David Hawker (Speaker) Share this | Link to this | Hansard source

I have received letters from the honourable member for New England and the honourable member for Hunter proposing that definite matters of public importance be submitted to the House for discussion today. As required by standing order 46(d) I have selected the matter which, in my opinion, is the most urgent and important—that is, that proposed by the honourable member for member for New England, namely:

The worsening impact of increasing petrol prices and the Government’s reluctance to act.

I call upon those members who approve of the proposed discussion to rise in their places.

More than the number of members required by the standing orders having risen in their places—

Tony Windsor (New England, Independent) Share this | Link to this | Hansard source

I think all members of parliament and the general public have expressed concern in recent weeks and days, particularly since the return of members to the parliament, about the price of petrol. We have seen the escalation of problems in the Middle East and leakage problems in Alaska and we know the flow-on effects that that could have in terms of the price of petrol. The matter of public importance that I have introduced today relates to the worsening impact of increasing petrol prices and the government’s reluctance to act. Some may think that that is being a little critical of the government. This MPI is really about looking at things that can be done to alleviate the short-term problems of the impact of petrol prices on our community, the impacts in the medium and longer terms, and the things that can be done into the future. I am sure that the speakers who come forward today will elaborate on some of the suggestions that are out there on how to alleviate the problem of petrol prices not only within Australia but also globally.

I took advantage of the winter break to spend a fortnight in the United States and Canada looking at ethanol plants and biodiesel plants. I was interested in the attitude of the farm sector, the government sector, the fuel company sector and the motor vehicle sector towards the acceptance or otherwise of renewable fuels. I do thank those people in all those sectors who took the time to visit with us. I would have to say that the overall impression that I obtained—and I think it can have an impact in Australia—was one of a very positive attitude to the future sustainability of fuel resources within those nations, particularly the United States. There was a very positive attitude in the farm sector and in the farm lobby sector. There was a high degree of leadership in the political sector as well. I think that stands in stark contrast to the dithering that has been going on in Australia since 2001 in terms of addressing renewable energy, particularly biofuels.

That is not to say that the government has not done anything; obviously it has put in place some renewable energy targets and it has put in place some assistance to proponents who are looking at building plants. The one thing that came through very clearly, talking to the Americans and to the Canadians, was that the industry would not have taken off had there not been the political leadership to actually mandate some degree of usage of the product so that the oil companies would be forced to access the product into their distribution network. I think we all realise the strong influence that the oil companies have over the distribution network within Australia. If they are not going to voluntarily accept a product—for a whole range of reasons; they might be health, environmental or economic—we may need government leadership. Under current circumstances with very high US barrel prices, accepting this product may be the most economic thing for them to do. It seems that, even though the Prime Minister had a cup of coffee with a few of them about 12 months ago and talked about achieving some voluntary targets, those targets are not being achieved. The target that was set for 2006 has not been achieved at all and it is very unlikely that future targets will be.

One of the things that came out of my American visit very strongly was that there is a need for the government to play a leadership role. I congratulate the United States state and federal governments, and the Republicans and Democrats, who have looked at this issue from a very clear perspective: one of trying to reduce the dependence of their country on other countries for the supply of oil and the obvious manipulation that can go on in relation to that particular marketplace. We have seen at home in Australia the debate about the Iraqi wheat debacle and corrupt markets in terms of the wheat trade and the oil market and the various things that are happening at present.

Overall I received a very positive message. I saw a stark contrast between the United States farm lobby groups and the Australian lobby groups. I was a member of the Grains Council of Australia before entering parliament. I was a great supporter of the Grains Council of Australia. But they seem more interested in the right of the motorist to have some sort of choice rather than the right of the grain grower—whom they are supposed to represent—to earn a viable living and have their domestic grain production underpinned in some sense by another competitive process: that of accessing the international ethanol market. The National Farmers Federation have not been much better. I saw a stark contrast between those groups. I saw a stark contrast in terms of government leadership. One of the things that I was very impressed with—and I think this should happen in Australia and could happen in Australia if there was more positive leadership in the farming sector—was that most of the plants had some degree of farmer ownership. I visited 10 out of the 106 plants that have been constructed in America and a number in Canada as well. One particular plant in a community of about 3,500 to 4,000 people, with many farmers in the surrounding area, of course, had 2,300 farmer shareholders—and some community members who were not farmers were also shareholders. They formed a limited liability company. They were also financed for some of their debt portion by their local bank, so it was very much a community business activity. Obviously the farm sector in that sense has been able to lock in another outlet for its grain and make a degree of profit in terms of value-adding to that grain to turn it into ethanol.

The debate in Australia at the moment is: ‘What about the price? Does it make any difference?’ In one case a farmer-owned cooperative had moved into buying some of its own fuel stations—I know that is on a limited level. The price was US60c a gallon cheaper for E85—that is, 85 per cent ethanol—than it was for unleaded petrol. I was driving a Ford Explorer, a vehicle that is readily available in Australia, and it was being fuelled by E85 for quite some time. That equates to US16c per litre, which converts to the equivalent of A82c per litre at the bowser. That is in stark contrast to prices in some parts of rural Australia, where prices are nearly double that at the moment.

Discussions in the feedlot industry in Australia have raised the point that, if the ethanol industry were established or encouraged, it would have a positive impact on the price of grain, which would make it more difficult for the feedlot industry to exist. The feedlotters that I met with in the US see the ethanol industry as being positive, because the dried or wet distillers grain, as they call it, the by-product of the process—which is about a third of the tonnage that goes into the fermentation process to create ethanol or alcohol—comes out as a flake or a rolled grain which is high in protein and readily used by the feedlot market. So, in contrast to it being seen as a negative in Australia—there have been so many negatives peddled by people of all sorts of political persuasions and industry groups—it is being seen as a positive in the United States. In fact, one of the large feedlotters that I met with, who has 35,000 head of cattle near Denver, is using a 25 per cent ration of wet distillers grain, a by-product of the ethanol plant, and is achieving about a 20 per cent increase in weight gain from the use of that product. So there is a positive happening there as well.

In Australia there has been talk from time to time about the car companies. The car companies do not particularly want ethanol. You cannot get the car companies to do anything. I have here a copy of the Wall Street Journal from Friday, 4 August, which contains a full page ad stating: ‘General Motors and ethanol—putting together the pieces to make it whole’. I will not read the whole ad, but it is congratulating the government and the fuel companies. You have very good eyes, Mr Deputy Speaker Jenkins; you will probably read it from where you are sitting. Right down the bottom, it says ‘Live-green-go-yellow.com’. I would advise people in the media to have a good look at that. This ad shows that the car companies are embracing ethanol. It states:

With more than 2 million General Motors flex-fuel vehicles on the road today, we want to make E85, a fuel blend of 85 per cent ethanol and 15 per cent gasoline, available to more people in the United States.

That is the sort of thing that needs to happen here. General Motors Holden in Australia is actually making flex-fuel vehicles in Australia to accept E24 fuel, with 24 per cent ethanol in the mix. Those cars are not available in Australia. They are being exported to Brazil. Brazil is an interesting example: it has gone from being 80 per cent dependent on foreign fuel sources to being 100 per cent self-sufficient, and that is what is happening at a political level in terms of policy. Countries are looking at renewable energy not only for a whole range of health and environmental reasons but also for ways of achieving some degree of self-reliance with respect to their energy needs. I think the Treasurer and others really need to have a good look at the way in which we have, in a sense, falsified the tax system so that we see energy as a source of tax revenue rather than as something that should give us a competitive advantage in international activities.

My suggestion to address the fuel problems in the immediate term would be to reduce part of the excise, the 51c a litre that is removed today, and in the medium and longer term to mandate and phase in at least 10 per cent ethanol in our fuel. It can be done at one per cent a year over 10 years or two per cent a year over five years. It is nonsense that you cannot mandate ethanol in this country because there would not be enough ethanol to put into the marketplace as of tomorrow. No fool in the world has ever attempted to do that. I hear fools in this country suggesting that. One of those, the Minister for Industry, Tourism and Resources, Ian Macfarlane, has been making the statement quite readily that we could not suddenly put 10 per cent ethanol into the marketplace. How foolish is that statement? Obviously it would be phased in. If he would like to travel to Minnesota, he can talk to the legislators there about how they did it over a four-year period. They are moving to 20 per cent ethanol as we speak. So let us break this dependence on others for our energy needs. Let us look at biodiesel, ethanol, wind and water. There are a whole range of alternatives out there that could be embraced.

In Canada, for instance, I visited a large plant that was going to use wheat as the basic ingredient—poor quality wheat, feed wheat, the wheat that is ruined by rain that we hear about so often in Australia, the wheat that does not have the protein and cannot access high prices in the international market. These are the wheats that produce more starch, and they are the grain that ethanol plants would be looking at. The over-reliance of wheat growers on high levels of nitrogen to achieve high protein levels is the sort of thing that could be broken.

If we start to look at the advantages of this approach, we will see that it is about not only renewable energy, health and the environment but also about investment; jobs; the domestic security of our energy needs; country towns growing, progressing and doing something beneficial; and recognising that even agricultural products that are considered essentially worthless on the world market, for a whole range of corrupt reasons, can be a valuable resource. Those products may be sugar, wheat, corn or sorghum.

In conclusion, I would suggest that there are things that we can do. One is to mandate the use of ethanol to develop a medium- and long-term approach to renewable fuels. In the immediate term, we should look at reducing some of the excise so that motorists and Australian families, whom we all represent, are not persecuted in the way in which they are being persecuted at the moment. (Time expired)

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

I am delighted to participate in this matter of public importance today. I think that we would all like to see lower fuel prices in Australia, but I dare say our good friend the member for Rankin, in an article he wrote for the Age on 22 July, summed up the position, where he said, ‘There is no doubt that the price of fuel in Australia is directly related to the price of oil on the world market.’ I think that sums it up absolutely correctly.

To hang out a promise to someone in the electorate that by embracing ethanol—as much as it might be of benefit to the environment and certainly a benefit to fuel and the additives in fuel because of the high octane that it supplies—we are in some way going to reduce the price of fuel I think is a wrong premise, quite frankly. I cannot see how hanging out this offer that somehow ethanol will reduce the price of fuel in Australia would in any way deliver that particular objective. At present, if you look closely at some of the incentives that the government has put in place, the only reason that fuel with an ethanol additive is cheaper is that the excise has been taken off the ethanol in that particular fuel. We can go into that argument a little later.

Having said that people would like cheaper fuel in Australia, I think it is important to say that in fact Australia has the third cheapest fuel in the world. Interestingly, a graph was put out in 2006 of the OECD countries. If you look closely at it, you will see that the base price of fuel in all those countries is very close to being the same. But it is the taxes that are added to that base price that change the price of fuel. If you look closely at the OECD countries you will see that only the United States and Canada are below Australia and that is because of the added taxes. Mr Deputy Speaker, I seek leave to table that graph because I think it is instructive to people to see how the taxes do affect them.

Leave granted.

Also, I think we need to take into account that the member for New England suggested that somehow ethanol will be a greater advantage to the rural industries of Australia. I doubt that very much, quite frankly. One of the important things about ethanol is that, if it is going to be competitive, you have to have cheap feedstock to produce the ethanol. My immediate question would be: what is the price that will be paid to the farmers for the feedstock that will be used in the ethanol industry? That is the first thing that has to be established. Quite frankly, just to talk glibly about the fact that we can produce ethanol from grain—and we can—or we can produce ethanol from sugar—and we can—I would say that the main question from the farmers’ point of view is: what are you going to pay us? If you look at the sugar industry at present—

Tony Windsor (New England, Independent) Share this | Link to this | Hansard source

Mr Windsor interjecting

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

The member for New England had his say, but he does not like it when someone starts to put another point of view. If you look at the sugar industry at present, where the price of sugar on the market today has escalated—now at $443 a ton—I suggest to you that no sugar grower will sell sugar to an ethanol industry at that price. The first thing you have to establish is whether you are credible in putting forward an argument in this debate.

To say that the government has not in any way encouraged these industries is quite wrong. There is plenty of evidence to show that the government has encouraged these industries in recent years. Yes, you can talk about mandating if you want to. I do not know whether that is absolutely necessary. One of the greatest things is to try to get through to the public, after a debacle we had here in Australia a few years ago, that in fact ethanol is not dangerous to engines. That is one of the greatest problems we have. There is an underlying fear amongst the community—and if you have a look at the research that has been done on this, it is very clear—that somehow ethanol damages motors. Why? Because we had the member for Fraser, I believe, stand up in this parliament. He asked a series of questions. He clearly put into the minds of people that the problems that were occurring with certain additives in fuel emanating from, I think, Victoria related to ethanol. Ethanol was causing the damage to engines to the extent that in my area the fuel companies had signs up in bold letters, saying: ‘This fuel does not contain ethanol.’ That underlying fear is still there and it is one of the greatest things that we have to overcome to ensure that people do know that in fact a 10 per cent blend would not be detrimental to any of the engines in their motor cars in Australia.

Another argument that is put forward very regularly as to why we have to do something about fuel prices is that fuel companies are a cartel. I have heard this from my days in the state parliament and from my days here and I suppose we all suspect because they are big that they could be involved in a cartel-like arrangement. But if you have a close look at what has happened over the years, you will see that reports from the ACCC have found that the petrol retailing industry in Australia is competitive and that heavy-handed regulation could lead to higher petrol prices. An argument has been put forward that the reason why people can in fact buy fuel at a lower price mid-week is that consumption at that particular time is not great and that the service stations are trying to encourage people to buy. An argument has also been put forward—which I suppose could be tested—that if you did regulate in some way, consumers would not get the benefit of cheaper prices with shopper dockets. So we have to be very careful about some of this. You would have to have a lot more information to categorically say you could overcome this.

Let me go back to the biofuels debate. There is keen debate across the world. It is interesting that the member for New England went to the United States, because that is one area where you will not get a true market in any fuel—maybe you will get a true market in the petroleum industry, but certainly not in biofuels, because they are up to their ears in subsidisation in the United States. From my experience, I can tell you that Brazil is badgering the United States to take off some of the tariffs on ethanol that is imported into the US. Brazil can produce ethanol more cheaply than the United States, but the United States will not let them sell it in their market.

Tony Windsor (New England, Independent) Share this | Link to this | Hansard source

Mr Windsor interjecting

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

That is true. If you do not believe it, you had better check it up.

Tony Windsor (New England, Independent) Share this | Link to this | Hansard source

Mr Windsor interjecting

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

If the member for New England wants to seek the call again, he can try. We can have a look at what the government has done in this particular area. The government has given $37 million in biofuels capital grants and $56 million in ethanol production grants. It has made a commitment to ensure that ethanol remains effectively excise-free until 2011. It has introduced an E10 blend that is suitable for Australian vehicles so that it is clear to people that these vehicles are safe to use E10. Production of ethanol in Australia has not been stagnant. We know of new plants that are coming on-stream. In the last 12 months there has been a 75 per cent increase in production from 23 million litres to 41 million litres. Last June there were 70 service stations selling ethanol; today there are 290. The use of ethanol in Commonwealth vehicles has increased by 2,000 litres, and ethanol and biodiesel fuels are now available at 400 outlets across Australia.

As I said earlier, we would all like to see cheaper fuel prices. We would all like to think there was a magic wand that could be waved and that, if only we produced ethanol, methanol or some other biodiesel—maybe from canola or soy—then all of a sudden our fuel problems would be overcome. In fact, that is just not the case, and you are holding out false hope if you go out and make those claims. During the break, I had a close look at the industry in Europe. I went to a large ethanol plant in France at which ethanol is produced from wheat and sugar. They are being subsidised by France to do that. I asked the managing director of the company at what point ethanol becomes competitive. Without hesitation, he said he thought ethanol becomes competitive when oil is at $US60 a barrel. That is good. It shows that there can be a competitive industry and that oil is not going to reach a high peak if you can establish an industry that will be competitive against oil. Australia has to look very closely at what it can produce. I put it very strongly to the member for New England that there is no way in the wide world that Australia can produce enough ethanol for a 10 per cent mix in Australia.

Tony Windsor (New England, Independent) Share this | Link to this | Hansard source

Rubbish!

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

Anyone who holds out anything different is talking pie in the sky. The member for New England has been peddling this as an election issue. I put it to him that, if he wanted to have a real input into the debate, he should be part of the government. You are certainly not part of the debate when you are sitting on the outside looking in. You need to look at this very closely. The government has set targets and they are being reached. There are incentives in place for the production of ethanol or other production that might be necessary. To simply put forward the glib suggestion that you can mandate and all our problems will be over, that you can set up an ethanol industry and it will solve all the problems of the farming community and that you can add ethanol or methanol to fuel and it will reduce the price of fuel is absolute bunkum—and we need to get that very clearly established.

Undoubtedly, alternative energies have a role to play. I agree very clearly with Wilson Tuckey, who says hydrogen is the future of the fuel industry. There is no doubt about that, and there are some breakthroughs we need to get in that area. I would be very keen to see some extra money put aside for research to help the CSIRO in this area. As far as alternative energies coming from ethanol, methanol or biodiesel are concerned, that is just not going to happen. It will put pressure on other areas. The member for New England skated over the fact that industries in Australia, particularly the feedlot industry, are concerned about the price of grain—and they should be concerned about the price of grain if most of it is diverted to methanol. You only have to look at the price of sugar. Everyone in this House has been saying that the sugar industry in Australia would be dead in two years if the price of sugar is down at 5.5c and 6c. As a long-term member of the sugar industry, I can tell you that the Australian sugar industry might be efficient but it cannot produce at that price.

The only reason that can be seen for a sudden change in 12 months is the escalating price of oil. Why? Because there has been more sugar converted to ethanol in countries like Brazil, India and Thailand, where they have different structures and different production subsidies in place. That has taken sugar off the market, and the price has gone up. Exactly the same thing will happen to grain. So this is not the panacea that is going to solve all our problems. We have to look very closely at these industries, but we also have to look closely at what we are going to do in the long term.

In recent times the Americans have made the bold statement that they think they will have developed a hydrogen cell within 10 years. We can only hope that they are right because it is about the only possible way you could claim to have an alternative energy source. It is certainly not going to come from methanol, ethanol or biodiesel. They may augment other industries—that is yet to be seen—but they certainly will not overcome the problems with pricing or the problems in rural Australia.

Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Assistant Treasurer and Revenue) Share this | Link to this | Hansard source

I should say at the outset that I do not resent the Speaker’s decision to grant today’s MPI to the member for New England. I am sure it was a very difficult choice, but in any case the themes of the MPIs submitted by both the member for New England and me were very similar. However, I did think the member for New England was a little generous in talking about the government’s ‘reluctance’ to act on high petrol prices. I would have gone in a bit harder and claimed they were absolutely refusing to act on high petrol prices. It is interesting that the member for New England’s MPI talks about high petrol prices but both he and the member for Page spent all of their time talking about ethanol, which, of course, has only a minor contribution to make to dealing with the challenges facing Australia. Given the time they dedicated to ethanol, it is probably appropriate for me to respond to that at the outset.

The opposition absolutely support the ethanol industry—we always have. In fact, we proudly commenced the process of growing an ethanol industry in this country right back in about 1992, when we first established capital grants for that industry. Let me discuss a few benefits of the ethanol industry. To a limited extent it can assist our agricultural sector. It is good for regional jobs. It is good for the environment. It does or can very slightly reduce our import dependence on oil. And, of course, it does help independent service stations compete with the major companies because they are less reluctant than the majors to use and market ethanol and its tax-free status gives them an important competitive edge over the major oil companies, which have so much market power.

We also have to understand that, while ethanol is and should be an important part of our energy mix, it is limited in its capacity. In Australia today we produce about 37 million litres of ethanol a year, and we hope to increase that rapidly. But to mandate it to the extent of 10 per cent, for example, we would need to produce about two billion litres of ethanol a year, so we are a long way short. Also, to mandate ethanol would force us to import much of that product, which would be counterproductive to what we are trying to achieve. So we certainly do support ethanol, but we have to have a sensible approach and acknowledge the limitations we have in pushing for market take-up of ethanol in the fuel mix generally.

During question time today, the Prime Minister again tried to portray the opposition as saying that the current rise in petrol prices is due to something other than the rise in crude oil prices. Of course we accept that. We would be fools to argue that the current hike in petrol prices is not largely caused by rises in the international price of oil—of course we accept that. But the Prime Minister misses two very broad points. First of all, when the international price of oil is high, it is more important than ever that governments become even more diligent in ensuring that we reduce the impact of those high prices on the consumer. The second point is that the ever-increasing rise in international oil prices should be a wake-up call to every import-dependent country around the globe that we have to do something about our import dependency. The Prime Minister is missing the point. When oil prices are high he has to do more, not less. When oil prices are high it is a signal to us that we have to wake up and start doing something about our import dependency, because in this country we are now importing almost 60 per cent of our crude oil and, hard as it is to believe, something like 22 per cent of our refined product.

Let me go to those two broad themes. The first is about doing something to reduce the impact of high oil prices. Despite the fact that the Prime Minister says there is nothing he can do, let me tell him at least three things he could do immediately to mitigate the impact of high oil prices on Australian families, who now face having to pay up to $40 a week more for their petrol. On top of higher interest rates, that is causing considerable pain. The first thing the Prime Minister could do is direct the Treasurer to write a simple letter to the Australian Competition and Consumer Commission referring to it the power to formally monitor and investigate the retail petrol market, the wholesale petrol market and terminal gate pricing; none of this looking at retail prices and putting them up on a website—that proves nothing. Motorists want to know what is generating what is posted on that website. They want to look behind the prices, not just at them.

This is not a difficult job for the Treasurer. As I indicated during question time today, I have written the letter for him. It is worth reading because people have to understand the technicalities of this. The Treasurer writes: ‘Dear Chairman, In this letter I give the commission a written direction to monitor prices, costs and profits relating to the supply of goods and services by refiners, wholesalers and major retailers of transport fuels, pursuant to section 95ZE(1) of the Trade Practices Act 1974.’

It is clear that this is what the act requires the Treasurer to do. Graeme Samuel does not have the power to investigate petrol prices or to demand information from the oil companies about wholesale pricing, for example, without this letter from the Treasurer. I do not know why the Treasurer will not do this. I do not know whether he just refuses to do it because it is our idea—

John Murphy (Lowe, Australian Labor Party, Parliamentary Secretary to the Leader of the Opposition) Share this | Link to this | Hansard source

He’s chicken!

Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Assistant Treasurer and Revenue) Share this | Link to this | Hansard source

or whether it is just that he is chicken, as my colleagues say, or whether he is protecting someone. The Australian people are entitled to know why he will not take this simple step. We are not saying that it is going to reduce the price of petrol by 20c a litre, but we are saying that, in the face of high oil prices, he needs to do everything humanly possible to mitigate the effects of those high oil prices.

The second thing that the Treasurer could do is to finally get into this place amendments to strengthen the Trade Practices Act. It is well known by all and sundry on both sides of politics that section 46 of the Trade Practices Act no longer reflects the original intention of the parliament. This is as a result of a number of High Court cases—in particular, the Boral case and the Safeway case—which have significantly undermined the ACCC’s ability to secure a prosecution for misuse of market power. We need those amendments in this place. The opposition will move these amendments if we get to debate the Petroleum Retail Legislation Repeal Bill tomorrow—if the Treasurer has the courage to bring that bill on tomorrow, as was the plan when we received the House routine of business earlier in the week. That is the second thing the government could do immediately.

The third thing the government could do is to get on with reforming the retail market in this country. We are working under a 26-year-old regulatory regime—a regime that has been circumvented by the major oil companies by way of multisite franchising and circumvented by the fact that Woolies and Coles are not covered by the act. We have been talking about this reform for years.

The Labor Party stands ready to support this reform, but the government has been unable to show the leadership required to get agreement in the industry to bring forward a package that is broadly supported in the industry. That is the first point. The second point is import dependence. This government has no energy plan. It does not know what our future needs are going to be. It has no plan to ensure we have resources to meet those needs. It is pretty good at shipping off LPG to other countries, which we support, but it has no plan for our own use of it.

The Leader of the Opposition put out a fuels blueprint earlier in the year. I would like to refer the Prime Minister to it. Indeed, he must have read it because just this morning there were reports that already the government is pinching part of it in its announcement that it intends to do something about LPG. What hypocrisy for the government to be talking about giving a lift up to LPG, when it was this government that opposed a tax on LPG for the first time. We need an energy plan in this country. We need to reduce oil import dependency. We need to diversify our fuel mix to biofuels, LPG and CNG and, in doing so, reduce the downward pressure—(Time expired)

Sophie Mirabella (Indi, Liberal Party) Share this | Link to this | Hansard source

I welcome the opportunity to speak on this matter of public importance moved by the member for New England—although one could be forgiven for being confused. It sounded more like an oral report of a study trip or perhaps an adjournment debate on why the government should mandate the inclusion of ethanol. His choice of topic was quite strange, as he was talking about the government’s reluctance to act, when he admitted that it is not to say that the government has done nothing. He is confused in himself and is perhaps confused about the appropriate forum in which to push his hobbyhorse and his version of the magic solution—the silver bullet—to the current petrol problem that we are facing right across the nation.

He also mentioned that the second part of his solution was to reduce some of the excise. Everyone in this House should know that there is only one government that has credibility with regard to the reduction and freezing of fuel excise—that is, this coalition government. The member for New England would know that the further cutting of excise would have very little impact on individuals and families at the petrol pump. A one cent cut in excise would cost revenue $380 million, and what practical effect would that have on Australian families? Absolutely none. It is so cheap and it is so easy for the magic little Independent dwarfs to come up and say: ‘We have a magic solution. We can fix it overnight.’ Well, they cannot, but they have the freedom to be able to say anything, promise anything and be extremely confident that they will never have the burden or responsibility of delivering.

Let us look at the cut in excise. It was the Howard government that reduced excise by 6.7c per litre so that the price of petrol need not rise with the introduction of the GST. It was the Howard government that again cut fuel excise by 1½ per cent in early 2001 and it was the Howard government that actually abolished the half-yearly automatic indexation of fuel excise.

What would have happened if the Labor Party had stayed in power and these measures had not been introduced? There would not have been any cut to excise and there would not have been any freezing of indexation. What would have happened? The excise on petrol would not be 38c per litre, as it is today; rather, it would be 54.9c, some 44 per cent higher than the current fuel excise. The member for Hunter stood there shamelessly claiming that the government needed to wake up to import dependency. I have a message for the member for Hunter: it is the Labor Party that needs to wake up from the policy-free zone it has been living in for such a long time. It is time for the Labor Party to look at the mistakes that marked its 13 years in government.

It was the Labor Party that introduced indexation of the excise in the 1980s and it was the Howard government that abolished it. The Labor Party did not just introduce indexation; on occasions they actually raised petrol excise beyond the automatic indexation. During its last term in office, the Labor Party raised petrol and diesel excise by 5c per litre through additional indexation. That is absolutely shameful. It is no wonder that there are very few of them here—only one member of the opposition, with her head bowed. These are very hard facts to swallow.

This government not only took measures to freeze and cut excise back then but also, in the intervening period, took a considerable number of measures—and is currently looking at other measures—to ease the pain on motorists. There is no easy fix. The member for Hunter and others on the other side have said that in black and white: there is no quick fix.

We live in a world where we all know that the high price of petrol is set by world supply and demand. In reality, dealing with this very complex issue is not as simple as the purported silver bullet. If it were that simple to fix, it would have been fixed already.

I have just completed a very lengthy electorate tour traversing the more than 28,000 square kilometres of my electorate of Indi. Yes, the price of petrol is certainly an issue. But people in the electorate, particularly country people, are smart enough to know why the price of petrol is that high. They know there is no easy fix. Yes, there is a desire to accelerate research and the possible use of alternative fuels, but people are not going to be fooled by the purported easy answers put forward by the member for New England and others.

Interestingly, it was only yesterday that the Labor Party, through the member for Hunter, acknowledged that the price of petrol is inextricably linked to the world price of crude oil, as has previously been acknowledged by the member for Rankin. The member for Rankin has also said:

Nor is it true that an oil cartel is artificially spiking petrol prices ... the petrol retail market is highly competitive.

The Labor Party make a lot of noise about petrol, but they have absolutely no solutions. The Leader of the Opposition is not going to touch the excise system. As recently as April, he stated:

If you ask me for what my priority is in taxation reform it’s not in that area of excise.

Yesterday the Leader of the Opposition spoke about monitoring. This is a very interesting point as petrol stations throughout Australia are monitored daily. Let us look at the ACCC. What did the people entrusted with monitoring the price of fuel say at the current petrol inquiry, which is the 53rd inquiry into petroleum products across all jurisdictions since 1976? They have not come up with a silver bullet, but the member for New England certainly has. The fact is that Graeme Samuel did say the following:

We have, in accordance with the general provisions, our normal investigative powers to investigate any suggestion or evidence of anticompetitive behaviour in the petroleum industry and, insofar as it is raised with us or we detect it, then we have all the investigative powers, including powers to demand documents and to call witnesses before us under section 155, and our other investigative powers to deal with anticompetitive behaviour.

It was only the other day that the Treasurer announced that the ACCC will have its powers extended to also monitor ethanol blended fuel prices. Mr Samuel was asked by Senator Joyce whether it was correct that the ACCC can investigate, conduct raids, call witnesses and get documents without ministerial or government intervention. He replied:

Absolutely, yes.

We can see some of the results of the ACCC’s action from 2005, not that long ago, when it investigated companies in Ballarat for price fixing and fined them over $20 million.

All these magic solutions and all these empty cries in the policy vacuum that is the Labor Party have never produced a solution to high petrol prices, and still those opposite offer no particular solutions. All we really have from the Leader of the Opposition and the Labor Party is nothing—no solutions, just the usual Beazley blunder: a big air balloon floating into the policy void and losing hot air as it floats along.

As a Victorian I have a particular interest in looking at what has happened in Queensland. Unlike Queensland, Victorians do not get any relief from the GST revenue from petrol. Everyone knows that all the GST goes to the states, but yesterday Premier Bracks was not showing any signs of forgoing his revenue to assist motorists when he said:

We accept that the current arrangements for the GST are universal. They apply across the board ... We’ve backed and supported it.

There are no solutions from the state Labor Party either. This government has contributed significant funds to research and development in alternative fuels. It has contributed $37 million in biofuel capital grants and $56 million in ethanol production grants. It has given a commitment that ethanol will remain excise free until 2011. It introduced the important ‘E10 suitable’ label. Ethanol and biodiesel blended fuels are now available at over 400 outlets around Australia. And the government has been extremely active in creating the right environment to develop an Australian gas to liquid— (Time expired)

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

The previous speaker, the member for Indi, is a lovely lady and we all like her immensely, but I have not heard one substantive thing. If you come into this place, you want to come in after having done a bit of research and homework. On our opponents’ side, this debate on the matter of public importance has been characterised by the homework not having been done.

People say that we cannot produce fuel. Have you ever heard of a country called Brazil? Have you ever heard of a country called the United States? You are saying that we cannot produce it. Brazil is doing it and the United States is doing it. Do not tell me we cannot do it.

As for capacity, we have five million tonnes of sugar. In Far North Queensland alone we are a million tonnes below capacity in the production of sugar, never mind cane. We are probably a million tonnes below production, so we could go to six million. But, even at five million tonnes, we are looking at 600 litres to the tonne. I emphasise to the House that I am not talking about airy-fairy figures; I am giving you the statistics. We produce five million tonnes of raw sugar per year in Australia. It converts at 600 litres per tonne. Everybody knows that. I should not have to explain it to the House or quote my sources on that. That is 3,000 megalitres. Australia used about 20,000 megalitres, last time I looked.

My honourable colleague the member for New England has informed the House that there is 30 million tonnes of grain production. You get 450 litres per tonne from grain. That would be of the order of 13,000 litres. That is 16,000 litres on current sugar and grain production.

Almost half of my electorate—about two or three per cent of Australia—has the water and flat irrigation land, the mid-west plains of Queensland, to turn into sugar production. Queensland is a magnificent, natural sugar producing area. We have the water, we have the land, but we have a problem: the state government in Queensland is not letting us take any water out of the rivers to irrigate this land. It has no trees on it, except for seven million hectares of an introduced species which has run amok and destroyed an area the size of Tasmania. One of the leading Natural Heritage Trust people said that it is the worst environmental holocaust in Australian history. If we were growing product on it, we could control the immense destruction taking place.

I cannot talk about the expansion of the grain industry but, as the sugar industry stands, the mid-west plains could put one million hectares of land under irrigation tomorrow. Mr Deputy Speaker Causley, you of all people know how much sugar that would grow. It could produce double Australia’s current production. We could put in two or three million hectares of sugar if we wanted to. The water is there. The flat land is there. It is being used to run a few moo-cows around in a year in which it rains. We cannot run many moo-cows on it because it does not rain a lot, so the land is not doing much as is except growing introduced species that are wrecking the flora and fauna in that environment. We are talking about one million hectares in an area of 20 to 30 million hectares.

We can produce sugar right at this very moment. People ask, ‘Will you do it?’ The opposition spokesman quite rightly asked us, ‘Are you going to put all of your sugar across to ethanol production?’ Too damn right we will, because all we are getting is $269 a tonne. We watch our Brazilian competitors enjoying a relative figure of about $470 a tonne, because that is the price of petrol reflected back to the farm gate. If they are getting the petrol price reflected back to the farm gate at $470 a tonne, our producers could also get $470 a tonne. Mr Deputy Speaker, you would know that we have been limping along on $269 a tonne for the last five years. It would be Christmas time big time if we converted our sugar into ethanol production.

Why is that not happening? Let us be very technical about price. I hear criticisms, but there are no figures being produced on this anywhere. If we were getting a decent price for sugar at, say, $360 a tonne—which is $100 a tonne more than we have been getting for the last five years—that would translate to 60c a litre. In the documents that I am holding up—which is work done by the Queensland state government and Brazil—both state 600 litres per tonne. If we were to add 9c a litre to 60c for processing costs, that would be 69c a litre. We could give you petrol at the bowser for 69c a litre. If we were to add, say, 6c for transport and storage and 5c for retail, that would come to 80c a litre. Mr Deputy Speaker, I do not want to get too technical here, but you and I both know that one-fifth of our sugar is actually molasses, for which we get paid virtually nothing. If we were to put molasses into the mix, we would be talking about 80c a litre. I know from the figures produced for the grains industry that it can also produce for around 80c a litre. Why are we paying $1.20? Why will the oil companies not put that petrol into the bowsers if it is so cheap?

Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Assistant Treasurer and Revenue) Share this | Link to this | Hansard source

And 38 cents tax.

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

No, Treasury would make more money. One on one now, ethanol is cheaper than petrol. Forget about the tax for now—I will come back to it in a moment. You can deliver to the motorist, at the moment that I am speaking, at 80c a litre. Even if you add 20c for reduced distance, you would still come in at 100c a litre compared with what we are paying for petrol at the present moment.

Why is that not happening? I have been in politics long enough to remember—when I was a very young man—when they lifted the price at the well head in Australia. BHP was producing oil and being paid $3 a barrel, but the world’s spot price was $7 a barrel. If the world price today is $75 a barrel, I will bet London to a brick that the oil companies are producing it—as they were back then in Australia—for less than half that figure. Mostly they own the oil wells.

I do not deny that the marketplace—I am a great advocate of the marketplace—should determine the price. That is fair enough. But we can deliver cheaper fuel to the Australian motorist. This country is different from other countries because it has about 12 million people who do not have any commuter systems to get to work on. If you live in the city, you get subsidised transportation. But we poor beggars in the bush do not. There are also no commuter transportation systems servicing people who live in the outer suburbs of Australia.

I have a map here of the United States, which I will hold up briefly for the House. The blacked-out areas, which cover California, New York and almost all of the mid-west states, including big states like Illinois, are using 10 per cent ethanol. The reason the Americans have moved to this fuel is that they are running out of petrol, and they do not want to be at the mercy of the Middle East and Indonesia.

I also have here an ABARE map which will show members of the House that, over the next five years, Australia will virtually run out of petrol. We will move from 90 per cent self-sufficiency down to about 25 per cent self-sufficiency. The Americans are moving with huge aggression. This map and the map that my worthy colleague the member for New England held up show you clearly that the Americans are moving in this direction with great determination. They are not going to be left to the mercy of other countries, but our nation will be well and truly at their mercy.

Dr Tom Beer says that more people are dying from motor vehicles fumes than from motor vehicle accidents. We should be talking seriously about 50, 60 and 70 per cent ethanol—or about 85 per cent ethanol, as the Brazilians are doing and the Americans intend to do. The United States President has said that 75 per cent of their imports will be converted over to electrical vehicles and to ethanol vehicles. In his State of the Union address, he said that America would not be dependent upon those countries, and they are moving forward with a determination. I conclude by saying that it is revenue neutral. The amount of money the government gets from this industry created in Australia is much greater than the amount of money the country gets at the present moment by sacrificing the excise. (Time expired)

Mrs Bronwyn Bishop (Mackellar, Liberal Party) Share this | Link to this | Hansard source

After that rather moving and colourful speech from the member for Kennedy, I thought I might return to the topic of this matter of public importance, which is ‘The worsening impact of increasing petrol prices and the Government’s reluctance to act’.

I was very interested at the outset to see that this was an amalgam of Independents and the Labor Party, with the member for Hunter saying that he was disappointed that he was pipped at the post for his matter of public importance because he would have been much tougher than the Independent proposer of the matter of public importance has been. I found that a fascinating statement. In this debate we have certainly heard a lot about ethanol and the importance of ethanol as a future source of fuel for motor vehicles, yet one of the things that is a strong disincentive to individual car drivers utilizing ethanol is a really malicious and wicked campaign that was prosecuted by the Labor Party against ethanol saying that it would destroy your engine. In fact there was hardly a single thing that went wrong with your car that ethanol did not cause!

That was a deliberate policy of the Labor Party to try to put suspicion into the minds of motorists, and it was very successful. It was successful to the extent that you had service stations around Australia putting up signs saying ‘No ethanol here’. That was in contradistinction to the situation in the United States, which has been pointed out by the member for Kennedy.

If we are really being honest in this debate, we have to look at the parameters that the government has set, in which it acts against the simple rhetoric of the opposition, which has gone from a position of saying, ‘Ethanol is wicked and bad, and we’re here to tell you so,’ to a position where it gets into bed with the Independents and says, ‘Actually, we like ethanol and we really think we are on the same side.’ So the degree of hypocrisy in this debate coming from the opposition is just mammoth.

If we look at the situation of the allegation in the MPI—that is, the government’s reluctance to act—I think it is important that we perhaps look at some factual bases of the way in which the escalating world price of crude is impacting on all of the OECD countries. You do not have to be a super sleuth to realise that the impact of China and India wanting added resources and added oil is adding to the price—plus, of course, the conflict that exists in the Middle East.

There is a very interesting graph that has been put together by Treasury based on estimates from the International Energy Agency—and it has been the practice to hold up graphs in this chamber today—and it shows that the cost of unleaded petrol in all of the OECD countries does not vary much. You can draw a straight line down and see that it is a constant price right across the developed countries. To that basic price is then added a selection of taxes. Of the countries on that list, Turkey has the most expensive petrol in the OECD by virtue of the taxes it puts on its unleaded petrol, and Norway comes in next. Then there is a whole clutch of European countries and then, right down the bottom, the last three countries are Australia, Canada and the United States. In other words, the action that the government has taken to reduce the incidence of tax so that individual motorists are not bearing an untenable burden has been quite responsible.

The first thing we did in 2000 with A New Tax System, when the GST was put on petrol, was to lower the petrol excise by 6.7c per litre so that there would not be a great increase in the cost of a litre of petrol. Of course, as was pointed out by the member for Indi, all the GST money is paid to the state governments. The Queensland government elected to use part of its GST to subsidise the cost of petrol in Queensland, which is consistent with the position it took prior to A New Tax System coming in and prior to the decision of the High Court, which said it was illegal for state governments to put so-called franchise fees—or whatever other name they chose to call them—on petrol because it was an excise and the Constitution said only the Commonwealth government may charge an excise. So, suddenly, all the states except Queensland had a great deficit in their budget. They asked the Commonwealth government if we would apply that tax on their behalf and then rebate it to them, and that is precisely what we did. But the premiers were sufficiently dishonest to then say that they did not have any petrol taxes in their states, and that the federal government was putting on the tax, when in fact it was at their request that we made up the deficiency when their own taxes were declared to be invalid.

So Queensland has elected to use part of its GST to reduce the cost of petrol in that state by about 9c a litre. That option is open to every other state and territory in the Commonwealth, but Mr Bracks has said he will not do it. I have not seen one single state premier or head of the territories say that they will follow the Queensland example and subsidise petrol in their state or territory. The fact of the matter is that the amount of money guaranteed to the states until the full impact of the GST was felt has been far exceeded by a very considerable sum from the collections of GST. This means that the states and territories are far better off than they would have been under the old arrangement. So they are perfectly at liberty, by good management if they choose, to use that GST money to subsidise the cost at the bowser for individual drivers and other consumers of petrol.

The second thing that the federal government did was in 2001, when we got rid of the automatic indexation of excise on petrol. That was something introduced by the Hawke government as a revenue measure, and it was in 2001 that this government said we would not allow that to continue and that we would abolish it. In fact we have reduced the impost of excise to 38c per litre. It is not a percentage figure and it is not a moveable feast; it is a fixed sum. So there is no additional benefit to the Commonwealth that accrues with the increase in petrol price. So the 38c per litre is fixed and does not depend on the price at which petrol is sold.

The net result of the actions we have taken is a saving of around $13 billion for petroleum users. If we had not taken that action, petrol would probably be around 17c per litre more than it is now. So to simply say, as this MPI does, that there is a reluctance by the government to act is not true. And it is not true also because the government is prepared to listen to suggestions that people are making, whether that is helping people convert their cars to using gas as a source of fuel, as distinct from petrol, or some other thing. Of course the use of ethanol is supported by this government. It is not mandated, but it is thoroughly supported, advocated and indeed proselytised in trying to remedy the damage done by the Labor Party when it went out to maliciously damage the reputation of ethanol.

So, in replying to those who have spoken on this MPI, I can say that I believe there is an acceptance and an understanding in the electorate that the cost of crude oil has gone up due to factors beyond the control of any of the governments of the OECD or of any government that may be elected in this country. The fact of the matter is that it is an international price that flows through here, but we have been sensible in the way that we have dealt with tax on fuel so that we have reduced the impact on consumers, and we are listening further for ways in which this can be done. (Time expired)

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

Order! The discussion is now concluded.