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Monday, 11 August 2003
Page: 12965


Senator STEPHENS (2:30 PM) —My question is to Senator Minchin as Minister representing the Minister for Industry, Tourism and Resources. Can the minister confirm that his department has established no performance benchmarks to test the effectiveness of the government's ethanol subsidy regime in maintaining and promoting the use of alternative fuels?


Senator MINCHIN (Minister for Finance and Administration) —As I indicated before, the government have basically continued what has been the case for a very long time—indeed, under the previous government—whereby alternative fuels are excise free. So ethanol has been excise free for a very long time. Faced with the prospect of the substantial importation of cheap subsidised Brazilian ethanol, which would have caused considerable damage to the domestic industry, we did make the decision to provide a regime whereby excise was payable on ethanol but that domestic producers would have that excise effectively rebated through a subsidy. These silly questions keep operating on the presumption that there has been a sudden windfall for ethanol producers, which is completely contrary to the facts. I can only repeat that what we have done is provide a neutral position for domestic producers of ethanol by rebating the excise they now pay in the form of a production subsidy and that, quite openly, was because of the threat to the domestic industry and the potential to supply Australia with alternative fuels, from subsidised and cheap importation, particularly of Brazilian ethanol.

As for all this talk about doing analyses and those sorts of things, we were quite up-front about what we were doing and why we were doing it. We believe there is a place for ethanol in the fuel mix in Australia and that domestic producers ought to be given a window of opportunity to develop their capacity to provide ethanol to the Australian fuel industry, albeit now with a 10 per cent cap. We have proposed some short-term measures to enable the industry to adapt to that short-term cap. Our assistance is no different, in the sense that the excise-free regime is maintained in another guise, albeit in a way that ensures this industry cannot be destroyed in the short term by cheap Brazilian imports from a heavily subsidised industry in that particular country.


Senator STEPHENS —Mr President, I ask a supplementary question. I thank the minister for his answer, which seems to me to confirm that there are in fact no performance benchmarks. Can the minister further confirm that the department has undertaken no analysis or established any benchmarks for the diversification of biomass feedstock in ethanol production, including sugar and its by-products? Can the minister advise the Senate why the government committed to the payment of millions of dollars to Manildra without giving thought to the effectiveness of its subsidy regime in promoting a diverse and sustainable domestic alternative fuels industry?


Senator MINCHIN (Minister for Finance and Administration) —Ethanol can be made from either sugar or wheat. It so happens that the biggest producer of ethanol does use wheat as the foodstock but, as I said, we have recently announced $37 million to fund one-off capital subsidies for new producers who will, if they enter the market, obviously compete with Manildra. So we are actively facilitating a competitive market and the entry of new producers that can and will be using sugar, as CSR do, to produce ethanol in competition with Manildra, but in a way and under a regime that ensures this quite important regional industry cannot be destroyed by the importation of cheap product that is heavily subsidised from overseas.