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Tuesday, 26 February 1985
Page: 178

Senator BJELKE-PETERSEN —My question is also addressed to the Minister for Resources and Energy. In view of the fact that world fuel prices continue to fall, can the Minister explain why this Government considers it necessary to introduce two-monthly indexing of the excise tax on fuel, the result of which is ever-increasing fuel prices and the erosion of Australia's competitive position on world markets?

Senator GARETH EVANS —The short answer is that the import parity pricing formula is based not only on prevailing world oil prices and in particular on the price of Arab market crude but also, of course, on the price of the Australian dollar on world financial markets. To the extent that the dollar is devaluing, which means that we have to pay more Australian dollars for a given quantity of something, the price of which is fixed in United States dollars, it does mean that the whole basis of the pricing formula does shift. That means there are pressures running in competing directions. There has been some recent modification of the price of Arab crude from $29 to $28, which would suggest a reduction in prices at the petrol pump in Australia, but countering that has been the devaluation of the Australian dollar, which more than compensates for it. That is the reason, and I think that point is beginning to be well appreciated by consumers as people better appreciate some of the consequences, both beneficial and occasionally adverse, that flow to the consumer from the floating of the Australian dollar.

The whole philosophy of import parity pricing remains, as it always has been, to ensure that there will be an appropriate return for Australian producers of the product of domestic oil exploration to encourage continuing expenditure on oil exploration, which is important in circumstances where, as we all know, we are facing a decline in the reserves of Australian oil. Although it would be politically attractive to be able to respond to the sorts of considerations that Senator Bjelke-Petersen points out, by allowing a reduction in the price, be it ever so small, at the petrol pump, the overall balance of policy considerations-which have been, I believe, supported in the past by her party, like the Liberals-points in favour of the maintenance of the import parity pricing system. The Government's decision to make adjustments more frequently than six-monthly was generally welcomed at the time it was made last year. If it so happens that the swings occasionally cancel out the roundabouts in terms of the way in which the pricing formula operates in practice, that is something I am afraid we all have to live with.