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Thursday, 31 May 1984
Page: 2283


Senator CHANEY (Leader of the Opposition)(8.38) —We are now considering the Estimates in Group C and I will refer to the report of Estimates Committee C. I note that the Chairman of the Committee is not present at the moment. I do not know whether he intends to participate in the debate during the Committee stage, but I wish to support a matter which the Committee reported to the Senate. It is contained in paragraph 3 of the Committee's report. The Committee said:

The Committee records its disappointment at the time that it has taken some Departments and authorities to provide written answers to questions arising out of the Committee's hearing on 30 April. With the exception of the Department of Primary Industry and the Department of Finance, all questions arrived only after a period of three weeks had elapsed since the hearings.

The report gives further detail. Later in the same paragraph it is reported:

The Committee considers that the provision of detailed written answers to questions is a normal and necessary part of Estimates Committee operations, and is essential for the proper consideration of the Appropriation Bills by the Senate.

The Committee believes that debate on the Second Reading of Appropriation Bills 3 and 4 should not proceed if satisfactory written answers are not provided in advance of the Bills being called on.

The Committee is of the opinion that all written answers arising out of the hearing on 30 April should have been available for Committee perusal within three weeks.

I wish to express support for the view of the Committee and to indicate that that is a view which I believe the Senate should act upon in future. I do think, as I said earlier in the Committee debate, that there is an element of farce in having arrangements which require debate before requested information has been provided. Indeed, it has been quite difficult during this current period to have even the reports of the Committees completed in time. I note we have just reported progress on and had the opportunity of getting the report of Estimates Committee D, which has been sitting as late as today. I wish to put the Government on notice that the Opposition expects the Government to program its Estimates during the Budget session in a way which avoids the difficulty we face this year. We would accept the all-party view which is expressed in Estimate Committee C that we should not be required to enter into a second reading debate , and certainly not into a committee debate, before all requested details have been provided. I accept that there could be occasions when it was totally impossible-the information simply not being available. In that case an answer indicating why that is so would, I think, be the minimum requirement. I ask the Attorney-General, Senator Gareth Evans, who is the Minister representing the Minister for Finance and who is here, simply to recall that, because I propose to act on it during the Budget session. The Government is always seeking to get its Appropriation Bills through before Supply runs out, and I would not wish the programming to be such as to present embarrassment to the Government during the Budget session.

The matter I wish to raise on the estimates of the Department of Resources and Energy was touched on in the questioning of the administrative officers at the Estimates Committee meeting. In particular, Senator Sir John Carrick asked a series of questions about a resource rent tax. He asked about the decisions which the Government has taken and was to take, and also established that officers of the Department have been engaged in working on this tax. So my remarks, if you wish them to relate to the Appropriations Bills, Mr Deputy Chairman, I suppose would relate to the salaries of the officers who have been engaged in this work.


Senator Walsh —You draw a long bow.


Senator CHANEY —The Minister for Resources and Energy says I am drawing a long bow, but I am sure it is a permissibly long bow. In this debate I publicly remind the Minister-I doubt that he needs to be reminded-of the very strong views which have been expressed by the industry about his and the Government's proposals. In particular, very clear views have been expressed by the Australian Petroleum Exploration Association on behalf of a wide range of oil explorers, both large and small. I remind the Committee, if not the Minister, of the public statement of APEA issued on 18 May, in which it was stated that the Association believes that the meeting which the Minister held with industry:

. . . underlines the Government's basic failure to appreciate the industry's exploration decision-making process and also the impracticality of trying to resolve the tax issue in a hurry. APEA, while welcoming the opportunity for discussion, believes that the meeting gave no reassurance to the industry that its basic concerns about the level and impact of the proposed tax were being accepted. The tax in its present form would seriously erode investor returns and would reduce marketing of a number of exploration and production investments undertaken by the industry, which ultimately would not be in the best interests of the country.

Senator Walsh is fond of pointing out that the industry speaks in its own interests in these matters. I wish to take this occasion to remind him of the fact that there is a very real element of risk in the Government proceeding in the way that is proposed. There is a real risk that off-shore exploration will be discouraged. I think the Minister would agree that, on the basis of our present knowledge, it appears that our best prospects for finding larger pools of oil is off-shore and that is, of course, the area in which this new tax is directed.

I take the opportunity to ask the Minister whether he agrees that if the Government, in the decisions that it has taken, has in fact misjudged what it is that will discourage investment, and does reduce investment, this will take some time to appear. It is apparent that short term decisions are not made on the basis of what has happened today but on the basis of plans which were made over a recent period. It is unlikely that there would be any great downturn in exploration in the short term. We are facing a situation in which the industry is saying very broadly that an additional tax on off-shore oil is going to discourage exploration. We are in a situation in which the truth or falsity of that, if the Government chooses to proceed down this course, will take some time to show. It seems apparent that if exploration does decline it will be difficult to turn the matter round by the Government simply changing its decision yet again. I would have thought that there is very little basis for the industry having any faith in this Government at all, given the fact that it has now established that it is prepared to make changes to the tax system on the basis of ex post facto judgments. If the Minister succeeds in emulating his most recent Labor predecessor, the late Rex Connor, and destroys the oil exploration industry in Australia, particularly off-shore, I put it to him that it would be very difficult for the Hawke Government to restore the confidence which is going to be required then to lift industry interests and to restore activity in what is a high risk and very expensive area.

I think the Minister is playing a very difficult and, I suggest, dangerous game for Australia. He seems to be determined to ignore the warnings which have been made to him very explicitly. I think there is a very simple explanation for that . Senator Walsh is not the Minister for Resources and Energy; he is the Minister for taxing the resources and energy industry and his Department has sadly been reduced to the same status. As I have said before, if we want to find a common denominator for what Senator Walsh is doing and what the Department of Resources and Energy and the Hawke Government are doing with respect to the resources and energy industry, we will find that the only common denominator is not the economic rationalism for which the Minister was famous when he was in opposition and able to be pure, but a desperate desire to raise extra money.

If we look at the Minister's performance with respect to the removal of the black holes, we find that he managed to use that as an exercise for increasing the burdens on the companies involved. If we look at the Minister's proposal to auction exploration rights, at the resource rent tax which he wants to impose, at the new excise which he has imposed over recent months and at his failure to adjust the liquified petroleum gas price and to use that as a cover to remove the subsidy for LPG, we will not find consistency of principle; we will find consistency of tax collection. Even the decision to allow the export of Australian oil-a decision which I support-is a decision which, as I say, has consistency with the others only because it further increases the Government's revenue take.

I think we are in a situation in which the Government is dicing with Australia' s future. It is making judgments which it had better pray be right-if prayer is not its style, it had better just hope it is right because if it is wrong, the damage which is done on this occasion might be even more lasting than the damage which was done by Rex Connor and the Government of Mr Gough Whitlam, which achieved absolute notoriety for its success in destroying oil exploration in Australia.

The rather narrow interest which is represented by APEA might lead one to say that that is a special pleading. It is interesting that this afternoon the Business Council of Australia issued a strong statement also opposing a resource rent tax. Part of that statement urged the Government to abandon the current proposals.


Senator Walsh —We all know about the neanderthals there.


Senator CHANEY —I think that interjection is really out of line with the views and attitudes of the Government he is supposed to be part of. I thought Senator Walsh was in favour of loving them to death. It appears he is prepared to growl at them as well. He seems to be better at loving them to death in his section of the Government than anything else. But let me quote what Senator Walsh calls the neanderthals-the members of the Business Council of Australia, many of whom are extremely public spirited people who have on a number of occasions as individuals made a significant effort to work with this Government whether in the Economic Planning Advisory Council or at the National Economic Summit Conference. I think the Minister's very churlish comment is unworthy of him, but perhaps it is only too typical. Let me quote a little from the Press release. Mr Allen said:

Prima facie this is an industry specific question and if this was the reality the Business Council would not comment. However, because of its broader implications we have considered it and now urge the Government to abandon the current proposals.

I will leave out a couple of paragraphs. The Press release states a little further on:

The Government cannot afford business confidence being dampened at this critical time by the acceptance of the concept, inherent in the RRT proposal, that the Government should determine what constitutes an appropriate return on capital for any particular industry, before levying a secondary tax. This situation is exacerbated by the unrealistically low rate of return at which a project can earn before this RRT applies.

Later it makes these most accurate statements:

It is generally true that any increases in taxes on a particular industry will result in a reduction in investment in that industry. The combination of a very high rate of taxation, the low threshold at which the tax is applied and the limit on allowable deductions (especially for unsuccessful exploration) would result in a marginal tax rate for a successful exploration programme of over 70 per cent. This makes it clear that a very substantial decrease in offshore oil exploration with a commensurate reduction in Australia's prospect for maintaining a high level of crude oil self sufficiency would result.

The proposed RRT violated one of the important principles that should underlie all taxation changes, that of neutrality . . .

I am sure that in purer and less responsible times Senator Walsh would have embraced that proposal. The press release continues:

The proposed RRT was not neutral between industries nor even between different segments of the minerals industry, but rather impacted only on one specific segment of the minerals sector, offshore oil exploration. This clear lack of neutrality would distort investment flows by diverting investment funds away from offshore exploration into other areas which, in a neutral taxation environment, would be second best. Australia would not be maximising the benefits from its available capital and natural resources.

I think the next point is most important. The release states:

Further, the total amount of capital available for investment funds in overseas exploration programmes where the returns from petroleum were more commensurate with the risks involved. Investment capital is a scarce resource and the Business Council considers that Australia cannot afford the risk of its misallocation or, indeed, the possibility that capital, which could be invested in Australia is invested elsewhere. This would be the inevitable consequence of the Government adopting a RRT.

The recent statements of the Shell Oil Co., a company not notorious for making anti-Government and highly political statements, should be noted. That was the clear import of the statement that came from Shell recently about the ability of Shell Australia to compete for available exploration capital within that multi- national company. What we are talking about is a proposal that the Government should impose a new tax of 45 per cent on returns obtained from off-shore oil which exceeds the long-term bond rate plus 10 percentage points. It is important to note that we are dealing here with a very expensive exploration process, a very high risk process. Those in the industry say that the level of return is below what they need to service capital. They further say that, given that the tax is to be applied prior to company tax, it is a fictitious test in any event. What the Government is doing has the potential to cause great damage to Australia. I ask the Government to reconsider its proposal and to go back to the drawing board.


The TEMPORARY CHAIRMAN (Senator Elstob) —Senator Chaney has asked that some matter related to next year's expenditure be explained by the Minister. I allowed the honourable senator to put his questions as he is the Leader of the Opposition. But in future I will restrict questions to the estimates before the Committee.


Senator Sir John Carrick —I raise a point of order, Mr Temporary Chairman. I invite attention to the Hansard record of the hearings of Estimates Committee C. You and honourable senators will find that Estimates Committee C pursued lengthy discussion on the resource rental tax and accepted, as a committee, that the discussion was relevant. The Minister also accepted that point. I ask that your ruling, Mr Temporary Chairman, be reconsidered because I believe it is essential to the whole framework of considerations on these matters.


Senator Chaney —Speaking to the point of order, Mr Temporary Chairman, I refer to the Hansard record of the proceedings of Senate Estimates Committee C. Page 62 records the answer given by Senator Walsh in response to a question from Senator Boswell. The Minister said:

Serious work commenced in about September or October last year. At least a dozen officers of the Department of Resources and Energy were involved in varying degrees. Several officers spend most of their time on it in the last few months.

That is, on the resource rent tax. Senator Walsh continued:

Officers from other departments have also been involved.

That is just part of the questioning. The facts are that currently officers of the Department are engaged in policy work in this area. We are undoubtedly appropriating funds that will pay the salaries of those officers. I am sure they are not doing the work purely for love of country. I argue that we are entitled to debate matters to which the resources of this Department are devoted and which we are funding through these Bills.


The TEMPORARY CHAIRMAN —The Committee is discussing votes for this financial year. The remarks of Senator Chaney relate to a future year. I could not see their relevance to the votes now being discussed. As I said, I will allow the Minister to answer the queries raised by the Leader of the Opposition, but I feel that the Committee should keep to the votes for this year.


Senator Sir John Carrick —I raise a point of order, Mr Temporary Chairman. I ask you, with respect, to reconsider. The fact of the matter is that we are dealing with expenditure for this year and undoubtedly additional expenditure was involved at staff and officer level, and no doubt at consultant levels, in order to formulate matters such as the resource rentals tax, the front end bonus and various matters of that nature. Discussion of those matters was accepted in principle in Estimates Committee C. I put it to you that it would be a paradoxical situation now if this Committee were not able to discuss what the Hansard records took place in the Senate Estimates Committee discussion; in other words, if we were denied the ability to examine what that Committee did. The purpose of this appropriation surely is to bring the report of the Estimates Committee to this chamber and to discuss it. It was fully accepted that the expenditure was part of expenditure for this year and therefore capable of examination.


The TEMPORARY CHAIRMAN —I will allow the Minister to answer.