Mr ANDREN (9:28 PM) —Reaching a position on the Diesel and Alternative Fuels Grants Scheme (Administration and Compliance) Bill 1999 , which puts in place the administrative framework for the Diesel and Alternative Fuel Grants Scheme, requires analysis of a number of factors—an analysis that has been somewhat lacking in much of this debate. There has been far more rhetoric than research in many of the speeches, as far as I could hear. These are the factors that do need analysis: the ability of the scheme to achieve its stated purpose—that is, reducing the cost of goods and services in regional Australia by reducing transport costs; the cost of the scheme and whether it justifies any benefits that might flow; the environmental impact; the impact on rail as opposed to road transport; the workability of the scheme for business and government in terms of enforcing compliance; and, the scope for the scheme to be abused.

Before dealing with each of these factors, it is important to remember how the government handled the passage of the main grants scheme bill back in June of this year, after securing its deal with the Democrats. That bill was introduced into this place late on 22 June and listed for debate early the next morning, giving members totally inadequate time to consider the proposals. The government treated the House of Representatives and the proper process of debate with contempt not only in the way it rushed the bill through but by requiring members to vote on it without knowing how the proposed scheme was to work—and both sides in this place want Australians to believe that they can deliver a people's President.

That contempt, that lack of any decent study and debate, is why I voted against the passage of that bill back in June, pending more information, more detail. Since that bill's premature passage I have had time to consider its provisions in more detail and now, with this bill, which should have accompanied the other, I can better assess the ramifications. I must note, however, that some glaring gaps still remain.

At this stage, no compliance strategy has been developed by the ATO. I can understand the tax office being a bit coy about what compliance measures it will put in place when it probably does not even know how much money it will get to administer the scheme. It is unclear from the explanatory memorandum what resources will be made available to the ATO to put in place a compliance regime. I note that the explanatory memorandum states that as the measures contained in this bill are `of a machinery and administrative nature' there are `no additional financial impacts'. It goes on to say that the financial impact of the scheme was contained in the explanatory memorandum to the Diesel and Alternative Fuels Grants Scheme Bill.

According to that EM, all we are told is that the scheme will cost $600 million in the first year and $690 million in the second, with a compliance cost impact described as `medium'—whatever that means. But, if a scheme such as that proposed is to work and not be open to widespread rorting like that which has plagued the Diesel Fuel Rebate Scheme, it will require a very active compliance regime, and the only way that can happen is if the ATO is provided with adequate resources.

I hope that, in summing up the debate, the minister will be able to explain to the House what financial commitment the government will be making to enforce the compliance measures. If we in this place had been given adequate time to assess the other bill, the government's attention could have been drawn to potential problems—problems such as that which formed the basis of my question on notice to the Deputy Prime Minister on the 27th of last month. That question is as yet unanswered, and that is not unreasonable, given that it was lodged only late last month. The problem that question refers to relates to the application of section 10(2) of the act, which sets out the types of journeys for which the grants can be claimed for vehicles above 4.5 tonnes and below 20 tonnes.

On my reading of that section, while it is clear that a grant will be available for the entire journey from a regional to a metropolitan destination, it is unclear whether an identical journey in the opposite direction will be eligible for the whole journey or only for that part of the journey which falls outside the metropolitan area. There is also ambiguity in that section about what constitutes a `point'. For example, a trip from Orange in my electorate to Sydney may comprise several delivery points in Sydney as part of a continuous journey.

The question is whether the grant will be available only for the trip between Orange and the first drop-off point or whether it will be available for subsequent travel between other drop-off points. If it is available for subsequent trips, then it would seem to make the grants available for trips within the same metropolitan area—which conflicts with the stated intent of the government's agreement with the Democrats to not allow the grants within those metro areas.

The problems with this section also highlight the administrative difficulties the ATO is likely to face. It points to the type of holes in the system that will be able to be manipulated for financial gain. For example, for trucks of 4.5 to 20 tonnes, a trip from Newcastle to Wollongong, in the same metropolitan area, would not attract a grant, but a trip from Newcastle to Lithgow and then from Lithgow to Wollongong might attract a grant. I wonder if we are going to have trucks ducking in and around metropolitan areas—perhaps damaging local roads—to enable access to this scheme. And who is going to police it?

If these sections are to be read literally, for them to work, on every road out of a metropolitan area the ATO will have to specify where the city ends and the bush starts. Not only that, but every transport provider travelling from city to country will have to know where these points are. That might not be so bad for operators who travel back and forth on the same route all the time but, for those who haul stuff all over the place—and especially for those smaller companies—it is not hard to see the compliance problems that could arise.

I draw the minister's attention to these issues, which have also been touched on by the Parliamentary Library's researchers. In fact, we pointed out some of the apparent anomalies to those researchers and they have picked that up in their research work. I hope that these can be clarified and rectified, if not in this place then in the Senate.

Quite obviously, the compliance burden of this scheme, will, like the GST, fall most heavily on small business. It will be regressive in that sense. Disregarding these administrative problems, the more important issue is whether the scheme will deliver tangible benefits to people living in rural and regional Australia. While the government has made much of how the scheme will reduce the cost of diesel, we have not seen anything about how the proposal will actually benefit people in rural and regional areas in terms of reducing the price of goods.

The scheme assumes, as does the GST package, that where costs are reduced they will be fully passed on to consumers and that competition will force the savings to be passed on. But I have read one interesting analysis of the diesel fuel scheme that questions its ability to provide cost benefits to regional consumers. That analysis uses Bureau of Industry Economics figures to estimate the flow-on benefits of the scheme. When the GST input credit is added to the diesel fuel grant, the price of diesel will fall by some 32 per cent. That is good. But, according to the bureau, fuel and oil costs represent only about one-fifth of the total costs of transport providers. This means that, rather than reducing transport costs by one-third, total transport costs will be reduced by about six or seven per cent. But transport costs represent only a fraction of the total shelf cost.

According to that analysis, the bottom line is that, if the cost savings are fully passed on to shelf prices, $10 worth of groceries would be 3.3c cheaper—and that is if the benefits are totally passed on. It ignores the additional compliance costs of the GST for small business. It ignores any inflationary impact of the GST. If this analysis of the scheme's likely flow-on benefits is correct, if the government's GST inflation estimates are as far out as some reputable commentators are saying they could be, and if the New Zealand post-GST inflationary experience is anything to go by, then it seems likely that any benefits flowing from the diesel scheme will be more than wiped out in the short, two-year life of this scheme.

Contrary to what the government would have us believe, the real issue in rural and regional Australia, at least in my rural electorate, with regard to fuel is not the cost of diesel fuel for business but the cost of petrol for ordinary people. In recent times, the price of petrol has increased substantially, due to world crude oil prices and a lack of transparency and rigorous competition in rural and regional Australia.

The Bureau of Statistics 1993-84 household expenditure survey showed then that, while the average Australian household spent $30.63 on petrol a week, only 99c was spent on diesel. That gap would have narrowed only marginally in the past six years—so huge is the difference between diesel and petrol usage. Mining and farm commodity transport would obviously benefit from this proposal, but the government is claiming that the major beneficiaries will be ordinary rural dwelling Australians who will be delivered significant cuts in their cost of living, courtesy of transport cost cuts passed on. That will not be the case, according to my examination of this.

The government's plan to reduce the excise on fuel by an across-the-board amount when the GST is added on 1 July next year will obviously widen the differential between city and country petrol prices. Why? If the excise is reduced by 7c, as is being widely speculated, it will be a 7c reduction on city petrol at 70c, which provides a greater percentage benefit than reducing the excise on country petrol at, say, 80c or—heaven forbid—89c by July next year. And, of course, the GST will then impact more on country fuel prices for the same reasons.

If the government were serious about providing a real benefit to the bush, it would do two things. First, it would look at how to introduce real competition and transparency into the petrol industry from terminal to bowser. On this point, I welcome the government's backdown on the planned deregulation of the petroleum industry. If those changes had gone through, I have no doubt that the long-term outcome for country people would have been even higher fuel prices. Second, rather than putting money back in the pockets of the major operators in the trucking industry, it would reduce the petrol excise on fuel used in country areas by substantially more than it is reduced in city areas. I certainly do not begrudge a lessening of costs to smaller local trucking companies and operators, but I have to question the benefit of these changes to the end user—the consumer—and the compliance costs which will affect those small operators far more than they will affect big trucking companies.

If the government reduced petrol excise by a greater margin in the bush, people in country areas might see direct benefits through cheaper petrol for personal as well as business use. This is dependent, of course, on the constitutionality of such a scheme. I understand that such constitutional questions have been raised to some degree about this. If it does have constitutional problems, maybe it should be investigated in terms of some grants program for rural and regional Australia vis-a-vis petrol pricing. With this scheme, the risk is that any savings will not go to the end consumer but will be pocketed by transport providers and retailers. That is a real risk, especially in areas where there is no real competition.

As far as the environmental impact of this proposal is concerned, it is hard to know who to believe. The Democrats argue that the revised scheme, along with the air pollution measures, represents a substantial improvement on the original ANTS package. On the other hand, the Australia Institute's analysis of the revised package found it would still result in significantly higher greenhouse gas emissions and urban air pollution in Australia—with a critical factor being the reduction in the prices of diesel fuel for heavy vehicles. In response, the government, relying on the analysis of its consultant economist, Dr David James, discredited the Australia Institute's findings, saying they were based on flawed modelling. The institute estimated that the revised package will result in the addition of 5.2 megatonnes of carbon dioxide and 1.5 gigagrams in particulate emissions on top of `business as usual' projections by 2010. But Dr James found that the revised package will result in greenhouse gas emission savings of 5.5 megatonnes by 2010 and substantial reductions in particulate emissions.

Given these massive differences in analysis, it is difficult to reach a conclusion on that aspect of the package. If one takes a middle line between the Australia Institute and Dr James's report, by 2010 the environmental impact will be close to what it would have been, had nothing been done. On that basis, given Australia's Kyoto greenhouse commitment, I am not convinced that the revised package does enough environmentally.

This is quite apart from the question of diesel quality in this country which, as I understand it, falls well short of acceptable standards—any incentives to use more will not help promote improvements in air quality. The member for Paterson alluded to the need to press on to new technologies in the new millennium. As I walked into the House for this debate he mentioned the ethanol bounty program, which had a particular resonance in my own electorate where the Manildra Group was the beneficiary of such a scheme and had set in train a very bold project to produce ethanol from its multimillion dollar projects at both Manildra and Nowra on the South Coast. There was an opportunity there for rural Australia and for all of Australia to have a win-win in new fuel technology.

The Alternative Fuel Conversion Program is part of the government's program now, and I draw to the attention of the House that, according to expert analysis, the cost of converting a heavy-duty diesel vehicle to CNG-LPG could range from $13,000 to $70,000, while the cost of converting a diesel vehicle to an ethanol-diesel blend can range from $200 for a Euro 2 engine up to $1,600 only for an American diesel. One wonders about the bias of this government in favour of fossil fuels. We should be leading the world in new technology. Here was an opportunity for rural and regional Australia to be at the very forefront and cutting edge of the technology—and that has been thrown out and burnt on the altar of financial rectitude and crazy economic rationalism. Again, we look at the cost of doing something rather than the cost of not doing it.

It cannot be denied that the range of short-term measures the Democrats have won with regard to this bill are far better than anything contained in the original ANTS package, but it is not hard to improve what was originally so detrimental to the environment. One component of the revised package I strongly support, however, is the extension to rail operators of the full rebate of excise on diesel—as much as I wish we were still moving to alternative energies that really mean something in terms of environmental standards. As we know, rail had a small comparative advantage to road transport in terms of the excise applying to diesel. Under the original ANTS package, that comparative advantage would have been removed. The Democrats are to be congratulated for securing this extension to rail and, by so doing, actually increasing rail's comparative advantage over road transport.

As I have just mentioned, too often governments—and the previous one too—think only of the cost of doing something rather than the cost of not doing something. There is no better example of this than the rail versus road argument. The more our goods can be transported by rail the less wear and tear on our roads, the fewer accidents, lower insurance premiums and so on. I hope the inclusion of rail transport in the off-road scheme, combined with a positive response from the government to the rail task force report into the future direction of the rail sector, will deliver the boost our rail industry so desperately needs.

In concluding, it is important that the scheme this bill puts in place is not viewed in isolation. As I have pointed out, both pieces of the diesel fuels grants scheme have problems. I hope this second bill will be given a closer examination by the Senate than the first one. It is arguable that the benefits the government claims will flow from this change have been overstated and that they can be, and probably will be, illusory. If international experience is anything to rely upon, any benefits that flow to regional communities from the scheme are likely to be quickly eaten up by the inflationary impact of the GST.

Rather than blindly supporting the scheme, members of the National Party should look closely at ways of reducing the cost of petrol in regional areas. That is the real issue for people living in regional areas. I look forward to necessary amendments to this legislation and will support its passage with a warning that the expectations the government has built up in rural areas about the benefits that these changes will deliver will come back to haunt coalition members if those benefits prove as illusory as I suspect they will be.