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Tuesday, 28 April 1987
Page: 1862


Senator McKIERNAN —I direct my question to the Minister representing the Treasurer and the Minister representing the Minister for Primary Industry. I refer to the Minister's answer to a question on 1 April regarding the possible effects on inflation if the National Farmers Federation proposal to abolish excise on all fuels were implemented, and to a statement made last Thursday by the Deputy Leader of the National Party-or should that be a national party-Ralph Hunt, aligning himself with that proposition, at least insofar as it relates to farmers, by promising farmers a full rebate on their fuel excise, including on-road use, reported in the Australian Financial Review on Friday last. Has any further investigation been done into the proposal of the National Farmers Federation? Is the Government in any way attracted to the proposition? Further, what would be the costs to revenue if the proposals were implemented, and would there be any wider economic effects?


Senator WALSH —I have seen the report in question. At the outset I point out the fact that all distillate used on farms-which comprises the great majority of fuel used by farmers-is excise free already. For the first time ever in 1985 this Government entirely reduced excise on fuel.


Senator Messner —That is not so.


Senator WALSH —It is so. It entirely removed excise for distillate used on farms. When Mr Howard was Treasurer there was an excise levy on distillate used on farms of something over 2c a litre. Having sorted that fact out-that is, that the excise that Mr Howard had imposed on distillate used on farms has already been removed by this Government-there is absolutely no justification for removing the excise on fuel used on roads by farmers while everybody else is paying excise on fuel used on roads.

As to the more important part of the question, I have seen the report-indeed, reports crop up with disappointing regularity-and the assertions that if the excise on all refined petroleum products was abolished the consumer price index, and consequently interest rates, would fall by 6 per cent or, it is sometimes said, by 5 to 6 per cent. The total revenue from these excises is of the order of $5.6 billion. If they were to be removed, the first round effect of the removal on the consumer price index would be a 2 per cent fall in the CPI; not a 6 per cent fall in the CPI as has been asserted by Mr McLachlan and echoed by Mr Hunt. There would be second round effects which, over a long period, could ultimately conceivably reduce the CPI by between 3 and 4 per cent. The first round figure is 2 per cent, not 6 per cent. I just wish that there were as many journalists around eager to publish that correct piece of information as there seems to be journalists eager to publish the misinformation or disinformation coming out of the mouths of Mr McLachlan and Mr Hunt.

Senator McKiernan asked what the wider economic effects would be. Something between 5c and 6c a litre of that excise is presently hypothecated for road funding. In this Budget the Commonwealth has provided some $1,250m for road funding from that hypothecated revenue. If the tax itself were to be abolished the hypothecated revenue would be abolished with it and Commonwealth expenditure on road construction and maintenance would fall by $1,250m. I do not know whether Mr McLachlan wants that or whether Mr Hunt wants that, but that would be one of the consequences of the policy that they are advocating.