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Wednesday, 3 December 1986
Page: 3310

Senator VIGOR(9.27) —Many of the amendments that are contained in the Bills that are before the Senate-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-can be considered to be housekeeping matters. In fact, they ratify changes to excise rates which have been made in accordance with various industry agreements. However, there are other amendments which involve important social issues. Senator Chaney has spent some time talking about these. The Australian Democrats are particularly concerned with two of these issues. One of them has already been raised by Senator Chaney.

The first of these issues is that of good economic management of Australia's resources. The Democrats' solution is not the Chaney solution; it is not the Opposition's solution. I would like to spend a little time looking at that. I do so by discussing the Customs and Excise Legislation Amendment Bill (No. 2) 1986, which is primarily concerned with the adjustments to excise rates on Bass Strait Oil.

Oil is a scarce commodity and Australia's known reserves are limited. It is a commodity which we will have exhausted in only three or four generations, with very little regard for the conservation of this resource. It seems to be just a matter of ripping it out of the ground. That is the policy of both the Liberal Opposition and the Labor Government. World prices are currently depressed, but it can be expected that prices will rise in the future, as reserves start to run out. The Australian Democrats consider that the Government's proposal to subsidise exports of scarce resources when world prices are depressed is a commercial folly. We would be better advised to buy on the lows and sell on the highs of the market; if necessary, converting some parts of the assessed national gain into aid for industry. We must have a much longer term look at the way in which economics operates.

This Government's short-sighted concern for our current balance of payments and its preparedness to give away scarce assets now in order to satisfy short term cash flow needs is very worrying for the country. It can mean only one of two things: Either the Government is looking only as far as the next election in its financial management of Australia, and it is prepared to sacrifice our long term well being for its personal ambition to be re-elected; or, and this is even worse, Australia is in such a desperate plight that we cannot afford to finance long term investment and that, as beggars, we can no longer choose what we sell and how we sell it, but must sell at all costs. I doubt whether Australia's finances are in such a calamitous state of emergency and suspect that the Government is guilty merely of mismanagement-in fact, of failing to understand the principles of sensible commercial operation and of putting self-interest before the interests of the nation.

Oil is not a product. It is not manufactured; it is not renewable. Oil is an inherited resource which has taken millions of years to develop and accumulate. Our current dependence on oil for energy and our spendthrift use of oil has gone a long way towards using those millions of years of accumulated resource within the span of just a few lifetimes. To seek positively to export Australia's dwindling oil resources at a time when the return on such sales is so low is, in my view, commercial and economic folly. The Australian Democrats will be opposing clause 13 of the Customs and Excise Legislation Amendment Bill (No. 2) 1986, which seeks to reduce the excise duty rate on exports of crude oil from Bass Strait in order to encourage greater exports of Australian oil. It also seeks to give the Minister power to vary the excise level by mere gazettal of new regulations. This gives a Minister enormous powers and removes from the Parliament some of the controls which we have on such self-seeking exercises.

Australia's demonstrated recoverable oil resources stand at around 230 million cubic metres. The present rate of production of about 185 million barrels a year in 1985 will reduce to 160 million barrels in 1988, falling to 100 million barrels in 1994-that is, assuming that no further major discoveries are made and that present rates of consumption of Australian oil resources are maintained. Under this type of regime our resources will be exhausted during the first decade of the next century-that is, within 15 to 20 years, assuming, as I said, that there are no further discoveries. Senator Chaney's solution is to search for oil in everyone's backyard or anywhere around the place. I believe that we have to go into a program of saving and conserving oil, as well as a program of exploration. The total known recoverable world oil reserves will indeed be exhausted at present rates of world consumption around the year 2030. At present rates of usage, areas such as the North Sea and Bass Strait will be the first major fields to dry up, leaving, in fact, the Middle East with a monopoly upon which the most extortionate price rises could be based. In other words, we will be totally at the mercy of the Middle East oil producing nations. This is really a problem. What we have to do is to conserve our oil and bring more oil in while the price is low. It will never be any lower than it is now.

The other matter I would like to raise relates to the Excise Tariff Amendment Bill (No. 2) 1986. This is a matter of considerable social importance and it relates to the tobacco industry in Australia. This Bill is the second Bill in the group we are debating and it seeks, amongst other things, to amend the excise rates on manufactured tobacco. Also, it increases this excise to bring it into line with the excise rates applicable to cigarettes. Tobacco and cigarettes are dangerous products. I think that is admitted by people on all sides of the House. They cost Australia over $400m each year in hospital bed day costs alone, as well as causing horrific costs in terms of medical expenses and working days lost. Sound economics alone would suggest that we should discourage use of these products.

The Australian Democrats plan to amend clause 14 (a) of the Bill to increase the excise on all tobacco products to a level which would be a much more effective deterrent to young people using tobacco of any form. It is the young who are particularly targeted by tobacco companies since they are particularly vulnerable when young and have a potential lifetime of addiction ahead of them, which of course means more profit to the tobacco companies. This Bill is also a hotchpotch of sundry amendments, the majority of which concern excise on crude oil and oil products. They remove tariff from oil and gas derived from Ashmore and Cartier Islands and Jabiru as they are now subject to the resource rental tax which replaces the excise.

The Australian Democrats support the concept of resource rental tax as a system much more likely to encourage development of marginal oil and gas fields and to increase exploration. The introduction of this tax is a move for which the Government can be thanked. The resource rental tax means in effect that no resource tax is paid until the development costs are recovered. This gives an incentive to establishing more production in these areas. However, we have to use the product more effectively and introduce conservation programs for oil. As I said before, it is a very scarce resource.

Other amendments alter the excise on petroleum products to ensure that Government revenue derived from these remains stable in the face of falling import parity prices. They also enact the 3c a litre increase in excise on petroleum brought in by this year's Budget. Members of the Opposition seem to shed a number of crocodile tears and to tear their hair out about these proposals but when it comes to the crunch they vote for them. This increase has been criticised by the Democrats as inflationary in its effects. We agree with Senator Chaney on its bad effect on industry and the standard of living of all Australians. However, on the other hand it promotes conservation of petrol and we have decided on that basis not to oppose it.

The Customs Tariff Amendment Bill (No. 3) alters customs and excise rates applicable to a wide range of goods. In the case of refined petroleum products, the rates are altered in line with changes to domestic excise rates following the collapse and partial recovery of oil prices. This Bill brings customs and excise on imported oil into line with the fluctuations in domestic excise dealt with in the previously discussed Bills. Other excise changes bring tariffs on such items as electric motors, books, agricultural chemicals and sulphur for fertilisers into line with changes to bounties previously approved by this Senate.

At this point I reiterate the Democrats' commitment to replacing totally tariffs on imports with bounties and subsidies for locally manufactured items and to supporting export industries. Where temporary support is needed for an industry a bounty should be applied. Where long term support is required in the national interest we should look to providing subsidies or government support through purchasing policy, or some other support scheme which will make the market more stable for that industry. We recognise the difficulties this poses in budgetary terms since tariffs on imports generate revenue whereas bounties are paid out of the public purse. However, eventually the two approaches have the same result but bounties and subsidies are much more specific in assisting where it is necessary. It seems much more sensible to apply bounties in the general revenue process rather than to use the blunt instrument of tariffs. Tariffs throw the cost of supporting protected industries on to related industries and, in particular, on to exporters, which causes a large number of problems and, as Senator Chaney has said, makes us uncompetitive. This deforms Australia's industrial investment market and particularly weakens our export sector so that eventually the whole community suffers. Our balance of payments figures go up because we are exporting less, thus a vicious cycle sets in. We are currently in that type of situation because of the policies followed by successive failing governments in this area.

It is better to count the cost cleanly and to spread the cost of protecting important sectors of the Australian community over the whole community, and to support only where needed and to be very careful about that support. Even better, I would expect that a revenue earning tax on money leaving the country could be offset against the cost of bounties. This would stop speculative money, which currently washes in and out of Australia, destabilising the dollar and at the same time destabilising our export industries. We need to do something about this to protect ourselves against the general wash of money around the world at various times, such as window dressing for the insurance groups, and money laid off from various speculative measures in the stock exchange. A tax on money leaving the country would also tax net imports, thus protecting export industries dependent on imported components and simultaneously encourage export-related industries in Australia. I believe that this would be a much better measure than the types of measures we have in this legislation.

Despite all the above arguments I commend the Government for its moves towards replacing tariffs with bounties. It is moving in the right direction. It seems to be learning. However, Australia's balance of payments crisis demands more decisive action. Action has to be taken to lower high interest rates. Action has to be taken to control the high foreign capital inflows which discourage productive investment. Action must be taken to build strong secondary and tertiary industries to exploit our natural resources and inventiveness in a much better way. I commend the Government on the positive way in which it is encouraging closer economic relations with New Zealand. I feel that the small problems, such as the one raised by Senator Chaney about lawn-mowers imported from New Zealand, can be solved by suitable measures. I join Senator Chaney in asking the Government to answer the queries about what the Government intends to do to solve this problem.

The Australian Democrats support this legislation and these amendments and endorse wholeheartedly the move to form a common market in our region with New Zealand and to extend this common market beyond New Zealand to include our South Pacific neighbours. I believe that we have a future in the South Pacific and Indian Ocean region and we have to develop the types of common markets that will make Australia an active trade component within a very active part of world trade. This is a very important step which the Government must take. It must consider this measure rather than concentrating on increasing taxes more and more and increasing our bureaucracy, which seem to be the main things it has been doing while it has been in office.

I will not repeat the arguments that have been put forward by Senator Chaney but just finish off by saying that these excise measures will add to the costs for every Australian. In fact, some of the measures-the ones that we will be opposing by amending or deleting clauses-act to the long term disadvantage of the Australian economy and the Australian people.