Michael Keenan (Stirling, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Australians are feeling cheated and conned, and they are feeling like they have been defrauded by this government, defrauded by Labor. At the election Labor said they were offering a government that would be putting downward pressure on inflation. They held themselves out on many different occasions as having fresh ideas. But what have Australians got? They have a government whose very first budget has been to up taxes, to increase spending and to forecast, for the first time in a long while, a rise in unemployment. This is a government that is backward looking, a government that is returning to old Labor, a government that brings in new taxes, increases spending and puts jobs at risk. This is hardly a budget that delivers on the Treasurer’s rhetoric that he would deliver a budget that would put downward pressure on inflation. It is not a budget that Governor Stevens at the Reserve Bank would have been hoping for. It is not a budget that puts downward pressure on interest rates. For all the Treasurer’s hairy-chested rhetoric, what we actually have is a budget that increases spending, increases taxes and increases unemployment. It is a budget that will—and this is a word that seems to be doing the rounds at the moment—‘whack’ all Australians: pensioners, singles, families and businesses.

The decision contained in this bill to impose excise on condensate is another of the inflationary measures that are contained within this budget. Condensate is a form of light crude oil that is associated with gas accumulations. It is a type of crude oil that is produced as a by-product when natural gas is extracted from the earth. Condensate is used for, among other things, making plastics and cosmetics. In 1977 condensate produced in Australia or produced separately from a crude oil stream was made exempt from excise. This action was taken to encourage the exploration of and production from onshore and offshore predominantly gas fields that did not have the same profitability of the mainly crude oil producing Bass Strait. This action was taken to encourage the development of petroleum resources in the mainly gas-producing areas in the Cooper Basin and on the North West Shelf. The North West Shelf partners comprise BHP Billiton, Woodside, BP, Chevron, Shell and a Japanese consortium. This is very important. This was the policy that those partners initially signed up to. This is part of the reason they explored the North West Shelf. The policy of exempting the production of condensate from crude oil excise has remained in place since 1977.

It is much more viable to extract gas from a reserve when the reserve also has condensate. The industry argues that the least viable gas reserves have no condensate. Making condensate more expensive will make gas exploration and extraction less viable, and it is also very likely to increase the domestic price of gas. The consumers of this gas include power stations and industry but also mums and dads with gas stoves and gas heaters and motorists using LPG. The cost increases will ultimately spread across the entire economy further feeding inflation, allegedly the main target of this budget. It is another classic example of this government not having a full understanding of the consequences of the decisions that they take.

The Excise Tariff Amendment (Condensate) Bill 2008 and the Excise Legislation Amendment (Condensate) Bill 2008 show just how brazenly and shamelessly this government has gone about increasing taxes. These bills are expected to raise a massive $2½ billion over the forward estimates, and they kicked in from midnight on budget night. Despite Labor’s I think disingenuous view that this tax impost will not ultimately flow on to consumers, I note that the Sydney Morning Herald has reported that the removal of the excise exemption will cost Woodside Petroleum, one of the joint venture partners, up to five per cent of its annual profits. And we have the Prime Minister calling this measure an exercise in financial integrity.

Let us pause for a moment here and look at what the Prime Minister says in this House about this measure in these bills before us. If you recall, last week the member for Curtin, the Deputy Leader of the Opposition, asked the following question of the Prime Minister:

Can the Prime Minister guarantee that his new $2.5 billion tax will not drive up the price of domestic gas and electricity for pensioners, households and businesses in Western Australia?

All members will recall that, not surprisingly, the Prime Minister did not answer that question, but I think his response is very instructive. He said:

On the condensate arrangement, it was actually instituted back then in order to provide for the industry to start with. That is the first point.

He went on:

Secondly, that is quite a long time ago, and since that time the industry has not only become profitable and been established; if you look at the return to the industry concerned, its actual profits in recent years have been not just in the hundreds of millions of dollars but in the billions of dollars. What this seeks to do is to actually close a tax loophole which has existed for a long, long time ...

It was not a tax loophole that was being closed; it was an agreement the joint venture partners made with the government in the late 1970s about how they could appropriately do business in Australia. The Prime Minister’s response seems to imply that, if you are doing business in Australia and you are making a windfall profit, you can expect the government just to come in over the top and slap a new tax on whatever it is you do. This is a pretty serious risk for businesses doing business in Australia. What we have with this measure is the re-emergence of sovereign risk.

What we see from the operations of a government that seeks to impose a measure like this without any consultation, without any discussion and without any notice is a government that does not really understand the consequences of what it does. From midnight on budget night the producer became liable for excise. What sort of message does this send to local or foreign investors about their ability to do business in Australia with confidence and in an environment of certainty? How can investors plan in confidence exploration and production projects that can take literally years to come on stream, and cost tens or perhaps hundreds of millions of dollars, when the government can simply at a whim, without talking to them, change the goalposts?

Let me describe the reaction of Woodside to the measures in these bills, because I think it is very important. Woodside is an operator of the North West Shelf liquefied natural gas project, Australia’s largest liquefied natural gas facility which has a current production capacity of 11.9 million tonnes per annum and produced 24.2 million barrels of condensate in 2007. Woodside managing director and CEO Mr Don Volte said in response to this ill-thought-out measure:

Governments have a responsibility to consult with industry on major issues such as this. On this occasion there was no consultation on changes to arrangements that we considered were binding.

Mr Volte well understands the history behind the excise treatment of condensate. As I have outlined, this exemption was an incentive to the industry to explore these untapped reserves. It is not a loophole, as the Prime Minister has tried to pretend in this place. This exemption was not some sort of escape clause or some trick for avoiding excise. This is an exemption that was granted by the government of the day for the express purpose of encouraging exploration of these gas deposits. I fully endorse what Mr Volte has said. He has gone on to say:

This is not a loophole which is being closed or a free ride that has come to an end. This is a negotiated fiscal arrangement which formed the basis of Australia’s largest resource development.

To similar effect to the comments from Woodside are the comments of Ms Belinda Robinson, who is the Chief Executive of APPEA, the Australian Petroleum Production and Exploration Association. They have rightly been concerned about this sudden change in policy and the total and complete absence of any consultation with the industry. She has said:

Given the magnitude of the investments involved and the important contribution of this industry to the Australian economy, a strong partnership between industry and government is critical. Investment decisions are made on the basis of certainty that fiscal frameworks agreed with governments will underpin the long term viability of projects.

The industry sees the government’s lack of consultation as sending very dangerous signals. These signals have the potential to impact across all of the industry. The industry states that the exemption provided an important incentive for the exploration of gas because condensate occurs in association with natural gas. The production of condensate is important in underpinning the economics of many gas projects. This excise hike may lead some energy companies to reduce exploration and extraction because they are afraid that an arbitrary tax on them can be imposed without any warning.

There is a second reason why these measures warrant further consideration. It was a reason that was raised with us when Treasury came to brief us on this legislation—an offer that was generously made by the Assistant Treasurer that I was very happy to take up. Treasury were completely and utterly unable to rule out whether these measures will firstly have an impact on gas prices in my home state of Western Australia and ultimately feed into gas prices across the country.

I will remind the House of what I said earlier. The Prime Minister was asked in this chamber last week, ‘Will these measures make gas more expensive for consumers in Western Australia?’ and he was completely unable to rule that out. We in this House and in this parliament need to look at these bills further to really get an understanding about what these measures may actually do. It is clear the government have no understanding about what these measures might actually do. If they did have an understanding, then maybe they would have been able to say whether or not they are going to put upward pressure on gas prices. It makes sense that these bills get further illumination. I would certainly like the industry to be able to have a chance to comment on these bills, as you would have expected the government would have allowed them to do prior to actually introducing and announcing these measures. That is certainly what the previous government would have done. That is what any sensible government would do: go and talk to the people who operate in the industry, who know about the economics of the industry. They will be able to give you feedback about the consequences of the actions that you are taking. With that in mind, I move:

That all words after “That” be omitted with a view to substituting the following words: “while not declining to give the bill a second reading, the House expresses its concern that the Government’s decisions reflected in this bill have been made without consultation with business or other interested groups and calls on the Government to support reference of this bill and the Excise Legislation Amendment (Condensate) Bill 2008 to the Senate Economics Committee for inquiry so as to permit consultation with those with practical expertise and responsibility in this vital industry”.

This is a $2½ billion tax take. It was announced without consultation with industry, who were shocked, quite frankly, to read about it on budget night. They have been operating since the late 1970s on the understanding that they had some certainty in their taxation arrangements and that they actually had an agreement with the Australian government—a government that actually lives up to its words and its commitments. Now we find that, if you are making windfall profit, apparently the government can just come in over the top of you and reap that back in tax. I think that is something that is extraordinary.

Secondly, this is a measure that has the potential to make gas in Australia more expensive. I think it is reasonable that the government rule that out if they have any understanding of what this measure might actually do. It makes sense that the Senate Standing Committee on Economics have the opportunity to look at these bills. I would certainly encourage them to go to Western Australia and talk to some of the joint venture partners on the North West Shelf about what this might do and what this means for their business—and, importantly, talk to them about what it means for gas consumers in Western Australia. Does it mean higher bills? I urge the government to seriously consider joining with the opposition in allowing the Senate economics committee to get an understanding about what these measures might do.

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

Is the amendment seconded?

Mark Coulton (Parkes, National Party, Shadow Parliamentary Secretary for Ageing and the Voluntary Sector) Share this | Link to this | Hansard source

I second the amendment and reserve my right to speak.

Bernie Ripoll (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

I rise with pleasure to speak on the Excise Tariff Amendment (Condensate) Bill 2008, which amends the Excise Tariff Act 1921, because it actually is good news. Contrary to what the shadow minister has been talking about, this bill is good news for consumers and it is good news for the taxpayer because it gives them the opportunity to have a windfall of $2½ billion from what is rightfully their resource and be compensated for private interests reaping rewards from the use of that resource. It actually is a good thing.

I will start with the amendment that the opposition moved. It seems to be broken down into three parts. One, they seem to be very concerned about consultation. They ought to be, because in the nearly 12 years they were in government that was the last thing on their minds and the last thing they ever did on absolutely anything at all. But if they never consulted with anyone in particular, let me just say that they never consulted with the taxpayer. They may have consulted with big oil—that they did plenty of—but when it came to consultation with the consumer and the taxpayer, then there was none. It is that one-sided street and one-sided argument you get from this mob, which used to be in government. When they talk about consultation, it was just consultation for the big oil companies, which is what they were interested in. If you listen to the speech made by the honourable member for Stirling, that was all he was talking about. He was talking about a $2.5 billion tax take. I remind him that it is not actually a tax take from the taxpayer; it is actually a tax take from oil companies from a resource which rightfully belongs to the Australian taxpayer and the Australian community. They are the people who should be sharing in that reward. Again, he got that one wrong, and I thought he most disingenuously represented the actual position of this bill and the position of the government.

He did raise one other issue, which was that gas or the price of petrol might become more expensive. Again, that was very disingenuous. Having been given a briefing from the Treasury, they would understand that Treasury is not going to rule one way or the other or give a decision; the reality is nobody can do that. The reality also is that there is such a thing as price parity. Everyone in Australia understands, and we have made very clear to people—and certainly the opposition did when they were in government—that we are price takers in Australia. We belong to a global oil market, and we pay the same price that is available on the global market. This so-called imposition of a tax is not actually an imposition of a tax; it is an equalisation of a tax where the industry, since 1977, has actually benefited to the tune of over $1 billion. That is $1 billion of Australian taxpayers’ dollars. There was a very good reason that that exemption from the excise was in place and why it dates back to 1977, but the environment and the conditions have changed.

The reason I am happy to speak on this bill today is that it is an adjustment, it is an equalisation. It is a bill about fairness for the Australian taxpayer and the use of their resource. This condensate gas and oil does not belong to the oil companies. They certainly are more than welcome to extract it and to make profits from it. We do not have an issue about the profits, but there should be fair compensation to the Australian community, the Australian public and the Australian taxpayer for the use of that resource by that oil company. And that is what this bill does. This bill is about fairness, so I am very pleased to be speaking on it.

This bill amends and removes the excise exemption from condensate for crude oil under the crude oil excise regime. This measure was applied from 13 May 2008. Currently, oil excise applies to crude oil that is produced from petroleum fields that are located in the North West Shelf project area off the coast of Western Australia and onshore Australia. By making this amendment, we now equalise what happens with condensate under what was the previous exemption regime. Currently, the excise is levied at a percentage of the value of the crude oil that is produced from the petroleum fields, but the first 30 million barrels of crude oil produced are still exempt under the crude oil excise regime and they will continue to be. In fact, I do not know there should be too much concern or any concern at all from the oil industry. In my view, it is quite a reasonable regime, and a regime that was fully supported by the previous government, now in opposition. They are making plenty of noise about how unfair all of this is. This is an Australian resource. I suppose the next thing we will be hearing from the shadow minister is there should not be any excise at all. Again, they are ripping away taxpayers’ funds that are coming in from their own resources but not explaining how the money will be replaced. How does the shadow minister and the opposition expect that that taxpayer money, that $2.5 billion, be replaced?

The reality is there will be zero excise for annual production of 500 megalitres or less; 10 per cent for annual production between 501 and 600 megalitres, which is about 3.8 million barrels; 15 per cent for annual production for up to 4.4 million barrels; 20 per cent for up to five million barrels; and 30 per cent for annual production that is over 800 megalitres or five million barrels. That brings into line condensate. There is no reason today, in today’s environment, for condensate to be treated differently to any other resource—be it oil, gas or any other. Why should it be that there is a special exclusion, an exemption, on this one particular product in today’s environment, in 2008, with global pressure on our resources and record profits being made—welcome record profits by the oil company? I certainly do not begrudge the profits they make, but by the same token they should not begrudge paying a fair share of those profits to the Australian community. That is who the money is going to. It is not going to the government; it is going to the Australian taxpayers, back to them. I am a bit bewildered by why the opposition would come in here and argue against that. Why would they argue against an Australian community resource not being properly taxed and excised so that the community can reap the benefit? Perhaps, when the shadow minister has another opportunity, he can explain where else he would get $2.5 billion to add to the budget to help all Australians if he believes this discount, which has existed since 1977, should continue.

The reality is this is good fiscal discipline. This is exactly what we were elected to do as a government. We were elected to run a strong economy, a responsible budget position, and to be responsible in making sure that oil companies and resource companies are properly taxed on the Australian resources so that all Australians can share in that benefit. I think that is more than fair and more than amply done by this very good amendment bill. The amendment that was moved by the opposition—I do not have a copy, as I said earlier—seemed to cover three areas: consultation, the amount of tax that will be of benefit and reaped for Australian taxpayers, and cost. I was curious to hear that the opposition, who complain every day about inquiries, task forces and so forth, are calling for another one themselves. Now they want the Senate Standing Committee on Economics to have another inquiry. Which way is it going to be? The shadow minister, the member for Groom, is at the table and he is shaking his head. I would too! I have no idea what you guys want to do. Every day of the week you come in here and make plenty of bluster and noise about inquiries, but here you are in the House asking for another inquiry. There is no need to have an inquiry, because this is a really good measure. This is a good measure for the Australian taxpayer because this $2.5 billion is going to them. We are not taking it from them; we are giving it to them. This is an Australian community resource that needs to be properly and equally treated, and this is exactly what is taking place with this bill and in this House today. This bill, as I said, is a good bill and I commend it to the House.

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

Mr Speaker, I listened with—

Bernie Ripoll (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

Be kind to me, Macca!

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

As the member for Oxley leaves the chamber he asks me to be kind to him. After that speech, it would be difficult to be anything else out of sheer sympathy for his lack of understanding of what goes on in this chamber, in the Senate chamber or in fact anywhere in the business community in Australia. While he did say on a number of occasions during his speech how delighted he was to be able to speak on the measure, it is my understanding that he is the only one on that side of the House to do so—an indication of perhaps just how uncomfortable some on that side are about this legislation.

I am surprised, I have to say, because I believe in being what you are and that what you have been is what you are. I think it is unusual, to say the least, that someone who would know a lot about this bill and how it may affect those companies involved in the North West Shelf has not put his name up to speak on this bill. The member for Brand, with his background, would understand all the issues that I am about to raise in regard to how important are investment certainty and a consistent approach by government, and how the risks that resource companies take, both in exploring and developing resources, work. Yet all we heard from the member for Oxley was a rambling five-minute speech with a beg for mercy at its end. There was really no explanation of what the thinking was from the government behind this. We have, of course, heard the normal words: ‘This is a windfall profit that needs to be taxed. It is a loophole that needs to be taxed. These are big oil companies.’ Any time you are in trouble, roll out the words ‘big oil’. ‘They are naturally evil, evil companies’: that is understood by those on the other side of the House. The fact that some of these companies have Australian shareholders—some of whom are self-funded retirees saving the public purse the need for support—and the fact that these shareholders’ incomes will be affected by this decision are of no consequence to those on the other side of the House. They would no doubt categorise those self-funded retirees, and those working families who receive a dividend from these companies, as ‘undeserving rich’ or something similar.

The thing that worries me most is this continual refusal by those who sit opposite to give a categorical assurance to gas consumers. I know the member for Oxley got a little confused as to what that issue was about, but for his benefit, and for the benefit of those on that side of the House who do not understand the issue, the North West Shelf supplies all the gas in Western Australia for both domestic consumers and industry. It is a key source of Western Australia’s economic growth and neither the member for Oxley nor the Prime Minister when he was asked by the Deputy Leader of the Opposition nor Treasury apparently, now that they have been drawn into the debate, are able to give an answer as to whether or not this measure will increase the price of gas in the Western Australian domestic market.

I do not have an answer for that, but I am damned concern about it because, at a time when energy prices are increasing around the world, those people in Western Australia who see the company they buy their gas from suddenly facing this inordinately large tax bill would quite rightly want an answer to that question. So let us hear it. Let us hear it from the minister who has introduced this legislation or let us hear it from the resources minister or from the finance minister. Let us get an answer to that, because I think that it is an issue that needs an answer: is this measure, that has been introduced out of the blue and without consultation, going to increase the price of gas to industry consumers, to households in Western Australia and to the users of electricity in Western Australia, bearing in mind that most of the electricity in Western Australia is, of course, produced from gas?

There is absolutely no justification for saying that this is a fairness issue. The member for Oxley displayed an absolutely breathtaking lack of understanding of what it takes to get a resource project up and an absolutely breathtaking lack of understanding of what the conditions were back in 1975 when the then Whitlam government introduced excise. In 1977 when this measure was introduced there was a climate where the sorts of dollars involved in getting these projects off the ground and the risk that the company and its shareholders would have had to take would have meant that this gas would most likely still be lying in the ground on the North West Shelf. The tremendous growth that it has brought to not only Western Australia but also the nation as a whole would never have occurred. This measure was introduced solely as an incentive, an inducement, almost a bribe, to get the companies to take the risks that had to be taken to get this gas and its associated condensate and oil out of the ground, into the industry and into the export ships.

We have heard a lot from the Minister for Resources and Energy lately on a whole range of topics, all of which are very interesting. More pertinently, however, we hear his suggestion that in this day and age, with our low self-sufficiency in oil and petroleum products, we need to put in place more incentives to get companies to go out into what are known as ‘frontier regions’ to explore and to pursue new deposits. That is a good idea. It is not a new idea; in fact, it is a very old idea. When I was resources minister I did something similar and I certainly say, ‘All power to the arm of the resources minister if he is going to improve on that.’ If we go back in time we come back to this issue. This was put in place as a measure to encourage the development of a field which, as I say, is a long way from any major population centre in Western Australia, let alone the rest of Australia. Without this inducement, without this incentive, without this concession—which it is—that field probably would not have been developed.

The crude oil excise, as I said, was introduced by those renowned socialists and economic vandals, the Whitlam government. I am starting to wonder whether or not this sort of activity, which the Whitlam government was renowned for, is going to be copied by the current Rudd Labor government. The exemption on the condensate for excise was then introduced in 1977, around about the same time as world parity pricing for oil—and I only mention that as an aside, because even with world parity pricing the development of the North West Shelf would not have proceeded without other incentives.

What this bill proposes is typical of Labor, and it shows that they have not changed their way at all. They might call themselves economic conservatives, but underneath it all they are just simple, old-fashioned Labor—that is, they are socialist in policy, they attack the achievers of Australia and they attack the so-called big companies. Companies that were started decades ago in Australia are now apparently the targets of those who sit opposite. It just shows that the Labor Party have not changed at all since the Whitlam days. This bill is incomprehensible in the context of developments over the past decade that have seen Australia’s economy become the envy of the rest of the world. It is an economy driven by innovation and investment that has helped drive unemployment to record lows. But the con end of the bill is more the stuff of Third World economies, where investments are made by multinational companies and then snatched away by governments the moment they tap into a rich resource or become profitable.

I guess we could hope that this will be a oncer. We could hope that, in its dash for cash, this government has decided that this is just something it has to do. But this morning we awoke to headlines that another Labor government—one not very far from here that is running up an enormous debt, as Labor governments do—has decided to do the same thing to the coal industry in Queensland. Time will not permit me to speak on that issue; but it is inherent in the Labor philosophy that the moment anyone has anything it grabs it. It is a philosophy which, as I say, would be far more at home in a Third World country somewhere else in the world. The Rudd Labor government is again trashing Australia’s reputation and dragging it through the mud as well, just for good measure, all for the sake of a grubby tax grab. The government is showing it has absolutely no idea when it comes to steering the Australian economy or ensuring investment opportunities remain attractive. Stability in the way companies are treated is essential. Those companies are not just essential; they are absolutely essential. Are you going to cut me off?

Anthony Albanese (Grayndler, Australian Labor Party, Leader of the House) Share this | Link to this | Hansard source

When you’re finished.

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

Okay. I thought that meant time out. You’re not going to allow the other people to speak?

Anthony Albanese (Grayndler, Australian Labor Party, Leader of the House) Share this | Link to this | Hansard source

I move:

That the question be now put.

Question put.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Stirling has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The question now is that the words proposed to be omitted stand part of the question.

Question agreed to.

Original question agreed to.

Bill read a second time.