Mr SECKER (12:36 PM) —In the brief time that I heard the last speaker, the member for Northern Territory, he was complaining about areas which do not have anything to do with these fuel grants bills, but I think it is very important to rebut some of his comments. He asked what we had done to improve educational outcomes for country people. I can assure the member for Northern Territory that one of the great initiatives in last night's budget was an increased discount on farms and businesses from 50 per cent to 75 per cent which will ensure that a lot of country students in the electorate of Barker—and, I am sure, in the electorate of Northern Territory—will now be able to afford to study at university. Also there is an increase of 10 to 30 per cent in the living away from home and boarding allowances. So if that is `nothing for country students' I suggest that the member for Northern Territory have another look at the actual initiatives of this budget.

He also suggested that health outcomes are not going to improve. What a load of rubbish! Here we have a budget which was almost entirely designed to improve health outcomes for rural and remote areas, yet he says we are doing nothing. There was nearly $600 million extra in initiatives in last night's budget to ensure that we have doctors, GPs, specialists, allied health professionals and nurses out there serving the health needs of country people. Of course we also have a huge increase in aged care funding for country areas as a result of this government's decisions. Certainly, Mr Deputy Speaker Hawker, I can join with you in taking great pleasure in the green triangle initiative, as I know you worked very hard on it. I was very pleased that initiative was announced last night as part of the budget detail. That will certainly help country people in both our electorates, and in the member for Forrest's electorate, because they are so important in the training and retention of health professionals in our electorates.

It gives me great pleasure to speak on the fuel sales grants package of bills, which is designed to ensure that electors in the electorate of Barker, which I have the privilege of representing, and in other country electorates will no longer have to pay more for fuel as a result of the A New Tax System and the introduction of a GST. This was a commitment and promise of the Howard government at the 1998 election which we are now delivering on. This sees our commitment to country people further enhanced by the year 2000 budget delivered last night. In the plan for the A New Tax System entitled Tax reform: not a new tax, a new tax system released in August 1998, well before the election, it was stated:

To achieve this promise it was estimated at the time that the rate of excise would need to be reduced by 7c a litre with the reduction being replaced by the GST payable. Businesses are able to claim input tax credits. They will be able to claim that amount of GST on petrol. For this purpose, the term `petrol' will be read as including retail sales of diesel fuel. The promise was repeated a number of times during the October 1998 election campaign. For example, the Prime Minister, John Howard, stated:

At another time he said:

The difficulty in implementing this promise arises from the fact that petrol prices are generally higher in rural and remote areas than in metropolitan areas, so the adding of a 10 per cent GST to a higher base price will result in the final price being greater than the adding of the 10 per cent to a lower base. For example, if petrol in a metropolitan area retails for 77c per litre and excise is reduced by 7c a litre, the addition of a 10 per cent GST will result in the same retail price of 77c per litre. However, if the retail price is 85c per litre in a regional or remote area and excise is reduced by 7c per litre, the GST will be added to a base price of 78c per litre, leading to a final price of 85.8c a litre, which is a 0.8c increase, due to the replacement of part of the excise payable with a GST. This is the result of the differing fuel prices in city and country areas. As prices increase in both metropolitan and country areas, it can be expected that the additional amount payable due to the GST will increase. Having variations in the rate of excise between different areas in a state or even between states, which may be considered as a method of reducing the base price prior to the application of the GST, is not an option due to section 51(ii) of the Constitution which provides power for the Commonwealth to legislate in regard to taxation but `so as not to discriminate between states or parts of states'. As an excise is a method of taxation, this paragraph effectively prevents the Commonwealth from imposing different rates of excise for regional areas compared to metropolitan areas.

The question of whether the Commonwealth can effectively bypass this restriction through a grants scheme direct to the operators of a retail outlet raises many constitutional issues. Due to payments of grants to individuals rather than through the states, it appears that the Commonwealth is relying on the appropriation power contained in section 81 of the Constitution. As the scheme is not restricted to corporations or interstate trade, it would appear that neither of these powers will be sufficient to support the entire scheme. So we have come up with this proposal to ensure, in line with the government's commitment regarding petrol, that the price of petrol is not increased due to the introduction of the GST. This will be met, as the Treasurer announced in a press release dated 11 April 2000. He said that a fuel grants scheme would be introduced with a minimum of two levels of grants to ensure that retail prices do not increase due to the introduction of a GST. The first level will be available for non-metropolitan sales and the second for sales in remote areas.

The Treasurer also announced in a doorstop interview that there may be a third level of grant. In explaining the scheme, the Treasurer said:

I am glad to hear that because it may be needed on Kangaroo Island, which is part of the electorate of Barker. It went on:

The scheme is largely to be implemented through regulation rather than by specific criteria contained in the bill. The Treasurer's press release states:

Regarding which areas are to be included in regional or remote areas, a spokesman for the Treasurer is reported as saying, `You will have to wait and see—closer to the introduction of the GST,' and, `If we were to announce it now, there might be a temptation for some to increase prices to take advantage.' The scheme is estimated, in the Treasurer's press release, to cost around $500 million over four years.

It is interesting to compare fuel excise charges under the previous Labor government with the record of the Howard government. When Labor came to government in 1983, the fuel excise on petrol was a relatively small amount of 6.155c per litre. However, in a matter of months they increased it by 1c a litre to 7.155c on 1 July 1983. Not content with that, less than two months later they increased it again by nearly two more cents a litre to 9.027c a litre on 23 August 1983. That is a nearly 50 per cent increase by the Hawke-Keating Labor government in less than six months of government. This was only the beginning of worse to come, because over the term of the Hawke-Keating governments, those 13 miserable years, they raised fuel excise no less than 31 times. From the original 6.155c per litre, the Hawke and Keating governments increased the fuel excise to 34.183c a litre—an increase of over 28c a litre. This amounted to an increase of 555 per cent over the term of the Hawke-Keating Labor governments.

We now have a Labor opposition that bleats about caring about the country, despite a record of having increased fuel excise by a whopping 555 per cent. And then they come up with a silly amendment that could only be generously called a political stunt. The Labor Party's so-called answer is not to have a GST on petrol. That so-called answer would rob all businesses in Australia of the ability to claim back the GST and to have cheaper fuel to run their businesses. By being able to claim the 10 per cent GST back—or about 7c a litre—businesses are more able to compete for export markets in the global economy and more able to run profitable businesses, and that is very important for country areas. Businesses are thus even more likely to grow and to increase employment than they are under the present Labor instituted system of taxation. We have already increased the work force by 650,000 jobs in four years with low interest, low inflation and high growth, and our taxation reforms will help our businesses and our job generators even more.

As I said, the Hawke-Keating Labor governments increased the fuel excise by 28c a litre—a 555 per cent increase in 13 years. That averages out at a nearly 43 per cent increase in fuel excise for every miserable year the Labor Party were in government. This equates to over 2c a litre per year. Contrast that with the four-year record of the Howard coalition government, discounting the 8.1c a litre collected on behalf of the states as a result of the High Court decision in 1997— and it should be discounted because the federal government does not get the money, the states do. The federal government was collecting 34.183c a litre at the time it came to government in 1996. This money was, of course, for the federal coffers. It now collects 36.087c a litre, which is a less than 2c a litre rise over four years, or less than half a cent a litre extra per year. That is a 5½ per cent increase over four years, compared with Labor's 555 per cent increase over 13 years—an average increase of 1.4 per cent per annum compared with Labor's 43 per cent per annum. So the record of our government on fuel excise is far better than that of the previous Labor government.

To ensure that country fuel consumers are not disadvantaged under the A New Tax System, we are delivering a $500 million grants scheme to ensure that country fuel does not go up. This, together with the GST rebates and the 23c a litre fuel reduction for the transport industry, means cheaper fuel for country people. It does not stop there. When we came to government in 1996, avgas, which is for use in the aviation industry, had an excise that had increased from 4.555c litre to 18.478c a litre under Labor. We then reduced it from that 18½c a litre to its present level of only 2.718c a litre—nearly 16c a litre less than under Labor. One can only say that we are about less tax, not more tax like the Labor Party.

These fuel grants bills will mean that the consumers of fuel in my electorate of Barker will benefit by the subsidies that will be set at either 1c, 2c or 3c a litre. I could imagine that a place like Kangaroo Island might even qualify for the higher rate of 3c a litre. As a frequent visitor to Kangaroo Island as part of my electorate responsibilities, I know that this will be warmly received. I will spend five days on Kangaroo Island in May. As an island that measures about 150 kilometres by 80 kilometres, that is an important factor for not only the locals but also the 160,000 tourists who annually visit the wonderful island of Kangaroo Island.

The price of petrol can be broken into a number of major components, some of which are relatively constant regardless of the place where retail petrol is purchased and sold and others which are variable. The major component of retail price can be seen as the price of crude oil, which is determined by international prices, which are reflected in the import parity price. We have seen the results of that over the last 15 months or so. Other components are, where petrol is purchased directly from overseas rather than from an Australian refinery, the purchase price plus transport costs to Australia; the profit margin for the refiner-importer; the excise payable to the Commonwealth, which is a constant rate regardless of the source of the petrol, which includes the 8.1c a litre going to the states; transport costs from the refiner distributor to the retailer; the retail profit margin; and any state or territory concessions. Of these components, the only one that can be regarded as totally transparent is the amount of excise charged by the Commonwealth, although this is proposed to be changed by this bill.

The price of the basic inputs—that is, the crude for refiners and petrol bought from overseas from distributors—is principally dependent on the world price of crude oil and can be seen as being in the same category as excise, being the same regardless of where the petrol is sold. While it would initially appear that the profit margin of the refiner-importer should also be equal regardless of where the petrol is sold, such an assumption would ignore the effect of the refiner-importer being able to sell larger volumes when there is a short-term oversupply of petrol. As it takes time to alter production schedules and for refiners there is a large component of fixed cost relating to the investment in the refinery, situations will arise where a refiner or importer will have a surplus of petrol and will be willing to accept a lower cents per litre profit so long as an increased volume is sold. Similarly, if importers wish to clear stocks, they will be willing to reduce their profit margin to sell in high volume.

While the above may apply in a reasonably competitive market usually found in areas of higher population density and hence higher demand and total turnover, the situation can change dramatically where there is little or no competition. With the abolition of a maximum wholesale price and general deregulation of the industry, retailers in remote locations with a relatively low turnover are likely to be faced with a higher wholesale price when there is a general shortage of petrol than would otherwise apply, and it is unlikely that they will benefit from discounts, due to the relatively small volumes that they sell. Obviously that is more in line with what happens in country areas, and that is why there is a price differential for country areas versus the city. It is a lot to do with the actual supply and demand.

I conclude by saying that it does give me great pleasure as the member for Barker to support the measures contained in this bill because they ensure that country consumers do not pay more for their fuel; in fact, they should pay slightly less. (Time expired)