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Tuesday, 17 February 1987
Page: 75

Senator MASON(4.49) —I move:

That the Senate take note of the paper.

The crisis that this Industries Assistance Commission report addresses would not have arisen had not the Government, against the advice of the Australian Democrats and others, insisted on applying the import parity price formula to both old and new oil. That formula, when combined with the high excise on crude oil-up to 87 per cent of the import parity price-was destined to create government dependence on crude oil excise as a prime revenue source. That has now created a major distortion of the economy and an economic time bomb in this community which we will rue bitterly before many more years have passed. In 1985-86 crude oil excise raised $4.3 billion-some 10.7 per cent of total tax revenue. That is what I mean by a distortion. It is no secret that this source of revenue will dry up in a few years. By the early 1990s the Bass Strait oil reserves will fall by 50 per cent. Unless there is a major new discovery, present rates of usage will have consumed all of Australia's commercial oil reserves by early next century. We have hopes, I know, of the Timor Sea, but so far they have not been realised in the sense that the Bass Strait field was.

The Government would have been forgiven this imposition of a flat tax on all petrol users if there had been some attempt by either the Fraser Government or the Hawke Government to apply the proceeds usefully. This has not happened. Only some 25 per cent of that revenue has been spent on roads. We had the opportunity to spend the money on liquid fuel substitutes. Year after year that matter has been debated in this place, whereas petrol is now made in New Zealand, from natural gas in the Maui field, giving that country a permanent source of liquid fuel in emergency or strategic situations. Those options were there. I quote from my speech in this place on 15 May 1980-six years ago-when I made this point to the Government:

The options were there . . . based on established technology and the best advice we could get in the world-from Davy Pacific Pty Ltd which is building methanol plants elsewhere in the world-

including Soviet Russia. I continued:

For $258m the Government could have got on stream two refineries which would have produced M15 for Australia at something like 20c a litre or less.

Those refineries would have been producing a petrol extender for this country now if only we had had a government that had the vision to look beyond the next pay day or the next long weekend. We do not have that. Meanwhile, there has been a collapse in the international price of oil, which was anticipated by everybody except the Government. The net effect of these changes has been a collapse in the oil excise revenue and the prospect of a further deterioration in the next decade or so.

To compensate for lost crude oil excise revenue the Government has increased the excise on petroleum by 10c a litre to a level which, in the IAC's opinion, is quite damaging to the economy. The major conclusions in this report are: Petroleum excises are imposing very high rates of tax on use of petroleum products, and the excises have significant economic costs, particularly given the extensive use of petroleum products as intermediate inputs to production of other goods and services and the substantial difference in excise rates between petroleum products. The major proposal is that rates of excise should be reduced to levels more in line with taxes on other goods. The following point is made:

However, because of the large amounts of revenue involved, such changes should be considered in the context of broader changes to the commodity tax system.

That is what is meant by `an economic time bomb'. It is one with which this Government, or whatever government wins the next election, will have to cope somehow, and I do not envy it that prospect.