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Tuesday, 5 May 1987
Page: 2329

Senator BOSWELL(6.07) —The National Party of Australia is firmly opposed to the resource rent tax. I suppose it is the brainchild of the Left. It has been one of the things that Senator Walsh has been carrying through the Senate. I often wonder about Senator Walsh. If the Government wants to find out whether this resource rent tax is acceptable to the industry, I suggest that it should pick up the phone, ring up half a dozen people in the oil industry, and ask: `What do you think this will do to you?' But the Government does not do that. It brings in this legislation helter-skelter and then it finds that the oil companies are forced into running advertisements such as this: `Australia is running out of oil. Do not tax us any further. Do not bring in any resource rent tax'. That is what the advertisements are saying. But the justification from the Labor Party is that the natural resources belong to the community and compensation should be received for the private exploitation of these non-renewable resources. I can see some logic in that argument, but the resources are absolutely of no value until they are extracted. The community does not contribute to the discovery and the evaluation of those resources. The resource sector contributes more than any other industry to the community. These are the offsetting reasons why I do not believe that the National Party can support this resource rent tax.

Senator Walsh has been flying around Australia promoting the resource rent tax for a long time; at least since I came to the Senate in 1983. I met him on an airliner on his way somewhere to promote the resource rent tax. Unfortunately, Senator Walsh is not a good salesman; he does not have the winning way. He could not even convince his own State Labor Party colleagues that the resource rent tax was a viable proposition and one that would distribute wealth. The Western Australian Government would not have a bar of it, nor would any of the other Labor governments. So Senator Walsh and the Labor Party were forced to remove the resource rent tax off-shore. Even so, it has met strong opposition from every sector of the exploration community.

The very threat of this legislation has caused considerable consternation and unrest in the industry since it was first discussed, and that was when I first came into the Senate in 1983. Exploration activity has consequently dropped in anticipation of this legislation, at a time when lower projections of future oil prices have been reducing the expected profitability of the exploration industry. The Australian Petroleum Exploration Association pointed out in January 1985 that a resource rent tax could harm Australia's exploration effort and correspondingly reduce our oil self-sufficiency.

I think it is an opportune time to discover just what has happened. Have APEA's predictions come true after all? It works with the industry. It warned the Government that this would happen. It openly pleaded with the Government not to impose a resource rent tax. Total exploration drilling declined from 49 wells in 1983 to 43 wells in 1984 and to 38 wells in 1985. The drop in the wildcat wells was particularly sharp. Off-shore seismic activity in 1984 remained at less than half the average for the five years 1979 to 1982. Off-shore exploration expenditure fell from $586m in 1983 to $540m in 1984 with an expected further decline to $412m in 1985. Drilling vessels declined from 10 to four within the first 12 months of the initial discussions of this legislation. One would have thought that this Government would have realised that it was on the wrong track. All it had to do was to look up a few statistics. But no, it adopted the attitude we saw last night-`Let's crash or crash through'. Generally it crashes and it will crash again this time as I believe that the Australian Democrats will see the light as an election becomes imminent. They are also starting to respond to the electorate and to the needs of the oil industry.

The Government has not taken on board the figures that have been coming out since 1983-84. Consequently, oil exploration has dropped right away and that is despite the evidence right before its eyes. The Government has refused to take heed and withdraw this Grim Reaper legislation brought in by the Grim Reaper himself, Senator Walsh. It has not realised the longer term negative effect of the resource rent tax on exploration activity and hence oil discovery. Lower production rates will lead to a decline in government revenue. Senator Cook was saying that the oil companies wanted this legislation. I ask him: `How much will it cost the Government in revenue to bring in this resource rent tax?'. Obviously, if the explorers want--

Senator Cook —I said that in their heart of hearts they would prefer it.

Senator BOSWELL —If they wanted it in their heart of hearts I do not know why they would spend $3,000 or $4,000 for a page in a prominent newspaper to say that they do not want it. I cannot understand the logic at all. Common sense never seems to reign in the Australian Labor Party.

High risk investment by an industry, particularly one characterised by current low commodity prices, requires legislation to act as an incentive, not as a disincentive, which is precisely what the resource rent tax is. The Government cannot fail to see the harmful results of a further decline in supply. A severely impaired self-sufficiency status will leave Australia open to being placed in an uneasy and unnecessarily vulnerable position as a purchaser on world petroleum markets traditionally characterised by violent fluctuations and politically unstable suppliers. That is the position we are heading for as our explorers, our oil companies and the number of wells decline. We will become more reliant on overseas exports. It will be another disgraceful day for this Government if this nation, with the resources it has, cannot get its act together and if, because of legislation such as this resource rent tax, we end up importing at great cost a commodity that can be extracted domestically. The result will be a downturn in the benefits due to the economy. The facts are that self-sufficiency is projected to decline before the end of the decade unless larger and newer reserves are discovered to offset the fall in Bass Strait production. Australia's capacity to supply domestic refined crude oil requirements is projected to decline to around 42 per cent by 1993-94. In order to sustain the exploration momentum, the industry requires a supportive regulatory environment, including a stable, non-discriminatory tax system which recognises the need for a high-reward high-risk ratio. That is the opposite to what this legislation does.

A decline in petroleum exploration investment and hence a decline in the domestic crude oil supply will further hasten the demise of our current account deficit. We will end up paying an estimated $3 billion by 1990 as opposed to what we are paying now for the import bill of around $44m. That, of course, will increase the deficit and will ultimately further increase interest rates unless we can produce our domestic oil requirements. Our current account deficit has now widened to 5.75 per cent of gross domestic product in the first half of 1986. That is according to a March 1987 economic survey by the Organisation for Economic Co-operation and Development.

This country cannot afford to introduce any measures such as the resource rent tax which will worsen the situation. The effects of the resource rent tax will be to add to the already extravagant cost of servicing this nation's ballooning international debate which is cited in the OECD March economic survey as being one of the primary contributors to the deficit. The potential export earnings of this industry will consequently suffer, once again hurting Australia in the one area where she most needs to improve her performance. This resource rent tax legislation is rapidly emerging as `raise revenue today and forget about tomorrow' legislation. There is some validity, I believe, in the assertion that by exporting our reserves today to extract overseas revenue we are evaporating tomorrow's needs. The Government should look at that proposition. It is a very near-sighted proposition to export our oil today when our needs will not be met in the very near future.

The Government has also chosen to ignore the reduced activity in the petroleum exploration sector which has contributed so much to the Australian economy in the past. That can have only a denigrating snowball effect on vital areas of the internal economy which this Government is not addressing at the moment. Unemployment, business confidence, investment and ultimately our standard of living will be lowered if we do not continue to find new oil fields.

Senator Cook —Do you want to provide a real incentive?

Senator BOSWELL —We need to provide a real incentive.

Senator Cook —Get Joh to cut the rail freights.

Senator BOSWELL —We are discussing oil freights at the moment. The rail freight issue in Queensland is not something that should concern the Senate. It is a matter that concerns--

Senator Cook —It applies anywhere in Australia.

Senator BOSWELL —I will take the opportunity to discuss the rail freights, which are a form of royalty. The Queensland Government does not accept high royalties, but it has offset the royalties against rail freights. So it does not give a true picture of what the rail freights are because they are a form of royalty. An argument that the Government is fond of espousing in its attempt to defend the legislation is that a resource rent tax will enable the Australian community to reap its fair share of benefits from the exploitation of Australia's resources. As I said before, if that were correct it would be a proposition that I would not find any difficulty in accepting. However, what we are really doing and what is really happening in the real world is that we are decreasing self-sufficiency in our basic energy resource. We are adding unnecessary inflation to the current account deficit and imposing resulting burdens on the taxpayer through the Government's faltering attempts to finance the country's escalating debt. We have forced unrest, shaken the confidence in a vital sector of the economy, leading to distortion of the industry's direction and growth, and scaled down the petroleum exploration industry with a corresponding scaling down of its contribution to the economy in areas such as employment and trade, and we are adding to the costs and long lasting administrative tangles in tax administration.

I suggest to Senator Cook and to the Government that this legislation will not create any excess in oil exploration. In fact, it will have the absolute reverse effect. In 1990 the motorists and the small businessman will feel the pinch with escalating interest rates-if it is possible for them to escalate any higher than has been the case under this Government. The whole proposition of a resource rent tax is opposed by this side of the Senate: Senator Sanders has stated that the Democrats will not accept it, the National Party certainly will not accept it, and the Liberal Party will not accept it. The oil industry does not want it either. It seems to me that it is some left wing hang-up that all resources belong to the community. Sure, that is a proposition-but first you must extract them before they are worth anything. The Government cannot place one tax burden after another on the industry and still expect it to perform. We have already seen company tax increase from 46 per cent to 49 per cent; and we have seen the introduction of fringe benefits tax, which is a tremendous burden on the mining industry because it must provide meals, housing, accommodation and transport for the people who work on the oil rigs.

Senator Gietzelt —Your Party in Queensland has been very active in getting money out of the mining companies.

Senator BOSWELL —I would not worry about Queensland if I were the Minister. He is elected to this place to represent the people of the Commonwealth of Australia-not to promote interference with the Queensland Government, which he seems to do all the time.

Senator Cook —What about the taxes and charges in Queensland?

Senator BOSWELL —I would not worry about that if I were Senator Cook, because he is elected to represent the Australian Labor Party in the Senate, not to be in de facto opposition to the Queensland Government. The Queensland Government can handle itself very well. The Federal Government has added one tax after another in every productive sector. Even last night we saw the Grim Reaper, Senator Walsh, come in here and try to give the fishing industry the kiss of death. However, he was rolled, just as he will be rolled again today. I do not know-it has not been a good week for the Government so far; it has not had a win yet. I know that the frustration is telling on the Government as one piece of legislation after another is rolled. I know that the Government must be very frustrated, so it reaches out in anger and attacks the Queensland Government. I feel sorry for the Federal Government because it has not had many wins as all the Opposition parties on this side of the Senate continually see the light of day and block the Government's legislation. That is as it should be because the Opposition parties represent the industry and the people of Australia while the Labor Party represents some left wing hang-up that resources belong to everyone. Resources are worth nothing to anyone until they have a value, and they have absolutely no value when they are left in the ground. Unless those resources can be extracted, sold and turned into petroleum, dieseline or distillate they are not worth anything to anyone.

I cannot believe that the Labor Party would implement this legislation when Australia is in such a perilous economic situation. Not only is it in a perilous economic situation; we need every oil well and as much mining exploration as possible so that we can earn overseas income to pay for our ever expanding overseas debt. When the Government brings legislation of this type into the Senate it is just flying in the face of what Australia really needs; that is, to create more jobs and more wealth so that we can pay our overseas debt, which is growing by $14.3 billion every month. The only way that we can provide a future for our young Australians is to create the jobs and wealth so that they have a future. While the Government continues to bring legislation like this before the Senate the Government is offering them absolutely no future and no hope. I conclude my contribution by saying that the National Party of Australia is very firmly opposed to a resource rent tax.

Sitting suspended from 6.28 to 8 p.m.