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

I rise to speak tonight on the Excise Tariff Amendment (Condensate) Bill 2011 and the Excise Legislation Amendment (Condensate) Bill 2011. The Excise Tariff Amendment (Condensate) Bill 2011 amends the Excise Tariff Act 1921 to clarify and confirm the area encompassed by the 'rank and trend', as it is known, condensate production area located within the North West Shelf project area. The Excise Legislation Amendment (Condensate) Bill 2011 amends the Petroleum Excise (Prices) Act 1987 to clarify that failure to provide petroleum producers with written notification setting out the terms of a volume-weighted average of realised prices determination does not affect the making of that determination, the measure of firms, or the current application of the crude oil excise regime as it applies to condensate production. And I make it clear, Mr Deputy Speaker Thomson, at the outset, that the coalition will be supporting these bills. However in doing so, the coalition will move an amendment to the motion of the second reading that condemns this Labor government for its assault on the Australian energy and resources sector and for its comprehensive mismanagement of the investment framework for oil and gas exploration and the resources sector in general.

When it comes to identifying which areas of policy this government has so fundamentally mismanaged, there is some very serious competition amongst its incompetence. Along with the well-publicised failures in border protection, there is the Prime Minister's carbon tax backflip which has, in itself, made its own assault on the resources industry by making it, and it alone, pay a carbon price on the fuel it uses. There is even further competition though on the bungling of the school halls program, the pink batts program and, most recently, the mishandling of the issues involved with live exports which has decimated Northern Australia. It is not just the cattlemen and women involved who are affected, but also the truck drivers, the Aboriginal stockmen, and the economy of Northern Australia which has been built around this incredibly important export trade. So incompetent is this government that they could not even get that right. The Gillard government has inflicted some extraordinarily counterproductive and destructive policies on a sector that has contributed so significantly to our economy and should be given the opportunity to continue to do so.

The oil and gas industry over time has made an enormous contribution to Australia's economy. But just as importantly, it has provided the energy security that other countries would literally kill for. We are one of the few countries in the OECD—the only country that springs to mind—that is in fact an energy exporter in its own right. That is, we have a surplus of energy which we export. Part of that export is condensate from the North West Shelf, originally exempted as part of the incentives that were provided to this very important industry to get the project off the ground. And whilst we see those incentives ripped away by this government, we also see a very significant change in attitude within the oil and gas sector, and potentially the investors in that industry in particular.

As a result of the government's deliberate actions, Australia has been forced to suffer an erosion of our previously gilt-edged sovereign risk profile when it comes to investment in the energy and resources sector in this country. There can be no excuses for this government-led assault based on changing international circumstances or economic difficulties given that one of the very first acts of the Labor government after it was elected in November 2007 was to slug a massive tax increase on the oil and gas sector, in particular the North West Shelf, by removing the exemption that had applied to condensate. It is fair to say that without that exemption and without some very significant courage by the players at the time the exemption was introduced, including of course Sir Charles Court, the Premier of Western Australia, this condensate would be still lying under the seabed thousands of metres down.

Coalition governments, Liberal governments in particular, go out of their way to provide incentives to get these resources developed. The moment that happens we have a government currently in power, the Labor government, that then does everything it can not only to rip away the money that these companies have put at risk and have then earned quite justly but also to destroy our international sovereign risk profile. We on this side of the House, and of course the wider community, have also been aware of the Labor Party's complete and absolute inability to manage money. We have seen the field evidence from successive Labor governments that apply the big-spending, big-taxing philosophy, and this legislation is just more proof of that.

But even though I am conditioned to this big-taxing, big-spending government, I was shocked when the former Rudd government so brazenly slapped a $2.5 billion excise on condensate. This signalled a very clear intention that this was to be a government that would view the resource sector as nothing more than a cash cow. I am sorry to say that the government has lived up to, or should I say lived down to, that expectation it has created. While the oil and gas industry, in particular the offshore sector, has spent much of history well out of the public spotlight, it is nonetheless one of the most substantial sectors in our economy. During my time as minister responsible for this sector, the coalition government took great care to encourage investment and to facilitate an environment that would be conducive to exploration and production where appropriate. I travelled the world, literally, selling Australia's wares, telling of the opportunities that lay in Australia, telling of the stability of the government regimes, and providing exploration incentives to try to get companies to invest here. And what happens? We get a government now desperate for money. The government's $2.5 billion tax slug has sent a shiver down the spines of major investors in the oil and gas sector because it has shown that this is a government that is prepared to be cavalier with investment, with issues of sovereign risk and with Australia's very dearly held reputation as a safe investment destination.

This bill before the House today is one of the consequences of the government's multibillion-dollar cash grab and an attempt to clean up some of the confusion it has created from that tax grab in the zone covered by that taxation. Unfortunately, but ever responsibly, the coalition wants to end that confusion and that is why we are supporting these amendments. As I mentioned, we will not oppose these bills because we take the responsible attitude that investors in the oil and gas sector deserve some certainty in this very uncertain climate, even in a situation where the government seems to go out of its way to create uncertainty. As I say, it is our responsibility to bring what stability we can as a coalition and as an opposition to this very uncertain playing field.

No matter how the government may try to spin it, the subsequent projects in this field are in spite of what the government is doing, in spite of the hurdles it is putting in place and certainly not because the government has put in place anything like appropriate policy settings. It seems to wake up daily wondering how it can tax this whole resources sector yet again and, even more, how it can tear down any incentive that we put in place previously to compete against those investment destinations around the world that are out there every day trying to tear the investment dollar away from Australia.

I fear a sense of complacency from this government, which assumes that because Australia has had past successes in oil and gas exploration it will continue to be a productive sector regardless of how badly the government handles the regulatory settings or how badly it handles the taxation of that industry. As I mentioned, it was one of the very first actions of the Labor government to reach further into the pockets of the successful enterprises, to ramp up the taxes after all the risks had been taken, after the resource companies and investors—many of them Australian mums and dads—had put their capital at risk in a project which, I can assure you, was exceptionally borderline in its instigation in the mid-to-late eighties.

We have seen the government ramp up the taxes to this sector to provide a convenient cover for the profligate spending, which has come from those who sit opposite. This huge tax burden was slapped on the industry with no warning and no consultation. Even the Minister for Resources and Energy found out after the event. What sort of government would do this to such an important sector? It is a government that knows no bounds when it comes to applying taxes and shattering the investment security that companies and investors from overseas look for.

It is little comfort that we now recognise in retrospect that this action is the standard operation procedure for this Labor government, particularly when it comes to decisions that affect the energy and resources sector. As we know from the resources super profits tax debacle, which not only affected onshore exploration and mining but also offshore exploration and development, and from the ongoing mess that surrounds the new version of the minerals resource rent tax and the toxic carbon tax, the Rudd and Gillard government simply do not understand or do not care about the dynamics in the resources sector.

Modelling done on the impact of the carbon price on industry estimates that a carbon price of $25 a tonne would close 16 coal mines and cost 23,000 jobs in that industry alone, many of them in the electorate or adjoining the electorate of my colleague here, the member for Paterson. I can assure this House that the member for Paterson—and I had the pleasure of being up there with him the other day—is tireless in his efforts to protect jobs in the Hunter Valley. And those who sit opposite—one them is here; I will be interested if she stands up and speaks on this bill and explains why she is happy to tax the industries in her electorate—sit silent while jobs in their electorates get wasted.

Kelvin Thomson (Wills, Australian Labor Party) Share this | Link to this | Hansard source

They would be out of order if they were to interject.

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

Deputy Speaker, I do expect them to sit silent in the House but I do not expect them to sit silent in their electorates. They should be out there fighting for local jobs; they should be out there, like the member for Paterson, defending local industries. Access Economics estimated that a carbon price of $26 a tonne will cost 126,000 jobs in Australia by 2020. We are seeing jobs disappear every day. And while those jobs, it could be argued, are not directly associated with the imminent introduction of the carbon tax, I cannot believe that people are not considering the impact of that carbon tax in their decisions because you do not make an investment decision today, whether it is to open or close something, without thinking about what your prospects are over the next 20 years. Not many on that side have been in business—I understand that. It is a given: you have to be in a union if you want to sit on that side. But those of us who sit on this side have been in business and know that when you make an investment decision you make it for 20 years. In imposing tax after tax after tax—like this condensate tax, the carbon tax, the mining and resource rent tax, any new tax they can think up at any time—all you are doing is chasing that investment away. I cannot believe that we have a government that, despite all of this and the economic insecurity in international markets, is still charging blindly into putting in place more taxes, in particular the carbon tax.

Along with the carbon tax are the financial and the investment insecurity produced by the MRRT. The government's mismanagement of this issue and the RSPT, the resource super profits tax, that came before it and was such a disaster means that the energy sector has little or no faith in the direction this government is taking. The signature policy that underpins this budget, the minerals resource rent tax, continues to fall apart. It continues to build in a deficit that could occur at any time. It could not make the budget more uncertain if it tried. Treasury figures show that with the MRRT the current Prime Minister's backdown will translate into a $60 billion hit to the budget bottom line. This certainly will build in a structural deficit by having this government relying not only on the prices of the resource but also the currency fluctuations. How the Treasurer can sit in this House and say he can budget with those sorts of questions hanging over his head is beyond me. This perhaps again highlights the incompetence of this government.

If the government persists with the flawed MRRT not only it is going to put the budget stability at risk but also it is going to show this government is rolling the dice on questions of energy security and future mining investment. Sudden changes such as the condensate tax which we are talking about continue to reinforce that instability and that impact on investment security. The government constantly changing the rules of the game for investments is jeopardising Australia's once gilt-edged sovereign risk profile and making Australia a less attractive place for investment, particularly in the energy generation sector. The coalition believes that decisions about taxation paid by the mining industry should be done under the existing regime of state based royalties because the resource belongs to the people of that state. It does not belong to the Commonwealth. It should be a decision made by the state. It has worked well in the past and will continue to work well once the coalition is re-elected and we rescind the MRRT.

All this taxation—tax and spend, tax and spend; putting new taxes on the oil and gas industry, putting new taxes on the mining industry, changing those taxes—sends a simple message: other countries that are our main competitors are better investment options. The real impact of the Gillard government's carbon tax, the mineral resource tax, the change to the condensate tax, the change to excise regimes in relation to fuel is on the mining industry, which has been singled out by this government to pay the carbon tax on fuel straight up. No industry or group will pay the carbon price on fuel except the mining industry. Why doesn't the Prime Minister just stand up at that box each day and say to the oil and gas industry and the mining industry, 'We hate you and we're going to tax you out of existence'? That is what she is trying to do. She is trying to get as much money as she can from the sector that is holding our economy together.

We have seen recent examples of even Australian based resource companies deciding that they no longer want to invest here. David Flanagan of Atlas Iron, a self-made man, put his and his wife's money at risk; he took the big dive to build up a company and get it rolling. He is going to be taxed on that at a level never seen before and at a rate far higher than his bigger competitors BHP, Rio and Xstrata. David's company's response to that is to make an investment in Brazil of $18.7 million that will not be invested in the resource sector here and will not give Australians the opportunity to have jobs. It simply has got far too hard.

The Prime Minister can expect to read plenty more about companies choosing to invest in projects in other countries, given the damage this government has inflicted on the sovereign risk profile of Australia's energy and resources sector. As it stands at the moment, the series of taxes including this condensate tax undermines Australia's energy security and risks international investment in the vital energy and resources sector. Coming at a time when the economy is also being slugged with a carbon tax, these policies show how poorly this government understands the contribution of the energy and resources sector and how ill equipped the government is to handle the economy.

In conclusion, this government has been digging deeper and deeper into the pockets of Australian workers and businesses. Every day it discovers a new way to tax people, like the quarter of a million Australian families who are now going to be taxed on the LPG they use in their family motor cars. Introduced by the Howard government, an incentive has been paid to these families to convert their cars to LPG. But like a honey trap, this government gets them into that position where they rely on LPG and then it taxes it. They cannot get away—unbelievable. But that is just part of how this government operates. It operates in a policy vacuum—no energy white paper, no direction to industry on how it is going to be done, no backdrop of how energy and resources investments should be made. The only messages that come out are: 'Here's a new condensate tax; here's a new carbon tax; here's a new LPG tax; here's a new tax on resources.' The energy and resources sector is constantly being used as a cash cow for this big-taxing, big-spending government that cannot control its own finances.

The energy and resources sector, including the oil and gas and the mining industries, is one of the driving forces behind the Australian economy. At the moment, it is sustaining the economy at a time of global difficulty, and when the manufacturing sector faces difficulties in competing with the very high dollar and the imports that are coming in. But we have a government, as I have said repeatedly and will continue to say both in this House and outside, that has no qualms about taxing this industry whenever it can.

The coalition will not object to these bills, but the Gillard government should stand condemned for its continued and comprehensive mismanagement of policies that apply to this sector and its high-taxing, high-spending regime that is hitting all sectors of the economy.

I move:

  That all words after "That" be omitted with a view to substituting the following words:

"whilst not declining to give the bill a second reading, the House:

(1) objects to the Government's repeated attacks on the resources sector, in particular its decision to impose a $2.5 billion tax on condensate on the North West Shelf in 2008, a decision which has made it necessary for this legislation attempting to clarify confusion created about taxable areas;

(2) notes the Government's comprehensive failure to provide leadership for the energy and resources sector, most grievously by its failure to deliver an Energy White Paper;

(3) expresses concern about the Government's decisions to put more pressure on all sectors of the economy by inflicting taxes such as the condensate tax, carbon tax and minerals resource rent tax;

(4) calls on the Government to scrap its destructive high taxing regime which is inflicting damage on the energy and resources sector, which is one of the most profitable sectors of the Australian economy."

Kelvin Thomson (Wills, Australian Labor Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Bob Baldwin (Paterson, Liberal Party, Shadow Minister for Tourism) Share this | Link to this | Hansard source

I second the amendment and reserve my right to speak.

Kelvin Thomson (Wills, Australian Labor Party) 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 Groom 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.

Sharon Grierson (Newcastle, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of these cognate bills, the Excise Tariff Amendment (Condensate) Bill 2011 and the Excise Legislation Amendment (Condensate) Bill 2011. I also stand to oppose the amendment moved by the member for Groom. Contrary to the member for Groom and the accusations he has made, I support these bills because they evidence this government's strong fiscal discipline and represent many of the values that we as a government hold at our core. All Australians should benefit collectively from the natural resources that we have inherited. They are not resources that will continue forever. They are finite resources, and these bills foster the fairer distribution of their benefit throughout the Australian community, with government correctly acting as the conduit between the people and corporate institutions.

The stronger, fairer and simpler tax reforms that this government is pursuing, including those embodied in these bills, go some way towards achieving this. When we make economic policy, we ask: will this make our economy stronger? In the case of these bills, it will. Will it make it fairer? In the case of these bills, it will. I find it quite surprising that the opposition would put a very different case when they have a $70 billion black hole in their budget forecast to explain.

We are a generous nation, and the dignity of work, the social benefits of gainful employment and the equitable distribution of prosperity are all principles that this Labor government seeks to foster. We will not shirk our responsibility to keep our economy strong and produce a more prosperous society, and we will continue to make the reforms to the taxation system that are necessary to modernise the economy and foster the growth of our society. We have not and will not put sovereign wealth at risk, as the member for Groom recklessly suggests. But, yes, we will remove a tax break that is absolutely past its use-by date.

Since 1977, the federal government has exempted condensate production from the crude oil excise regime, recognising the need to support the exploration and development of petroleum resources within the North West Shelf. As a result of the exemption, petroleum fields in the region matured, the energy demand of the people of Western Australia was satisfied and business benefited from the excise exemption in the order of more than $1 billion. However, since then, the Australian economy has radically changed and the business environment has shifted. The exemption has become outdated and no longer reflects the current needs of the resource sector. Yesterday, the Sunday Times reported that BHP Billiton is expected to unveil full-year earnings for 2011 of US$22.1 billion, while Rio Tinto's half-year net profit was approximately US$7.6 billion. With oil prices for non-renewable energy resources remaining high, the subsidisation of resource divestment in the North West Shelf is no longer necessary.

Greenpeace highlighted this in their submissions to the Senate Select Committee on Fuel and Energy when they asked the government to consider redirecting excise exemptions for non-renewable energy production to the development of renewable energy technologies. That is exactly what we have been doing for three years—trying to invest again and to encourage investment in renewable energy technologies after 12 years of neglect by the Howard government. That sentiment was not only expressed by Greenpeace; it was reiterated by the Executive Director of the Australian Conservation Foundation, Don Henry. Shane Wright, the economics editor for the West Australian, hardly a socialist rag for the chattering classes, summarised this line of thinking succinctly when he asked:

Why keep a tax break that was aimed to get a project up when the project is now highly profitable and expanded beyond its initial parameters?

I agree and would suggest that the member for Groom should take note of that comment by an established economics commentator from Western Australia no less.

In order to modernise the excise regime, we removed the crude oil excise exemption on condensate in the 2008-09 budget through the Excise Tariff Amendment (Condensate) Bill 2008 and the Excise Legislation Amendment (Condensate) Bill of 2008 with effect from 13 May of that year. In the absence of government subsidy, condensate and crude oil are now taxed in a similar manner. As resource management expert, Dr Richard Griffiths commented, 'There is no strong argument for exemption other than the usual one—that no-one likes to be taxed,' but this legislation simply closes a loophole. It does impose a new tax.

These bills clarify the application of the current excise regime to condensate production on the North West Shelf and amend the Petroleum Excise (Prices) Act 1987 Specifically, they address the existing uncertainty regarding the prescription of the Rankin Trend condensate production area in order to effectively implement the condensate measure and clarify that a failure to provide written notification of a price determination to a producer does not invalidate that determination. This is because BHP Billiton and its six partners in the North West Shelf LNG resource project have commenced proceedings in the Federal Court alleging that the Rankin Trend is of uncertain size and therefore invalid; and that the condensate production areas located on the North West Shelf operated by North West Shelf LNG consist of several gas fields rather than one field, thereby allowing for a larger production threshold before the excise cuts in. The consortia further allege that the VOLWARE prices were not valid as written notification of the price determinations had not been provided to producers as required.

The original measures introduced in 2008 are estimated to raise approximately $2.8 billion by 1 July 2012 and will increase the return to the Australian community from the non-renewable resources that are extracted from our soil. It is because of the financial implications of the consortia's challenge to the abolition of the excise exemption that we have decided to act proactively and legislate to define the Rankin Trend—$2.8 billion; I do not think anyone would agree that that has to be ripped out of our economy.

However, I do note that the Senate Standing Committee for the Scrutiny of Bills has criticised this legislation as a retrospective 'trespass unduly on personal rights and liberties, in breach of principle 1(a)(i) of the Committee's terms of reference'. This is because the measures contained in this bill take effect from midnight 13 May 2008, consistent with the original 2008-09 budget measure. Yet, with all due respect, it seems clear that these bills do not effect a retrospective impost on corporations operating on the North West Shelf but clarify the existing state of the law. Accordingly, it is not retrospective in the sense that the committee has suggested and not contrary to modern notions of the rule of law or individual rights and liberties.

These bills are a testament to our ongoing work to ensure the fair distribution of opportunity in this country and our belief that all Australians should benefit collectively from the resources that are extracted from our soil and which rightly belong to all the people of this country. In this respect, these bills are similar to the mining resource rent tax, which will be legislated later this year, because they ensure that the Australian people receive greater benefit from the development of our mineral resources. It surprises me that the member for Groom so roundly criticises that measure when I know how much he has been involved in some of the calculations around that. By removing the condensate excise exemption, the federal government can reallocate the subsidies and invest in the infrastructure we need for the future. It can reduce company tax rates and ensure that every sector of our patchwork economy prospers.

The opposition, in moving their amendment, would suggest that we destroy our international sovereign risk portfolio. Not only is that rubbish; it is reckless. We are blessed as a nation with absolute security for investors. Investors know that they get a regulatory framework that is strong and fair. They know that they get skilled labour. They know that they get the support of government. They know that they operate in a safe and secure environment. They know that these sorts of changes and reforms will occur. They are not radical; they are a natural progression for a country that has achieved great wealth from its mineral resources. They are about sustaining wealth and making sure the benefits of that wealth flow to as many people as possible and to the generations of the future.

Many commentators at the moment talk about the Dutch disease and we talk about a patchwork economy. We have to do everything we can to be fair in this country. We cannot move everybody to Western Australia. We cannot move everybody to the mining and energy resources rich areas. We have to do all we can to maintain wealth and sustain jobs throughout the whole country.

The coalition condemns these bills as an assault on the energy and resources sector. That has never happened under this government. Our ministers in those areas—Martin Ferguson, in particular—have worked hand in glove with the energy and resources industry sector and have, I think, their respect and trust. They know we will be tough and pursue our agenda, but they know we will consult, discuss and, when it comes down to it, if we differ, the government will pursue its agenda as it should in the best interests of the public of this country.

When you think about the framework of change of legislation, I am sure the member for Groom did not mean the very much more robust safety regimes we have put in around oil and gas exploration and production. I hope he did not mean that, because we have created so much legislation to protect the sector from the damaging fallout of incidents that we have seen around the country. I think we all remember the spill on the north-west coast and how fortunate we were that that did not have a greater impact, and we have responded to all the findings from those studies. The member for Groom thinks that somehow this is legislation about the carbon tax. No, it is not about pricing carbon and it is quite scurrilous to suggest it is. He quotes studies about job losses and says that there will be job losses in my area. In fact, overall there will be job growth. There will be transition; there will be transformation. Newcastle is our best example of dealing with transition and transformation of our economy. We also know that you cannot just oppose; you cannot just condemn; you do have to be held to account. It is time the opposition were held to account. They pose no solutions at this stage for their $70 billion hole and their economic mismanagement.

Before I finish, I want to congratulate the Treasurer, the Assistant Treasurer and the federal Labor government since 2007, not just on this bill but on taking on, simplifying, harmonising, amalgamating, modernising and correcting anomalies in so many areas of taxation legislation. This is just one of so many pieces of legislation that has found its way before the House by a responsible government that certainly is making our economy stronger. Finally, I commend the bills to the House and I oppose the amendment moved by the member for Groom.

Barry Haase (Durack, Liberal Party) Share this | Link to this | Hansard source

I rise this evening to make some comment in this debate in relation to the Excise Tariff Amendment (Condensate) Bill 2011 and the cognate bill. Of course, this measure is almost shutting the gate after the horse has bolted. I do accept that the major purpose of this amendment is to dispel any doubt as to the impact of the original measure, which was the removal of an exemption from paying excise on condensate that was won as almost a by-product of the development of the North West Shelf gas fields, specifically the Rankin field.

I am sure you recall, Mr Deputy Speaker, that the North West Shelf gas field was viable only after very long negotiations and strong commitment by the Western Australian government and specifically Sir Charles Court, who negotiated considerations for the Woodside North West Shelf group that allowed such a project to proceed. In the days prior to the commencement of that project, Australia was awash with sceptics—awash with individuals who could come up with every reason for not proceedings with investment in the North West Shelf gas project. The late Sir Charles, to his great credit, had a vision for the development of that petroleum field and could see quite clearly that, so long as the administrative process was put in place that gave some consideration to that project and its investors, it could be a successful project. All went well. I was most fortunate to be a resident of Karratha in those heady years of the commencement of that Woodside project. I saw the changes, so many of them for the greater good of, firstly, the Pilbara community of Dampier and Karratha but, secondly, of Western Australia and the nation as a whole.

Of course, that was a very long time ago. With the emergence of Woodside as a mature, sophisticated, technically competent company and its very large workforce, one Mr Gary Gray emerged as an employee of Woodside. To the great credit of Woodside, they encouraged his challenge to the electorate of Brand, and it is history that his challenge was successful and he was elected as the member for Brand. Everyone in Western Australia was very happy to have as a member of the federal parliament a member who had good sense, excellent knowledge and experience in the oil and gas industry, because we did not have somebody with such qualifications previously. Woodside was very happy; Gary Gray was very happy; the Labor Party of Western Australia was very happy—and then along came the May 2008 budget. Boy, oh, boy, didn't we see some radical change from that point! We saw the new member for Brand absolutely backstabbed and insulted because a pack of greenies headed by Greenpeace decided that the exemption that was being offered to Woodside—which, do not forget, was the very reason that this project was finally financially viable—should not be allowed. This whole strategy was knifed by Treasury.

I have just heard the member for Newcastle waxing lyrical about the fine skills of the Treasurer and Treasury in getting it right. My goodness! I thought that, amongst all of the other failings of the member for Newcastle, blindness would not be one of them. She commended Treasury and the Treasurer simply on the basis of turning green. We know the reason, of course: it keeps Bob Brown and his henchmen close and cooperating with the stated intention of this government, which is simply to stay in power at any cost for as long as possible, because, if we go to an election, there will be an absolute abject failure by this government to win the votes necessary to get back in power. So there was an act of treachery that quite clearly paved the way for the final treatment of Kevin Rudd—and we know what happened to him. There seems to be little doubt that the Australian public's attitude towards and definition of this government right now—that this is a toxic government wanting to impose a further toxic tax—is pretty much spot on. The training ground in treachery was the knifing of the member for Brand, Gary Gray—who, I might add, is a very honourable fellow—as well as the about-face in the treatment of Woodside condensate and the resultant disillusionment of Woodside. That company had no knowledge that they were going to have the rug pulled from under them and a $2 billion-dollar tax—a trifling amount, I am sure, to this Treasurer, but an amount that was very important to Woodside, to West Australians and to shareholders in Woodside—imposed on them. But I am sure that, if it was justified by the leader of Greenpeace, it was all right, because it would have been in keeping with the attitudes espoused by Bob Brown of the Greens and by the Treasurer in cooperating with Greenpeace and the Greens in order to maintain power.

This bill is very specific and highly technical. It defines the Rankin Trend—some condensate is from geological areas within the Rankin Trend, while other condensate is not. Previously, condensate from the Rankin Trend was exempted; under this bill, it is intended that it will no longer be exempted. It is very boring legislation, but, typically, it makes its intentions very clear. It is also retrospective—it dates back to 13 May 2008 in its impact.

In discussions surrounding this bill tonight, we have heard much criticism by the member for Newcastle of the comments of the member for Groom. The member for Groom wanted simply to point out that we do not act sensibly if we aspire to reducing carbon emissions but do not recognise the gas industry for what it is worth. It is an industry that will reduce pollution relative to the pollution that may have been caused had we used coal as an energy, and we fail to recognise that at our own expense. Therefore, I think it is quite reasonable to state that this bill almost represents yet another own goal. It strikes me as extremely lopsided to attack an industry that will produce fewer emissions by imposing additional taxes on it, which this legislation does—and here I am merely clarifying where the legislation will hit—whilst trying to reduce emissions.

The other statement of the member for Groom that was questioned by the member for Newcastle was that this bill represents further evidence that Australia's good reputation as a secure location for international investment was being further trashed by the actions of this government. But if anyone doubts that, they need simply to lift their gaze to the horizon by communicating with a few of our overseas finance houses and looking at some of the internal mail every time there is an action such as this which further destroys the reputation of, firstly, the Rudd government and, secondly, the Gillard government.

We have a great deal going for us in this nation. We are incredibly rich in mineral wealth and petroleum resources, we are in very close proximity to Asia and therefore some of our strongest trading partners, we have had in the past very secure and predictable administration and a safe working environment as well as, in recent times, very efficient ports—many of them privately controlled and run—and infrastructure which works in an incredibly efficient manner by comparison with other port and rail infrastructure in the world. Yet all of those assets are going to amount to nothing if we cannot say to our overseas investors, whose capital is mobile and able to land in any part of the globe, 'Your investment is safe because our taxation regime is consistent.' Those investors will be inclined to overlook our proximity to markets, the efficiency of our materials handling infrastructure and our good record in the area of industrial relations. We trash our reputation as a secure location for investment every time we change the rules after the commencement of the game. We have seen too much evidence in the life of the Rudd and then the Gillard governments of a highly valued reputation trashed time and again overseas to the point where many commentators have raised issues like: 'What are you doing down there, shooting yourself in the foot? Why are you coming up with these taxation changes that will send investors away in droves?' For anybody to suggest that the security of investment in Australia today is equal to that prior to the 2007 election is in dreamland. Ask any international investor whether our reputation today stacks up with that of pre-2007 and they will say emphatically, 'No'. They sincerely hope that it is not trashed any further with any other crazy ideas emerging as policy from cooperation with the Greens or aspirations to take minute portions of reviews of taxation and impose all of the stick and none of the benefits, as has been done too often. I support the push for amendment of this bill and I thank the House.

Andrew Leigh (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Excise Tariff Amendment (Condensate) Bill 2011 and the Excise Legislation Amendment (Condensate) Bill 2011. In the 2008-09 budget the Labor government announced the removal of the crude oil excise exemption that had applied to condensate production since 1977. Condensate production is subject to an excise regime that is the equivalent to that applying to stabilised crude oil discovered on or after 18 September 1975. Under the regime the excise is applied to condensate production from individual prescribed condensate production areas in a manner that is similar to income tax: higher rates apply to production exceeding certain thresholds up to a maximum of 30 per cent. To implement the condensate measure the Commissioner of Taxation issued a bylaw prescribing both Rankin Trend, which contains a number of condensate producing reservoirs, and Angel as being condensate production areas located on the North West Shelf production area.

This legislation amends the Excise Tariff Act 1921 and it does so for a simple reason. The aim of the legislation is to address uncertainty regarding the scope of the Rankin Trend. The legislation will statutorily define the Rankin Trend production area principally by reference to those reservoirs within the intended Rankin Trend area that are currently producing condensate. The amendments also provide for the resources minister to add known but currently non-producing reservoirs to Rankin Trend by specifying them in regulations. Where he is satisfied that they form part of the Rankin Trend field and after considering the effect that specification may have on the efficient exploitation of the resource. As a result of this bill the price of condensate on which excise duty is calculated is known as the volume weighted average realised price, or the VOLWARE price. It is determined in accordance with the Petroleum Excise (Prices) Act 1987. That act provides that oil producers have to be provided with written notice of VOLWARE price determinations. The Excise Legislation Amendment (Condensate) Bill 2011 amends the Petroleum Excise (Prices) Act 1987 to clarify the failure to provide petroleum producers with written notification does not invalidate the determination and consequently eliminate crude oil excise liability. I do not think any of us in this House would like to see that outcome. The amendments together will ensure that crude oil excise applies to condensate which is consistent with the original policy intent and the revenue collected to date is protected.

The North West Shelf partners commenced a legal challenge to their condensate excise liability on technical grounds. They argued that the condensate production area known as Rankin Trend is not valid as it is of uncertain size and that the VOLWARE prices were not valid because the written notification of the price determinations had not been provided to producers as required. These amendments will provide clarity and they will clearly define the scope of the Rankin Trend area and clarify the failure to provide a written notice of a price determination does not invalidate the determination. They will apply from midnight on 13 May 2008 and that is consistent with the original decision.

The opposition, while not necessarily opposing the legislation, have moved an amendment to this and their amendment goes to a much broader set of issues. As is their wont, the opposition—they are after all the 'no' party—have used this opportunity again to put three noes on the table. They want to say 'no' to the condensate tax—it will be interesting to see how they vote on this one—'no' to carbon pricing, and 'no' to a minerals resource rent tax.

It is important to provide the economic context in which Australia is sitting at the moment. When the global economic downturn happened, Australia acted as quickly as any other country in the world. We had in place household stimulus payments as early as October 2008. That was extraordinarily fast and reflects the fact that many of those senior public servants dealing with this downturn had cut their teeth on the recession of the early 1990s, a recession in which it is generally acknowledged fiscal and monetary policy acted too slowly. That was not the case in the latest downturn. We put in place timely, temporary and targeted fiscal stimulus. We did it in two different tranches. Economics clearly tells us that household payments have a lower bang for the buck—a smaller multiplier effect—but they act quickly. So a portion of the stimulus came in household payments. Economic theory also tells us that infrastructure expenditure has a higher bang for the buck—a higher multiplier—but takes longer to take effect. So the package sensibly, as the OECD and the IMF suggested, contained elements of both of those.

We have strong evidence that both sides of that package worked. For example, my own work when I was an economics professor at the ANU, which surveyed recipients of stimulus payments, estimated that a substantial portion of those stimulus payments was spent and went directly back into the economy. You can see that simply by looking at the timing of the stimulus payments and putting them on top of retail trade figures: there were big spikes in retail trade in December and again when the second tranche of payments came out around February, March and April. This was absolutely critical. We know that in a downturn it is the construction sector that is hit hardest—the construction sector is a particularly cyclical part of the economy—and so the infrastructure that we put in place was enormously important in ensuring that construction jobs were maintained, that young apprentices who had just started out in their careers were able to continue working and that you did not get the demoralising, debilitating and deskilling effect that a downturn can cause.

I left high school in 1990, just as the early nineties recession was starting to hit, and I can tell you that a recession is not a pretty time to leave high school. Many of my friends spent a long time looking for work. That did not happen this time around. Youngsters who left Australian high schools in 2008-09 were able to walk into an economy where the unemployment rate was the envy of much of the developed world. The unemployment rate now is only five per cent in Australia, substantially below the nine per cent in the United States and the eight per cent in the United Kingdom. It is so often mentioned by economic policymakers in this country—not just the Treasurer but also the Reserve Bank governor—that when they go to international meetings and sit amidst their counterparts from developed nations there is no-one in that room who would not happily trade places with them and take on the economic fundamentals of Australia. Those economic fundamentals are extraordinarily strong.

The debt that we took on arose from two sources. One is the revenue downgrades. In a recession revenues fall, particularly corporate profits, so two-thirds of the rise in debt is actually just a result of the effect that the lower company profits had on government revenues. The other third is the stimulus payments. So, every time you hear a member of the coalition saying Australia should have no debt, you need to recognise exactly what they are saying. They say that, when the global financial crisis hit, Australia should have taken the Herbert Hoover approach and slashed government spending. Not only are those people anti stimulus; they are actually saying we should have contracted government spending when the global downturn hit. That is what an anti-debt position amounts to.

But our debt is modest. When many countries in the OECD have debt levels that are nearly their entire annual GDP and sometimes higher, Australia's is $7,000 of debt for every $100,000 of income. That is about the level of debt that many households would take on to buy a small car. I do not recommend it, but there are many Australian households that carry $7,000 worth of credit card debt. So Australia's debt must be put into perspective and we must always remember what we bought for that debt: 200,000 jobs saved. That is 200,000 lives that were not blighted by unemployment.

But the opposition's amendment also goes to attacking the minerals resource rent tax, a tax which will put in place a fairer regime for the taxation of minerals in this country—a regime that will ensure that Australians get a fair share of the minerals that are their birthright—and a more economically efficient way of taxing minerals resource rents based on profits, not on royalties. We are also putting in place carbon pricing. We are doing that because every credible economist tells you that if you want to deal with a negative externality—and that is what carbon pollution is in economic jargon—then you go straight to the source of the problem. You put a price on carbon pollution, and that is exactly what we are doing. By contrast, the opposition, when they do not like the fact that they cannot find a single economist to back their so-called direct action plan, attack economists. So the Leader of the Opposition will go out and say that the fact that he cannot find an economist to back his plan is a reflection on the quality of the Australian economics profession. As my good friend Joshua Gans said, 'No, I think that's a reflection on the quality of Australian opposition leaders.'

We also need to look at the fiscal situation in which the opposition now find themselves. They are currently in a $70 billion black hole. I do not think we have spoken in Australian politics of a black hole of these proportions. We have in the past spoken of black holes; one side of politics or another has spoken of black holes of a few billion dollars or maybe $10 billion. But $70 billion? This really is unprecedented.

Let us go and break it down a little. Thirty-seven billion dollars of that black hole is spending commitments that the opposition announced during the election. Eleven billion dollars of that black hole would come from unwinding the minerals resource rent tax, saying to mining companies, 'You'd be paying too much tax under the minerals resource rent tax; here, have a little bit back,' and, of course, unwinding the superannuation for low-income earners, the company tax cuts for small businesses and the many good economic reforms that flow from that package. Another $27 billion of the coalition's $70 billion black hole comes from unwinding the carbon price—$24 billion in gross revenues from carbon pricing and another $3 billion from the coalition's direct action plan. I think, Mr Deputy Speaker, that is under the lower estimates for the coalition's expenditure. As you would recall, the coalition have now moved to a 'we don't deal with foreigners' approach when it comes to carbon pricing, which makes their approach to climate change all the more expensive. Another $7 billion to $8 billion is to fund their income tax cuts.

In practical terms, what does that $70 billion in savings mean? It means stopping Medicare payments for four years, stopping the age pension for two years, stopping assistance to people with disabilities for three years or stopping family tax benefit payments for three years. It requires savings equivalent to doubling the GST for a single year. This is the situation in which the coalition find themselves. It is extraordinary that they are now willing to trash their economic credentials on virtually every issue. The coalition spokesperson for agriculture is now saying that Australia should start a trade war with New Zealand. What could be more economically irresponsible?

John Murphy (Reid, Australian Labor Party) Share this | Link to this | Hansard source

Order! It being 8 pm, the debate is interrupted in accordance with standing order 34. The resumption of the debate will be made an order of the day for the next sitting. The member for Fraser will have leave to continue speaking when the debate is resumed.