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Monday, 23 March 1987
Page: 1322

Mr LEE(6.10) —Before addressing the details of the Bills before the House, the Petroleum Resource Rent Tax Assessment Bill, the Petroleum Resource Rent Tax Bill, the Petroleum Resource Rent Tax (Interest on Underpayments) Bill and the Petroleum Resource Rent Tax (Miscellaneous Provisions) Bill, I wish to make a few remarks in response to the comments made by the honourable member for the Northern Territory (Mr Everingham). I agree with his comment that there is real anger in the community about the current price of fuel. I also think the community is getting sick and tired of politicians of all political persuasions claiming to belong to the party which will deliver low petrol prices. The community at large is becoming very cynical about political parties, whether they are from my side of politics or from the conservative side of politics, which promise lower petrol prices but which never deliver. The important thing is to look at the record. The facts will speak for themselves.

Mr Moore —They do.

Mr LEE —I wonder whether the honourable member for Ryan will agree after I have quoted the record of the Fraser-Howard Government. The figures I will give have been prepared by the Australian Bureau of Statistics, the Government's official statistical body. They are the average retail prices for super grade throughout Australia. In 1975 the price of supergrade petrol on average was 15.6c a litre. By the time the Fraser Government was thrown out of office, in March 1983, the price of petrol had risen by 176 per cent to 43.1c a litre. I often wonder where people such as the honourable member for Franklin (Mr Goodluck) and others, who claim to be launching crusades to keep the price of petrol low, were during the Fraser-Howard years when the price of petrol rose by 176 per cent. During the last four years of Liberal-National Party government petrol prices rose by 21.2c a litre. During the first four years of this Labor Government petrol prices have gone up by only 11.4c a litre. As I said before, those figures speak for themselves. I will let the Australian community judge which party has the least worst record on petrol prices. But as I said at the start of my speech, no side of politics is free of blame.

As the honourable member for Franklin has made a contribution in this debate, I suppose it is important to remember that the State which has the highest petrol franchise, that is, the State tax levied on petrol, is the only Liberal-governed State in Australia, Tasmania, where the levy is 7c a litre. I often wonder what the position of the honourable member for Franklin is on that. I agree with one part of the speech made by the honourable member for Franklin-his attack on petrol discounting. In my electorate of Dobell on the central coast of New South Wales the price of petrol last weekend was only 49.9c a litre. In the last few weeks it has fluctuated between 49.9c a litre and 59.9c a litre. I, for the life of me, cannot understand how such massive fluctuations in the price of petrol can be justified. Often it is the areas of smaller population concentration which seem to miss out on petrol discounting. My view is that government should take action to prevent discounting so that all Australians share in a lower average price of petrol. That is something I agree with the honourable member for Franklin about.

Turning to the detail of the legislation, it is important for us to remember why a tax on the exploitation of mineral resources is different from a tax on companies and other forms of production in our economy. The fact that mineral resources are not renewable is the reason it is different from any other form of production. If someone extracts a barrel of oil from Bass Strait that barrel of oil has gone forever. It is not like someone who owns a hotel, produces cars or has a clothing factory which makes shirts. One can always obtain the factors of production, such as wool or cotton and more labourers. But once a barrel of oil is extracted from Australia it is gone forever. One cannot get it back. That is why I believe that the community is reasonably able to expect secondary taxation to be contributed by the petroleum industry. This legislation will provide that secondary taxation. The State governments' levies and royalties and the Federal Government's excise are imposed for that very reason-because it is believed that these industries should make a special contribution to the Australian community.

Mr Ian Cameron —There is nothing wrong with the freight charges in Queensland.

Mr LEE —We are led to believe by people such as the honourable member for Maranoa (Mr Ian Cameron) that people on his side of politics are opposed to secondary taxation on the extractive industries. I ask them to explain why conservative governments, when they have been in power, have also levied secondary taxes on the petroleum and minerals industries. They have done so for many decades. The levy which stands out as the greatest revenue-raising levy was the Fraser-Howard Government's crude oil levy of the late 1970s and early 1980s. As the honourable member for Maranoa is following me in this debate, perhaps he could also explain to us why Sir Joh Bjelke-Peterson, the Queensland Premier, seems to be able to raise quite a deal of revenue from rail freight charges. If rail freight charges are not a disguised form of secondary taxation on the extractive industries, I do not know what is. Perhaps the honourable member could explain to us why he supports Sir Joh Bjelke-Peterson's outrageously high freight charges in Queensland. I suppose that Sir Joh would tell me I do not have to worry about that. Another Queensland member of this House, the honourable member for Dawson (Mr Braithwaite), remarked that he thought the petroleum and mineral industries are overtaxed and that they should have to pay only the normal rate of company tax. As I explained earlier, that is quite unfair because, unlike car manufacturers and shirt producers, once the extractive industries take away the nation's resources there are none to take their place.

The principle of a resource rent tax has been supported by the Australian Labor Party since 1977 but we have to go back further than that in history to find the origins of the tax. It was Labor's great Minister for Minerals and Energy, Rex Connor, and the Labor Prime Minister of those days, Gough Whitlam, who first started arguing for a more equitable contribution from the mining industry to the nation. A very important report was commissioned by Minister Connor, prepared by Mr Tom Fitzgerald, entitled `The Contribution of the Mineral Industry to Australian Welfare'. The result of the debate which followed the tabling of the Fitzgerald report in 1977 was that Paul Keating, the honourable member for Blaxland and the then shadow Minister for Minerals and Energy, announced that Labor's policy for following elections would be to apply a secondary, profits-related tax to the extractive industries. This legislation implements that promise, which has been made by the Labor Party at each election since 1977. Perhaps some of the people in the community who claim that this Government is not a real Labor government could explain to me why a resource rent tax is not a great achievement for the Hawke Labor Government.

The legislation applies only to off-shore petroleum discoveries. On-shore industry is excluded from the legislation. The legislation will apply only to fields where permits have been issued after 1 July 1984. So the Bass Strait and North West Shelf fields will not be subject to the resource rent tax. As the honourable member for the Northern Territory pointed out, the only field currently producing which will be subject to the tax is the Jabiru field in the Timor Sea, although it is hoped that the Challis field will be subject to the tax in the not too distant future.

As both Jabiru and Challis are marginal fields, the impact of the resource rent tax will be quite minimal. The second reading speech of the Minister for Resources and Energy (Senator Gareth Evans) indicates that no revenue is expected prior to 1989-90. That is the beauty of the resource rent tax. It is a profits-based tax, which the honourable member for Capricornia (Mr Wright) explained in quite some detail. It is not a tax based on production, on the output from a field. So if we have a bonanza discovery in the league of Bass Strait or the North West Shelf which proves to be quite profitable, that field will be expected to make a major contribution to the Australian community, whereas fields whose production and exploration costs exceed their receipts will be exempt from the resource rent tax. Not only is it a fairer system of taxation but also it makes economic sense not to discourage investment in the more marginal fields. If we compare that with a production based tax such as the current Federal excise and State royalties, it is crazy to have a system where we apply a flat rate of tax to every barrel produced because that hits the jackpot discoveries at the same rate of taxation as the marginal fields that are in trouble. I was interested in the comment of the honourable member for the Northern Territory that he had proposed a profits based tax to the industry. I take it that that was when he was the Chief Minister of the Northern Territory. His comment was that the industry was not persuaded by rationality. Listening to his comments today, I am convinced that he has lost his power of rationality because he intends to oppose the Bills along with the rest of the Opposition.

These Bills will not affect retail prices in the community because they do not apply to the on-shore field or the fields where permits were issued before July 1984. In addition, they will replace the existing Federal Excise and State royalties. If ever one needed a case study which demonstrated why we need a resource rent tax, the Bass Strait field is it. Some of the fields in Bass Strait are among the 10 most profitable in the world ever. It is important to remember the history of the Bass Strait fields. The initial investment decisions for Bass Strait--

Mr Ian Cameron —What is wrong with making a profit?

Mr LEE —The honourable member for Maranoa would know all about investment decisions, given his property speculation in the Noosa area. I doubt whether the honourable member for Ryan (Mr Moore) will be making any strategic investment in anything that the honourable member for Maranoa has anything to do with. The initial investment decisions regarding Bass Strait were made when the international market price of oil was $US1.70 a barrel. The price peaked in 1981 at $US36.30 per barrel, an increase of over 2,035 per cent in 11 years. Because the price of oil went through the roof, because of the actions of the OPEC group, Esso Australia and the Broken Hill Proprietary Co. Ltd were given massive windfall profits. Since Esso and BHP were exploiting community resources, if there were a similar discovery at some time in the future the Australian people have a right to expect a fair return on their resources and this Government will ensure that next time the Australian people will receive that return.

Mr Humphreys —Joh won't get his hands on that money.

Mr LEE —As the honourable member for Griffith suggests, the Queensland Premier will not get his hands on any of that. Lastly, I address my remarks to the comments made by the honourable member for the Northern Territory on the decline in the self-sufficiency of the oil industry. I acknowledge that that is a serious problem and it has rather severe implications for our balance of payments situation. The honourable member for Dawson suggested that these Bills will discourage exploration, yet a similar profits related tax applies in the United Kingdom and Norway and it does not seem to have discouraged exploration in those countries, so I do not know why it should discourage exploration in Australia. He quoted the United States system as a country which does not slug the oil companies and exploration has flourished. We have to look at the reasons why the oil industry is not taxed particularly highly in the United States. I do not think it is because the Government wishes to encourage oil exploration, given the current glut; it has more to do with the influence of the oil lobby on the United States Congress, and its use of targeting particular members for special privileges.

Mr Martin —Just like in Dallas.

Mr LEE —The honourable member for Macarthur obviously studies it-not too frequently I am sure. The way to encourage greater petroleum production is not to provide companies with a reduction in taxation but to provide long term stability. Given the likelihood that this Government will be re-elected for its historic third term, we will ensure that the industry gets stability in government. It is important, if investment decisions are to be made with confidence, that the petroleum companies know what rate of tax will apply to future discoveries. The current system is a total mess. We have old oil, medium term oil and new oil each slugged at a different rate of excise. Because there has been a series of ad hoc decisions by governments of varying political persuasions, we have nothing but a mess. The industry does not know what any government, if it is under some fiscal pressure, will do to the rates of excise which apply. The resource rent tax will provide a means of coping with the bonanza field, the battlers and everyone in between. Whether people strike the jackpot or make a very minor profit, they will know what rate of tax will apply. It will give the industry and the Australian people for the first time a fair, equitable and economically responsible return on our country's petroleum resources and I support the Bills wholeheartedly.