment, additional taxation andgovernment revenue generated from flow-on economicactivity generated revenue in excess of the annual financingcharge (including provision for maintenance).It indicated that the specific taxes imposed to finance theinvestment could be foregone and that the servicing costcould be fully met from additional tax and other revenueresulting from increased economic activity generated bythe investment.ConclusionIt is time for an increase in road funding with more moneyfrom fuel excise being allocated to fund expansion andmaintenance. Motorists strongly support this policy.The government should instigate a ten-year renewalprogram and it should not concentrate exclusively onmajor new projects but should also increase existingCommonwealth funding to local government and addresssmaller projects like road edges, by-passes, bridges andblack spots which impact directly on road safety andmotoring costs.We agree entirely with the statement 9 of the Minister forTransport and Regional Services, John Anderson, that:“Australia must make a quantum leapto planning, building and maintainingroads that would serve the nation beyond2020 and not just rely on an existingroad network that might not be adequatefor future needs”.1 Federation Address presented to the GlobalFoundation by the Prime Minister, The Hon JohnHoward, Melbourne, Friday 28 January 20002 House of Representatives Standing Committee onCommunications, Transport and MicroeconomicReform (Neville Inquiry), ‘Planning not Patching’,October 19973 Department of Transport and Regional Development, ‘Submission to the Inquiry into Federal RoadFunding’, February 1997, page 264 Ibid page 405 The Institution of Engineers, Australia and GHD PtyLtd, ‘A Report Card on the Nation’s Infrastructure’,December 19996 ABS, Survey of Motor Vehicle Use, Catalogue 9208.0,18 February 20007 Australian Automobile Association, “Motorists’priorities and attitudes”, report prepared by ANOPResearch Services Pty Ltd, December 19998 The Allen Consulting Group, Land TransportInfrastructure, Maximising the Contribution toEconomic Growth, 19939 Report in the Wellington Times, Monday 14 February2000Motoring Directions WINTER 2000 ISSUE 1 VOLUME 111

MOTORING DIRECTIONSMotoring Across The MilleniumThe motor vehicle has now been with us for over acentury. It has had an enormous impact on society,both good and bad. Its greatest gift, undoubtedly, is theunprecedented level of personal freedom it has providedvirtually everyone in the developed world. Today the motorvehicle is affordable and can take people to the local shopsor across the continent. It can run night and day, in allweather conditions and requires minimum maintenance.No one can argue that after a hundred years ofdevelopment, the motor car is now a product providingmobility, comfort, safety and even excitement. Yet, despitethe continuous development and innovation of the pasthundred years, the car still retains many of the features ithad at the beginning of the last century. It is still fueled bypetrol, supported by springs, runs on rubber tyres andprovides ignition with an electrical generator and battery.And despite significant improvements in quality, technologicalinnovation and mass production, cars still breakdown for much the same reasons as they did all thoseyears ago. Flat batteries and tyres, and fuel and electricalproblems still account for a significant proportion ofmotoring clubs road service call-outs. And cars are stillstolen, although in the past decade security has improveddramatically. As a matter of interest, the first recordedcar theft was in Paris in June 1896. Finally, one hundredyears on, manufacturers are becoming serious aboutvehicle security through effective engine immobilisationsystems and vehicle alarms.Many of the major changes in vehicle development overthe past century have occurred in the last decade,predominantly with the goal of achieving betterenvironmental outcomes. And this pace of change is onlygoing to increase over the next few decades.There are two key areas where this change is likely tooccur. The first is the introduction of in-carcommunications technology. The second is advancedtechnology, low emission powertrains.Soon, developments such as dynamic route guidancesystems and autonomous speed and lane control will beavailable. These systems will allow motorists of the futureto select a lane and speed and then sit back readinga book as the vehicle guides itself along the highway. Thetechnology already exists and is currently being trialed.There will also be a constant flow of useful informationsuch as traffic and road conditions, touring informationand the latest weather and financial data through in-carcomputer systems linked to the outside world via satelliteand mobile phone technology. And motorists will even beable to communicate via the Internet while mobile.This communications advancement brings with it theproblem of driver ‘sensory overload’. First experiencedby Air Force pilots in Vietnam, this problem is now findingits way into the motor car. Much work is being done tomanage what is known as the man-machine interface byreducing the distractions that come with the use of thesenew systems. This work includes the development of invehiclevoice recognition systems for hands-freecommunication with the in-car computer and the outsideworld.Today the technology is available in Australia for remotevehicle diagnostics, satellite vehicle tracking in the eventof theft, and vehicle location and breakdown assistancevia satellite. A system, CarCom, which provides theseservices, is already available through the motoring clubs.Yet despite all these benefits, one major problemconfronting motorists in the 21 st century is still to beadequately addressed. That problem is the motor vehicleand the environment are in conflict.Today motorists are faced with choices they are oftenreluctant to make. When purchasing a vehicle they havea choice of high performance, usually with higher fuelconsumption and a higher environmental cost, or lessperformance with lower fuel consumption and,importantly, lower emissions. Motorists also have a choicebetween using public transport or their own vehicle.In Australia it is clear people are not willing to surrenderthe personal liberty of their own vehicle by opting forpublic transport, and they are reluctant to move awayfrom the highest level of comfort and performance theycan afford. In light of this, we can only be thankful thatthe petroleum companies and vehicle manufacturers aremoving towards more environmentally friendly products.12 Motoring Directions WINTER 2000 ISSUE 1 VOLUME 1

MOTORING DIRECTIONSA seed change is occurring in the car industry withsignificant new investment being put into alternativepower-trains, particularly the use of hybrid electric vehiclesand new generation fuel cells. The hybrid car combines asmall internal combustion engine with electric storage anddrive-train, giving the best compromise for both powerand zero emissions using our most advanced presenttechnology.The new generation fuel cell looks like providing the answerto clean power for the next few hundred years at least.Combining hydrogen fuel with oxygen through a permeablemembrane produces electricity and water. Of course thereare some emissions created when producing hydrogen,however, depending on the means of production, theseemissions can be successfully managed at the source.Although very expensive to develop, the industry isfocussing its attention on this fuel cell concept and weare likely to see these sorts of vehicles on the marketwithin a very few years.These and other research programs are leading to someexciting changes in the motor vehicle during this century.A glimpse into the future suggests we are likely to seesome fascinating changes, such as:• The further introduction of small cars capable ofachieving at least 3 litres per 100km (94mpg).• More use of cleaner diesel engines, particularlyin higher performance luxury cars where powerwill be achieved with sustained lowering ofemissions.• The introduction of lightweight hybrid petrol/electric vehicles. Taking advantage of both thelow cost and power of the petrol engine coupledwith the ‘zero-local-emissions’ of electricity, thesevehicles will begin to break down the currentproblems of poor performance versus relativelyhigh emissions.• The slow but certain introduction of Hydrogen/Oxygen fuel-cell vehicles over the next ten years.Manufacturers are currently preparing for apursuit-race. That is, they are all are working onthe fuel-cell concept but are reluctant to be atthe leading-edge of this development by beingfirst to market with a volume product. However,they all plan to be in the position of quickly bringingproduct to market to remain competitive withwhoever leads the way.And for those who worry about the long-term viability oftheir current vehicle, we are likely to see the survival ofthe petrol internal combustion engine for at least 20 yearsand probably longer, particularly as the third world catchesup with the developed nations. An important factordetermining the speed of change will be the attitude ofthe general public. People simply will not buy newtechnology for the sake of it. Any new car, howeverlightweight, efficient and technologically advanced, willhave to provide at least the same performance, rangeand value for money as an average family car of today ifit is to achieve widespread acceptance and sales.As you can see from our glimpse into the next century ofmotoring, there has never been a more exciting time inthe development and production of the motor vehicle.Environmental requirements are forcing the pace ofchange.As we enter the second century of motoring we shouldremember that the Model-T Ford started the automobilerevolution by bringing motoring to the masses. It istherefore appropriate that we summarise the future ofmotoring with the recent words of the Chairman of theFord Motor Company who said – “You can have anyvehicle you like, as long as it’s green”.• The development of ultra-lightweight vehicles.They will be made from aluminum, plastics and/or carbon-fibre, yet able to achieve the same orbetter crash worthiness as current cars.Motoring Directions WINTER 2000 ISSUE 1 VOLUME 113

MOTORING DIRECTIONSaXcessaustralia car has arrivedA state-of-the-art hybrid electric car – the most innovativeproject ever undertaken between CSIRO and theAustralian auto industry – has been unveiled for publicexhibition.Under wraps for over two years, the aXcessaustralialow emission car project is now being hailed as the futurein automotive technology and an outstanding example ofhow more than 100 companies involved in the auto industryhave worked together to create a showcase for Australiantechnological excellence.The project builds on the success of the firstaXcessaustralia project in 1998 which promotedAustralia’s automotive components’ industry around theworld.The latest innovation is a hybrid electric car that reducesemissions by 50 %, and in a business world increasinglyconscious of the need for greenhouse gas solutions, themarketing target for the car project is A$ one billion worthof new export business.With hybrid-electric cars already in mass production inJapan and France, the Australian designers haveincorporated a unique combination of supercapacitors andbatteries to provide a lighter and lower-cost ‘Surge PowerUnit’ unavailable until now to manufacturers overseas.Supercapacitors absorb energy and deliver stored energyvery fast. The use of a proprietary chemistry and a uniqueconstruction of the batteries greatly increases capacityand power delivery – they may spend considerable timepartially discharged, unlike conventional car batterieswhich are always charged by an alternator. The car canalso be charged overnight on low-tariff electricity to effecta major reduction in running costs.Both the supercapacitor and battery innovations weredeveloped by CSIRO in collaboration with localmanufacturers.The aXcessaustralia technology delivers some of thehighest capacity-to-weight ratios reported anywhere inthe world. BHP Steel’s products have helped achieveweight targets that are crucial in achieving ecologicalcommitments while maintaining world’s best practice.With the unveiling of the hybrid electric car in Canberralast month (May), CSIRO and CMC Power Systemswere congratulated for their work on the car’s drivetrainthrough the use of motors, generator and electronics. InMarch, the President of the Senate, Senator MargaretReid, had already referred to Australia’s unique exportmarket opportunity as “one of only ten countries in theworld that can style, design, engineer and manufacturemost components of the modern car”.As Holden Chairman, Peter Hanenberger, remindedmanufacturers at a hybrid technology seminar recently,goals for automotive improvements will require “someinnovative, even adventurous initiatives”. TheaXcessaustralia Projects Limited hybrid electric car designis expected to provide many of these.Director of CSIRO’s Australian Automotive TechnologyCentre, David Lamb, says a goal of the project has beento demonstrate that Australia need not rely on overseassources for technologies to reduce gas emissions. He isvery pleased with the way Australian componentmanufacturers worked so cohesively on this exportfocussedproject.“Companies worked together in ‘system groups’ to agreeon the best technology and sharing of information thatwould create the greatest impact for the common good,”Lamb says.14 Motoring Directions WINTER 2000 ISSUE 1 VOLUME 1

MOTORING DIRECTIONS“Australia needs this collaborativeapproach in order to compete withthe international giants of theindustry,” he says.“A key feature of the project isthat the technologies selected are‘production-ready’ andaffordable”.Among the major pluses of thehybrid-electric car are:• A proven, crash-tested body structure dressed withsteel body panels made from BHP steel innovativelytooled.The light-weight steel was able to match theweight and strength targets at the lowest cost formass production. Dent-resistance is maintained witha 25% saving in the weight of the outer panels.• Innovative products associated with advances ininformation technology and telemetry. These includeon-board navigation, diagnostics and mobile office.The sound system incorporates an Australianinnovation in loudspeaker systems, the door locks arekey-less and the power management system usesdriving patterns to optimise the electrical power usedand stored.• A smaller engine used to generate electrical poweras a result of the supercapacitor and batteryinnovations. This has led to a fuel saving of morethan 50% compared with a conventional car and a90% drop in exhaust pollution.• An Energy Supply Unit (ESU) consisting of a CMCPower Systems Scotch Yoke petrol engine connectedto a generator. The advantage of Scotch Yoketechnology is improved combustion efficiency and lowvibrations.• A CSIRO Electric Traction Motor (ETM) using anew switched reluctance motor technologyspecifically developed for traction applications, bothvehicle and train. The features of the motor are lowcost,full torque at low speed and a wide speed range.The motor is water-cooled, controlled electronicallyand therefore able to be programmed. The need fora mechanical gearbox has been eliminated.• A power storage system whichcan be charged from an externalsource, and qualifies as ‘secondgeneration’for hybrid-electric carsunder the latest European definitions.• Compliance with all Australianand international safety standards inthe operation and manufacture ofcomponents. In addition, the car hasa feature to measure driver alertness,with sensors in the driver’s seat andsteering wheel detecting a driver’s movements andgrip and then issues a warning signal if necessary.The system is set for each driver’s individualcharacteristics.• A design directly comparable with a conventionalequivalent car in performance, comfort, safety andprice. Top speed was specified as 140km/h,acceleration 0-100 km/h in 10 seconds and massproduction costs within a target of $21,000 (excludingluxury features).David Lamb says the end users of these innovations arenot the typical end users of more tangible consumerproducts.“The users are companies competing in the thrivingAustralian automotive component industry. The true valueof the development of aXcessaustralia will only be knownonce the marketing program has been completed andopportunities have been created out of Australia’senhanced reputation as a major innovator in auto design,”he says.“The first aXcessaustralia project car has been attributedwith new export sales of automotive components worth$730 million. We expect even greater results from thisdevelopment,” Lamb confidently predicts.Following its Canberra exhibition, the hybrid electric caris travelling to a number of international symposiums inAsia and Europe, first up FISITA 2000 in Seoul this month(June).For more information contact Mandy Parry-Jones(ph) 03 9484 8624 (fax) 03 9662 7851(mobile) 0409 806 986or (email) mandy.parry-jones@cmst.csiro.auMotoring Directions WINTER 2000 ISSUE 1 VOLUME 115

MOTORING DIRECTIONSMotorists and the GSTOn 1 July 2000 the Federal Government will introducea broad-based Goods and Services Tax (GST) to replacethe Wholesale Sales Tax (WST) System which willhave implications for Australian motorists.New motor vehiclesUnder the current Wholesale Sales Tax (WST) regime,all motor vehicles are taxed at the rate of 22% on thewholesale price which is determined using a formulaagreed between the motor vehicle industry and theAustralian Taxation Office. This formula results in aneffective sales tax of between 15% and 17% on therecommended retail price of the vehicle, excluding dealerdelivery charges, registration and other on-road costs.Luxury motor vehiclesUnder the current regime, a luxury tax of 45% is appliedto new motor vehicles with a wholesale price of morethan $36,995. Under the new tax system the old 45%luxury tax will be abolished and replaced with a 25% luxurytax. This tax will be charged in addition to the GSTinclusive price of vehicles with a value of more than$55,134.The change to the new tax system should, other thingsbeing equal, translate to savings on luxury vehicles of upto $5600.Used motor vehiclesThe price of used vehicles should fall under the GSTbecause of the flow-on effects from the reduction in theprice of new vehicles.With the introduction of the GST, the actual selling price(including delivery charges and stamp duty) of a newvehicle will be subject to a 10% tax. Once dealer deliverycharges and stamp duties are added to the retail price(including GST) of a new car, the net GST effectivelyequates to about 9% of the total price of the vehicle.Because of the reduction in the effective tax rate, it isestimated that the price of a new vehicle should fall byapproximately 6% under the GST. However, other factorswhich might affect the final price of new vehicles includeany discounts offered by dealers in the lead up to theintroduction of the GST, exchange rate movements andthe advent of new models.While the GST will not apply to the sale of a privatelyowned motor vehicle, it may impact on what privatebuyers are prepared to pay and it will affect the trade-invalue that a dealer is likely to offer.16 Motoring Directions WINTER 2000 ISSUE 1 VOLUME 1

MOTORING DIRECTIONSTransitional arrangements for fleetbuyersCurrently businesses are liable for sales tax on thepurchase of new motor vehicles. This will remain the caseup until the introduction of the GST on 1 July 2000. TheFederal Government decided to progressively introduceGST input tax credits for businesses purchasing new motorvehicles to ease the transition in the purchase of newmotor vehicles when the GST is introduced.Under this policy, during the first year of the GST, noinput tax credit will be allowed on the purchase of newmotor vehicles by businesses. In the second year of theGST, businesses will be able to claim 50% of the GSTcomponent of a new motor vehicle as an input tax credit.In the third year of the GST businesses will be able toclaim the full GST component of the purchase of a newmotor vehicle as an input tax credit.Petrol pricesA 1999 national survey of motorists undertaken on behalfof the AAA identified that 72% of motorists expressedconcern about the amount of tax collected from the saleof petrol. The concern was greater in regional Australia.At present the Commonwealth collects excise, or fueltax, of 44.1 cents per litre for unleaded petrol, 46.4 centsper litre for leaded petrol and 44.1 cents per litre for diesel.This means that the Federal Government’s excise onleaded and unleaded petrol and diesel accounts for around60 per cent of the retail price paid by motorists.With the introduction of the GST, the government intendsto reduce the current excise on petrol and diesel and thenadd 10% GST. The Government has yet to decide bywhat amount excise should be reduced.AAA believes the government must reduce excise by8.9 cents per litre because any amount less than this wouldlead to petrol price rises in rural, regional and remote areasof Australia.By way of an example, a 7.0 cent per litre reduction inpetrol excise could bring the price down from around 77cents per litre to 70 cents per litre and then back up to 77cents per litre with the 10% GST. However, in many areasof Australia, petrol prices are significantly higher thancity prices. Petrol is often anything up to 15 cents perlitre more in rural, regional and remote Australia than incity areas.Reduce, say 89 cents per litre by 7 cents per litre (downto 82 cents per litre), and then apply the GST and theprice jumps to 90.2 cents per litre. This effectively resultsin a higher tax being paid by those in areas where theprice of petrol is already high. The government’s recentannouncement on fuel sales grants scheme in rural andregional Australia is designed to redress this problem.There is also another important point to note, and that isthe effect indexation of petrol and diesel excise rates willhave on the GST component of the price of petrol.In August 2000, the excise rate applied to petrol and dieselwill be adjusted to reflect the change in the CPI. This willmost likely result in an increase in the excise rate whichwill cause prices to rise further. The increase in February2001 is expected to be even higher with the GST beingapplied to the price of petrol and diesel at the bowser, thiseffectively means that the GST component of a litre ofpetrol or diesel will also increase. This results in a taxbeing applied on a tax and the tax component of a litre ofpetrol or diesel (GST and excise) being increased morethan the CPI rate.The AAA has long been opposed to the indexation ofpetrol and diesel excise taxes and believes that the FederalGovernment should abolish it.DieselUnder the GST legislation, eligible parties will be able toclaim a rebate so that the effective diesel excise willbecome 20 cents per litre. Access to this input tax creditwill be limited to:- all vehicles over 20 tonnes GVM; and- vehicles 4.5 tonnes or more but less than 20 tonnes forprimary production trips not related to primary productionin areas defined by central boundries.Motoring Directions WINTER 2000 ISSUE 1 VOLUME 117

MOTORING DIRECTIONSLPGUnlike petrol and diesel, Liquid Petroleum Gas (LPG) isnot subject to taxation. Under the GST system, however,the 10% GST will be applied to LPG at the bowser. Thismeans that LPG will become relatively more expensivecompared to petrol and diesel.Vehicle servicingServicing costs will increase in instances where labourcharges are the predominant component of the total servicebill. It is predicted that the labour component of avehicle’s service will account for most of the suggested3.8% increase in the cost of servicing a motor vehicle.It is expected that the 22% tax on the wholesale price ofparts will be equivalent to a 10% GST on the retail priceof those same parts. There is, therefore, likely to be littledifference in the cost of this component of a vehiclesservice.Given all of this, it is likely that where a service involves,say a tune-up without parts, the cost is likely to increaseby 10%. On the other hand, where half the service costinvolves replacing spark plugs, lubricants and othermechanical items, the total price is likely to increase onlyslightly (provided the mechanic retains the same profitmargins).Motor vehicle spare partsIn the case of tyres, replacement costs will fall. The costof replacing five tyres for an average sized 6-cylindervehicle is currently between $650 and $700. The WSTcomponent of this cost accounts for between $100 and$108. With the introduction of the GST the price shouldfall to between $604 and $651.As is the case with tyres, the cost of replacing a batteryshould also fall. Currently the supply, test and fit of an 11-plate heavy-duty battery costs about $104. With theintroduction of the GST, this price should fall by about$2.25, or a reduction of just over 2%.Motor vehicle accessoriesIt is expected that motor vehicle accessories should costless under the GST.Mag wheels are a common after market accessory. Fivemag wheels currently costing $1,150 fitted (wheels $1,100and fitting $50) should cost $1,057 with a GST applied.This results from the elimination of $180 worth of WSTon the cost of the mag wheels to the dealer. A 10% GSTon the total price of the goods and services is charged forthe supply and fitting of the wheels resulting in an overallsaving of $93.Motor vehicle insuranceThe introduction of the GST has already increased premiumsfor most motor vehicle insurance products. However,it is also expected that any increase in insurancepremiums will be partly offset by the removal of the WSTfrom other associated motor vehicle products and servicessuch as crash repairs and replacement parts.At present WST is not directly applied to insurance premiums.WST does, however, have an impact on the costof insurance claims and is therefore reflected indirectlyin the premiums paid by those insured.An important point to note is that one of the main taxeson insurance, i.e. stamp duty, will not be abolished as partof the Federal Government’s changes to the tax system.These State-based taxes will, in most cases, continue tobe payable on most insurance policies.As expected, the impact of the GST will affect differentinsurance policies in different ways. The impact of theGST on the two most common motor vehicle insurancepolicies, comprehensive and compulsory third party, areoutlined on the next page.18 Motoring Directions WINTER 2000 ISSUE 1 VOLUME 1

MOTORING DIRECTIONSComprehensive motor vehicleinsuranceWhile comprehensive car insurance policies will attractthe GST, which has already caused some premiums toincrease, the abolition of the WST and the introduction ofthe GST will affect motor vehicle insurance claims.As stated earlier, the change to the GST should reducethe cost of spare parts. However, the labour componentof any repairs will nowattract the GST. Anyreduction in motor vehiclerepair claims should partly,but not fully, offset the GSTthat is payable on comprehensiveinsurance policies.The overall result is likely tobe a small increase in comprehensive insurance premiums.Compulsory third party insuranceMoving AustraliaThe Australian Automobile Association, together with theFederal Council of Automotive Industries and AustralianPetroleum Institute sponsored a major internationalconference, Moving Australia – Challenges for thePetroleum and Automotive Industries, in Melbourne inMarch.The conference was well attended by representatives ofgovernment at the state and federal levels, departmentalofficials, vehicle manufacturers, petroleum producers andconsumers.The focus of the conference included fuel quality, theimpact of world oil pricing on domestic fuel costs, thedevelopment of vehicles and fuels to meet theenvironmental needs of the future and the restructuringof the Australian petroleum industry.The impact of the GST on compulsory third party (CTP)motor vehicle insurance will most likely be different ineach state as the CTP systems vary considerably fromone state to the next. It is, however, accepted that theintroduction of the GST will lead to increases in premiums,probably of around 10%.While some insurers have already chosen to apply thecost of the GST on a pro rata basis, others have opted toabsorb any GST obligation until 1 July 2000 when theGST will be applied to all policies in full.Motor vehicle registrationRegistration and drivers’ licences will not be subject tothe GST following the Treasurer’s statement of the Determinationof Taxes, Fees and Charges Not Subject toGST announcement earlier this year.International speakers including Vince Fazio, the Directorof the Ford (USA) Partnership for a New GenerationVehicle Program, and Dr John Price, Director of theEuropean Petroleum Industry Association joined localexperts in the petroleum and automotive fields.A variety of papers were present on subjects rangingfrom The Automotive Industry and its Technologies toA Response to Euro 2/3/4, The Consequences forRefiners and The Outlook for Alternative Fuel Vehicles.Speakers included senior representatives of Australiancar manufacturers, senior oil company executives andsenior government officials.Copies of the Moving Australia papers are available fromThe Australian Automobile Association.This advice should be seen as general only and specific questionsshould be directed to the Australian Taxation Office or youraccountantMotoring Directions WINTER 2000 ISSUE 1 VOLUME 119

MOTORING DIRECTIONSIn November 1999, Australia’s automobile associationsjoined forces to launch AAA Tourism, a nationaltourism company that will provide Australian auto clubmembers with the country’s most comprehensive and upto-datetourism information and advisory service.AAA Tourism manages the national tourism database(TRIPS), publishes the Automobile Associations’ populartouring and accommodation guides, managesAccommodation Assessing through the STARSAccommodation Classification Scheme and developstouring products and services including the NationalSpecial Rates Program.STARS TM accommodationclassification systemAAA Tourism is currently developing a nationalaccommodation star rating system. AAA Tourism hasundertaken several initiatives to ensure consistency andstrengthen confidence in the replatformed national system.These include an intensive three month AAA TourismAssessors training course and industry consultation.AAA Tourism will also be publishing the state-basedExperience guides. These are designed to answer thekey touring questions of where to go, how to get there,and what to do. The first of these guides, ExperienceQueensland, will be available in July 2000.National special rates programThe National Special Rates Program was launched on1 May 2000. This program gives automobile club membersdiscounts of 15% or more at participating accommodationproperties, discounts of 10% or more on selected prepurchasedattractions and special members’ car hire ratesthrough Hertz. Over 1 million Special Rates brochureshave been produced and are available through theautomobile clubs.“The formation of AAA Tourism in November 1999underlies the importance of road based tourism to autoclub members,” said AAA Tourism CEO Peter Stainlay,“and our goal is to help the auto clubs contribute to theirmembers’ travelling experiences.”PublishingFor the first time, the clubs’ popular accommodation andtourist park guides will be published centrally and distributednationally throughout Australia. Close to threequarters of a million National Accommodation Guides andover 400,000 National Tourist Park Guides are nowavailable through the seven motoring organisations.AAA Tourism Pty LimitedACN 087 199 504Level 6131 Queen StreetMelbourne, Victoria Australia, 3000Phone: 03 8601 2204Facsimile: 03 8601 2222Email: Motoring Directions WINTER 2000 ISSUE 1 VOLUME 1

MOTORING DIRECTIONSPetrol Price MonitorAAA audits and publishes petrol prices to assist in thetransparency process and to ensure consumers haveaccess to up-to-date data. This monitoring followed theintroduction on 1 August 1998 of the FederalGovernment’s petrol marketing reforms. Analysis ofmonthly petrol prices enables AAA to gauge whetherthe reforms are reducing volatility in petrol prices and, inparticular, narrowing the gap between city and, regionalprices. Prices for all 100 locations monitored are availableat: Federal Government recently announced that fromJuly 2000 a Fuel Sales Grants Scheme (FSGS) would beintroduced to ensure that petrol prices did not rise in ruraland regional areas as a result of the introduction of theGST. This scheme will involve grants being paid on acents per litre basis directly to service stations owners inthose areas where fuel prices would otherwise rise as aresult of the introduction of the GST.The FSGS is estimated to cost $501 million dollars overthe next four years.Average Monthly Petrol Price in Australia95.0Cents per litre90. Monthly Unleaded Petrol Prices in NSW95Cents per litre90858075CoonabarabranTamworthForbesDubboNewcastleWollongong70651999April1999JuneAugustOctoberDecember2000FebruaryAprilSydneyMotoring Directions WINTER 2000 ISSUE 1 VOLUME 121

MOTORING DIRECTIONSAverage Monthly Petrol Prices in VICCents per litre95. AprilJuneAugustOctoberDecemberFebruaryAprilMilduraBairnsdaleSheppartonBallaratGeelongMelbourneAverage Monthly Unleaded Petrol Prices in QLDCents per litre959085807570656055AprilJuneAugustOctoberDecemberFebruaryAprilCharlevilleMt IsaTownsvilleToowoombaBrisbaneAverage Monthly Unleaded Prices in SA100. per litreCoober PedyWhyallaPort AugustaRenmarkPort PirieAdelaide200022 Motoring Directions WINTER 2000 ISSUE 1 VOLUME 1

MOTORING DIRECTIONSKey Motoring Facts and FiguresMember Services of Motoring Clubs in Australia 1996 and 19991996 1999Membership 6,175,702 6,803,098Road service calls attended 6,582,689 5,791,679Vehicle inspections conducted 189,447 182,642Maps and itineraries issued 8,404,561 5,235,212Touring and accommodation guides issued 1,406,419 2,667,241Properties inspected as part of the nationalaccommodation classification scheme 13,200 13,295Legal enquiries handled 94,667 72,678Driver training lessons provided 109,903 79,625Loans approved 17,613 14,445AustralianAutomobileAssociationVisit our web site· Transport Statistics Data Base· Issues Papers· Consumer ResearchThe Australian Automobile AssociationACN 008 526 369e-mail aaa@aaa.asn.auMotoring Directions WINTER 2000 ISSUE 1 VOLUME 123

MOTORING DIRECTIONSThe Role of the AAAThe Australian Automobile Association (AAA) has been the official voiceof motoring in Australia since 1924. The Australian Automobile Associationsupports and coordinates the activities of the State and Territory motoringclubs and associations. AAA represents the interests of these constituentorganisations , their 6.8 million members and, indirectly, all Australianmotorists at the national and international levels. AAA is widely recognisedby government and industry as the official voice of Australian motorists.The AAA VisionTo help co-ordinate constituents in maintaining world best standards ofmotoring services.The AAA MissionTo promote the interests of Australian motorists by influencing public policyand the efficient use of member organisation services among constituents.Constituent MembersNRMA LimitedThe Royal Automobile Club of VictoriaRoyal Automobile Club of Queensland LimitedThe Royal Automobile Association of South Australia, Inc.The Royal Automobile Club of W.A., (Incorporated)The Royal Automobile Club of Tasmania LimitedAutomobile Association of Northern Territory Inc.Royal Automobile Club of Australia24 Motoring Directions WINTER 2000 ISSUE 1 VOLUME 1

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