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Ethanol subsidy poor value for money.



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Mark Latham MP

Shadow Treasurer

Senator Kerry O’Brien

Shadow Minister for Primary Industries

Senator Kim Carr

Shadow Minister for Industry, Innovation, Science & Research

23 July 2003

ETHANOL SUBSIDY POOR VALUE FOR MONEY

The Howard Government’s record of insider deals and political favouritism is confirmed by its decision to deliver another $50 million to Australia’s ethanol companies.

The key beneficiary of the Government subsidy is Manildra - Australia’s dominant ethanol company with 90 per cent of the market. The head of Manildra, Dick Honan, is well known as a close personal friend and golfing partner of the Prime Minister.

The new package of industry assistance follows last year’s decisions to introduce an ethanol production subsidy of 38.143 cents per litre and impose a tariff on ethanol imports. The production subsidy has already benefited Manildra to the tune of $17 million between October 2002 and May 2003. The subsidy was extended in the 2003-04 Budget and will cost taxpayers an additional $195 million over the next four years.

The total subsidy of $245 million is despite advice to Cabinet from the Department of Industry, Tourism and Resources that ethanol producers are “quite profitable”. Moreover, Manildra uses wheat for the bulk of its raw material for ethanol production. Therefore sugar producers will receive next to no benefit from the Government’s subsidy program.

Labor supports the development of a viable alternative fuels industry. Pouring hundreds of millions of taxpayer dollars into the pocket of the Prime Minister’s mate is not the best way of achieving this goal.

Even the head of the Government’s Fuel Tax Inquiry, David Trebeck, has described the decision as “one of the craziest examples of public policy I’ve come across in 30 years”.

Contact:

Michael Cooney (Mr Latham’s office) 0411 591 120

Jack Lake (Senator O’Brien’s office) 0427 773 842

Catriona Jackson (Senator Carr’s office) 0410 522 262