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Wednesday, 12 November 2008
Page: 6631


Senator CAMERON (9:42 AM) —I heard Senator Joyce commence his tirade last night, and I thought it was a bit flippant, a bit lightweight and a bit without substance. Well, it did not get any better this morning. Here is the National Party criticising the government’s economic capacity. Let me tell you that the nation will not be running down to put money into poker machines, they will not all be getting drunk and they will not all be fighting outside the pubs. Our economic security package is there for hardworking families in this country. I think it is an absolute disgrace for Senator Joyce to come in here and flippantly run those tired old lines that people cannot look after themselves and they should not have access to the government security package. Listening to Senator Joyce this morning, you would think that nothing has changed in the world, that we are still in the middle of an economic boom and that there is no economic crisis or no failed banks around the world. Senator Joyce continues with the same claptrap that he went on with for the 11½ years that the Libs were in government.

I will now turn to the National Fuelwatch (Empowering Consumers) Bill 2008. I appreciate the opportunity to participate in this debate. This is an extremely important bill that will provide significant benefits to the Australian public. The public are entitled to get some access to information on where the cheapest fuel is; it should not be just the public who do not have access to information. Fuelwatch will go directly to the problem of the lack of information available to consumers. It will provide detailed information to consumers. It will not leave us with the current situation whereby the only detailed advice or information on petrol prices belongs to the producers, the wholesalers and the retailers. This inequality of information is described in economic terms as ‘information asymmetry’. We did not hear any argument about this economic issue from Senator Joyce; we just heard a flippant rant about the government. Joseph Stiglitz, who won the 2001 Nobel prize for his work on information asymmetries in the market, put it this way:

Efficiency requires that information be freely disseminated. The private market will often provide an inadequate supply of information … there are various market failures associated with imperfect information …

That is exactly the position that the Australian public find themselves in in relation to fuel. The public do not have access to the breadth and depth of information available to the big oil companies, the wholesalers and the retailers. Yet we are going to see Liberal senators get up and argue that the public should not have access to information while their mates in big business, their Maserati-driving mates who do not need to find cheap fuel, have better access to information than the Australian public do.

The public are expected to predominately rely on petrol station billboards—that is the Liberals’ answer to Fuelwatch—which requires the visual sighting of a number of billboards at different petrol stations to establish the lowest price amongst that range of petrol stations. That is what the Liberals are saying to the Australian public: you depend on the billboards and let the retailers and big business have access to minute-by-minute information on petrol prices which you will not get. The public have to rely on an extremely inefficient, time-consuming and—for most of the public—frustrating exercise to find cheap fuel. During a Senate Economics Committee inquiry the cheap fuel day was described as ‘magic Tuesday’. Nobody could explain during any of the committee hearings that I was involved in how magic Tuesday worked. Magic Tuesday, in my view, is a manipulation of the market. It gives big business a very big incentive to make sure petrol prices stay high. Nobody could explain to me whether magic Tuesday was about black magic or white magic. Everybody knew magic Tuesday was there, but nobody could explain how it worked. Yet the Liberals want magic Tuesday to stay. I do not want the Australian public to have to face magic Tuesday, the black magic of big business, supported by the Liberals, keeping proper information from the public.

It is interesting to note that the Australian Competition and Consumer Commission have commented on this information asymmetry and its potential to distort the market in favour of the petrol industry. The industry uses a private company, Informed Sources, to provide instantaneous advice on movements in petrol prices to it. Using Informed Sources is an extremely expensive proposition that is beyond the reach of the general public and even a lot of businesses within Australia. Evidence was given to the committee in Rockhampton by Mr Steve Marshall of WIN Television—and WIN Television would not be the poorest lot around and not the poorest company in the country—that the cost of obtaining price information was extremely high. WIN Television wanted to provide a community service in the Rockhampton region. They conducted their own surveys. But Mr Marshall told the Economics Committee it was going to cost ‘an extraordinary amount of money’ to pay Motor Mouth, which is a subsidiary of Informed Sources, to collate that information for WIN Television. He said they were quoted $50,000 per year per market to get access to the information that is available to big business. All WIN Television wanted to do was provide that information to the community of Rockhampton. As WIN Television cover five Queensland markets, it would have cost them $250,000 to participate in the Informed Sources program.

This demonstrates that, if you have money and power, you can participate in the Informed Sources program to give you an advantage in the market. That is what the Liberals are going to stand up here today and support: an advantage for big business, an advantage for the retailers and a disadvantage for ordinary Australians. If you are an ordinary consumer, according to the Liberals, you are to depend on the billboards. But if you are one of their big business mates, you can spend money and get access to the computer technology that lets you manipulate the market. If you are a small independent petrol station operator and you cannot afford to participate in the Informed Sources program, you have to either hope for the best or seek to conduct your own local survey of prices at significant cost to your small business.

This is not a good system. This is a system that the Liberals wanted to continue. This is a bad system. It is a system that provides benefits to the business users of Informed Sources and, in my view, disadvantages Australian consumers. This is what the government wants to fix. We want to deal with it in an economically credible manner. We want to deal with the information asymmetry. We do not want to deal with the rant that we heard from Senator Joyce. The unfair advantage that business has over consumers has prompted the ACCC chairman, Graeme Samuel, to comment on the current system. He said that while the use of Informed Sources information by large retailers was not illegal—and I say that in inverted commas—it could be described as being as close to illegal collusion as you can get. So what do the Liberals want? They want ordinary Australians to depend on the billboards, and they want their big business mates to have access to illegal collusion to disadvantage ordinary Australians. Fuelwatch will move the retailing of petrol from a system which is close to illegal collusion to one which is open and transparent for the Australian public. Why should the Australian public not have an open and transparent system? Why should the Australian public not have access to the same information that big business has? Do you know why? It is because the Liberals do not want the Australian public to have access to that information. It is an absolute disgrace.

Concern has been raised about the 24-hour rule, which requires companies to lock their prices in for 24 hours. There has been an argument put that this would be anticompetitive and that it would distort the market. There was no substantive argument put to the committee in support of this unfounded proposition. The people who argue this proposition are the same people who take advantage of the collusion that now goes on in the industry at the expense of ordinary Australians. I expect it is also supported by the mates of big business on the other side, the Liberal Party. To the contrary, on this proposition, evidence from the ACCC, the NRMA, the Western Australian Department of Consumer and Employment Protection, Professor Wang and Commerce Queensland supported the 24-hour rule. The NRMA said:

By having to quote fixed fuel prices for a 24 hour period, petrol retailers will have to make better judged and more competitive choices on fuel prices.

Thus the pressure comes back onto the retailers, not the consumers. Professor Wang, an international expert on fuel prices, said:

The disincentive to be the first to hike price is much greater under the 24-hour-rule. Without the rule, the price leader for a cycle knows that once its price is hiked, other firms can respond very quickly (within hours) by hiking their prices as well. If other firms do not respond quickly, the price leader can quickly retract its price hike to avoid losing much market share. However, under the 24-hour-rule, after a price leader hikes its price, other firms cannot respond within 24 hours. The price leader has to lose market share for an entire day—it cannot retract its price hike either.

Senator Joyce’s rant this morning suggested that we were not dealing with economic reality. The economic reality is that the Treasury, via evidence from its executive director, Mr Jim Murphy, has clearly said that it is in support of the need to provide consumers with some counterbalance to the unfair advantage that petrol retailers have by their use of Informed Sources. So it is collusion. It is an unfair advantage. That is what the Liberals are standing up to support this morning: maintaining a position that disadvantages Australian consumers. Jim Murphy, from Treasury, said this:

Realistically, if you want to get the best deal you can for Australian consumers, you have to start looking at getting pressure coming, at the grassroots level in my view, from consumers to be seeking out the best prices for petrol. Hopefully they will then put pressure on the retailers to actually compete more aggressively in the supply of petrol. The only way you can do it, given the introduction by the retailers of this informed sources device or mechanism, is to actually try to redress that and get an energetic consumer awareness out there.

How do you get energetic consumer awareness out there? How do you try and get this disadvantage against consumers dealt with? You do it with Fuelwatch. If there are other issues that are problems in the industry, they should be raised and dealt with, but what we can do immediately, in the short term, is to even up the disadvantage that ordinary Australian consumers have against big business in this country in the retail petrol industry and give them access to the same information that is available to big business.

I am sure we will hear the same refrain from the Liberals here this morning about the econometric modelling, so let me turn to that. Opponents of Fuelwatch have asserted—in the absence of any evidence—that the scheme led to higher petrol prices in Western Australia. The reason for this assertion was never put in a proper manner to the committee. The reasons were never stated. In the face of the criticism, the ACCC conducted a model of the Fuelwatch scheme to test the assertions that had been put by those opposed to putting more market information in the hands of the consumer. The overall conclusion of not only the ACCC study but also of the analysis done by Professor Harding, Professor Davidson, Access Economics and Concept Economics, is that, since the Western Australian Fuelwatch scheme was introduced, the average retail margin in Perth relative to other mainland capitals had fallen. This was the evidence that was put forward, and what the Liberals want to do is to deny consumers access to the information that is paid for by big business in order to give them an advantage over ordinary Australian consumers. It is an absolute outrage.

It was clear that the wild fluctuations in fuel prices that had characterised the petrol market in all the capital cities no longer existed in Perth. So what the econometricians really argued about was whether Fuelwatch, some other factor or a combination of factors contributed to this highly beneficial phenomenon in Perth. Let me tell you what we heard from some of the econometricians in their arguments to the committee. They said that Perth is just different from the rest of Australia.


Senator Mark Bishop interjecting—


Senator CAMERON —It might have been their strongest point. They said that Western Australians think differently to Victorians; that Melbourne is in a valley and Perth is not; that Melbourne is the home of Coles Myer; that the introduction of the GST had had different effects in WA than it had in the rest of the country; that there is only one refinery in Perth; and that Perth is closer to Singapore than the rest of the country is. The committee was left to determine what effect any of these factors have had in WA, if any.

The ACCC found that the introduction of Fuelwatch in WA had had the effect of dropping the retail margin by 1.9c per litre. The ACCC’s conclusions are supported by Treasury, which found their methodology ‘reasonable, valid and robust’. Professor Joshua Gans described the ACCC’s work as ‘a far more rigorous investigation of the WA scheme than anyone had ever done’. These were the facts that were before the committee, and all the support for big business to have an advantage over Australian consumers will not hide the facts about the need for the Fuelwatch scheme for the benefit of ordinary Australian consumers. If the Liberals want to protect their big business mates, they should be upfront about it. Do not hide behind some crook econometric modelling. Do not hide behind an argument that says this is bad for consumers. Because none of those points can be sustained. None of those points were argued with the committee. This is a good thing. Fuelwatch will be good for the economy and good for consumers. It will fix up the information asymmetry in the industry and give ordinary Australian consumers a good old Australian fair go. (Time expired)