Gavan O'Connor (Corio, Australian Labor Party, Shadow Minister for Agriculture and Fisheries) Share this | Hansard source

The opposition will be supporting the Fuel Tax Bill 2006 and the Fuel Tax (Consequential and Transitional Provisions) Bill 2006. However, I state to the House my support for the second reading amendment which has been moved by the member for Hunter. I believe the member for Hunter has foreshadowed further amendments that may be introduced in the consideration in detail debate, and of course I will be supporting those. This legislation creates a single fuel tax regime with credits approved through the business activity statement system. It essentially provides transition arrangements to phase in the fuel tax credits scheme while phasing out the Energy Grants (Credits) Scheme, the Fuel Sales Grants Scheme and the state administered Petroleum Products Freight Subsidy Scheme. The purpose of the legislation is directed at ensuring that claimants receiving a grant continue to benefit from fuel tax concessions and at phasing in over time the extension of eligibility for the off-road business use of fuel. Currently ineligible off-road activities will become eligible for a 50 per cent fuel tax credit from 1 July 2008 and for a full credit from 1 July 2012.

Much has been said in the debate on this legislation about the current state of fuel taxation in Australia. The general public could be forgiven for asking what the Australian parliament and successive governments have been doing up to this point in time about this very complex area of taxation. It is a scandal, and I do not mind saying that after 10 long years of the Howard government we finally have legislation presented to the parliament which the government itself is still busily amending. I reiterate the comments of the previous speaker in this debate: one would have thought that the government, with all the resources at its disposal, could have developed a coherent fuel policy for Australia and developed over time a less complex fuel taxation system, if that is indeed the way that this Treasurer wants to raise revenue for government purposes.

The current arrangements for the taxation of fuel in Australia are highly complex and there is enormous scope for rationalisation. After 10 long years, this legislation seeks to introduce some rationalisation of the current scheme. It is important to note that the current bill does not change the taxation of petrol for basic household motor vehicle use. Under the current regime, a grant is available for diesel fuel under the Energy Grants (Credits) Scheme. There is an on-road credit, which includes alternative fuels, for vehicles over 20 tonnes, for vehicles between 4.5 and 20 tonnes and for vehicles operating outside or across metropolitan boundaries. Off-road credits apply to business usage and a fuel sales grant, under the Fuel Sales Grants Act, of 1c to 3c per litre of gasoline or diesel fuel in non-metropolitan areas applies. Remission certificates apply to exempt commercial users, in industries like plastics and chemicals, from excise or customs duty on certain types of fuel. The proposed changes, to apply from 1 July 2006, seek to consolidate these measures into a single fuel tax regime with credits achieved, as I have stated, through the BAS reporting system. Many users will receive the same level of tax but under different administrative arrangements, and of course the cost of compliance and understanding will fall on those businesses. Some users will face significant tax reductions, and there will be a higher tax for some on-road use. Aviation fuels are excluded from the fuel tax credit system.

Labor’s position on this has been articulated by previous speakers and I will not canvass too widely those statements. Labor supports the basic structure of the bill as providing a more sustainable basis for fuel taxation in Australia. In the general scheme of things, the bill is a major reform of fuel taxation in Australia. It provides for many things: a single system of fuel tax and associated credits, reductions in the incidence of fuel tax levied on taxable fuels and a staged introduction of a framework for the taxation of liquefied petroleum gas, liquefied natural gas and compressed natural gas from 1 July 2011. It provides for a staged reduction in tax assistance for biodiesel and domestic ethanol and it links fuel credits to environmental standards, something for which Labor has argued for a long period of time.

This legislation had some serious shortcomings for small and medium sized enterprises in Australia, which have been the subject of significant representations by people in my constituency and by members of the farm sector in my capacity as the shadow minister for agriculture. Their main concern was the provision, under the originally proposed regime, that fuel credits would be received only after a BAS had been lodged and processed by the Australian Taxation Office. It was estimated by many of those seeking change in this area that many SMEs that lodged business activity statements would have something like a 50-day delay between paying the excise and receiving the fuel credit. As we know, the ATO has not had an exemplary track record of processing activity statement refunds quickly, so the provisions as they stood were going to lead to significant cash flow problems for many small businesses.

Labor particularly has worked very hard with those sectors to put pressure on the government to look closely at this particular provision and change it, which the government has done. The government has made a minor concession that extends the sunset period by a couple of years. But, as we know, these are ongoing problems for small and medium businesses. I think it is a reasonable proposition that we extend that sunset clause indefinitely, and I will certainly support any measures to do that.

For example, Labor was approached by the ACCI, which had real problems with the new legislation. We were also lobbied by the farm sector and other business lobby groups—of course, that lobbying effort was directed at government members also—and changes have been made. So we would welcome any change in that regard, but more particularly we think it ought to be extended beyond that two-year period.

The issue of fuel is one of direct concern to my constituents and the people whom I seek to represent in my shadow ministerial portfolio in the farm sector. As you may well know, Mr Deputy Speaker, my electorate of Corio encompasses most of Geelong. We have some tens of thousands of people who every day travel to Melbourne for work. Most of those people travel by car. I am not saying that that is the most efficient way to move people between Geelong and Melbourne. I commend the Bracks government for the recent upgrading of the rail system and the introduction of the fast trains between Geelong and Melbourne, and I commend those people who seek to use that transport mode to get themselves to their place of work. But the reality is that, for convenience, many people in my electorate travel to Melbourne for their work by car. They have to do that. They have been affected deeply by the rises in oil prices that have occurred which have translated into higher prices at the petrol bowsers in my electorate and in Melbourne. The simple reality is that most of those commuters are facing quite significant increases in their fuel bills, and these issues of fuel taxation are very important to them.

They are also important to the farm sector, because the cost of fuel is a significant input into the production of agricultural produce in this country. Much production is undertaken in rural and regional areas that are quite far away from ports and the markets in which we sell that produce. When you look at the inputs that come from petroleum based products into farm processes you see that it is not just confined to fuel but to fertilisers, and the rising international price has impacted very heavily on the baseline costs of farmers on-farm. It has also affected the delivery of goods into regional areas—the delivery of spare parts and general household items. The general cost structures are moving as businesses adjust to the new economic environment typified by high petrol prices.

There is a simple reality about Australia’s position. We are terribly dependent on foreign oil, and that dependence is growing. For example, petroleum based fuels account for 97 per cent of Australia’s transport needs. That is an extraordinary statistic. The reality is that we are consuming petroleum based products at a rate some three times faster than we are finding those resources. At the end of the day, as we all know, there is a finite limit to these resources. No matter how you look at the situation, we could go on finding huge reserves of oil but, as we know, at the end of the day, at quite significant rates of consumption, those fossil fuels are going to run out whether it be in 10, 20, 30 or 100 years.

I have some experience of this. As a young man I happened to work as an administration manager on the construction sites in North Sea oil, where British Petroleum contracted the company that I worked for to extract oil from the North Sea. The technology that was being employed was at the forefront of the recovery technologies at the time. The company that was involved was a significant Texas contractor which is well known to people on both sides of this House. The Texans who worked in that particular company made no bones about the fact that, once the oil was discovered, caps would be put on the oil and the companies would wait until the price increased to release it. I found that quite staggering as a young person, knowing that households and people depended so much on fuels to generate their livelihoods. But here I was working with a company where, although there were huge exploration costs involved, once the product was found, the caps were being put on the oil wells and the supply trickled out to influence the eventual price, given the demand. I mention this example because, at the end of the day, either Australia is in a vulnerable position on this particular issue or it is not. That is the reality: we are either vulnerable or we are not. There are degrees of vulnerability, and at the moment we are highly vulnerable—and we should not be. That is the simple logic of what we have seen take place over a period of 30 years.

Some of us in this House can actually remember the 1974 oil shock. That was supposed to be something that created enormous difficulties for the then Labor government. The then opposition would not hear of any excuse about a trebling of the price of oil feeding into the cost structures of businesses and farms. There was no concession or quarter given to the Labor Party then, but we have seen over the last couple of years a trebling of the oil price again. This government has had at its disposal over a decade a whole raft of things it could have done to much better prepare Australia for the situation it now finds itself in.

Crude oil and refined petroleum now constitute the largest item on our trade accounts—that is, crude oil in 2004-05 was the second-biggest import, at $15 billion. The statistics are quite alarming. In 2005-06 Australia relied on imports for 17 per cent of our petroleum consumption. Those are figures produced by ABARE, which estimates that by 2020 that will rise to 46 per cent. The Australian Petroleum Production and Exploration Association think it will be closer to 78 per cent. So somewhere between 50 and 80 per cent is probably a reasonable guesstimate. We tend to rely on those two bodies for their expertise in making these sorts of predictions. Even if that is the case, we are highly vulnerable and dependency means terrible exposure to any rises that take place or any events that will affect the demand or the supply of petroleum based products.

The economic impacts are substantial. We have seen a trebling of oil prices in three years globally, and that has started to feed into inflationary pressures. It has already impacted on household budgets in Geelong. It is being used by this government as an excuse for the brakes being applied to growth. I am not disputing that that is an economic impact; but, for heaven’s sake, we have known about our dependence on petroleum based products for a long period of time and we are only now getting the fuel tax regime right and we have no alternative fuel strategy of any moment in place. I get sick and tired of members opposite saying that Labor is a policy-free zone. We are an opposition with limited resources, yet we could come up with a comprehensive policy. You have been in government for some 10 or 11 years and you are still in a mess. The nation is highly vulnerable and we are all going to pay a price for your incompetence.

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