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Wednesday, 3 December 1986
Page: 3305

Senator CHANEY (Leader of the Opposition)(9.00) —The Customs and Excise Legislation Amendment Bill (No. 2) 1986, the Excise Tariff Amendment Bill (No. 2) 1986 and the Customs Tariff Amendment Bill (No. 3) 1986 contain a range of tariff and excise changes in several areas. Without any doubt at all the key areas of interest relates to the very considerable increases in excise on petroleum products which are imposed under this legislation. It is worth remembering that in 1983 this Government opened its batting on the petroleum debate by saying that on accession to government it would reduce the price of petrol by 3 cents per litre. That was, of course, one of the dramatic promises which was broken by this Government. It ranks with the promise that there would be no capital gains tax and the many other promises that have been broken by the Hawke Government since 1983. From the point of view of the Australian economy, from the point of view of the Australian consumer, and from the point of view of the Australian taxpayer the approach of the Government in this area has caused very considerable pain and distress. We have had a massive rise in the excise on petrol. It has risen by 11 cents per litre in the time that this Government has been in office. It has been a dramatic imposition on consumers, motorists and industries. I will come back to that a little later.

I will deal firstly with the general scope of the legislation. The most important changes which are incorporated in both the Excise Tariff Amendment Bill and the Customs Tariff Amendment Bill relate to the excise and duty payable on petroleum products. The changes implement the Government's decision to recoup any loss in revenue from the crude oil levy as world oil prices fall, as well as its recent Budget decision to increase the excise rate over and above the amount necessary merely to offset revenue shortfalls. The Opposition will not be voting against this legislation because it implements long standing government policies and recent Budget decision. The Opposition has withheld voting against legislation which would increase the deficit which we already believe is too high, but we are very strong in our criticism of the Government for not passing on to consumers in full dramatic fall in world oil prices which has occurred over the last year and more.

The Excise Tariff Amendment Bill deals with the excise on petroleum products as outlined. It also implements part of the Government's resource rent tax package as well as the Budget decision to increase the excise payable on manufactured tobacco. Major provisions of the Customs and Excise Legislation Amendment Bill include a proposal to expedite the payment of rebates of excise duty on exports and domestic free market sales of Bass Strait crude oil, and a belatedly introduced clause, introduced as an amendment in the House of Representatives, which makes it an offence to bring narcotics into Australia, either as a transit passenger or otherwise. Obviously, the Opposition does not oppose that change, although we wonder why it took so long for the Government to bring it forward.

The Customs Tariff Amendment Bill (No. 3) covers a multitude of tariff amendments ranging from cultivation machinery and agricultural chemicals, sulphur, electric motors, generating sets, lawn mowers, furniture from New Zealand, books and cheese as well as tariff changes related to the excise changes on petroleum and manufactured tobacco already outlined. As I said, the Opposition will not vote against these Bills for the reason I have said.

I will deal briefly with the Customs and Excise Legislation Amendment Bill which contains two major amendments. First, a new mechanism is being introduced to facilitate the payment of rebates of excise on exports and domestic free market sales of Bass Strait crude oil. Second, the Government proposes an amendment at the Committee stage of the Bill in the House of Representatives which would close a possible gap in the law by making it clear that it is an offence to bring narcotics into Australia either as a transit passenger or otherwise. The Bill will not, I think, require a great deal of debate and certainly it will not be opposed by us.

I wish to spend a little more time on the Excise Tariff Amendment Bill (No. 2). This is the Bill which legislates the changes in the excise rates on petroleum products and which gives effect to the Government's policy of not passing on any fall in world prices for crude oil. It also gives effect to the Budget decision to increase petroleum excise by 14.4 per cent and to raise a further $625m in 1986-87 and $715m in a full year. That decision alone adds 3c per litre to the retail price of petrol. One does not have to look very far to see why this Government is forced to load motorists with ever increasing prices of fuel, notwithstanding the dramatic drop in the world price. We find, of course, that this Government is steadily increasing the share of gross domestic product which is taken by government. The share of gross domestic product-the share of the totality of what is produced in Australia which has been taken by governments and is being taken in taxes by this Government-is steadily increasing. In 1984-85 the Government took a quarter of our gross domestic product in taxes. It increased the percentage in 1985-86, and it is up to 25 1/2 per cent in 1986-87. These higher excises and the high fuel prices being imposed on the people of Australia are a simple function of this being the biggest spending and highest taxing Government in Australia's history. The Government's policy of not passing on the fall in world prices is widely understood in the community. It is widely known that the price of crude oil crashed from $27.28 a barrel to $13.15 a barrel. The import parity price in Australian dollar terms has fallen from over $43 on 1 January to just under $26 when it was last set on 1 October. In other words, over the course of this year the world market price for oil has dropped from something over $43 a barrel to just under $26 a barrel and yet the price of petrol is continuing to rise because of this Government's taxing policies. If the crash in the world price had been passed on to consumers they would be paying some 11c a litre less for petrol now than they were in January. The Government instead has chosen to increase the excise rate by over 8c a litre.

It is interesting to look at the changes that have occurred since the Hawke Government, with its penchant for tax increases, came to power. The excise rate has increased from a little over 6c a litre to nearly 20c a litre. That is a 14c a litre increase over the past 3 1/2 years. The average retail price of super grade petrol as measured by the Australian Bureau of Statistics in its publication `Average Retail Prices of Selected Items' has gone from 42.1c a litre in March 1983 to 51.5c a litre in September 1986. That is a 20 per cent increase over the 3 1/2 years of the Hawke Labor Government, but that 20 per cent increase in petrol prices has to be contrasted with the dramatic decline in the world price and it needs to be clearly understood that the reasons for the increased price is the Government's greed for taxes which of course is fuelled by its ever increasing expenditure.

The Government missed a major opportunity to assist Australian competitiveness by passing on the fall in world prices to Australian manufacturing industry and to consumers. It is useful to look at what the increase in excise has meant both to industry and to the average suburban motorist. It is estimated that the increase in excise has resulted in the average suburban motorist paying an additional $5.80 a week in petrol taxes. It is interesting to put that fringe against the tax cuts which the Government introduced this week, three months later than it had promised. The tax reduction for an average wage earner is $8.46 a week. Of course, we have to deduct from that the Medicare tax increase which was imposed at the same time. That reduces the tax reduction to only $7.26. After allowing for petrol tax increases, which is just one of a number of Government imposts, only $1.46 is left. I can only say that it is not surprising that there is such widespread acceptance in the community that the tax cuts are a sham. What the Government has given with one hand it has taken away with the other. It must have been a sobering experience for honourable senators opposite to see the way in which the Australian media have responded to the tax cuts, not least the cartoonists of Australia who have made it quite clear that their perception is that what has been promised for so long is both too little and in fact illusory.

Senator Michael Baume —There have been no spending cuts, either.

Senator CHANEY —As my colleague Senator Michael Baume points out, there have been no spending cuts. That is the fundamental part of this equation from which the Opposition does not seek to escape but which the Government seeks to ignore. We cannot go on increasing Government expenditure in the way that this Government has without imposing these increased taxes which are such a feature of the Hawke-Keating regime. It may be that the Treasurer (Mr Keating) is not very efficient at lodging his own tax return but he has certainly shown considerable efficiency in producing new ways to impose taxes on the Australian people. He has not only managed to increase this excise tax from a little over 6c a litre to around 20c a litre but also to introduce new taxes such as the fringe benefits tax and the capital gains tax. Again, these are simply a function of the insatiable appetite of this Government for taxes, which is caused by its expenditure policies. I suppose the simplest way of expressing it is that in the first three Budgets one finds an increase in Government expenditure of something like $20,000m. That is a quite extraordinary monetary change. Whilst in real terms one might be able to make that look less, I think most Australians would believe that over the last 3 1/2 years this Government has taken an approach to government expenditure which has left the country in a desperately difficult situation.

Senator Michael Baume —A lot of that totally new spending programs.

Senator CHANEY —Again my friend and helpmate on this occasion, Senator Michael Baume, points out that much of this is new expenditure. The tax increase has had a major impact on consumers. It has eaten up most of the tax reductions which were delivered this week. But it has to be borne in mind that about 40 per cent of petrol consumption, and higher proportions of other products in this area, are used as an immediate input to production. Any of our employment creating enterprises that consumes part of this 40 per cent of total consumption will have their costs raised by indirect means. Of course, this increase in costs will be passed on to the consumer. So the average Australian taxpayer is not only paying the extra taxation on the petrol he uses but is also paying higher prices for goods that are produced where petroleum products are one input. There is this combined effect which leaves everybody obviously worse off.

The Government is always trumpeting its good record on industry restructuring. One can only say that when the Government increases taxes of this sort, which put such a burden on industry, this is a distortion of the industry's choice of inputs and will lead to a less efficient industry structure. In this area, as in so many others, the Government is acting in conflict with its own policies. On the one hand it sets out to create an industry policy structure which will encourage investment, while on the other hand it imposes new taxes on employers-these fuel taxes in particular, along with capital gains and fringe benefits taxes-which discourage the very enterprise it is otherwise seeking to promote. The Industries Assistance Commission second draft report on taxation of petroleum products estimated that the ad valorem excise tax on petrol had risen from 26 per cent in January 1986 to around 80 per cent now-a most extraordinary change in the tax regime and one which this Government cannot be proud of and which many consumers and motorists resent deeply.

It is the view of the Opposition that the Government has adopted a shortsighted policy that involves milking the motorist and disadvantaging the consumer. One has to ask why the Government does this. Of course, it goes back to the point I mentioned a few moments ago, the fact that this Government has a great greed for revenue. The Government will cream off from the petroleum sector some $7 billion in 1986-87. The revenue from the petroleum excise will increase by 95.9 per cent to $5.6 billion. The figures really defy the imagination. I think it is beyond the capacity of most of us to understand that the Government can increase the revenue from petroleum excise by $5,600m.

This policy of maximising revenue has denied a possible increase in competitiveness to Australian industry and a reduction in our inflation rate which would bring us more in line with our trading partners. The fundamental point is that by adding to the costs of industry in this way, by adding to the costs of all consumers and to the consumer price index generally, we are contributing to the general malaise which afflicts Australia-our lack of international competitiveness. In a government which, through both its Minister for Industry, Technology and Commerce (Senator Button) and, indeed, over the last couple of days through the Prime Minister (Mr Hawke), is talking loudly about the need for Australian industry to be outward looking and internationally competitive, it is farcical that its tax policies, well represented by these Bills before the Senate tonight, are causing us to be even less competitive with those countries that are so busily taking our share of world trade.

The Government's failure to take hard decisions to cut expenditures has been the underlying malaise. The fact is that this Government, after talking a great deal about the need to restrain government expenditure, has gone on adding to government expenditure, and has retained its record for the third year in a row of being the highest spending government in our history. That is the direct effect of the Government's policy of milking consumers through the taxation of petroleum products.

However, in our national interest there is a further an more important long term effect and that is the negative effect that the enormous taxation grab is having on the oil exploration industry. The Government seems intent on blaming the fall-off in exploration on the decline in petroleum prices, ignoring the effect of the taxation take. The Australian Petroleum Exploration Association's activity and development drilling statistics report for the third quarter of 1986 provides some quite alarming information. Looking at our balance of payments situation and at the potentially high cost of petroleum imports, every Australian has to be alarmed at the drop-off in exploration activity and at the unhealthy state of our vital oil industry; which seems to be becoming more unhealthy month by month. This year it is estimated that 136 petroleum exploration wells will be drilled in Australia. That is the lowest level since 1980. It represents a huge change from recent levels of activity. On-shore exploration activity has dropped by 70 per cent. Off-shore exploration activity has declined, in metres drilled terms, by 63 per cent. On-shore development activity crashed by 90 per cent. Off-shore development activity remained at the same low level of two development wells drilled. Seismic activity on-shore was down 74 per cent and off-shore was down 30 per cent.

Those figures are hard to absorb in a debate but they point out quite clearly that there has been an extraordinarily dramatic decline in investment in oil exploration and oil development in Australia. Given our relatively poor prospectivity and given the clear limits on our present reserves, that is a very serious predicament for this country. The figures are a sad indictment on the state of the industry in Australia, and taxation is in large measure the cause of that decline.

I will look at what the industry is saying. Esso Australia Ltd has also stated that the combination of low oil prices and high government charges make it unable to justify investment in new exploration and development. It has deferred indefinitely $1 billion worth of planned developments. In most weeks it is possible to see media reporting of job reductions in the industry due to the decline in exploration. Other countries have made major concessions to the oil exploration industry to ensure that it does not collapse in changed circumstances. However this Government is totally unable to come to terms with expenditure, and that appears to have it impossible for the Government to consider effective reductions in industry burdens.

Whereas the rest of the world is acknowledging the difficulties of the oil exploration industry and the need to make changes which will lighten the government imposed burdens on the industry, this Government is moving in precisely the opposite direction. What the Government needs to consider are the long term effects of maintaining a taxation regime that discourages exploration. Australia's level of self-sufficiency in petroleum will run down quite substantially over the next few years. From 1995 through to the year 2000 self-sufficiency in petroleum is predicted by some to be as low as 35 per cent.

In a year in which there is constant concern about the balance of payments, in a year when we have braced ourselves after a massive deficit last year and when we see the deficit steadily increasing as the monthly figures emerge, the prospect of our having to import a substantially larger proportion of our oil and the prospect that those imports will be at a higher price level than exists at present are a quite daunting element when considering our economic prospects. There is no expectation even within the Government of a short term turnaround in the terms of our trade or in the balance of trade itself. In those circumstances, to be pursuing domestic taxation policies which almost certainly guarantee a worsening of that situation is indeed the height of folly. It represents the running of risks with our national economic welfare in the future which is an indictment of this Government. It is quite clear that, as things stand, we will have to make far more substantial payments to overseas suppliers for the oil that we will need. If we are to avoid that, exploration needs to be encouraged, and an appropriate taxation regime is needed to encourage that.

The Excise Tariff Amendment Bill (No. 2) contains a provision relating to the imposition of a resource rental tax on oil production from the Jabiru field. We have been opposed to the imposition of a resource rental tax because it is quite clear that it lessens the prospectivity of oil exploration in the sense that, if the very few good discoveries are taxed on the basis proposed by the Government when it brought forward its proposition for a general resource rent tax, it would greatly lessen the incentive to conduct exploration in this country. What the Government is doing now is trying to introduce a resource rent tax on a gradual post-exploration basis. Of course, on occasions deals can be done with a particular supplier by providing a less punitive regime based on profits rather than on the gross return on the oil. But the general imposition of a resource rent tax on all future prospects would have a quite different effect, and the Opposition is concerned that the Government should not impose such a tax.

In the end the most central concern that arises from all this legislation relates to the effect on the consumer of the Government's petrol taxation policies. The effect of those policies, which fly in the face of the undertakings given by Mr Keating, who of course was the resources and energy spokesman, and by the new Prime Minister, Mr Hawke, who promised a reduction in petrol price, effectively has been to milk motorists to the tune of over 8c a litre and indirectly to tax those products that the consumer buys and that use petroleum products as an input. The longer term effect of the decline in exploration is increased payments overseas and thus further problems for our balance of payments.

In a crowded legislative week, in which we have a great number of major issues of concern to us, there is probably no single measure which more directly impacts on the immediate welfare of Australian consumers. Of course, most Australians are motorists or are directly involved in some way in meeting the cost of transport. What this Government is doing is adding to the cost of living in this country, to the whole problem of inflation, and rendering the country less competitive. It is doing all of this because of its gross expansion of government expenditure and hence its gross need for expanded taxation.

I turn briefly to the Customs Tariff Amendment Bill (No. 3). It contains a series of matters that I will not deal with here. Some relate to the changes in the duty on agricultural chemicals which has been removed. We welcome that. We are concerned about the complaints from the industry that it has been short-changed in the swap. We debated that in debate on another measure. A number of things affect electric motors. I do not believe that I have time to deal with them. There is some concern about the 5 per cent duty which was previously applicable on imports of certain lawnmowers from New Zealand and the implementation of a decision after a review of the closer economic relations agreement with that country. The concern arises from representations we have received from a manufacturer of lawnmowers in Australia who believes that lawnmowers are entering Australia from New Zealand at nil duty, with engines made in the United States of America. I ask the Minister for Community Services (Senator Grimes) to give some consideration to this matter in his response to the second reading debate. It has been put to the Opposition that the mowers have been imported from New Zealand, that they have American motors installed and that those motors would normally carry a duty of 25 per cent. The situation is of considerable concern to the Australian manufacturers who see this as a means of getting around the industry assistance that has been provided for them. I ask the Minister to advise what the attitude of the Government is to this problem which is causing serious concern to an Australian manufacturer.

These Bills could be debated at very considerable length, but I see that the time allowed to me has nearly expired. I merely say to the Senate that it is a matter of deep concern to the Opposition that the end effect of this legislation is to exacerbate considerably the serious economic problems that the country faces. When the Government stated in the Budget that part of the role of this Budget was to trim the living standards of all Australians, undoubtedly this legislation was a substantial element in achieving that noble end. I hasten to add that, in using the word `noble', I intend heavy irony. I do not believe it can be a matter of satisfaction to any of us that the economic management of this country is directed to a reduction in Australian living standards. The fact is that that has been rendered necessary by the economic policies of this Government. It has consistently ignored the suggestions and advice of the Opposition, which have been that unless we have a revival of production and industry in this country, unless we cease to rely on the force feeding of higher government expenditure, we will continue to decline economically. The sad fact of the current Budget is that that decline is clearly acknowledged by the Government. The even sadder fact is that this legislation, in common with the rest of the Government's Budget program, offers no hope to the people of Australia.

With great reluctance we have to allow this legislation to be passed by the Senate. It imposes heavy burdens on taxpayers. But if we sought to throw out this legislation and thereby greatly to increase the already excessive government deficit, we would be doing an even greater disservice to the people of Australia. So it is with great reluctance that we will see this legislation passed by the Senate. But we believe that it is a clear indication to the Government that its economic policies are failing and that there is a need for a substantial change of economic direction in this country.