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Monday, 22 August 2011
Page: 8823

Mr IAN MACFARLANE (Groom) (18:52): I rise to speak tonight on the Excise Tariff Amendment (Condensate) Bill 2011 and the Excise Legislation Amendment (Condensate) Bill 2011. The Excise Tariff Amendment (Condensate) Bill 2011 amends the Excise Tariff Act 1921 to clarify and confirm the area encompassed by the 'rank and trend', as it is known, condensate production area located within the North West Shelf project area. The Excise Legislation Amendment (Condensate) Bill 2011 amends the Petroleum Excise (Prices) Act 1987 to clarify that failure to provide petroleum producers with written notification setting out the terms of a volume-weighted average of realised prices determination does not affect the making of that determination, the measure of firms, or the current application of the crude oil excise regime as it applies to condensate production. And I make it clear, Mr Deputy Speaker Thomson, at the outset, that the coalition will be supporting these bills. However in doing so, the coalition will move an amendment to the motion of the second reading that condemns this Labor government for its assault on the Australian energy and resources sector and for its comprehensive mismanagement of the investment framework for oil and gas exploration and the resources sector in general.

When it comes to identifying which areas of policy this government has so fundamentally mismanaged, there is some very serious competition amongst its incompetence. Along with the well-publicised failures in border protection, there is the Prime Minister's carbon tax backflip which has, in itself, made its own assault on the resources industry by making it, and it alone, pay a carbon price on the fuel it uses. There is even further competition though on the bungling of the school halls program, the pink batts program and, most recently, the mishandling of the issues involved with live exports which has decimated Northern Australia. It is not just the cattlemen and women involved who are affected, but also the truck drivers, the Aboriginal stockmen, and the economy of Northern Australia which has been built around this incredibly important export trade. So incompetent is this government that they could not even get that right. The Gillard government has inflicted some extraordinarily counterproductive and destructive policies on a sector that has contributed so significantly to our economy and should be given the opportunity to continue to do so.

The oil and gas industry over time has made an enormous contribution to Australia's economy. But just as importantly, it has provided the energy security that other countries would literally kill for. We are one of the few countries in the OECD—the only country that springs to mind—that is in fact an energy exporter in its own right. That is, we have a surplus of energy which we export. Part of that export is condensate from the North West Shelf, originally exempted as part of the incentives that were provided to this very important industry to get the project off the ground. And whilst we see those incentives ripped away by this government, we also see a very significant change in attitude within the oil and gas sector, and potentially the investors in that industry in particular.

As a result of the government's deliberate actions, Australia has been forced to suffer an erosion of our previously gilt-edged sovereign risk profile when it comes to investment in the energy and resources sector in this country. There can be no excuses for this government-led assault based on changing international circumstances or economic difficulties given that one of the very first acts of the Labor government after it was elected in November 2007 was to slug a massive tax increase on the oil and gas sector, in particular the North West Shelf, by removing the exemption that had applied to condensate. It is fair to say that without that exemption and without some very significant courage by the players at the time the exemption was introduced, including of course Sir Charles Court, the Premier of Western Australia, this condensate would be still lying under the seabed thousands of metres down.

Coalition governments, Liberal governments in particular, go out of their way to provide incentives to get these resources developed. The moment that happens we have a government currently in power, the Labor government, that then does everything it can not only to rip away the money that these companies have put at risk and have then earned quite justly but also to destroy our international sovereign risk profile. We on this side of the House, and of course the wider community, have also been aware of the Labor Party's complete and absolute inability to manage money. We have seen the field evidence from successive Labor governments that apply the big-spending, big-taxing philosophy, and this legislation is just more proof of that.

But even though I am conditioned to this big-taxing, big-spending government, I was shocked when the former Rudd government so brazenly slapped a $2.5 billion excise on condensate. This signalled a very clear intention that this was to be a government that would view the resource sector as nothing more than a cash cow. I am sorry to say that the government has lived up to, or should I say lived down to, that expectation it has created. While the oil and gas industry, in particular the offshore sector, has spent much of history well out of the public spotlight, it is nonetheless one of the most substantial sectors in our economy. During my time as minister responsible for this sector, the coalition government took great care to encourage investment and to facilitate an environment that would be conducive to exploration and production where appropriate. I travelled the world, literally, selling Australia's wares, telling of the opportunities that lay in Australia, telling of the stability of the government regimes, and providing exploration incentives to try to get companies to invest here. And what happens? We get a government now desperate for money. The government's $2.5 billion tax slug has sent a shiver down the spines of major investors in the oil and gas sector because it has shown that this is a government that is prepared to be cavalier with investment, with issues of sovereign risk and with Australia's very dearly held reputation as a safe investment destination.

This bill before the House today is one of the consequences of the government's multibillion-dollar cash grab and an attempt to clean up some of the confusion it has created from that tax grab in the zone covered by that taxation. Unfortunately, but ever responsibly, the coalition wants to end that confusion and that is why we are supporting these amendments. As I mentioned, we will not oppose these bills because we take the responsible attitude that investors in the oil and gas sector deserve some certainty in this very uncertain climate, even in a situation where the government seems to go out of its way to create uncertainty. As I say, it is our responsibility to bring what stability we can as a coalition and as an opposition to this very uncertain playing field.

No matter how the government may try to spin it, the subsequent projects in this field are in spite of what the government is doing, in spite of the hurdles it is putting in place and certainly not because the government has put in place anything like appropriate policy settings. It seems to wake up daily wondering how it can tax this whole resources sector yet again and, even more, how it can tear down any incentive that we put in place previously to compete against those investment destinations around the world that are out there every day trying to tear the investment dollar away from Australia.

I fear a sense of complacency from this government, which assumes that because Australia has had past successes in oil and gas exploration it will continue to be a productive sector regardless of how badly the government handles the regulatory settings or how badly it handles the taxation of that industry. As I mentioned, it was one of the very first actions of the Labor government to reach further into the pockets of the successful enterprises, to ramp up the taxes after all the risks had been taken, after the resource companies and investors—many of them Australian mums and dads—had put their capital at risk in a project which, I can assure you, was exceptionally borderline in its instigation in the mid-to-late eighties.

We have seen the government ramp up the taxes to this sector to provide a convenient cover for the profligate spending, which has come from those who sit opposite. This huge tax burden was slapped on the industry with no warning and no consultation. Even the Minister for Resources and Energy found out after the event. What sort of government would do this to such an important sector? It is a government that knows no bounds when it comes to applying taxes and shattering the investment security that companies and investors from overseas look for.

It is little comfort that we now recognise in retrospect that this action is the standard operation procedure for this Labor government, particularly when it comes to decisions that affect the energy and resources sector. As we know from the resources super profits tax debacle, which not only affected onshore exploration and mining but also offshore exploration and development, and from the ongoing mess that surrounds the new version of the minerals resource rent tax and the toxic carbon tax, the Rudd and Gillard government simply do not understand or do not care about the dynamics in the resources sector.

Modelling done on the impact of the carbon price on industry estimates that a carbon price of $25 a tonne would close 16 coal mines and cost 23,000 jobs in that industry alone, many of them in the electorate or adjoining the electorate of my colleague here, the member for Paterson. I can assure this House that the member for Paterson—and I had the pleasure of being up there with him the other day—is tireless in his efforts to protect jobs in the Hunter Valley. And those who sit opposite—one them is here; I will be interested if she stands up and speaks on this bill and explains why she is happy to tax the industries in her electorate—sit silent while jobs in their electorates get wasted.

The DEPUTY SPEAKER ( Mr KJ Thomson ): They would be out of order if they were to interject.

Mr IAN MACFARLANE: Deputy Speaker, I do expect them to sit silent in the House but I do not expect them to sit silent in their electorates. They should be out there fighting for local jobs; they should be out there, like the member for Paterson, defending local industries. Access Economics estimated that a carbon price of $26 a tonne will cost 126,000 jobs in Australia by 2020. We are seeing jobs disappear every day. And while those jobs, it could be argued, are not directly associated with the imminent introduction of the carbon tax, I cannot believe that people are not considering the impact of that carbon tax in their decisions because you do not make an investment decision today, whether it is to open or close something, without thinking about what your prospects are over the next 20 years. Not many on that side have been in business—I understand that. It is a given: you have to be in a union if you want to sit on that side. But those of us who sit on this side have been in business and know that when you make an investment decision you make it for 20 years. In imposing tax after tax after tax—like this condensate tax, the carbon tax, the mining and resource rent tax, any new tax they can think up at any time—all you are doing is chasing that investment away. I cannot believe that we have a government that, despite all of this and the economic insecurity in international markets, is still charging blindly into putting in place more taxes, in particular the carbon tax.

Along with the carbon tax are the financial and the investment insecurity produced by the MRRT. The government's mismanagement of this issue and the RSPT, the resource super profits tax, that came before it and was such a disaster means that the energy sector has little or no faith in the direction this government is taking. The signature policy that underpins this budget, the minerals resource rent tax, continues to fall apart. It continues to build in a deficit that could occur at any time. It could not make the budget more uncertain if it tried. Treasury figures show that with the MRRT the current Prime Minister's backdown will translate into a $60 billion hit to the budget bottom line. This certainly will build in a structural deficit by having this government relying not only on the prices of the resource but also the currency fluctuations. How the Treasurer can sit in this House and say he can budget with those sorts of questions hanging over his head is beyond me. This perhaps again highlights the incompetence of this government.

If the government persists with the flawed MRRT not only it is going to put the budget stability at risk but also it is going to show this government is rolling the dice on questions of energy security and future mining investment. Sudden changes such as the condensate tax which we are talking about continue to reinforce that instability and that impact on investment security. The government constantly changing the rules of the game for investments is jeopardising Australia's once gilt-edged sovereign risk profile and making Australia a less attractive place for investment, particularly in the energy generation sector. The coalition believes that decisions about taxation paid by the mining industry should be done under the existing regime of state based royalties because the resource belongs to the people of that state. It does not belong to the Commonwealth. It should be a decision made by the state. It has worked well in the past and will continue to work well once the coalition is re-elected and we rescind the MRRT.

All this taxation—tax and spend, tax and spend; putting new taxes on the oil and gas industry, putting new taxes on the mining industry, changing those taxes—sends a simple message: other countries that are our main competitors are better investment options. The real impact of the Gillard government's carbon tax, the mineral resource tax, the change to the condensate tax, the change to excise regimes in relation to fuel is on the mining industry, which has been singled out by this government to pay the carbon tax on fuel straight up. No industry or group will pay the carbon price on fuel except the mining industry. Why doesn't the Prime Minister just stand up at that box each day and say to the oil and gas industry and the mining industry, 'We hate you and we're going to tax you out of existence'? That is what she is trying to do. She is trying to get as much money as she can from the sector that is holding our economy together.

We have seen recent examples of even Australian based resource companies deciding that they no longer want to invest here. David Flanagan of Atlas Iron, a self-made man, put his and his wife's money at risk; he took the big dive to build up a company and get it rolling. He is going to be taxed on that at a level never seen before and at a rate far higher than his bigger competitors BHP, Rio and Xstrata. David's company's response to that is to make an investment in Brazil of $18.7 million that will not be invested in the resource sector here and will not give Australians the opportunity to have jobs. It simply has got far too hard.

The Prime Minister can expect to read plenty more about companies choosing to invest in projects in other countries, given the damage this government has inflicted on the sovereign risk profile of Australia's energy and resources sector. As it stands at the moment, the series of taxes including this condensate tax undermines Australia's energy security and risks international investment in the vital energy and resources sector. Coming at a time when the economy is also being slugged with a carbon tax, these policies show how poorly this government understands the contribution of the energy and resources sector and how ill equipped the government is to handle the economy.

In conclusion, this government has been digging deeper and deeper into the pockets of Australian workers and businesses. Every day it discovers a new way to tax people, like the quarter of a million Australian families who are now going to be taxed on the LPG they use in their family motor cars. Introduced by the Howard government, an incentive has been paid to these families to convert their cars to LPG. But like a honey trap, this government gets them into that position where they rely on LPG and then it taxes it. They cannot get away—unbelievable. But that is just part of how this government operates. It operates in a policy vacuum—no energy white paper, no direction to industry on how it is going to be done, no backdrop of how energy and resources investments should be made. The only messages that come out are: 'Here's a new condensate tax; here's a new carbon tax; here's a new LPG tax; here's a new tax on resources.' The energy and resources sector is constantly being used as a cash cow for this big-taxing, big-spending government that cannot control its own finances.

The energy and resources sector, including the oil and gas and the mining industries, is one of the driving forces behind the Australian economy. At the moment, it is sustaining the economy at a time of global difficulty, and when the manufacturing sector faces difficulties in competing with the very high dollar and the imports that are coming in. But we have a government, as I have said repeatedly and will continue to say both in this House and outside, that has no qualms about taxing this industry whenever it can.

The coalition will not object to these bills, but the Gillard government should stand condemned for its continued and comprehensive mismanagement of policies that apply to this sector and its high-taxing, high-spending regime that is hitting all sectors of the economy.

I move:

   That all words after "That" be omitted with a view to substituting the following words:

"whilst not declining to give the bill a second reading, the House:

(1) objects to the Government's repeated attacks on the resources sector, in particular its decision to impose a $2.5 billion tax on condensate on the North West Shelf in 2008, a decision which has made it necessary for this legislation attempting to clarify confusion created about taxable areas;

(2) notes the Government's comprehensive failure to provide leadership for the energy and resources sector, most grievously by its failure to deliver an Energy White Paper;

(3) expresses concern about the Government's decisions to put more pressure on all sectors of the economy by inflicting taxes such as the condensate tax, carbon tax and minerals resource rent tax;

(4) calls on the Government to scrap its destructive high taxing regime which is inflicting damage on the energy and resources sector, which is one of the most profitable sectors of the Australian economy."

The DEPUTY SPEAKER ( Mr KJ Thomson ): Is the amendment seconded?

Mr Baldwin: I second the amendment and reserve my right to speak.

The DEPUTY SPEAKER: The original question was that this bill be now read a second time. To this the honourable member for Groom has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The question now is that the words proposed to be omitted stand part of the question.