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Wednesday, 25 March 1987
Page: 1517

Mr McGAURAN(6.12) —Prior to the debate being interrupted at the adjournment of the House on 23 March, I was stressing the particular difficulties that the city of Sale within my electorate has encountered as a result of the oil price drops. I repeat my previous statement to the House that the city of Sale, more than any other throughout Australia, has incurred particular difficulties as the price of petroleum has declined. It was for that reason that on 19 September last year I joined with a delegation from the city of Sale in a meeting with the Minister for Resources and Energy, Senator Gareth Evans. At that meeting a very sophisticated and detailed submission was presented by the delegation to the Minister. It sought to outline for his information and for that of the Government the problems that Sale has suffered, as well as to put forward a number of solutions.

At the risk of stating the obvious, the Government is not about to frame its economic policy merely on the consideration of one or another city in any part of this country. Nonetheless, the expectation of the delegation was not raised to such an unrealistic level. Instead the delegation sought to stress upon the Minister the human loss suffered by the city of Sale. The purpose of the submission was, firstly, to alert the Government to the loss of more than 750 jobs in Sale industry; secondly, to impress upon the Government the impact of job losses in the oil industry on the morale of Sale, not to mention, of course, the hinterland; thirdly, to petition the Government to restructure oil and gas excise as well as taxation so that the Bass Strait producers could compete effectively on both domestic and export markets. In fact, that is the crux of the debate before the House. It is my argument and that of my colleagues on this side of the House that the Petroleum Resource Rent Tax Assessment Bill, the Petroleum Resource Rent Tax Bill, the Petroleum Resource Rent Tax (Interest on Underpayments) Bill and the Petroleum Resource Rent Tax (Miscellaneous Provisions) Bill will discourage exploration as well as production. In other words, these four Bills will dampen incentive.

To continue with the purpose of the Sale City Council's submission, fourthly, it was to seek to retain the substantial oilfield expertise already assembled in Sale. In other words, the city of Sale, as well as the oil industry, did not want to see Sale divested of all those special skills and experiences that had been built up over a long period of time. Fifthly, the city of Sale wishes to facilitate the development of the Kipper Wild Cat well through Government recognition of the potential for Bass Strait to supply the natural gas requirements of Adelaide for the year 1991 as well as the natural gas requirements of Sydney in the year 2000.

The city of Sale, as well as my constituents and I wish to stress the potential of Bass Strait's natural gas supply. Sixthly, the purpose of the submission was to resolve the urgent need for initiatives to promote gas and oil exploration-again, I stress, to prevent Australian self-suffiency in oil supplies diminishing by the year 2000. Seventhly, the purpose is to encourage the Government to develop a long term strategy framework for the oil industry so as to provide incentives for domestic exploration and production of oil and gas.

I know that in any dealings a government, whatever its political makeup, may have with the oil industry, there will be a great deal of bargaining, negotiation and even-not to put too fine a point on it-brinkmanship. Obviously, the oil industry has a vested interest, as well as a legitimate responsibility to shareholders. But, even allowing for the normal-and I would imagine vigorous-negotiations between government and that industry, it is my firm conviction that the balance has been tilted in favour of government to the detriment of the oil industry and in consequence to the detriment of Australia.

My colleagues, not least of whom the honourable member for Mallee (Mr Peter Fisher), detailed, as the Hansard shows, the reasons why a healthy oil industry is so important to the economy of this country. To seize upon just one aspect of the argument put forward by the honourable member for Mallee and his colleagues for the Opposition, I take the matter of the current account deficit. We are faced with a severe crisis in our imports far outweighing our exports. Any government decision that restricts the potential of an export earner will disadvantage the economy and, of course, specifically the industry involved.

What has this Government really got to show for its petrol policies to date? It is worth while just recounting the Commonwealth Government's strategy in its raising of revenue from the petroleum industry. We understand from estimates that in this financial year 1986-87 over $7 billion will be raised. This is approximately 11 per cent of all estimated total taxation revenue, which incidentally is estimated to be some $65 billion. That revenue is raised by way of two measures-the crude oil and liquefied petroleum gas levy and the petroleum product excise. This Government has made a policy decision to raise the $7 billion from the petroleum sector and it will adjust the rates of these two taxation measures to maintain that level of income. The crude oil and LPG levy, is revenue raised from producers based on the price they receive. If that falls, the shortfall of the $7 billion will be made up by increasing excise.

Over the past year the price of oil has fallen dramatically and, therefore, the crude oil and LPG levy has decreased, but the excise has simultaneously increased. The Budget figures reflect this in that they show that the revenue to be raised from the crude oil and LPG levy has fallen by 67.3 per cent while the adjustment to excise has seen revenue rise from that source by a massive and almost unbelievable 95.9 per cent. In simple terms, this means that whereas motorists were paying 6.1 cents per litre excise in March 1983 they are paying 18.7 cents a litre excise in March 1987. In the 1986-87 Budget the Government decided to increase the excise by three cents a litre. It, therefore, will obtain some $625m in this Budget year and an incredible $715m in a full year.

That is the situation in a nutshell. It means that in March 1983 Sydney motorists were paying almost 44 cents a litre and in December 1986-these are the latest Australian Bureau of Statistics figures we have-they were paying 55 cents. In Melbourne in March 1983 motorists were paying 42 cents and in December 1986 they were paying 55 cents.

Mr Peter Fisher —You should get the prices Minister on to this.

Mr McGauran —As my colleague and friend the honourable member for Mallee said, this is an issue that the Minister Assisting the Treasurer on Prices ought to address. Of course, if we ask any questions on issues such as this, he takes them on notice and refers them to his colleague, the Minister for Finance (Senator Walsh), in the Senate.

Motorists are being bled dry with obvious and dramatic economic effects. We also find in exploration that the Government's taxation policies are discouraging further development. I stress that the four Bills before the House dealing with the imposition of the resource rent tax will further dampen exploration and production. One wonders how often those of us on this side of the House have to state the obvious consequences of such government policy before the Government will take notice.

The RRT is a profit-based tax and no matter how the Government seeks to dress that up or divert attention from it, that is the inescapable conclusion. Of course, there has to be a tax on a resource such as petroleum. We understand that, but there are a number of philosophical problems, not to mention economic problems, arising out of these four Bills. This is the wrong time to impose such draconian taxation measures. In the city of Sale 750 jobs at least have been lost. In the industry overall we are advised that 6,500 jobs have been lost.

The exploration figures tell a story in themselves. The total exploration wells in 1983 were 49. In 1987 there are estimated to be between 15 and 25-a very dramatic fall. Seismic kilometres achieved in 1983 were 15,168. In 1987 it is estimated to be between 5,500 and 8,500. Expenditure in 1983 was $519m and in 1987 a paltry $132m. Furthermore, we are advised that exploration drilling at present is the lowest since 1980-I draw upon Australian Petroleum Exploration Association statistics for the fourth quarter 1986.

The Government is seeking to impose heavy taxation based on profit, not on net profit, at a time when the industry is in a very severe downturn. We must also look to the future because in February 1987 the Federal Government released an outlook which forecast that production-not exploration, but production-will be 20 per cent lower in 1989-90 than it was in 1983-84. The outlook estimates that Bass Strait production in 1992-93 will be only slightly more than half last year's production of 437,000 barrels a day. This rate assumes that the development of several discovered but as yet undeveloped fields will proceed together with projects to enhance production rates within existing fields. The Government's estimate of 1984 suggested that Australia could be 95 per cent self sufficient in crude oil in 1990. We now find that estimates point to Australia being only 65 per cent self sufficient in that year.

What does the Government seek to do about the very serious, even depressing, estimates for the future? The Minister for Resources and Energy (Senator Gareth Evans) in a speech yesterday to the APEA annual conference in Surfers Paradise said that while Bass Strait producers had earned high returns, the Government take also was relatively high in comparison with other countries. What an extraordinary admission for the Minister responsible to make. I will read his exact words:

While it would be premature for me to at this stage indicate its possible contents--

he is referring here to future government taxation packages-

I therefore do see the prospect of developing a package which will recognise the economic circumstances faced by the Government, and at the same time, meet some of the genuine concerns expressed by the industry.

It is mere rhetoric because at a later Press conference he would not expand on this ambiguous and nonsensical statement. He said at his Press conference:

I think I will have to leave it to you to plough your way through the chicken entrails of the speech rather than to give you any more specifics.

Uncertainty has crept into the industry. He also told the conference:

However, when all taxes are taken into account, the total Australian tax take is in an intermediate position.

At that conference the Minister admitted that there are relatively high taxes placed upon the petroleum exploration and production industry. Moreover, he did not clearly spell out what the industry can expect in the future, so how can he plan for the industry at a time when reserves are running down?

Mr DEPUTY SPEAKER (Mr Drummond) —Order! The honourable member's time has expired.