Jonathon Duniam (Tasmania, Liberal Party, Assistant Minister for Forestry and Fisheries) Share this | Hansard source

I table a revised explanatory memorandum relating to the Treasury Laws Amendment (Prohibiting Energy Market Misconduct) Bill 2019, and I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

FARM HOUSEHOLD SUPPORT AMENDMENT (RELIEF MEASURES) BILL (NO 1) 2019

Our farmers are key to achieving our ambition of a $100 billion agricultural industry by 2030.

Australia has a world class agricultural industry.

But increases in the quality and quantity of our agricultural production largely depend on good seasonal conditions in our rural areas.

And there are farmers and their communities that are doing it tough right now.

By keeping the economy strong, the Government can support our agricultural industries to combat, recover and prepare for drought.

There are times, like now, when persistent widespread drought conditions impact on primary production, and the livelihoods of our farmers and their families. These are challenging times for many in the bush.

Supporting farmers is the Australian Government's most urgent priority.

This Government recognises that farming is a long game. Support in times of hardship is part of what is needed to help farmers and their communities through these difficult times. That's why the Farm Household Allowance (FHA) was created – with strong bipartisan support.

Multiple reviews recommended creating a payment that would respond to individual need. When a farmer can't pay their creditors and suppliers it's academic about the cause of the cash flow issues. What matters is they can't put food on their own table. And that's ironic – because they are putting food on everyone else's tables, and clothes on their back.

Since introduction of the FHA in 2014, over $365 million in fortnightly payments have been made to almost 12,700 farmers and their partners.

FHA is not a drought measure. It helps farmers facing financial hardship, which does not need to be caused by drought conditions. However, many of the farmers who access FHA do so because of drought.

The program gives income support to eligible farmers and their families to pay for basic household necessities while they make decisions about the future of their farm businesses and take action to improve their circumstances.

It also provides thousands of dollars to help with professional financial assessments of the farm business, and for activities and services that maximise the chance of recipients' better managing their businesses.

During its operation, the Australian Government has made a number of changes to ensure the allowance meets the needs of Australian farming families.

The Farm Household Support Amendment (Relief Measures) Bill (No 1) 2019 is another vital step in the Government's commitment to supporting farmers in challenging climatic conditions.

The Bill aligns with the Government's three point drought plan: immediate action for farmers, support for the wider communities affected, and longer term resilience and planning. Our plan will continue to help farmers to get through their immediate problems, and to prepare for the future.

This Bill is the first piece of legislation to support implementation of the recommendations made by the Review 'Rebuilding the FHA: a better way forward for supporting farmers in financial hardship'.

The new arrangements outlined in this Bill will allow more people to be able to claim FHA. The Bill will allow farm business losses of up to $100,000 to be deducted from other income. This means the true net position of the farm business will form the basis of establishing their need.

The bottom line is that through this amendment we will be able to reach more farmers in need.

This Bill also means that for the first time, farmers generating income from agistment can offset those gains against either the farm loss, or the loss of another related business. This recognises that many farms have multiple arms to their operation. They are pretty clever at making money when there's money to be made. In addition to running the farm business they often have contracting businesses, like harvesting or spraying or earn money by value-adding to their produce.

The Bill will also enable farmers and their partners to receive FHA for four in every ten years.

This acknowledges that farmers may experience more than one period of hardship in their lifetime, often due to cyclical and unpredictable impacts to agricultural production in Australia. These changes will better reflect the real financial position of our farmers.

As you would expect, we are counting the first ten years from 1 July 2014, when FHA was launched. The first ten year anniversary falls due on 1 July 2024. After that time, farmers and their partners who face tough times again, can have the breathing space to address the drivers of business shock and make the big decisions about their future.

Finally, in recognition of the extending severe drought conditions, this Bill provides for a Relief Payment for those farmers who have or will exhaust their four years of payment up until 30 June 2020. Each couple that has come to the end of their four year payment period will be given a Drought Relief Payment of $13,000 and for singles this Drought Relief Payment will be $7,500. That's the equivalent of 6 months FHA payment.

Some FHA recipients have done everything they can to respond to their circumstances. Many have continued to face severe drought conditions. Nothing any of us can do will make it rain but we can ease this transition off payment. This creates more space for those people to take the time they need to decide what their long term future holds.

FHA is about taking stock. Farmers are exposed to lots of risk that they can't control. Good planning is essential to get through difficult times. If they continue farming and face another tough period, they can access FHA again from 1 July 2024.

The FHA program has always been designed to help farmers assess their position, to look at succession or decide to sell-up. The program has a suite of measures designed to assist them look at these options. This includes up to $1,500 for a professional financial assessment of the business. The person chooses who does that assessment – their own trusted advisor. This comprehensive look at the farmer's bottom line informs their approach to maximising the opportunity of being on payment.

But we don't leave it there. We don't pay for the road map and leave them to it – hoping they'll make decisions that are right for them. We make up to $4,000 available to each recipient to pay for advice and training – either on or off-farm. Recently we've approved people undertaking courses to maximise farm production, improved financial administration, additional training for occupational therapy, and food safety handling and assessment. All this is supported by one-on-one case support from the Department of Human Services, and also agri-business expertise from the Rural Financial Counselling Service.

There is more that we are doing. The Government has already announced its plan for a radical simplification to make the FHA easier for farmers to access payments and better support their families. The measures in this Bill are just the first instalment of the changes required to simplify the FHA.

We are also improving claim procedures for farmers and their partners, cutting unnecessary red tape. Farmers and their partners will soon be able to apply for FHA using just one application. Removing duplication in the application process will mean more time for farmers and their partners to manage their farm, and look after livestock.

Supporting drought-affected communities remains the Government's most urgent priority.

TREASURY LAWS AMENDMENT (PROHIBITING ENERGY MARKET MISCONDUCT) BILL 2019

This Bill amends the Competition and Consumer Act 2010 to define energy market misconduct and provide a series of penalties and remedies for companies engaging in misconduct that is prohibited.

The Australian energy market has not been serving consumers well. That's why the Liberal National Government directed the Australian Consumer and Competition Commission (ACCC) to undertake a Retail Electricity Pricing Inquiry in March 2017.

This review identified problems in the retail, wholesale and contract markets, calling the situation "unacceptable and unsustainable" and noting that energy retailers "have played a major role in poor outcomes for consumers".

The ACCC found three key failures.

In the retail market, retailers deliberately confuse customers with their discounting strategy, often using what the ACCC call "excessively" high benchmarks and complex offer structures.

In the wholesale market, a lack of competition has resulted in higher prices.

In the contract market, a lack of liquidity can act as a barrier to entry, where the dominant position of "gentailers" can make it harder for smaller retailers to get hedging contracts and therefore to compete.

It is these problems that the Government is seeking to address in order to strengthen competition in the market and put downward pressure on electricity prices.

The measures in this Bill build on a package of other initiatives that the Government has recently announced to ensure that Australians have access to affordable and reliable energy.

The Government has introduced a default market offer, which acts as a price safety net for households and small businesses. The default offer protects consumers and small businesses from being exploited by inflated standing offers, while still allowing for the benefits of retail competition.

The Australian Energy Regulator (AER) has developed cheaper, comparable default prices, with savings being passed through to families and small businesses from 1 July 2019.

The Government has also acted to simplify the confusing array of offers that are currently on the market by requiring retailers to use the new default rate as a reference point for all advertised discounts. This gives customers more clarity when they compare retailers and offers and help ensure they get the best deal.

The Government will also underwrite new firm, low-cost generation, which is particularly important for Australia's commercial and industrial users who the ACCC found were struggling to get medium to long-term contracts. This program will be technology neutral, as recommended by the ACCC.

The Bill we introduce today is an essential part of this package, and will address energy market misconduct, improve competition and bring down energy prices for Australian consumers.

The Government has directed the ACCC to monitor retail prices, wholesale bids and contract market liquidity in the National Electricity Market until 2025, and announced that this would be backed up by a series of remedies where the ACCC identifies misconduct by electricity market participants.

This Bill will establish the misconduct to be prohibited, and targeted, proportionate remedies to apply in respect of misconduct in three key areas.

First, the retail market. In the event of a "sustained and substantial" reduction in supply chain costs, retailers will be required to "make reasonable adjustments" to their retail prices for market offers, including to households and small businesses.

The explanatory memorandum makes clear retailers will not be required to pass on small or short-term cost variations that might last a week or a month. Rather, if they enjoyed a sustained and substantial cost reduction, they need to pass it on.

Second, the wholesale market. Generators will be prohibited from gaming the spot market. This can occur in a number of ways, for example, by scheduling discretionary maintenance at high summer demand periods with the specific purpose of causing a spike in prices for their other generators or by making low bids that were designed to discourage other companies from bidding into the market only then at the last minute increasing the price of their bids.

The ACCC has specifically recommended that rules around false and misleading bids be strengthened and our legislation does exactly this by prohibiting bids that are fraudulent, dishonest or in bad faith for the purposes of distorting or manipulating prices.

Third, the contract market. Energy companies will be prevented from withholding hedge contracts for the purpose of substantially lessening competition, which draws on existing concepts from section 46 of the Competition and Consumer Act.

Unlike "gentailers", smaller retailers are unable to manage the risk of volatile spot prices without a hedge contract.

The measures in this legislation are designed to ensure financial market liquidity and facilitate competition in the energy market.

In each of these markets – retail, wholesale and contract - the ACCC will be actively monitoring behaviour. Where companies are in breach, they will act.

The legislation sets out a graduated set of penalties that can apply in the event of misconduct. The ACCC will be able to issue a warning notice, accept an enforceable undertaking or seek a financial penalty of up to the greatest of $10 million, three times the value of the total benefit attributable to the conduct or 10 per cent of the annual turnover of the corporation in the 12 months before the conduct occurred.

For the most egregious conduct, the ACCC will be able to recommend that the Treasurer either issue a Contracting Order or pursue a Divestiture Order in the courts.

A Contracting Order will only be able to be made following a breach of either the contract liquidity or aggravated wholesale conduct prohibitions.

A Divestiture Order will only be able to be made following an aggravated breach of the wholesale conduct prohibition.

Both are sanctions of last resort.

In respect of these orders, companies will be given a chance to explain their conduct before such an order is made. A Contracting Order would require generators to make reasonable offers in the contract market and the Divestiture Order could see companies required to sell an asset allowing them at least 12 months to do so.

The Treasurer may only apply to the Federal Court for a Divestiture Order when the ACCC and the Treasurer are satisfied that the order has a net public benefit and that it is proportionate to the breach, namely that it is necessary to prevent such conduct occurring in the future and that no other remedy would achieve the same outcome.

These laws apply to government-owned and privately-owned corporations. In the case of a government-owned corporation, a Divestiture Order can only require divestiture to another government-owned corporation. Recent Parliamentary amendments ensure that if the divestiture of a government-owned corporation occurs, the buying corporation must have equal or greater government ownership than the selling corporation. The Bill does not empower the Court to order privatisation. This ensures the relevant asset remains in government ownership while still addressing the misconduct in question and promoting competition.

The current Bill includes a Parliamentary amendment that addresses an interaction between a divestiture order and the Fair Work Act. It ensures that when an employee moves with a divested asset, their existing rights and protections are preserved under the ordinary operation of the Fair Work Act.

The Bill also includes a Parliamentary amendment that commits the Government to review the new laws within four years, taking into regard its effectiveness in improving energy reliability and affordability for Australians. These new laws will commence six months after Royal Assent, allowing the ACCC time to develop guidelines and make its enforcement approach clear to industry. Finally, this Bill will also provide additional information gathering powers to the Australian Energy Regulator (AER), bringing the AER's powers in line with comparable regulators including the ACCC. The AER will be able to share this information with Commonwealth agencies.

Full details of the measure are contained in the Explanatory Memorandum.

Debate adjourned.

Ordered that the resumption of the debate be made an order of the day for a later hour.