Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Hansard source

With great respect to my friend and coalition colleague Senator Joyce, I regret to inform him that the government opposes his motion for disallowance, while respecting his right to move this motion—one of the great things about our side of politics. On 30 March this year, the minister whom I represent in this chamber, Ian Macfarlane, the Minister for Industry, Tourism and Resources, announced in his second reading of the Petroleum Retail Legislation Repeal Bill 2006 that he would be amending the Petroleum Marketing Retail Sites Regulations 1981, consistent with the government’s downstream petroleum reform package. That package provides a uniform regulatory environment for industry participants through the introduction of the oil code, which has been worked up in full consultation with the industry, under section 51AE of the Trade Practices Act 1974 and, at the same time, repealing the old Petroleum Retail Marketing Franchise Act and the sites act. I remind the Senate that this package has been government policy for quite some years. In fact, I spent three years as industry minister seeking to have this package adopted—regrettably, to no avail—and it is well beyond time that it was implemented. I think it is an essential reform.

The aim of the oil code that we have developed is to provide industry participants with a national approach to terminal gate pricing, fairer contractual arrangements and access to a downstream petroleum dispute resolution scheme. Development of the code, as I said before, does follow very extensive consultation with industry, industry associations, consumer groups, state and territory agencies and relevant Australian government agencies.

Senator Joyce’s disallowance motion seeks remove the oil majors as prescribed corporations and suspends the oil majors reporting and compliance obligations under the existing sites act. The amendment to the regulations prevents market uncertainty and breaches of the act, while the repeal bill is under the consideration of the parliament—in other words, this amendment is an essential mechanism to ensuring proper consideration of this repeal bill without undue intervention, interference or uncertainty for the industry itself. Under the existing legislative framework, the oil majors may temporarily operate a retail site for a period of up to eight months while they determine the best business structure for the site. Under the existing sites act, to temporarily operate a site the franchisor must have a good faith intention to either dispose of or franchise a site at the end of this temporary eight-month operation period.

The introduction of the government’s bill to repeal the sites and franchise acts has the effect of reducing the ability of the oil majors to meet that intent in good faith. It actually prevents them from making use of these temporary operation provisions because they could not, knowing our repeal bill is there, meet that good faith requirement. Had the government not made an amendment to these regulations, for which there is a motion seeking its disallowance, the oil majors would have had to re-enter nine-year franchise agreements, close retail sites or enter into arrangements with third parties, even if a different business structure would clearly be more appropriate and knowing, of course, the government’s intent to repeal the whole structure.

We are committed, as I said before, to repealing the sites and franchise acts and to the introduction of the oil code, and I think we have gone now to at least three elections with that as our clear policy. The regulation that has been promulgated is entirely consistent with this aim of the government to introduce a more effective regulatory regime, to allow all industry participants to respond and adapt to changes in the retail petroleum marketing industry without distorting or reducing levels of competition. It is our strong view that the proposed reforms to Australia’s petrol retail sector will increase competition, not reduce it. I remind senators that many in this place and in the other place have publicly supported the repeal of the sites act, including, I understand, the Leader of the Opposition.

The sites and franchise acts are consistently acknowledged by industry and, indeed, the opposition as being outdated and redundant. Under the current restrictive regime, approximately one-third of the nation’s service stations have closed. The ample supply of petrol that fuelled the rise of the independents no longer exists. Greater demand for fuel in the Asian region and cleaner Australian fuel standards have had the effect of changing the market quite significantly. Shell and Caltex have divested much of their direct retailing to Coles and Woolworths. The reality under the existing arrangements with the sites and franchise acts is that Coles and Woolworths now have around 50 per cent of the petrol retail market. Really the sites act has effectively been rendered redundant. The government, quite clearly and simply, want to achieve a level playing field for all petrol retailers to ensure that we do have a competitive market. We are very committed to having a competitive market. That is what we believe our package is all about given the current realities of petrol retailing.

In terms of the independent sector, the government’s proposed oil code, which, as I say, has taken an enormous amount of time, effort and consultation to develop, will strengthen the position of independent retailers through better representation and access to a fairer dispute resolution process. It will be backed by changes to the Trade Practices Act. Maximum competition remains the greatest guarantee of the lowest priced petrol and that means ensuring that oil companies and the independent sector can compete on level terms with the supermarket chains.

In relation to Senator Joyce’s proposed disallowance, existing franchisees are unaffected by the change coming about as a result of the regulation that we have introduced. Current franchise agreements continue to be covered by the franchise act, including all terms, conditions and renewals. If franchise agreements have ended and the parties negotiate and enter into new franchise agreements, they will need to comply with the existing franchise act. For other market participants such as commission agents, their agreements will be covered by the oil code once it comes into effect, if indeed this parliament so deems, including preservation of tenure for agreements entered into before the commencement of the oil code. Disallowance of this regulation in our view will serve no purpose. It will not result in any changes to the government’s downstream petroleum reform package, which we remain committed to, and it will only cause further uncertainty for the oil majors and their franchisees, who are small businesses in many cases. It will reimpose compliance costs on the oil majors that may well end up being reflected at the pump.

Should the disallowance motion itself be successful, it is our estimation that BP will be the major most immediately affected. Rather than signing nine-year franchise agreements, which may prove to be an uneconomic business model, it may well have to choose to close sites or enter into third-party arrangements outside of the constraints of the sites act. BP does want to run more of the sites it already owns, yet it is restricted by the current law to operating just 87 petrol stations around Australia. It is our view that that restriction does not augur well for BP’s clear, articulated and welcome strategy to offer consumers greater access to biofuels. While we understand and respect Senator Joyce’s very strong commitment to small business in this country, we do not think disallowance will do anything to assist small business operators in this industry. The government’s position on balance is very much, regrettably, in the circumstances, that we oppose the disallowance motion moved by Senator Joyce.