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Monday, 30 August 2004
Page: 26724

Senator MURRAY (8:58 PM) —I understand—and the chamber can advise me if this is incorrect—that there is an agreement tonight that speeches can be incorporated. I am willing to do so on the Tax Laws Amendment (Wine Producer Rebate and Other Measures) Bill 2004 if that is all right.

The ACTING DEPUTY PRESIDENT (Senator Lightfoot)—I understand the practice is that the whips on both sides of the house should concur on it being incorporated, Senator Murray. I am sure that if you have sought their permission there will be no problem.

Senator MURRAY —I have not sought their permission. That is why I am seeking to do so on the chamber floor.

The ACTING DEPUTY PRESIDENT —Is leave granted for Senator Murray to incorporate his speech?

Government senators interjecting—

The ACTING DEPUTY PRESIDENT —I take that, Senator Murray, to be a negative and that leave is not granted.

Senator MURRAY —If the whips and leaders have agreed that is how it should be, I am more than happy to take up the Senate's time.

Senator Eggleston —Mr Acting Deputy President, on a point of order: we have recently discussed this matter with Senator Ian Campbell, who is the Manager of Government Business in the Senate. He says that certainly there is an agreement to incorporate speeches, but it is always subject to those speeches being read by the whip or a representative of each party. That is how the system works.

Senator Patterson —Mr Acting Deputy President, on the point of order: Senator McGauran, the whip, has been telling me that we asked some time ago for Senator Stott Despoja's speech. We have been waiting for it. I did not grant leave because I had not seen it. We—and I do not know where Senator McGauran is now—had been advised it was on its way at about five o'clock. I have a personal view about incorporating speeches, and I have had my say on that. I still have not had time to look through this speech. I think that was the agreement. The Labor Party shook their heads because they had not seen it either.

Senator Mackay —That is not right.

Senator Patterson —I am sorry, let me speak on this point of order. When I said I had not seen it, the people on the opposition side—whoever was in the chamber at the time—shook their heads as well. If the whip had seen it, that would have been a different matter. But we had not seen it—I have checked with our whip. I am reading through it now. If we are going to have speeches incorporated, they need to be here in time for somebody to have a look at them.

Senator Mackay —Mr Acting Deputy President, I hope this might enlighten the Senate. I notice the Manager of Government Business in the Senate, Senator Ian Campbell, is sitting behind the minister. We have in fact just had a joint meeting of leaders and whips, at which it was agreed that incorporations would proceed as per normal. It is not normal practice for speeches in the second reading debate to be authorised or otherwise. They are in their nature contentious in that they are speeches in the second reading debate. We had this difficulty towards the end of the last sitting of the Senate. As far as the Labor Party is concerned, people are entitled to say whatever they like in their speeches in the second reading debate—because they are speeches in the second reading debate. If the bills were not contentious, they would be listed under `non-controversial'. They are listed in the program; they are controversial. The Labor Party will be acceding to all requests for incorporation of speeches in the second reading debate.

Senator Allison —Mr Acting Deputy President, on the point of order: for the record, Senator Stott Despoja's speech was handed to the Government Whip prior to the end of the debate. I do not know how long the whip is suggesting that the speech needs to be available for reading before leave. I understand it is quite a short one. The spirit of our leaders' and whips' meeting earlier on was that it was an automatic matter; it was not a question of seeking approval and passing speeches around the chamber for everybody to read them in advance of thinking about whether or not they could be incorporated.

Senator Mackay —It's not an adjournment debate.

Senator Allison —It is not an adjournment debate; it is a speech in the second reading debate. I doubt very much that there is something in that speech that would need to be responded to on the part of the government. As Senator Mackay said, they are speeches on the second reading, which are of a fairly standard format in expressing the way in which each party will deal with the bill. I think the government is being unreasonable. We all want to finish this evening if it is possible, and incorporating speeches seems to be a fine way of doing that. I suggest that the government get its act together and agree to accept those speeches as they are handed over.

Senator Brown —Mr Acting Deputy President, further to the point of order: I would agree with that. I think there needs to be a good spirit tonight. I am very happy to accept that—

Senator Mackay —A bit too much `spirit', perhaps!

Senator Brown —I also want to say that I quite admire you, Senator Mackay—I will put that on the record.

The ACTING DEPUTY PRESIDENT —If you wish to carry on a conversation with Senator Mackay, Senator Brown, you are more than welcome to do so, but perhaps it ought to be outside the chamber.

Senator Brown —I think we have now had time for the good senator's speech to be reviewed. I am sure it is acceptable and we can proceed.

Senator Ian Campbell —Mr Acting Deputy President, further to the point of order: there is actually an important point that Senator Patterson has made here. That is, although generally speaking Senator Mackay is right and speeches on the second reading should be incorporated—and we reached an arrangement last night to get things done quickly—Senator Patterson makes a very good point. It is quite possible to write something that is outside standing orders in a speech on the second reading. What we do here, as happens on the other side, is to give them a quick read over. Senator Patterson has done that, and we are very happy that the speech that was prepared be incorporated. As Senator Mackay knows, I am also reading over some tabling documents that Senator Harris is seeking to incorporate. I do have some concerns with those; I will read them slightly more cautiously. I thank all honourable senators for the agreement we have to finish three important bills this evening.

Senator Conroy —How many days have you been in cabinet?

Senator Ian Campbell —Not long enough! I commend the bill to the Senate, and I also commend Senator Stott Despoja's speech on the second reading debate to the Senate.

The ACTING DEPUTY PRESIDENT —Because it is the convention of the Senate rather than a regulation of the Senate that these things be acceded to by leave, I am prepared to put the question again with respect to leave. Is leave granted to have the speech of Senator Murray on the second reading incorporated?

Leave granted.

The speech read as follows—

In speaking on the Tax Laws Amendment (Wine Producer Rebate and Other Measures) Bill 2004 I wish to acknowledge the valuable alcohol industry data and material that I have accessed from websites and Senate committee submissions.

This includes the pre-budget submissions from the wine, brewing and spirits industries; submissions to the 2002 Senate Economics Legislation Committee review of the Excise Tariff Amendment Bill (No. 1); and the Fosters Group website `Update on the Ready to Drink Market'.

The Bill provides for a $290,000 rebate of the value-added Wine Equalisation Tax (WET) per producer, effectively exempting the first $1m of domestic wine sales from any tax on its alcohol content.

The Bill also removes accelerated depreciation available for grapevines, and contains some minor technical amendments.

The rebate will cost around $338m over 4 years but this is partially offset by $36m of savings from the removal of accelerated depreciation.

One major shortcoming to this measure is that it also applies to large producers. They do not need and should not get this tax concession.

There are two dangers to the costs estimates. Under the CER agreement with New Zealand we may have to compensate New Zealand wine producers for this discriminatory tax concession.

Secondly, foreign wine producers may import wine in bulk to Australia, blend it with a small amount of Australian wine and bottle it for the domestic market, thereby becoming eligible for the wine producer rebate for wine manufactured in Australia.

This legislation is an economic subsidy measure that will assist mostly small wine producers in rural and regional Australia, who will receive around 85% of the rebate benefits.

This Bill is the consequence of a long intense campaign by the wine industry, particularly the Wine Federation, and reflects the importance of rural seats, to the Government, particularly in South Australia.

There is strong support for the Bill from all sectors of the wine industry.

Countering that is consistent and valid criticism by the agencies that deal with the misuse and harm caused by alcohol, that all alcohol should be taxed volumetrically as alcohol regardless of its type.

The Democrats have always supported the taxation of alcohol as a standard regulatory mechanism to prevent alcohol being cheaply available, and as a means of contributing to the public cost of harm arising from alcohol consumption.

The Democrats also support promoting the viability of rural and regional based enterprises, which this Bill does.

Despite the social need to tax all alcohol, it is our view that we have no option but to reluctantly support this tax concession on economic grounds, as it will relieve genuine financial pressure on regional small business in agriculture and tourism.

Quite properly, there is continuing concern at the costs of alcohol abuse, at binge drinking, and health problems arising from excessive consumption, but alcohol consumption in Australia needs to be put into perspective.

Australia's alcohol consumption has been continuously falling since it peaked in the mid-1970's, and it has fallen a dramatic 22% over the period 1980 to 2001.

We are now below France, Spain, Germany, the UK, Greece, Italy and New Zealand.

Consumption has fallen from a high of approximately 11 litres of pure alcohol per adult per year in 1977-78, to around 9 litres of pure alcohol per adult per year in 2002-03.

The current alcohol tax system is a considerable improvement on the former regime, but the policy framework still lacks sufficient coherence. There is therefore a need for a comprehensive alcohol tax review.

Further improvements to the alcohol tax regime could make a significant contribution to improved health outcomes. In particular, the Government's low-alcohol policy is poor. It only focuses on beer, and fails to provide clear incentives to encourage low alcohol ready-to-drinks (RTDs) and wine.

There are significant continuing inequities and anomalies in alcohol taxation, including an unjustifiable preferential rate for brandy over other spirits.

The `all-the-way-with-the-USA-FTA' requires the abolition of the 5 per cent ad valorem customs duty applicable to imported bourbon. So Scotch whisky and Russian vodka will now be taxed at a higher rate than American bourbon. This is untenable and inequitable alcohol policy.

The value-added WET is a failure in two respects. It has created a low-price cheap-alcohol cask market that is at the centre of alcohol abuse. Secondly, it continues to punish the premium bottled wine sector.

The Government is to be congratulated for its introduction of a broad conceptual framework for alcohol taxation policy in Australia.

The framework has three key compartments: products with less than 10% alcohol content; products with more than 10% alcohol content; and wine and cider.

The Government has recognised the merit of taxing most products under 10% alcohol content at similar taxation rates, regardless of the form of the alcohol.

This tax is levied volumetrically as excise or customs duty on the amount of the alcohol in the product.

The Government has also recognised the merits of taxing all products over 10% alcohol content at a higher rate. This too is sound policy.

However, a fatal policy flaw is that the taxation of wine and cider is still based on the value, not alcohol volume, of the product.

It is better tax policy to tax each alcohol product on its alcohol content rather than its value.

Alcohol is alcohol. If tax is applies to the amount of the alcohol in the product, then industry is encouraged to producer lower alcohol products. That is because the lower the alcohol content, the less tax that will be paid.

Secondly, industry is free to develop products from various alcohol sources, without the tax system providing incentives to choose one type of alcohol over another. This is good non-interventionist policy design.

In 1998 the New Tax System proposals announced a new approach to taxing RTDs, including cider, at a rate similar to beer. In 1999 the Government reversed its ANTS and pre-election policy and was successfully lobbied by cider interests to exclude traditional cider from the RTD taxation regime.

This was a classic failure by a re-elected Government to hold a sound policy line against a self-interested lobby.

In April 2001 the Government was forced to accept Senate amendments to provide concessional excise rates for draught beer. Many argue that was not as good a policy as we thought at the time.

In June 2002 the Government and the Opposition refused to support my motion that the Senate Economic References Committee undertake a comprehensive alcohol tax inquiry, thereby failing to take that opportunity to further strengthen the alcohol tax framework.

In November 2002 the Government amended the Excise Tariff Act to replace State low-alcohol beer subsidies and to overcome an unintended consequence of poorly designed mid-strength packaged beer excise rates under the New Tax System.

However, the Government (and the Opposition) refused to support Democrat and Independent amendments to introduce tax incentives for low-alcohol and mid-strength RTDs.

The Democrats have consistently advocated a coherent alcohol policy framework comprising three key dimensions: the economic dimension, the social dimension, and policy integrity.

From an economic perspective, alcohol policy should encourage innovation, growth and diversity amongst Australian businesses. A coherently constructed alcohol policy should maximise business investment, employment and export opportunities in both metropolitan and regional Australia.

Australia has strong, globally-recognised beer, wine and spirits industries. These valuable industries create many jobs in our major cities and regions. Their products contribute to a great many enjoyable social occasions.

The Australian alcohol industry is an $11 billion industry, with one beer industry estimate of retail sales as follows: beer $5 b; wine $2.6b; spirits $1.7b; RTDs $1.7b; and cider $0.07b.

The beer industry is a major employer in Australia, and is a high value adding industry, with value-add estimated at between 30% and 35%. The Australian beer industry has developed a world-class range of low-alcohol and mid-strength beer products.

These beer product innovations are most likely a key contributor to the falling levels of alcohol consumption in this country in recent decades.

The WFA estimates that employment in grape growing and winemaking has doubled from 15,000 to 30,000 between 1996 and 2001. Wine exports have been a stellar success story. However, there has been a clear downward trend in winery profits over recent years, according to the Deloitte 2002 Annual Benchmarking Survey.

Prior to this year's Budget announcement of the proposed wine producer rebates, Econtech had forecast that winery profitability will continue to decline over the 5 years to 2006-07. Econtech had also forecast that employment growth will suffer, and that employment may even decline due to exits from the industry.

The Democrats recognise the role that the wine producer rebates contained in this Bill will play in further encouraging growth and sustainability in small and medium sized regional Australian wineries.

Wine tourism is a vibrant and growing economic activity in many key regions. The Democrats support the vital role that wine tourism plays in strengthening regional economies.

The local spirits industry is growing. Despite being handicapped by the Coalition, which gives cognac and foreign brandy an excise tax advantage over our own rum products, Bundaberg Rum asserts they are now the biggest selling spirit in Australia.

Most RTDs are manufactured in Australia.

Good social and health outcomes are a key objective of a coherent alcohol tax policy. This means that Australia's alcohol policy should regulate the price and availability of alcohol in a manner that minimises harm and encourages responsible consumption.

Drinking alcohol responsibly and moderately has health, social and economic benefits for individuals, communities, industry and governments, which collect over $4b in alcohol revenue. The abuse of alcohol has a huge cost however.

People who drink in moderation have better health and social outcomes than abstainers. Abstainers have better health outcomes than people drinking at risky or high-risk levels.

Alcohol abuse affects certain indigenous communities, and specific age groups, such as underage drinkers.

Good alcohol tax policy can make a positive contribution to beneficial social and health outcomes.

A balanced alcohol taxation regime requires policy integrity. Alcohol tax should ideally conform to the principles of simplicity, efficiency and equity. Equity in a tax system requires that `like be taxed as like'.

Alcohol taxation should not discriminate between different forms of alcohol on such arbitrary bases as how the alcohol was created, whether by fermentation, distillation or any other method. A standard drink is a standard drink. Alcohol taxation should reflect this truth.

A key feature of any alcohol policy should be the promotion of low-alcohol products.

In concert with credible and authoritative health campaigners who are experts in the alcohol field, the Democrats have long campaigned for changes to alcohol excise to encourage the production and consumption of low-alcohol products, whatever their form.

All beer products currently enjoy an excise-free threshold of 1.15% alcohol content. This means that no excise duty is paid on the first 1.15% of the alcohol content in the beer product. The lower the alcohol content of the beer, the greater the value of this concession.

However, the failure to provide an excise free-threshold for RTDs means there is no incentive for producers to make lower-strength RTD products.

The Democrats have consistently recommended that low alcohol packaged RTD products be subject to the same tiered excise regime that has successfully encouraged the production and consumption of low-alcohol packaged beer. There is no revenue cost in doing this, and no plausible policy rationale for not doing it.

Some believe that RTDs target young people and are the cause of a growing youth alcohol abuse problem. On this basis many claim that RTDs should be taxed at a higher rate in order to price them out of the youth market.

Competitors emphasise this argument in the hopes that it boosts their own products. The only way to deal with competing claims is to use credible genuinely independent empirically based research.

Data from the spirits industry indicates that two thirds of the RTD market is made up of dark-spirit based products, based on bourbon, scotch and dark rum. They argue that these RTDs compete in the same market to beer and are comparable in terms of alcohol strength.

The spirits industry argues that these products are neither overly sweet, nor colourful, and are in fact targeted at 18 to 30 year olds.

Spirits industry data shows that the share of the RTD market made up by white-spirit based RTDs is falling. Sales of white-spirit based RTDs fell approximately 8 per cent during 2003, compared with an increase in sales of over 25 per cent for dark-spirit based RTDs.

The NDS Household Survey commenced in 1985 and I am advised that it is arguably the most sophisticated national empirical data available relating to the use of alcohol (and other drugs) in Australia.

The findings of the AIHW after the 2001 NDS Household Survey indicated that RTDs are the most commonly consumed alcoholic beverages for 14 to 19 year old females drinking at low risk levels. (Although I would have thought anyone drinking at 14 is high risk.)

14 to 19 year old males drinking at low, risky and high risk levels all preferred regular strength beer, whilst risky and high risk females in that age group preferred bottled spirits and liqueurs.

A report in the West Australia Sunday Times recently (11 July) said that the Australian Secondary School Students Alcohol and Drug Survey shows a reduction in the number of underage school students consuming alcohol.

Importantly, the Survey found that excessive drinking among males aged 16 to 17 dropped from 29 per cent in 1999 to 19 per cent in 2002.

The Ministerial Council on Drug Strategy has requested that a taskforce be established to prepare a report by November 2004 recommending interventions to reduce underage drinking.

That report will outline mechanisms to inform parents of the need to monitor alcohol consumption levels by their adolescents. This is a sound initiative.

Unlike wine, beer alcohol taxation now probably looks about right overall.

WET provides wine producers with an incentive to produce low-value wine. The low-priced alcohol cask market is at the recorded centre of alcohol abuse.

Research in the Northern Territory demonstrates that increasing the price of cask wine substantially reduced alcohol abuse. In my own state of Western Australia the green suitcase, cask wine, is notorious in street and parks drinking.

Contrary to the myth, wine is at the heart of alcohol abuse, not at its periphery.

This is one reason I maintain my campaign for the volumetric taxation of wine.

Beyond increasing the price of cask wine, a volumetric wine tax would also lower the price of higher value wines, which are over-priced by virtue of the WET. This, in turn, would stimulate that sector of the industry, and create jobs.