George Brandis (Queensland, Liberal Party) Share this | Link to this | Hansard source

I present the Economics Committee report Petrol prices in Australia, together with the Hansard record of proceedings and documents presented to the committee.

Ordered that the report be printed.

by leave—I move:

That the Senate take note of the report.

I seek leave to continue my remarks later.

Leave granted.

Steve Fielding (Victoria, Family First Party) Share this | Link to this | Hansard source

Family First appreciates the work that has gone into the report Petrol prices in Australia, but it will make no difference to the lives of ordinary Australian families. As Family First said when the inquiry was announced, it is just a stunt to take attention away from the lack of government action on petrol prices. The inquiry was proposed by the opposition in an attempt to also take attention away from its lack of action. This is the 45th petrol inquiry since 1983. What Australians want is not more talk but action.

Family First is the only party with a plan to give relief to families and small businesses. Family First has repeatedly called on the federal government to give families and small businesses relief at the bowser by cutting petrol excise tax by 10c a litre. That would cost $3.8 billion. If that had been part of the budget, it would have helped protect families, now and in the future, from an interest rate hike.

A cut in petrol tax is the only way the government can have an immediate and real impact on petrol prices. We do not need an inquiry to tell us that we are taking too much tax on petrol. Every time families fill up their tank, nearly 50c a litre in taxes goes to governments. Excise tax accounts for 38c a litre and the rest is made up of GST. Unfortunately, the government seems to be too attached to the tax revenue to let go of it. The Labor Party is no better, as it will not commit to a tax cut either. Both the major parties clearly are not serious about putting families first.

Sitting here in Parliament House, where we do not pay for petrol ourselves, we do not feel the same pain. Family First says it is time to cut petrol tax. Some families will have had to revise their Christmas travel plans because petrol prices are still quite high for families. Earlier this year a survey published in the Age asked people to rank their priorities for reducing tax. Almost half the respondents—45 per cent—said they wanted a cut in petrol tax. Yes, petrol prices are down from the highs of $1.40 or $1.50 that we saw earlier this year, but they are still a lot higher than a few years ago and people are feeling the squeeze.

The impact that petrol prices have on the family budget is demonstrated by the fact that people will go to the extent of using supermarket shopper dockets to get a 4c-a-litre discount. Family First is proposing a 10c cut in petrol tax. Coles, Woolworths and other retailers think 4c a litre is important and makes a difference—and people clamour to get that discount. Imagine what would happen if there was a 10c-a-litre cut in petrol tax? It would make a huge difference to families. Families are also struggling to pay higher mortgage payments, courtesy of the recent interest rate rises.

Let us think about the economics of this situation. We had a budget surplus of about $14 billion last year. Yes, you could say that is good management and give it a big tick, but you could also say we are taking a heck of a lot more than we need. So, quite rightly, the government thought, ‘We’ll give it back to people.’ Around $9 billion was given back to people in tax cuts. But why should that automatically mean income tax cuts? Why not do both—income tax cuts and petrol tax cuts? That would take pressure off inflation and that would take pressure off interest rates. It would have been more than affordable to do it in the last budget. We could have made sure that we handed money back to people in the outer suburbs and regional areas, where they do not have public transport alternatives. Families are struggling with high petrol prices and they will continue to struggle until the government and the opposition get serious about cutting the obscene level of petrol tax.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

Yes, there are issues that can be addressed in the short term, but there are issues for the long term as well. The government has looked at the freezing of excise in the past, and what I would like to bring attention to briefly is that this nation must look at alternative biorenewable fuels; it must look at ethanol. In my dissenting report I stated that we must start to look over the horizon. We must not just start to believe the major oil companies are going to progress with us in trying to develop a biorenewable alternative but also start to actively campaign in such a way as to deliver a mandate. We have tried to herd this elephant with a feather for too long. What is happening right now is that a lot of people who are trying to get into the ethanol industry are being compromised. Their product is just not being purchased. People are actually handing back their grants.

An inherent weakness in the committee’s report was its failure to consider the impacts of biofuels such as ethanol and biodiesel on fuel prices, climate change and liquids transport. Oil will become unaffordable long before it becomes unavailable. Because our economy, in the mining, agriculture and tourism sectors, is so vulnerable to any shift in supply and because oil can become an unaffordable major overhead, it is imperative on an economic base for this nation that we start to manage and work towards getting a biorenewable alternative.

My National Party colleagues and I put forward a number of recommendations which I hope go some way to actually delivering a solution to what will be an ongoing oil crisis. It is not going to get better; it is going to get worse. You may have a calm in the storm, but it is going to get worse. The only way we are going to manage it in the long term is by putting forward a program that starts delivering biorenewables as the majority of available fuel.

I leave the house with this: I think it was on 28 September 2005 that the Prime Minister, the Deputy Prime Minister and the major oil companies all stood up and said they would reach a 350 million litre target by 2010. It was supposed to be about 89 million litres this year. It just has not happened. The major oil companies have no interest in promoting a competing product. They have no interest in a process where they have excess refining capacity and so they have to discount their product. This is a way that we can deliver an affordable alternative. Sure, I take on board what Senator Fielding has said, but that is a very short-term issue that does not deal with the real problem. Our nation must move towards a biorenewable alternative and this government must be proactive in developing it.

Grant Chapman (SA, Liberal Party) Share this | Link to this | Hansard source

The issue of petrol prices is not one issue but many. Australia now has almost 15 million vehicles. To the Australian motorist, prices go up and down like a roller-coaster. The parameters of supply and demand have changed profoundly. Instability and violence in producer countries together with natural occurrences such as cyclones render crude oil prices unstable, and Australia’s high fuel-quality standards add to the range of complex factors behind petrol prices. That is why the economics committee inquiry on petrol prices in Australia was timely and useful. The committee received 75 submissions to this inquiry and held public hearings in diverse locations, including the Matilda roadhouse at Kybong near Gympie in south-east Queensland and national metropolitan centres.

Petroleum is an internationally traded commodity and hence it is factors outside the direct control of domestic oil companies that influence the price of petroleum products in Australia. These factors include the international price of crude oil, the changing balance between supply and demand in the Asia-Pacific region, fluctuations in the United States and Australian dollar exchange rate and increased Australian fuel standards. Australian oil companies exercise some control over some margins contained in the price of petrol, although not the refiner margin freight costs. Petrol price cycles affect the community in different ways. Many Australians are acutely aware of prices and will take action to benefit, such as driving across town to purchase petrol from a lower cost supplier or buying petrol only on certain days of the week.

Regulating petrol prices would cause fewer fluctuations in the price at the pump and at the same time address consumer concern about price cycles; however, it would interfere with competition in the market and reduce the extent of market fluctuations both at the higher and lower ends of the market. The benefit currently gained by customers who purchase petrol at the lowest points in the price cycle would be lost.

Capping the price of petrol is not a suitable option. The ACCC has reported that 60 per cent of petrol is purchased at the lower price points in the cycle, so it stands to reason that petroleum retailers and oil companies compensate for losses sustained by selling the remaining 40 per cent of petrol during higher price points in the cycle. Capping the price of petrol would potentially inhibit the lower range of the cycle because of the diminished capacity to recoup losses through higher prices at other points in the cycle.

Regulating the price of petrol would certainly lead to a flattening of the band in which petrol prices fluctuate. It would also likely result in an overall increase in the price that consumers pay for petrol. Petrol price cycles, as with other market force influenced commodities, are not fundamentally undesirable, and, as argued by the ACCC at our hearings, attempts to remove the price cycles would be to the detriment of consumers.

This is reflected in Western Australia’s Fuel Watch regulatory system, which compels retailers to notify their next day’s retail price for each fuel type by 2 pm. Price boards and bowser prices are changed by the retailer at 6 am and must remain unchanged for 24 hours. The ACCC cautioned that, while Fuel Watch provides transparency in petrol pricing, the 24-hour notification rule may have a negative impact on competition in the market because it limits the price reduction available immediately to customers in other states and that occurs in other states to a next-day basis where the Fuel Watch system applies, as it does in Western Australia. This point was reinforced to the committee by Mr Gerald Hueston, the President of BP Australia, who commented that Fuel Watch slows the speed with which the cycle moves, both up and down, and effectively masks whether it is competition or regulation which is driving price change. When that competition is masked or diminished by regulation, such as with Fuel Watch, then consumers are the losers, since it is competition which has been shown to lead to consumers getting a better deal.

The ACCC, which brought an independent and expert view to the consideration of the issue, is sceptical about the claimed benefits of the Western Australian system. In the end no clear, substantive evidence was presented to the committee that the Fuel Watch system in WA, other than being an informative source in relation to daily fuel prices, has any bearing on lowering prices in the market.

The dynamics of the Australian petrol industry have changed over the past decade or so. The market has moved from highly regulated to deregulated with few competitors at wholesale level, as well as a smaller number of retail outlets, while retaining sufficient competitive forces to place downward pressure on retail prices for consumers. The committee found no persuasive evidence that the industry currently reflects anticompetitive conduct. Parallel pricing in the industry is not indicative of collusion and is in fact indicative of vigorous competition. The committee found no persuasive evidence of misuse of market power and concluded that, taking into account the international actors, retail prices for fuel are not unnecessarily high.

The matter of taxes and excise on petrol attracted a significant amount of interest during our inquiry. While taxes comprise a third of the total cost of petrol at the pump, Australia has the fourth lowest level of taxation in the OECD—and hence the fourth lowest petrol prices in the OECD, a fact not widely understood by Australian consumers. Evidence to the committee reflected a double-edged sword debate as to whether taxes should be reduced to combat the rising price of petrol or, alternatively, if petrol taxes should be restructured to encourage less reliance on petrol. Removing GST from petrol or reducing excise is at best a short-term measure. Alternatively, increasing excise will hurt consumers even more. Effort would be better directed to promoting public understanding and awareness of how petrol consumption can be reduced.

Calling for an increase in the level of petrol taxation on environmental grounds is an isolationist view. Appropriate and balanced environmental policy making demands a holistic approach, and the committee has not been persuaded that increasing taxation on petrol, thereby hurting consumers, will be significant in improving environmental outcomes sought by those who advocate that cause. Other inquiries have consistently found that consumers living outside of metropolitan areas pay more for petrol and that the differentials can be especially higher during a time of rising prices.

I spoke earlier of the roller-coaster of petrol prices and the many factors contributing to this. The higher freight costs associated with longer transportation distances do contribute in part to the differential, but this is not the sole cause. Lower sales and the relative absence of competitive pressures in local markets, both on retail and wholesale prices—as well as the reality, for people who live in many rural, regional and remote communities of Australia, that fuel is simply a nondiscretionary commodity—also have an impact. It is the sum of these influences that lead to country consumers paying more for petrol, and the committee acknowledges that these are only someway offset by lower rent and property prices and that, in the end, sustained high petrol prices are particularly painful to those in country areas. Rising petrol prices hurt consumers and certain industries, more so when significant and rapid spike increases occur. The widespread lack of understanding about the factors behind steep rises leads to suspicion that oil companies, together with petrol retailers, use events such as conflict in the Middle East as an opportunity to significantly and collusively raise prices and, consequently, profit margins.

In view of the fact that I understand Senator Brandis is now able to speak, I seek leave to incorporate the balance of my remarks in Hansard subject to showing them to the Opposition Whip.

Leave granted.

The rest of the speech read as follows—

There is also a lack of understanding of the overarching importance of international factors and how these influence the petrol price.

Finally, there is a lack of understanding in the community that active monitoring of, and reporting on the petroleum industry at all levels: refining, wholesale and retail, is occurring currently and is effective.

None of these factors led us to conclude that increased government intervention in the market would provide gain to consumers. Indeed, evidence to the committee was that an unregulated petroleum market helps ensure the long-term viability of Australia’s domestic refining industry.

The findings of the Committee were that there are clearly many benefits to be derived from a ‘free market’, that is one which is largely unregulated and where prices are set by market competitors according to the forces of supply and demand.

This ultimately leads to Australians paying more competitive prices.

It does not however address the widespread lack of understanding to which I earlier referred, nor does it mean that we can step back from ongoing monitoring to recognise and remove anticompetitive and predatory behaviours in the market, if and when they arise. These are ongoing matters for government and regulatory agencies.

Capping petroleum wholesaler and retailer profit margins, implementing artificially controlled prices, or restructuring petrol taxes do nothing to address the factor which most influences petrol prices, that is the import parity price which is set on the international market and, consequently, is outside the sphere of control of Australia’s petroleum industry.

The conclusion, therefore, is that the action which must be taken by government is to ensure the presence of a market which is healthy, competitive and free from interference.

At the same time the Government should facilitate understanding of petrol prices in the community and offer specific advice and information to those who live outside of metropolitan areas and are unable to take advantage of the benefits of market fluctuations.

I commend the secretary of the committee, Peter Hallahan, and the staff of the secretariat on the work that they have undertaken in relation to this Report.

Kerry O'Brien (Tasmania, Australian Labor Party, Shadow Minister for Transport) Share this | Link to this | Hansard source

I was surprised that the debate on the committee report on petrol prices in Australia continued. When Senator Brandis sought leave to continue his remarks, I thought the debate would come on on another day at another time, perhaps on a Thursday evening as is normally the case. I thought that was the intention of the motion. We have since heard Senator Fielding and Senator Joyce on the report, and now we have heard Senator Chapman on it. I understand that at the end of my contribution Senator Brandis will seek leave to make a short statement in relation to the report. On the basis that it is a short statement we will grant it, but it is quite unusual for the mover of a motion to seek leave to continue his or her remarks to then seek to speak in the debate. It may be that Senator Brandis was not aware of the standing orders in that regard. It may be that he simply wanted—and thought it was available to him to do so—to speak later in the debate, to speak as a speaker in reply rather than as an initiator of the debate. Nevertheless, we will give him an opportunity to make a short statement.

The Senate should note that the opposition and Senator Murray of the Australian Democrats have no respect for this report. The Labor senators’ dissenting report says:

To the extent that we have been able to scrutinise this report, we feel that the report is shallow and self-serving and reflects only the view of the committee Chair and perhaps Liberal Party Senators on the Committee. This report is a report that Non-government Senators cannot endorse.

Non-government Senators are appalled in the selective and misleading use of evidence particularly while other quite compelling evidence has been totally ignored. Of great concern to Non-government Senators is that because of the truncated timeframe available to Opposition Senators a full dissenting report cannot be prepared.

Despite the inquiry stretching over five months, the chair provided Non Government Senators with less than 24 hours to consider the contents of the Chair’s draft prior to its approval by the government-dominated committee.

We make further comments and highlight the fact that the chair himself was critical of witnesses providing evidence to the committee on the morning of the hearing just prior to their examination. We agree that it is inappropriate for committees to be confronted with a written presentation on the day that witnesses appear before a committee, but it is worse that the deliberative report of the committee found its way into the hands of the committee less than 24 hours before the meeting at which the final determination of the contents was to be made, particularly at the end of the year when senators have a variety of pressing matters to attend to.

I say that is the non-government senators position, because Senator Murray, as I understand it, has also presented some comments. I have not seen the official presented copy but, as I understand it, this is what he said:

As a member of the Committee, a copy of the Chair’s Draft was sent to my email address on Tuesday 5 December 2006 at 11h41. I had seen no earlier drafts. The Committee meeting to approve the Chair’s Report was held at 08h30 on Wednesday 6 December, 21 hours later.

As this report is a broad reference, and was not dictated by a legislative timetable, there is nothing to have prevented it being tabled later, out-of-session.

Later he said:

I have no opinion on the Chair’s Report because I have not had time to read it or refect on it.

The contempt with which I and other members of the Committee have been treated reflects poorly on the Chair. It indicates an unhealthy and unwise attitude.

It is really concerning that Labor and Democrat senators have to deal with these matters in reports of the committee. As our dissenting report says, this inquiry had been running for five months. The arrival of the chair’s draft less than 24 hours before a deliberative meeting at which the final decision on the report was rammed through by a government majority tells you that there was no intention for there to be consultation about the contents of the draft, and indeed the draft was the final report to which no changes were considered by the committee.

In relation to certain aspects of the report, the opposition draws attention to the fact that on a matter which impacts on the pricing of petrol in Perth, Western Australia—it may indeed be an example to be considered elsewhere—critical evidence about the scheme was omitted from the chair’s draft and therefore the final report. We refer to this in our dissenting report. Evidence was given by impartial bodies, such as the Royal Automobile Club of Western Australia. They made what I would have considered to be impartial statements on the petrol price watch system in Western Australia and its impact on petrol pricing. But their statements could not find their way into the report because that would have been inconvenient to the chair’s view that the only thing that should be considered was the ACCC’s idea about that report, which they conceded was based only on comments made—evidence which was not based on particular facts but attributable to people’s views about the Western Australian scheme.

If reports of this committee are to be given credibility they have to be seen to have been properly considered. There has to be an opportunity for contemplation of the contents and debate. It may be that in the end a majority takes the view that the draft is right, and for good reason. It may be, for political reasons, that the draft does not express what others might put in it. Nevertheless, there would be opportunity for those who disagree to prepare a proper dissenting report. When you look at the timetable that Labor and Democrat senators were given to prepare a dissenting report on a matter which was not the subject of pressing legislation, you find that we had slightly more than 24 hours following that meeting, despite all that was going on with other reports to be considered and bills being brought through this chamber. We had slightly more than 24 hours to present a document to this chamber.

It is clear from Senator Murray’s comments that he is appalled by what has taken place. I understand that Senator Joyce did not endorse the report. I believe he has indicated that at the time of the convening of the meeting of the committee he had not had an opportunity to read the committee’s report. I understand from what he has said that he has tabled other comments. I have not had an opportunity to see them and do not know what they say. This is an entirely unsatisfactory situation for members of the committee to have to deal with. I really think that arising from this there ought to be contemplation about appropriate procedure and a timetable set up, or at least a guide for chairs of committees on how they handle these matters.

On occasions—for example, because of government insistence on dealing with legislation at a particular time—there will be great pressure on committees in presenting reports, but this is not a case of legislation causing such pressure. No legislation arises from this report. All that arises from this report is a series of views being promulgated, purportedly by the committee but in fact by the chair and perhaps some of the members who, I understand, had not even read all of it—or at least some of them had not—but supported the view.

I have never had to sign a dissenting report like this in my time in the Senate. I hope I never have to do so again. I think that the chair of the committee needs to have a good, hard look at how the committee proceedings are handled. I am not normally a member of this committee; I was a member for this inquiry. (Time expired)

George Brandis (Queensland, Liberal Party) Share this | Link to this | Hansard source

by leave—The short statement I wish to make is in relation to the report, and I thank opposition senators for the indulgence. I had planned to follow Senator O’Brien in the debate because I had anticipated some of the things that might fall from his lips. Let me set the record straight on two matters: firstly, the matter of the process by which the consideration of this report was embarked on and, secondly, the allegation that the report of the committee does not represent a balanced view of the evidence. In relation to the first matter, what had been agreed among the committee informally was that a draft would be circulated by the close of business on the Monday and the report would be tabled on the Thursday of the same week. At the time those agreements were made informally with the non-government members of the committee, there was no controversy about them whatsoever. In fact, the chair’s draft was circulated not at the close of business on Monday but on Tuesday morning, about three hours after the commencement of business. But the tabling of the report, in view of that delay of some three hours, was delayed from the usual time after housekeeping matters this morning till after question time this afternoon. So in fact the period of time between the circulation of the chair’s draft and the debate on the report was longer, not briefer, than had been informally agreed among senators.

Michael Forshaw (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Senator Brandis, just before you continue, and I note you are making a short statement, I think I should remind you and senators that at 4.30 we are due to return to other business. I am not necessarily inviting you to use all of the time available, but I want to be sure that this is a short statement.

George Brandis (Queensland, Liberal Party) Share this | Link to this | Hansard source

Thank you, Mr Acting Deputy President, for that guidance. I will not take until then to finish what I have to say. I conclude the first of the two matters. A longer period of time elapsed between the circulation of the draft and the consideration of the report by the Senate in the arrangements that were ultimately made than had been, uncontroversially, informally agreed to among senators in the first place. To suggest otherwise is quite misleading. I know the Australian Labor Party senators had other things on their minds on Monday and Tuesday—and I do not want to make any cheap political points about this matter—but I suspect one might look at the other things Australian Labor Party senators had on their minds on Monday and Tuesday rather than look at any default or defect in the process of the committee for the explanation as to why the opposition has not responded meaningfully to the report.

The second point, briefly, is this: I take umbrage on behalf of the secretariat at the attack that Senator O’Brien has just made on the balance of treatment of the evidence in the report. As is the custom with committee reports, as you know Mr Acting Deputy President, the first draft is prepared by the secretariat in accordance with broad instructions from the chair. That was what occurred in this instance. In my view, the report of the committee, as drafted in the first instance by the secretariat, does reflect a balanced view of the evidence. That is not very surprising because the evidence was not very controversial.

The weight of the evidence was overwhelmingly to the effect, as Senator Chapman said in his contribution in the debate on the report, that the Australian petroleum industry, in the various market levels at which it operates, is a highly competitive industry. All of the credible evidence—not unanimous, but the overwhelming weight of the evidence—pointed to that conclusion. There was in fact only one particular issue on which there was a sharp controversy among witnesses and between senators, and that was the utility of the arrangements that are unique to Western Australia whereby, as a result of state legislation, movements in the retail price of petrol are pegged on a daily basis so that there is a prohibition on the alteration of the board price of petrol not more than once every 24 hours. A number of witnesses praised that scheme; a number criticised it. Their different views are reflected in a balanced and thorough way in the report. That is an issue which has divided government and non-government senators. With the exception of that discrete and relatively small issue, the weight of evidence before the committee was overwhelming, and the weight of the evidence is reflected in the balanced treatment of it given in the report of the committee. I thank the Senate for the indulgence.

Debate (on motion by Senator Parry) adjourned.