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Tuesday, 14 June 2011
Page: 5891


Ms OWENS (Parramatta) (18:09): I stand in this place again tonight thinking the world is perhaps turned upside down. We have the Labor government on this side of the House tackling climate change through a market based mechanism, and we have a Liberal opposition, supposedly the soldiers for the free market system, arguing for direct action. We have a Labor government talking about introducing a Liberal policy that dates back to 2003 in accordance with the Liberal government's time frame of 1 July 2011, and we have a Liberal opposition opposing it. We have a Labor government talking about introducing consistency in the tax regime for alternative fuels to remove distortions, and we have a Liberal opposition, again the supposed soldiers for the free market, arguing to leave those distortions in. I really do think this debate tonight shows a significant change in the way that both parties approach the modern world. You have to go back quite a few decades in the Labor Party to find the kind of anti-free-market rhetoric that we find from the Liberal Party on both this issue and the issue of acting on climate change.

I do know that we are in the world we were in yesterday, because we still have the same scaremongering from those opposite. The member for Moncrieff talked about a massive spike in the price of LPG, and for that reason he wants to keep the distortions there for LPG. The LPG industry has enjoyed a tax holiday for decades—it has been very well protected for a very long time and has had a substantial period in which to grow and establish itself. Let us look at the facts of that before I get back to the alternative fuels legislation in general. Taxi operators are able to claim deductions for the expenses incurred in the course of conducting their business, including fuel. State governments actually set the fees for taxis. For a start, according to the evidence we have heard, if the state governments increased the fees for taxis in accordance with this so-called massive spike—I will talk about that in a minute—the impact on the taxis themselves would be negligible. We heard that evidence from the taxi operators; we heard that it would not have an impact on their profit margins at all. The question is whether it will have an impact on the number of people who catch taxis. Again, the answer from the taxi industry was that the fare rise due to the increase in the tax on LPG would not have an impact on the number of people catching taxis.

Let us look at what the actual amount is. This massive spike is 3.5c on the average metro taxi trip, from 1 December 2011—hardly a massive spike. It sounds like a scare campaign to me. Over the five years, it will be a massive 19c by July 2015. So, again, let us keep the scaremongering in perspective here—we are talking about 19c on an average taxi fare at the height of the increase, by July 2015. By the way, the average taxi fare is around $20, so we are not talking about a massive increase at all—in fact, 19c is a very modest increase over a five-year period. It is a nice bit of scaremongering from an opposition which opposes everything, including their own policy, and tends to work as hard as possible at scaring people along the way.

These taxation of alternative fuels bills reflect policy which was first announced in 2003 by the then Howard-Costello government. They implement very longstanding plans to bring alternative automotive fuels, which include biodiesel, renewable diesel, ethanol, methanol, liquefied petroleum gas, compressed natural gas and liquefied natural gas, into the fuel taxation regime on the basis of their energy content but with a fuel discount of 50 per cent to reflect the benefits of alternative fuel use. The policy underlying the bills, the same now as it was back in 2003 under the previous government, is to introduce greater consistency into the taxation treatment of automotive fuels to reduce distortions in economic activity arising from the tax-preferred status of some fuels—again an objective which we would expect those opposite to endorse. And they did endorse it, for many years. Being an opposition that simply opposes has some interesting side effects in that you end up opposing your very own policy. The second objective is to provide policy certainty to industry, and in a moment I will talk about the lack of certainty that this industry has been working under for the last decade at least. The third objective is to phase in the new fuel tax regime while continuing to provide support to the alternative fuels industry in recognition of the potential environmental, food security and regional development benefits from the use of these fuels. The bills were introduced on 23 March, with the legislation required to be in place before 1 July 2011 to avoid a number of tax consequences. These have been built into the tax laws for quite a while because the assumption was that the 2003 policy would be implemented on 1 July 2011. If it is not in place before then there will be a few gaps when previous laws phase out. So we do need to do it and it is quite time sensitive.

Fuel tax policy has been in flux for the better part of a decade and several elements of the industry have criticised that uncertainty by claiming that it has hindered investment. In the 2003-04 budget the then government announced its intention to tax all fuels, including biodiesel, ethanol, methanol and gaseous fuels, on an energy content basis but with a 50 per cent discount for alternative fuels. In the following budget it was deferred to 1 July 2011, but the financial impact of the alternative fuels taxation measure has been in the forward estimates since that 2003-04 budget.

Since then the government has changed—I think we all know that; it has been changed for quite a while. The current government decided in May 2010 to commit to implementing the previous government's policy on the previous government's time frame, except that we revised the phasing-in arrangement for the taxation of ethanol to allow a 10-year period instead of a five-year period. Apart from that adjustment, we decided in 2010 to implement the previous government's policy on the previous government's timetable, which had been accounted for in the forward estimates since 2003-04 and is something that governments tend to do. When there is a change of government there are quite often policies that flow over from one government to the next. It is less usual that the new opposition opposes its previous policy, but when an opposition simply opposes I guess it has to find ways to go about that and this is one of them. It is one of the stranger ones, I have to say. A number of changes were required to implement the policy, including bringing gaseous fuels and methanol into the fuel tax regime, levying fuel tax on an energy content basis and reducing the excise rates on alternative fuels by 50 per cent.

The bills are really quite important because they play a role in providing certainty for investors. In a submission from Smorgon Fuels, for example, they noted that the biofuels industry urgently required strong investment signals in order to underpin investment decision making and to realise commercial success with second- and third- generation feedstocks and technologies. We heard from a number of witnesses in those public hearings who talked about the fact that their investment had been on hold and that over the last 10 years there had been considerable uncertainty which had prevented the industry from making the kinds of decisions to move ahead in the way that we all need them to. A number of witnesses from the biodiesel industry emphasised the fact that the industry was essentially an infant industry in the very early stages of development. They suggested that the certainty that the bills provided would be invaluable to the further development and eventual maturation of the industry. In their evidence, Biodiesel Industries Australia pointed out that they had only spent funds on repairs and maintenance for the past two years due to that uncertainty in policy. Similar points were made by other witnesses, including the Department of Treasury, which claimed that the bills will provide certainty to industry. At the moment there is no final legislation in place, but it was announced in 2003-04, so there has been a period of seven or eight years of uncertainty about what the final legislation would be.

There was a short period of consultation with the industry earlier this year. We heard from various representatives of the industry that changes had been made to the original draft bill to take their concerns into account. There was general positive feedback from many witnesses on that.

In closing, I would like to lend my wholehearted support to these bills. These bills have been a long time coming. These are bills that industry has known are coming. They were scheduled for July 2011 back in 2004-05 and they have been in the forward estimates. They will provide certainty for the sector. They will provide consistency across the sector. They will provide a framework for this extremely important industry to grow and make the decisions it needs to in order to move forward.