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Monday, 15 September 2003
Page: 20089

Mr WINDSOR (7:52 PM) —I congratulate the member for Kennedy for the great speech that he made a moment ago, particularly in terms of the health issue but also for the analysis of the scientific implications of the use of ethanol. I rise to support the Fuel Quality Standards Amendment Bill 2003. I am delighted that so many were in the gallery to hear the speech made tonight by the member for Kennedy, because I think it is a matter that should be reported by the press gallery. With its national significance to job creation and regional development and the major contribution it could make to the health care of the nation, I believe the press gallery should be paying this matter enormous attention.

Ethanol has absolutely enormous implications for agriculture. We heard the member for Kennedy say that about 550,000 hectares of sugar cane would be able to produce something like three to four per cent of our fuel needs if all of that area were turned over to the production of ethanol. In my area and that of the member for Gwydir—and also in southern Queensland—there is the potential for three plants to be put in place, the production from which would amount to something like one per cent of our fuel needs. They would generate something like $0.25 billion in investment and another $120 million in natural gas private sector investment and utilise something like a million acres of sorghum or grain crop—corn or wheat. The implications from that, not only for investment but to the regional communities, are absolutely enormous.

I cannot believe the way in which this issue has been treated by both sides in this parliament. I cannot believe that the Labor Party have embarked on a process of removing the issue of ethanol from the minds of the fuel-using community. The Labor Party have embarked on this process to score some cheap political points over some confused rationale that the government had at one stage over the dealings of the Prime Minister with the proprietor of Manildra. But that is not an excuse.

Mr Fitzgibbon —That justifies it.

Mr WINDSOR —No, it does not justify it at all. The cheap political advantage that has been gained by that, if any has been gained, is at the risk of major production in the ethanol industry.

The government on the other hand is not squeaky clean on this issue either. The government says that since 2001, when it brought in the 350 million litre biofuel policy it is currently trying to implement, it has tried, by removing the 38c per litre excise until 2008 and phasing out that excise exemption in five equal instalments through to 2012, to put in place a policy—and we have heard speakers here tonight talk about this—that will encourage investment in the ethanol industry. That will not occur.

Let us look at the mathematics and the economics of the ethanol industry. If you are a greenfield site at the moment, even if a decision were made today, it would take something like two years for that plant to get into production, which would take you to the end of 2005 before a litre of ethanol was produced. You would then have three years of exemption from the 38c excise and then there would be a phase out over the next five years. Investors looking at investing in ethanol—and there are significant investors right across Australia—are all saying that under that regime it is uneconomic to start an industry.

The member for Kennedy is quite right: we are not going to see an industry start with that sort of policy mix. It is not going to occur. The government have to rethink the policy mix. They cannot keep saying, `We've put in a policy mix that's going to encourage investment in ethanol,' when the investors are saying that it is not good enough. The two things do not add up. It is private sector investment. We are going to have to rethink that policy. A corruption of economic language has come into the debate in this place, where the removal of a tax—an excise—is described as a subsidy to an industry. It is a tax that should not be on the production sector to start with. The language should not be corrupted in that way. The removal of a tax is considered by the government to be a subsidy to an industry.

In a lot of other countries in the world that sort of logic does not hold true. We heard what the member for Kennedy said about the US Senate with the 10 per cent mandate. They are the so-called bastion of free enterprise, the nation we listen to most, the nation we have listened to in recent years and with which we have formed a number of treaties. Let us hope that the Minister for Trade can do something about a free trade treaty while he is in Mexico. But we are not following the Americans with this mandated 10 per cent.

Mr Fitzgibbon —Do you support the FTA?

Mr WINDSOR —I support a 10 per cent mandatory usage of ethanol. The government should bite the bullet on that. It should mandate for 10 per cent, which would give investors security, and should remove the corruption in language which says that the removal of a tax is a subsidy. Remove the tax and let the industry grow. The flow-on effects to our communities and the environmental impacts will be enormous. There will be a generation of investment and a decreasing reliance on the Middle East and other oil-producing countries into our future because of the capacity to grow our own readily renewable fuel. As I said, the implications of that for regional communities are enormous.

The community of Gunnedah, in the Deputy Prime Minister's electorate, currently has a proposed investment package of $120 million. Depending on the yield, that $120 million would utilise something like 500,000 to 600,000 acres of sorghum. That would underwrite the price of coarse grain in that area. Dalby is a smaller plant—I think it is about a $60 million investment—that would create something like 60 million litres of ethanol per year. In terms of crop input, that particular plant would need 200,000 to 300,000 acres of sorghum. There is another plant in the township of Corindi south of Tamworth. These are the sorts of investments that are out there and the sorts of things we should be encouraging.

The government would not agree with fuel excise being charged. I think some of the players in the current cabinet argued behind closed doors when the GST came in that fuel should have been considered and a flat rate of GST applied to it. That would have sent some positive messages to the investment community in terms of our comparative advantage in being an export nation. I suggest that there would be people in the cabinet who would agree with that view, but there would be others who would suggest that, if we start to remove or not charge an excise on a renewable fuel, that may well encourage the growth of a readily renewable biofuels industry, which the 2001 policy was supposed to do—350 million litres of fuel by 2010 was supposed to be the objective. So we have this argument going on: do we go for a renewable biofuels industry that does not produce an income stream to government, or do we stay with an income stream to government? At the moment we are told that we must, at some stage, reimpose a tax, an income stream. The Deputy Prime Minister said the other day in relation to a question on this that the industry must be able to stand on its own feet at some time in the future—so there will be a capital grant of 16c a litre or whatever and the excise exemption will be graded out—which means that the industry will be fully taxed. So again we have this corruption that, if you do not tax this industry, that would be subsidising it.

We have a circumstance where the government is opting for the income stream. The Treasury are saying, `If we start to erode this income stream base, we will be in big trouble later on'—we are starting to see it with LPG gas and some of the other things as well—`we've got to be careful that we do not lose our income.' On the other hand, in the Telstra debate the government is happy to lose a very large income stream. The government has to make up its mind whether it is in the business of encouraging domestic industry, particularly inland Australian agricultural industries. This is a very real opportunity to come to grips with some of the problems that inland Australia is having. We have an oil industry that is based on US dollars essentially, a global currency, and we have the potential—if we apply a 10 per cent mandate, for instance, so that 10 per cent of fuel is generated by crop production—to enter that global market in terms of pricing. The impact of that on our communities would be enormous.

I believe that some members of the government are actually trying to do the right thing but are being caught in this mesh and using the Labor Party's scare campaign—and the Labor Party are playing into the hands of this agenda—and a few erroneous facts are being thrown about by the fuel companies to say, `Oh well, we tried, but it was the filthy Labor Party that stopped us from achieving the goal.' The policy mix that the government currently has in place will not encourage or guarantee anything; it will not do anything other than support the existing industry for a short period. The existing industry is essentially one producer: Manildra. The production from this plant relates to what was a by-product that they were going to have difficulty with in terms of environmental outcomes. They have turned a by-product into ethanol and done it very successfully—and I congratulate them. But they are the only beneficiaries of this current policy mix. Other investors will not be able to establish themselves for long enough to accept the 38c a litre exemption and put themselves in a position where they can, as the Deputy Prime Minister keeps saying, stand on their own feet at some stage with full taxation being applied to them. The only producer that can do that is the one in the industry at the moment, and that is Manildra.

So I would encourage government members to revisit this if they are serious about doing something for regional Australia, for country communities, for country people and for agriculture that does not rely on the world to exist and if they are serious about getting into the renewable biofuels industry—and at some stage we will have to, but it might be 50 or 100 years away. Australia has some of the best and most competitive farmers in the world, because they have had to struggle in a non-subsidised environment. Yet here we have the government saying, `You can only have this one, boys, if you can stand full taxation.' I think it is an absolute disgrace that we are even suggesting that. The Minister for Agriculture, Fisheries and Forestry and the Deputy Prime Minister should be demanding that there be no excise on this industry. Why do we want to tax an industry that is going to create this amount of investment? If 10 per cent of our fuel suddenly became ethanol, it would need $2.5 billion to $3 billion worth of investment. Where would that occur? In the agricultural lands of Australia. That would be an enormous investment in not only the employment levels but the whole underwriting of the grains industry and perhaps the sugar cane industry.

We have to look at the social implications if we do not do something for the sugar cane industry. I know—and the member for Kennedy might disagree with me—that sugar cane is not the most efficient way to produce ethanol. But we have an industry and communities out there that have been making a major contribution to Australia over many years, and here is an option we can adopt. If it does require some sort of `subsidy', so be it. If we destroy our agricultural industries, those people we destroy along with them are going to be subsidised at some time in the future. So I would encourage the government members to revisit this and get it right. Remove this idea that people seem to have polluting their minds that a renewable biofuels industry must be taxed at some stage. There is no logic to that. Why does it have to be taxed? We are a global player, trying to compete with others. Why are we looking at taxing people in relation to these particular industries? It is just a corruption of the worth of this industry.

I would like to mention a few other things in conclusion. The points that the member for Kennedy made in relation to health are very important. I urge the press gallery to pick up on this and really start to do some homework on what is going on within the fuel industry and on the rumours that are about, such as the rubbish being peddled that you cannot use 10 per cent ethanol in fuel because of the so-called damage that is being incurred. All those sorts of things can be taken care of. As the member for Dawson said earlier, they are up to E85 in some parts of the United States. As I said, we have followed the United States in many areas. Maybe we have to take a closer look at what they are doing over there, because we have the capacity to join with them and provide readily renewable biofuels in our country communities, rather than looking at importing fuel into the future. The health implications and the US experience are very important.

Let me conclude by saying that I believe there are two issues that are very important in relation to the economic implications for country Australia. The first is the issue of Telstra and communications. Equity of access to communications is the very thing that can break the distance factor as a disadvantage of living in rural Australia. The second is that we can start using agriculture to grow fuels into our future. We can start using agriculture to produce its own jobs, rather than relying on the vagaries of the international marketplace and the corrupted cost structures of some of our competitors. It would be nice to think that the Minister for Trade, Mark Vaile, would be successful with some of his negotiations; history says that countries looks after themselves. Maybe it is time that this country started to look after itself as well.