Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Monday, 22 August 2011
Page: 8834

Dr LEIGH (Fraser) (19:46): I rise to speak on the Excise Tariff Amendment (Condensate) Bill 2011 and the Excise Legislation Amendment (Condensate) Bill 2011. In the 2008-09 budget the Labor government announced the removal of the crude oil excise exemption that had applied to condensate production since 1977. Condensate production is subject to an excise regime that is the equivalent to that applying to stabilised crude oil discovered on or after 18 September 1975. Under the regime the excise is applied to condensate production from individual prescribed condensate production areas in a manner that is similar to income tax: higher rates apply to production exceeding certain thresholds up to a maximum of 30 per cent. To implement the condensate measure the Commissioner of Taxation issued a bylaw prescribing both Rankin Trend, which contains a number of condensate producing reservoirs, and Angel as being condensate production areas located on the North West Shelf production area.

This legislation amends the Excise Tariff Act 1921 and it does so for a simple reason. The aim of the legislation is to address uncertainty regarding the scope of the Rankin Trend. The legislation will statutorily define the Rankin Trend production area principally by reference to those reservoirs within the intended Rankin Trend area that are currently producing condensate. The amendments also provide for the resources minister to add known but currently non-producing reservoirs to Rankin Trend by specifying them in regulations. Where he is satisfied that they form part of the Rankin Trend field and after considering the effect that specification may have on the efficient exploitation of the resource. As a result of this bill the price of condensate on which excise duty is calculated is known as the volume weighted average realised price, or the VOLWARE price. It is determined in accordance with the Petroleum Excise (Prices) Act 1987. That act provides that oil producers have to be provided with written notice of VOLWARE price determinations. The Excise Legislation Amendment (Condensate) Bill 2011 amends the Petroleum Excise (Prices) Act 1987 to clarify the failure to provide petroleum producers with written notification does not invalidate the determination and consequently eliminate crude oil excise liability. I do not think any of us in this House would like to see that outcome. The amendments together will ensure that crude oil excise applies to condensate which is consistent with the original policy intent and the revenue collected to date is protected.

The North West Shelf partners commenced a legal challenge to their condensate excise liability on technical grounds. They argued that the condensate production area known as Rankin Trend is not valid as it is of uncertain size and that the VOLWARE prices were not valid because the written notification of the price determinations had not been provided to producers as required. These amendments will provide clarity and they will clearly define the scope of the Rankin Trend area and clarify the failure to provide a written notice of a price determination does not invalidate the determination. They will apply from midnight on 13 May 2008 and that is consistent with the original decision.

The opposition, while not necessarily opposing the legislation, have moved an amendment to this and their amendment goes to a much broader set of issues. As is their wont, the opposition—they are after all the 'no' party—have used this opportunity again to put three noes on the table. They want to say 'no' to the condensate tax—it will be interesting to see how they vote on this one—'no' to carbon pricing, and 'no' to a minerals resource rent tax.

It is important to provide the economic context in which Australia is sitting at the moment. When the global economic downturn happened, Australia acted as quickly as any other country in the world. We had in place household stimulus payments as early as October 2008. That was extraordinarily fast and reflects the fact that many of those senior public servants dealing with this downturn had cut their teeth on the recession of the early 1990s, a recession in which it is generally acknowledged fiscal and monetary policy acted too slowly. That was not the case in the latest downturn. We put in place timely, temporary and targeted fiscal stimulus. We did it in two different tranches. Economics clearly tells us that household payments have a lower bang for the buck—a smaller multiplier effect—but they act quickly. So a portion of the stimulus came in household payments. Economic theory also tells us that infrastructure expenditure has a higher bang for the buck—a higher multiplier—but takes longer to take effect. So the package sensibly, as the OECD and the IMF suggested, contained elements of both of those.

We have strong evidence that both sides of that package worked. For example, my own work when I was an economics professor at the ANU, which surveyed recipients of stimulus payments, estimated that a substantial portion of those stimulus payments was spent and went directly back into the economy. You can see that simply by looking at the timing of the stimulus payments and putting them on top of retail trade figures: there were big spikes in retail trade in December and again when the second tranche of payments came out around February, March and April. This was absolutely critical. We know that in a downturn it is the construction sector that is hit hardest—the construction sector is a particularly cyclical part of the economy—and so the infrastructure that we put in place was enormously important in ensuring that construction jobs were maintained, that young apprentices who had just started out in their careers were able to continue working and that you did not get the demoralising, debilitating and deskilling effect that a downturn can cause.

I left high school in 1990, just as the early nineties recession was starting to hit, and I can tell you that a recession is not a pretty time to leave high school. Many of my friends spent a long time looking for work. That did not happen this time around. Youngsters who left Australian high schools in 2008-09 were able to walk into an economy where the unemployment rate was the envy of much of the developed world. The unemployment rate now is only five per cent in Australia, substantially below the nine per cent in the United States and the eight per cent in the United Kingdom. It is so often mentioned by economic policymakers in this country—not just the Treasurer but also the Reserve Bank governor—that when they go to international meetings and sit amidst their counterparts from developed nations there is no-one in that room who would not happily trade places with them and take on the economic fundamentals of Australia. Those economic fundamentals are extraordinarily strong.

The debt that we took on arose from two sources. One is the revenue downgrades. In a recession revenues fall, particularly corporate profits, so two-thirds of the rise in debt is actually just a result of the effect that the lower company profits had on government revenues. The other third is the stimulus payments. So, every time you hear a member of the coalition saying Australia should have no debt, you need to recognise exactly what they are saying. They say that, when the global financial crisis hit, Australia should have taken the Herbert Hoover approach and slashed government spending. Not only are those people anti stimulus; they are actually saying we should have contracted government spending when the global downturn hit. That is what an anti-debt position amounts to.

But our debt is modest. When many countries in the OECD have debt levels that are nearly their entire annual GDP and sometimes higher, Australia's is $7,000 of debt for every $100,000 of income. That is about the level of debt that many households would take on to buy a small car. I do not recommend it, but there are many Australian households that carry $7,000 worth of credit card debt. So Australia's debt must be put into perspective and we must always remember what we bought for that debt: 200,000 jobs saved. That is 200,000 lives that were not blighted by unemployment.

But the opposition's amendment also goes to attacking the minerals resource rent tax, a tax which will put in place a fairer regime for the taxation of minerals in this country—a regime that will ensure that Australians get a fair share of the minerals that are their birthright—and a more economically efficient way of taxing minerals resource rents based on profits, not on royalties. We are also putting in place carbon pricing. We are doing that because every credible economist tells you that if you want to deal with a negative externality—and that is what carbon pollution is in economic jargon—then you go straight to the source of the problem. You put a price on carbon pollution, and that is exactly what we are doing. By contrast, the opposition, when they do not like the fact that they cannot find a single economist to back their so-called direct action plan, attack economists. So the Leader of the Opposition will go out and say that the fact that he cannot find an economist to back his plan is a reflection on the quality of the Australian economics profession. As my good friend Joshua Gans said, 'No, I think that's a reflection on the quality of Australian opposition leaders.'

We also need to look at the fiscal situation in which the opposition now find themselves. They are currently in a $70 billion black hole. I do not think we have spoken in Australian politics of a black hole of these proportions. We have in the past spoken of black holes; one side of politics or another has spoken of black holes of a few billion dollars or maybe $10 billion. But $70 billion? This really is unprecedented.

Let us go and break it down a little. Thirty-seven billion dollars of that black hole is spending commitments that the opposition announced during the election. Eleven billion dollars of that black hole would come from unwinding the minerals resource rent tax, saying to mining companies, 'You'd be paying too much tax under the minerals resource rent tax; here, have a little bit back,' and, of course, unwinding the superannuation for low-income earners, the company tax cuts for small businesses and the many good economic reforms that flow from that package. Another $27 billion of the coalition's $70 billion black hole comes from unwinding the carbon price—$24 billion in gross revenues from carbon pricing and another $3 billion from the coalition's direct action plan. I think, Mr Deputy Speaker, that is under the lower estimates for the coalition's expenditure. As you would recall, the coalition have now moved to a 'we don't deal with foreigners' approach when it comes to carbon pricing, which makes their approach to climate change all the more expensive. Another $7 billion to $8 billion is to fund their income tax cuts.

In practical terms, what does that $70 billion in savings mean? It means stopping Medicare payments for four years, stopping the age pension for two years, stopping assistance to people with disabilities for three years or stopping family tax benefit payments for three years. It requires savings equivalent to doubling the GST for a single year. This is the situation in which the coalition find themselves. It is extraordinary that they are now willing to trash their economic credentials on virtually every issue. The coalition spokesperson for agriculture is now saying that Australia should start a trade war with New Zealand. What could be more economically irresponsible?

The DEPUTY SPEAKER ( Mr Murphy ): Order! It being 8 pm, the debate is interrupted in accordance with standing order 34. The resumption of the debate will be made an order of the day for the next sitting. The member for Fraser will have leave to continue speaking when the debate is resumed.