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Thursday, 11 September 2003
Page: 19863


Mr KELVIN THOMSON (12:43 PM) —The member for Dunkley does not love it very much, but there is only one party in this parliament that supports the interests of consumers—the Labor Party. We have dragged this government kicking and screaming to do something to protect the interests of consumers. The Fuel Quality Standards Amendment Bill 2003 that we are debating now—the labelling bill—and the limit on ethanol which the government has been dragged kicking and screaming to implement were policies that we announced back in September last year. The member for Dunkley says that the Labor Party have not achieved anything. The Labor Party have acted in the interests of consumers and have acted to drag this government, I repeat, kicking and screaming to do something in the interests of consumers in relation to ethanol.

Most people think that Operation Helpem Fren is about Australian troops going to the Solomon Islands to deal with the problems of lawlessness, gangs and police corruption. In fact, Operation Helpem Fren is a more appropriate name for the excise slapped on importers of ethanol by Prime Minister Howard to advantage his friend Dick Honan. Maybe it should be called Operation Helpem Dick! Isn't the Howard government supposed to be totally in favour of the benefits of free trade? Time and time again, we have heard that efforts to protect Australian jobs and production are nothing more than an unfair burden on Australian consumers and a barrier to increased efficiency. So why is it that the government was persuaded by the need to protect Manildra from the menace of competition from cheap Brazilian ethanol?

The issue of why a free trade, free market economic rationalist like the Prime Minister is willing to protect an Australian firm against imports has gone largely unremarked. For years we have heard that there is no long run benefit to Australians by protecting jobs in the manufacturing industry. I dare say this would be a view that the member for Parramatta would endorse. Indeed, hundreds of thousands of Australians, including some in my own electorate, have paid a high personal price as a result of the implementation of just such a view. We are in the middle of negotiating a free trade agreement with the United States, and people talk about driving up the price of medicines in Australia to secure greater exports of beef or lamb. We are told that this is in the name of increasing trade and efficiency. But when it comes to Manildra and the production of ethanol, it seems that the government's preferred approach to economic policy no longer holds true. All of a sudden protecting jobs and developing new industries is what the government's policy is all about, rather than the usual preference for low trade barriers and market forces.

There are good reasons from time to time for adopting a strategic approach to industry and trade policy. We are all aware of that infant industry argument, but this government has generally been a staunch critic of such protectionism. Beneath the rhetoric, however, the economic rationalist veneer of this government has always hidden some rather more pragmatic realities. We all remember the Prime Minister's determination to assist his brother's textile firm. And while workers in the rail and electricity sectors lost tens of thousands of jobs with the introduction of competition policy, in the dairy industry the government said that it was unfair to impose the cost of deregulation on milk producers, so they got a multibillion dollar assistance and transition package which unemployed rail workers could only dream about. While the government relies heavily on the rhetoric of free trade, deregulation and market forces, in practice it is always willing to step in and help out its preferred firms and industries. Low-income workers in the Australian textile industry—some of whom are in my electorate of Wills—no doubt hope that the Prime Minister will extend to them the same favour when Australia's textile tariffs come up for review. It will be interesting to see whether protecting their meagre wages is of as much concern to the Prime Minister as assisting Manildra.

The Australian newspaper—a notorious supporter of the Prime Minister and opponent of Labor—had an editorial on 12 August titled `Ethanol: a tale of favouritism'. It said:

The Government's decision last September to protect Australian ethanol producers against imports—a policy that costs taxpayers $150 million a year, and that the May federal budget extended to 2012—was only one more episode in the long attempt to deem an ethanol industry in Australia. The history of the effort to kick-start ethanol is littered with tax exemptions, subsidies, tariffs and bounties ... Nor was the decision in September the final cave-in to ethanol's voracious rent-seeking: last month, the Government detailed new assistance to the industry of $47 million.

The Australian asked the question:

And has all of this given us a viable ethanol industry? Forget it. The day after the latest announcement, ethanol producers had their hands out again, crying poor because the package did not give them “long-term certainty” ...

As if that is something that any industry which does not happen to have the government's ear could claim to have. The editorial went on to say:

Because of motorists' fears about the damaging effect of ethanol on car engines, the Government has capped ethanol content in petrol at 10 per cent and introduced a stringent labelling regime, creating an absurd situation where it is simultaneously bankrolling ethanol production and limiting ethanol consumption.

The Australian editorial also pointed out:

... the fact that subsidising ethanol props up uneconomic sugar producers is a mark against its claim to environmental friendliness, given that run-off from sugar farms is blamed for polluting the Great Barrier Reef. And last, as with all forms of industry feather-bedding, the protection of ethanol blights industries that do not enjoy the same patronage.

It concluded:

It is this whole sorry mess ... that damages Mr Howard's credibility.

Similarly, the Financial Review—no friend of Labor either—recently produced an editorial about the sugar industry which went through the history of handouts to the industry. It said that three years ago the industry received an $80 million handout—half of which was for industry restructuring, which never took place—and that last year it received a further $150 million, $120 million of which was funded by a levy on domestic sugar consumption. The Financial Review editorial said:

The latest twist in the farcical campaign to featherbed the sugar industry is John Howard's attempt to bully the Beattie government into with-drawing plans to partially deregulate the Queensland sugar industry, by threatening to withhold the $120 million in funds being collected by the levy.

The Financial Review also pointed out:

... even if a viable local ethanol industry could be established at a cost to taxpayers of hundreds of millions of dollars in forgone fuel excise revenue ... it would do nothing to lift sugar prices.

It said that, because of the prevailing world price:

... ethanol producers would be unwilling, at best, to pay more than the world price if they were to buy sugar as an ethanol feedstock ... the price received for sugar would remain the same and, overall, sugar farmers would be no better off.

This is not just about the government's hypocrisy in its handling of this industry; it is about questions of honesty and integrity. We have had the stories about `children overboard' when the government sought to cover up the truth about those dodgy pictures of asylum seekers that it released during the last election. Then we had truth overboard in relation to the war in Iraq and the existence or otherwise of weapons of mass destruction. For MPs to mislead the parliament is to break a high principle, and certainly the Westminster tradition has been that when ministers mislead the parliament, they resign from the ministry.

Dick Honan is the head of the Manildra Group, the nation's major ethanol producer. He is a major donor to the Liberal Party. One of his competitors, Trafigura, decided to import cheap ethanol from Brazil last year after it had unsuccessfully sought to negotiate with Mr Honan to purchase his own product. At about the same time, Dick Honan sought a meeting with the Prime Minister. The Department of the Prime Minister and Cabinet record of their meeting on 1 August last year refers to Manildra's concern about cheap imports from Brazil. The document says the meeting focused on two issues, one of which has been blanked out in the copy released to the opposition under freedom of information legislation. The other issue was the Australian ethanol industry, and Dick Honan requested a government subsidy to protect his company from imports. He requested, according to the record:

... the payment of a producer credit to ethanol producers to enable Australian ethanol producers to compete with the cheaper Brazilian product. Mr Honan provided a copy of a preliminary report into the Australian fuel ethanol industry to the Prime Minister.”

Later on, in late August, Australian embassy staff in Brazil were instructed to make inquiries about a shipment being loaded by Trafigura for Australia. On 12 September Mr Honan had a great victory and Trafigura suffered a severe blow. Despite the free trade rhetoric of this government, the Prime Minister slapped an excise of 38c a litre on ethanol. He gave a subsidy of 38c a litre to local producers. The Trafigura shipment instantly became uneconomic and was sold at a loss of a million dollars. A week later, we asked the Prime Minister, in the parliament:

... was the government contacted by the major Australian producer of ethanol or by any representative of his company or the industry association before its decision to impose fuel excise on ethanol? If so, when? Was the government urged to take action to prevent Trafigura Fuels Australia from importing a shipment of ethanol from Brazil at a commercially competitive price?

The Prime Minister said:

... I did not personally have any discussions, from recollection, with any of them.

Indeed, he responded to a subsequent question on this issue saying:

The member asked me what communication my office had with Manildra relating to the decision to change excise arrangements for the ethanol industry. As I stated earlier, I had not spoken to Dick Honan on this issue.

Extraordinary! He was asked on 17 September whether he had met the ethanol industry representatives before cabinet's decision to impose the excise. He said he did not have any discussions with any of them. He said he had not spoken to Dick Honan on this issue. But the subsequent Labor freedom of information request revealed that he had met Mr Honan on 1 August, and the censored notes of the meeting reveal that they spoke about ways of strengthening the domestic industry. It seems that the Prime Minister's truthfulness has had a Brazilian.

Slapping excise on imported ethanol effectively delivers a $2 million a month subsidy to Manildra at the expense of importers, Neumann and Trafigura Fuels. You have a situation where Manildra's donations to the Liberal Party totalled $241,000 in 2001-02 alone. So Labor have been mounting the case that the Prime Minister misled parliament by failing to disclose the meeting that he had with Mr Honan last August before cabinet made a decision favourable to Manildra. We are also warranted in asking why the government decided in September to drop excise exemption for ethanol and start giving subsidies for local production, thereby disadvantaging Manildra's rivals and rendering their ethanol operation uncompetitive. We are further concerned about the way in which the Australian Embassy staff in Brazil were effectively used to spy on the operations of these rival companies. The companies said they were contacted by embassy staff at least five times in August and September last year seeking details of their plans to import ethanol, and they described these conversations as `a bit weird'. I think this tawdry affair has been best summed up by Mike Carlton in a couple of verses he penned in the Sydney Morning Herald to a very familiar tune. One of them goes:

Waltzing Manildra, waltzing Manildra,

Howard's gone a-waltzing Manildra, you see

And he squirmed and he fibbed

As he tried to wriggle out of it

But he gave his mate a huge subsidy.

That is about where this sorry situation stands.

As my colleague the shadow minister for consumer affairs has pointed out, we have been pursuing this issue since September last year, when we announced policies to protect motorists and other users of petrol. We announced two policies. The first was a limit of 10 per cent on ethanol blending in petrol and the second was a mandatory labelling of ethanol in petrol where the content is five per cent or more. We did that in response to calls from every major car manufacturer in Australia, which had been warning that car warranties would be voided if higher blends were used, and in response to concerns being expressed by consumers. The government have now adopted these policies, yet all the while they had been trying to accuse Labor of acting badly on the ethanol issue. If those two policies that we announced in September last year were wrong, why have they adopted them? If you do not believe in it, why are you moving the bill that you are moving now? When you hear some people going on about ethanol, you would think we were the government. They always say, `Labor's got no policies.' In this instance we had the policies, we announced them and the government have finally adopted them, so we have acted as the friends of consumers.

It is the government which have acted badly in relation to this matter, and not simply for the reasons I have described—the secret meetings and the special deals done for mates and done for donors to the Liberal Party. It has also been the case that they have not come clean with consumers about ethanol issues. For example, they commenced a fuel sampling program in April 2002. They tested 520 fuel samples from service stations across Australia, and some 42 of those samples contained ethanol levels above 10 per cent. Several of those were above 20 per cent; most of the results above 10 per cent were from New South Wales.

They did this testing and they were in a unique position to know that ethanol in levels in excess of 10 per cent was out there in the marketplace. Did they tell anybody about it? No, they did not. The only way we found out about it was in response to questions asked by the opposition at Senate estimates hearings. We also found out through the Senate estimates process that two ethanol related projects had been funded under the Greenhouse Gas Abatement Program for a total of up to $16 million. Those answers also advised us that a CSIRO study carried out in 2001 concluded that there is no greenhouse benefit in a 10 per cent ethanol content in premium unleaded petrol compared with premium unleaded petrol without ethanol.


Mr McGauran —That is not exactly what they concluded.


Mr KELVIN THOMSON —That is what they found—


Mr McGauran —No, it is not.


Mr KELVIN THOMSON —and that is what they advised us through the Senate estimates process. You had better review your own answers, Minister.


The DEPUTY SPEAKER (Mr Wilkie)—Order!


Mr KELVIN THOMSON —We have a situation where the bill before us involves labelling of ethanol. Back in December last year, the Minister for the Environment and Heritage promised to introduce nationally consistent labelling in February 2003. He said:

If the States do not move immediately to institute this labelling the Commonwealth Government will introduce legislation when parliament resumes to give it the power to require all petrol retailers to label the ethanol content of their petrol at the pump.

However, rather than fast-track implementation of a national fuel quality information standard via the act, he chose to put the onus for labelling onto the states. He defended this inaction on the basis that the federal government did not have the power to require labelling of fuels. Of course, now we are getting the opposite. In February, he said:

The Commonwealth will now take action. ... I expect to be making an announcement shortly and hope that motorists will see labels on petrol bowsers within the next couple of months.

It was not until 26 June that this legislation was finally introduced. It has now been six months since the original promise was made and labels will only appear once the legislation is passed. On 1 August the government agreed to a deadline of 31 October for a uniform national labelling regime to enforce mandatory labelling at petrol stations selling ethanol blended fuel.

All the way along, throughout this whole unhappy saga, the government have had to be dragged, kicking and screaming, to do the right thing on ethanol and to protect consumers. All the way along, they have been much more interested in protecting a single company, with whom they have a close relationship and from whom they receive electoral donations, than in looking after the interests of consumers. It is Labor's policies from September 2002 which the government are putting into effect—finally, belatedly, and under duress; you can still hear them bleating, whingeing and whining about it—and consumers will be better off when these policies are fully put into effect. I urge the House to support our amendment. (Time expired)