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Thursday, 22 August 1985
Page: 132


Senator GRIMES (Minister for Community Services)(10.08) —I move:

That the Bill be now read a second time.

This Bill proposes to amend the Liquefied Petroleum Gas (Grants) Act 1980 to terminate the operation of the subsidy scheme under that Act on and from 1 October 1985. The Government's decision to terminate the LPG subsidy was announced by the Treasurer (Mr Keating) in his statement on 14 May this year outlining Government expenditure savings. This subsidy was originally introduced for a three year period from 1980 and later extended in a modified form to alleviate the impact of the sharp increases in the price of LPG at that time and to allow consumers time to adjust to changing price trends for LPG. In the longer term consumers would have the opportunity to convert to more readily available alternative fuels such as natural gas and electricity. The decision to abolish the subsidy is therefore consistent with the original intention of the subsidy which was to provide temporary relief to consumers facing rising prices for LPG. Since its review of pricing and subsidy arrangements in 1984 the Government has been concerned at the high cost of this subsidy and the continuing situation whereby subsidised consumers of LPG are being more favourably treated than consumers of other competing fuels. Abolition of the subsidy will remove a distortion of the demand for energy that has been created by the encouragement of LPG use in areas where alternative energy forms of lower real cost might have otherwise been used. The average household user of subsidised LPG is expected to face a once-only price increase of around 3 per cent but all LPG consumers will continue to benefit from the price stabilisation measures introduced last year.

These measures, which provide for the Minister for Resources and Energy to determine the wholesale price for LPG, were introduced to eliminate the frequent price fluctuations facing consumers as a result of movements in exchange rates and world prices. The effect of this policy is that LPG consumers are currently enjoying substantially lower prices than would otherwise be the case. To minimise the impact on consumers, the subsidy has been allowed to continue through the winter months, the period of peak demand, until 1 October 1985. Its termination at that time will also reduce the impact upon consumers who may have made investment decisions based on the current arrangements.

Financial Impact Statement

The abolition of the subsidy on and from 1 October 1985 is expected to save the Government about $3.5m during the remainder of the 1985-86 financial year. This saving would have amounted to an approximate $6.8m in the full 1985-86 financial year. I commend the Bill to the Senate

Debate (on motion by Senator Reid) adjourned.