David Bushby (Tasmania, Liberal Party) Share this | Hansard source

The incorporated speech read as follows—

I rise today to contribute to the second reading debate on the National Fuelwatch (Empowering Consumers) Bill 2008.

Can I start by saying emphatically that I support fully the spread of better information on petrol prices.

However, I will not support anti-competitive price fixing in the petrol market and hence cannot support this bill

Almost 12 months ago, the Rudd Labor Government was elected on the promise that it was listening to Australia’s working families and that Labor had heard they were suffering under the dual yoke of rising grocery prices and increasing petrol prices and that, enough was enough.

It went to the people saying it had a plan to fix the cost of living pressures that grocery and petrol price increases were introducing.

Mind you, it didn’t say what the plan was for either —because, I suspect, it didn’t have one - but it did say that it had a plan.

And many Australians, who were finding the increase in the price of petrol and groceries difficult to manage, liked the sound of someone who said they had a plan.

They didn’t want to know the details, or the realities of how prices of both are delivered, or the effects on petrol prices of international factors, or even the lack of competition in both the wholesale petroleum markets in Australia and the retail grocery market and how that affects retail prices.

All they wanted to hear was that someone could bring the prices down—and that is what the then Labor Opposition told Australians—regardless of Labor’s ability, inability or otherwise to actually implement this promise.

Why are petrol prices so important to Australians? Because many Australians have limited or fixed incomes that are stretched already. Combine that with the importance of the mobility that having their own car provides and increases in petrol costs suddenly start to seriously impact upon their lifestyle.

Of course, there are worse things that can happen to Australian families than having to use their car a little less, or even a lot less. But it is important to understand that the personal mobility provided to Australians by being able to afford to drive their car is significant to most. And the impact on lifestyle by reducing that mobility is not something they want to accept.

As such, and make no mistake about this, the drift in votes to Labor at the last election—a drift that delivered them government—was in a large part contributed to by people who heard Labor say they would bring the price of petrol down and that they expect them to do so.

So where are we at today?

We have before us a Bill that is the Rudd Labor’ Government’s total commitment to addressing petrol pricing—a bill to take a scheme in place in Western Australia and turn it into a national scheme—a scheme that at best in Western Australia has been spectacularly ineffective at reducing prices and at worst, has introduced anti-competitive pressures and largely removed the ability of WA motorists to access their petrol at the bottom end of the price cycle.

Prime Minister Rudd was quoted earlier this year as saying ‘we have done as much as we physically can to provide additional help to the family budget recognising that the cost of everything is still going through the roof cost of food, cost of petrol, cost of rents, cost of childcare.’

At the same time, he went on to say ‘when it comes to things you do not have direct control over, obviously in terms of the global price of oil, then what you can do is simply act in the other areas to make sure that there are some more dollars to draw upon in terms of the family budget’.

At the time, this statement by the Prime Minister attracted a lot of negative press and the justified ire of many Australians

It is not that he is so wrong. The fact is that a lot of what was driving up petrol prices earlier this year were outside the sphere of influence of the Australian Government

What annoyed so many Australians was the fact that this was no different prior to the 2007 election, when he was travelling around the country quite happily telling people that there was a lot that could be done, the then Coalition government wasn’t doing any of it and that a Labor Government would

Yet here we are today with a bill before us that will achieve little, which in fact will most likely reduce competition and increase prices and the overall fuel bill for Australians and, a Prime Minister who says the government has ‘done as much as we physically can’.

I am sure that there are Australians all over the country who expected a little more of Mr Rudd when he told them he felt their pain on petrol costs, who heard him say that he had a plan and who thought the plan would be something more than a half baked copy of a system that had delivered little or no price benefit in Western Australia

I am sure they expected real, tangible lower petrol prices to result from the plan

So given the Prime Minister’s own admission that he considers there is nothing else that can be done, this is it. The pinnacle of the Rudd Government’s plan to reduce petrol prices for struggling Australian ‘working families’ and the sole answer to those problems

I will look in more detail at the proposed scheme in a few minutes, but initially I would like to take a bit of a look at what factors actually influence petrol prices in Australia

This issue has been the subject of countless inquiries by state and federal government bodies as well as private consumer and motorist organisations

The main factors influencing petrol prices at the bowser are well understood and generally not in dispute.

At an international level, they are, the international price for refined petrol and the Australian/US dollar exchange rate.

State government policies and subsidies also can affect petrol pricing, for example, policies relating to fuel quality and petrol retailing arrangements and Australian Government policies and grants (eg as they might index excise and impose fuel standards and set the regulatory environment in which petrol is wholesaled and retailed)—and excise and GST all impact significantly on the price paid in Australia for a litre of petrol.

Of these factors, the Australian government is only able to influence in a meaningful manner, its own policies and the level of excise and GST.

Many of the inquiries into petrol pricing I have already referred to, examine these issues and particularly the first of them—that is the policies implemented at an Australian government level affecting the regulatory environment in which petrol is sold and the level of true competition at both a wholesale and retail level

the government has argued that the Fuelwatch scheme, the subject of the bill before this chamber today, is designed to address the issue of competition in the petrol markets and that the new regulatory environment it creates will promote additional competition.

Sadly, the evidence taken at the Senate inquiry into this matter demonstrated unequivocally that this will not be the case.

Even the Government’s rhetoric surrounding the benefits of the Fuelwatch scheme changed dramatically following its announcement, as the evidence piled up proving that it would not deliver lower fuel bills to working Australian families.

When they announced the scheme, it was all about ensuring motorists would not pay anymore than they had to for petrol.

For example, the Prime Minister was quoted as saying ‘What we want to do is ensure motorists are not paying one cent more than they have to as the bowser what we want to do is ensure that motorists are able to buy the cheapest petrol at the cheapest prices at the cheapest petrol stations at the cheapest times’.

And on 16 April, Assistant Treasurer, Chris Bowen said on the ABC that Fuelwatch would lower fuel prices by 2cp1.

Within a week, in the face of the barrage of criticism and evidence thrown up in horror at the prospect of a national Fuelwatch scheme, the rhetoric of the Minister responsible, Chris Bowen, had dramatically changed.

No longer was he, or the government claiming the main reason for the scheme was price. On the contrary ‘the much more important reason for doing this is to give consumers more information’.

Ah, I see now, when Labor went on the attack about petrol prices before the election, when they aggressively accused the Coalition government of being asleep on the job with petrol and that they would put a ‘cop on the beat’—they weren’t talking about petrol prices —and the difficulties Australia’s ‘working families’ were having with rising petrol costs—no they were promising to give motorists more information!

And I am sure that the many Australians who voted for them because they ‘had a plan’ did so because they thought that plan would ‘give them more information’.

Unfortunately for the many Australians facing real and worrying cost of living pressures as petrol prices remain high and grocery prices and rents keep rising, more information is not what they want or need.

Australians were hoodwinked by Labor prior to the last election —the government promised something they knew they couldn’t, or possibly more accurately, wouldn’t deliver.

The Prime Minister’s statements that there is little that can be done by the Australian government to affect international oil prices is correct.

But he knew that before last year’s election.

Yet Labor deliberately worked towards creating the impression that they would tackle petrol prices head on and make a meaningful difference.

It was a con of a grand scale conducted on the Australian public and the Labor Party should stand condemned.

But as mentioned, there are measures the government can take that can either directly reduce petrol prices, or genuinely lead to pressures that will keep it lower than it would otherwise have been.

A cut in excise is the obvious, easy direct route in lowering petrol prices —such as the 5 cents a litre cut in excise tax as promised by the Coalition.

This would deliver a real cut in petrol prices—and I don’t for one minute accept the intellectually dishonest argument posed by many on the other side of this place, that 5 cents is nothing and would be swallowed up by small changes in the international price of oil, or a fall in the Australian dollar.

This trivialises the challenges faced by Australians in meeting their cost of living challenges.

The fact is that a 5 cent cut in the excise is the one petrol price measure that can’t be taken away by international factors.

No matter what the international price of oil, no matter what the exchange rate, if you take 5 cents off the excise, petrol will always be 5 cents a litre cheaper than it would have been.

This is fact and presents a 5 cent a litre saving every time Australian motorists fill up, for so long as the excise remains at the new rate - for ever—whether petrol is $1 a litre, $1.50 a litre, or $2 a litre.

Sure it is a costly measure in terms of the Government’s budget, but we are in Australia in a fortunate position of having had a substantial surplus—despite the current woes, we can arguably, as a government, afford the measure. But even more so, given the current economic crisis and the almost certain slowing of the Australian economy, taking a few billion out of the hands of the government and giving it back to the people is the economically responsible thing to do.

We have been saying this for some months and the government itself finally acknowledged this with its $10.4bn plan to stimulate the economy for most of this year, the government has been strenuously arguing that we need to maintain a high budget surplus … and their approach to this was to take the money off the people so they can’t spend it, thereby cooling an overheating economy.

Indeed, any of our efforts to stop them taking money from taxpayers lead to an accusation that we were economic vandals.

But the reality is that Malcolm Turnbull, as the then Shadow Treasurer, has been warning the government about the potential effects on the growth of the Australian economy of rising petrol prices and the international financial crisis, since February this year he has consistently called for the government to hold back a little on its zeal for cooling the economy, because these two factors were going to have a major cooling effect and that it would be prudent to take a more cautious approach.

Well, he was right, and this has been acknowledged by the Government as the likely impact of the international financial woes on the Australian economy finally sank in.

It is important to understand that the objective of their $10.4bn package is the very opposite of the objective upon which their entire 2008 Budget strategy was based. It is a complete reversal of policy.

The budget was intended to cool economic growth, this package is intended to stimulate economic growth.

We have told them all year to take it easy on their efforts to slow economic growth in Australia, because there are bigger things at play and, now, finally, they have acknowledged that —but because they had been trying to achieve the exact opposite of what is now openly acknowledged as being required, the government’s efforts to stimulate the economy have to be far more significant than they would if the government hadn’t been trying to contract the economy.

It also highlights how hollow the accusations levelled against us for holding up some of the budget measures are.

If we had let them sail straight through, they would have been in effect out there cooling the economy, slowing economic growth and making it even harder to stimulate the economy as is openly agreed by all, now needed.

Similarly, the economy would need less of a heart starter package, if two of the Coalition policies had been accepted by the Government.

As has been noted by various commentators in the context of our policy to increase pensions, widespread economic stimulation is best achieved by returning taxpayers funds back to them to spend in the economy. The same principle applies to Australians and a cut in the excise tax.

Cutting excise tax will deliver both cheaper petrol prices and help to domestically stimulate an economy facing many factors trying to slow it down—a win win situation —but one the government has yet to adopt—despite its acknowledgement yesterday of the need to backflip on its policy of trying to slow economic growth.

Hopefully they will see the benefit of cutting petrol excise tax soon. Because implementing Fuelwatch certainly isn’t going to deliver economic stimulation, or cheaper petrol.

Rather, it is in fact likely to increase prices through a minimisation of competition and removal of deep discounting during price cycles.

The proposed Fuelwatch scheme is based on the existing scheme that has been operating in WA for some 7 to 8 years.

There are varying claims about the success or otherwise of this scheme, the truth of which is clouded to a significant extent by the variable nature of other relevant factors in the price of petrol in WA and the other states that make it hard to do direct comparisons.

Nonetheless, various learned persons and organisations have looked at the success or otherwise of the scheme using both sophisticated econometric modelling taking into account a wide variety of factors as well as simple straightforward comparisons of outcomes not affected by the variables.

The first major examination of the scheme was conducted by the ACCC in 2002.

Its findings were—to put it simply—damming of the WA Fuelwatch scheme.

In considering the outcomes of the WA scheme, the ACCC states it had regard to the objectives of the arrangements put in place by the WA government and what they sought to achieve

These included:

• Greater competition;
• A fairer and more transparent petroleum market;
• Greater price transparency;
• A reduction in the volatility of metro prices; and
• A reduction in the differential between city and country prices.

The data collected by the ACCC in 2002 found that Perth prices increased relative to 3 benchmarks, namely: Sydney and Melbourne prices, the Commission’s import parity indicator and Western Australian maximum wholesale prices.

The ACCC acknowledged that a significant part of the price increase could have been due to higher fuel standards introduced at the same time as WA Fuelwatch, but it also concluded that some of it is likely to be due to other factors, specifically mentioning the 24 hour rule.

With respect to the greater transparency objective, the ACCC concluded that the publishing of petrol prices on the Fuelwatch website did increase price transparency, but also found it introduced unwanted distortions into the market.

In terms of the reduction of volatility objective, the ACCC found that, contrary to wide held views, petrol prices were already relatively stable within a day —with Perth prior to the Fuelwatch scheme only experiencing an average of 1.18 changes per day, and that the change therefore had a minimal effect on volatility.

And finally, the ACCC also found that the city country price differential blew out, totally in the face of the objective of reducing this differential.

The ACCC concluded that on those findings, it was hard to see how that the WA Fuelwatch scheme had been successful, stating that it appeared a number of the Western Australian fuel pricing regulations may have been introduced quickly, without full consideration of their implications or the necessary administrative details for their successful implementation.

Sounds eerily similar to the fast-track approach taken by the Rudd Labor Government in the face of dramatically rising fuel cost earlier this year.

In their panic given the public clamour for them to live up to their promise, they announced the scheme and as petrol prices continued to rise and as the Coalition started to gain the public’s acceptance as the party capable of doing more in this regard, they rushed through legislation to implement their scheme, forcing a number of treasury officials to work 36 hours straight to meet their unreasonable and ill-considered deadline.

The result was again, legislation that was introduced too quickly, and without full consideration of its implications or the necessary administrative details for its successful implementation.

Since then, there have been a number of objective outside examinations of the WA Fuelwatch scheme and the weight of evidence has clearly demonstrated that it failed to deliver lower prices and may actually lead to limiting the opportunities for motorists to minimise their fuel bills.

Of course, the most comprehensive consideration of the effectiveness of the WA Fuelwatch scheme was undertaken as part of the recent Senate Standing Committee examination of the potential impact of the bill before us today.

The overwhelming evidence presented to that inquiry was that there are a number of significant risks to petrol pricing as a result of this bill, that there are a number of very likely scenarios that will lead to higher petrol prices for most if not all Australians and that there is very little evidence, if any, to suggest that motorists will be any better off as a result.

Of course, the majority report —ie the Labor Government Senators —recommended the bills be passed.

However, as noted in the minority report, any objective consideration of the evidence would, at minimum, have to have raised alarm bells that the scheme might actually raise petrol prices as a result of a lowering of competition and that the best that could be hoped for was that it would not harm motorists.

Given the multi-million dollar spend involved—not a great return on investment!!.

Of course, the ACCC in its most recent report to the government, considered and written after the election of the Rudd Labor Government, takes a completely different tune to its past comments and findings.

The ACCC’s methodology on its previous examinations of the WA Fuelwatch scheme were always made public and understandable by peers looking to review those results.

But with this most recent consideration, the modelling upon which they base their findings has been kept secret.

The reason why this is the case has been speculated on ad infinitum and I could put forward some obvious theories myself today—but I will decline to do so.

Suffice it to say, the ACCC prior to the election of a government looking to nationalise the WA Fuelwatch system, had publicly panned that system as failing to deliver the benefits to consumers it was intended to deliver.

After the change of government, it has a different view, but has refused to release—or is not allowed to release—the modelling upon which it says it has based this flip flop.

As the ACCC’s modelling has not been publicly released and can’t be objectively peer reviewed, the unfortunate reality is that the weighting given to their findings must be lower than if it could be objectively tested.

In its 2007 report, the ACCC pointed to a reduction in price of 1.9c per litre in WA, but also stated clearly that a lot more needed to be done before the scheme was rolled out nationally.

The view of independent economists on this report suggested, even though the methodology was not released, that it was clear there were issues with it, including:.

• The ACCC failed to take account of the entry into the WA market of Coles.
• The ACCC has since claimed to have adjusted for the Coles effect, but will not say how it did so.
• The ACCC analysis looks only at prices and not the volume sold at a particular price—for example, a service station with a price of $1.80 but selling no petrol is given the same weight as one with a price of $1.50 and selling high volumes, and.
• The ACCC refused to release its methodology so other economists can fully test its analysis and results.

The ACCC has also been quite inconsistent in its comments about the potential benefits from a national Fuelwatch scheme.

As mentioned, in its 2007 report, it talked about 1.9epl savings in WA as a justification for taking the scheme nationally.

But in May this year, ACCC Chairman told the ABC that Fuelwatch was ‘not about saving motorists money’.

Again, I find such statements incredible.

Remember, the Rudd Labor Government was elected partly on its promise to tackle petrol prices and after announcing the twin measures of Fuelwatch and a dedicated ACCC ‘petrol commissioner’ who has no additional powers, the Prime Minister said there was nothing more that could be done.

And here we have the senior public servant responsible for implementing Fuelwatch and the boss of the petrol commissioner, saying that the government’s measures to tackle fuel prices aren’t intended to deliver lower prices.

Millions of Australians who believed the Prime Minister had a plan to reduce petrol prices must be bitterly disappointed.

So given that the ACCC advice, so heavily relied upon by the government in justifying its petrol price plan, appears to be unconvincing and based on methodology that has not been released for peer review, maybe there was other advice received by the government that clearly outlined the potential benefits to Australians from implementing such a scheme?.

• The reality is of course, that all other departmental evidence the government received was completely contrary to that the ACCC says it provided the government.

In fact, four key relevant departments, including the Prime Minister’s own department and Treasury, advised the government that the scheme should not be adopted and warned of potential negative consequences and that the scheme would push petrol prices up.

Even the Minister responsible, Energy Minister Martin Feguson argued against the adoption of such a scheme as he believed it would be counterproductive to the interests of Australian motorists—especially those in locales with a high proportion of Labor’s ‘working families’, like Western Sydney.

This from the Minister who is advised by the most expert department in Australia on energy policy.

He said that Fuelwatch would put petrol prices up, will decrease competition and will hurt working families … but did the Prime Minister listen to this evidence based advice?

No, he did not.

And then there is the Department of Treasury’s regulatory impact statement, or RIS.

This document points out:

• 72 per cent of consumers in cities other than Perth always or usually try to purchase unleaded petrol when it is cheapest, whilst 59 per cent of Perth consumers always or usually try to buy petrol at its cheapest—suggesting where Fuelwatch is operating, more motorists are forced to buy petrol at a higher price.
• the RIS also said it is possible that the introduction may have anti-competitive effects.

let me repeat that …

• as the RIS notes, Fuel Watch in WA has ‘harmed the competitive position of independents as it allows large operators to adopt a strategy of rolling price leaders. Operators with small networks are less able to employ this pricing strategy and are therefore placed at a competitive disadvantage in the market’.
• and, ‘the provision of this taxpayers funded service creates greater opportunities for price co-ordination amongst retailers, especially in more concentrated markets;.
• The RIS also stated that the benefits of a national scheme are likely to be very limited in regional and rural areas—where petrol is already higher than metro areas.

Prior to last year’s election, the Prime Minister said he was going to govern on the basis of evidence and the basis of getting the best advice.

Yet here he and his government are, making decisions that fly in the face of the best advice provided to it—all so it can create the dishonest impression it is delivering on its promise to address rising petrol prices.

This is not a government developing evidence based policy, but one that looks for evidence to back its policies.

The stated objective of the National Fuelwatch (Empowering Consumers) Bill is to “provide intra-day price stability and decrease search costs for consumers.”.

It is clearly not intended to deliver cheaper petrol.

Only the Coalition’s promise of a 5cp1 cut in excise tax will do that.

There are many issues and problems with the proposed scheme that I don’t have time to examine in detail today, but I am sure others will, although I will try to mention a few, such as constitutional questions about the scheme’s implementation.

The government plans to use its corporations power to implement the scheme—but it remains unclear how this will work for unincorporated family business owned petrol retailers.

As mentioned, there is no evidence that a national Fuelwatch scheme will lower petrol prices nor that the WA scheme lowered prices there.

Monitoring over many years shows that the average price in Perth is consistently higher than in other mainland capitals.

Also, the weekly price cycle present in Perth prior to Fuelwatch and still present in Brisbane, Sydney, Melbourne and Adelaide, stretched out to a two week cycle upon the introduction of Fuelwatch.

This means that Perth motorists who have to fill up weekly—(and around 76% of Australian motorists do) - and who are looking to find the best price, miss out every second week as the discounting phase only happens once a fortnight.

The fact is that it will not save motorists any money—despite the Government’s clear weasel words designed to create the perception that the bill will relieve petrol price pressures.

Both Minister Chris Bowen and the Prime Minister initially said it would save around 2c a litre, the now defunct petrol commissioner Patrick Walker said it would save 5c a litre, the ACCC originally said it saved almost 2c a litre in WA, but now none of them say it will save money.

The purpose of the bill now is to ‘provide motorists with more information, not savings’.

Again, I say that if this is the government’s implementation of its plan to reduce the price of petrol, by ‘giving more information’, Australians should be very disappointed.

The fact is the scheme proposed in this bill is bad for competition and will drive independent retailers out of business, leaving only the big petrol companies and major supermarket chains in the petrol retailing business.

Evidence from motorist organisations—almost all of them—is that the scheme proposed in this bill will be detrimental to motorists and would create higher average fuel prices and remove much of the opportunity for canny motorists to buy their petrol at the heavily discounted end of the petrol cycle.

It will deliberately iron out the discounting cycle, stopping completely heavy discounting in that cycle, reduce competitive pressures in the market and reduce the opportunities for families to fill up at the bottom of that cycle.

The scheme is nothing more than an expensive con so that the government can say it has done all it can, but it will deliver nothing.

It will cost motorists, not benefit them and accordingly, the bill should be rejected.