Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard   

Previous Fragment    Next Fragment
Monday, 23 March 1987
Page: 1320

Mr EVERINGHAM(5.55) —The honourable member for Capricornia (Mr Wright) spoke about a lot of flesh in the petroleum industry. From the way in which he was squealing in his contribution to this debate it seems to me that the blow torch of the electorate is about to be applied to some of his flesh. He had to search back as far as the Fraser Government to try to compare its figures and what we were promised would happen under the Hawke Government. Prime Minister Hawke in 1983 was prepared to promise anything to the Australian people in order to gain their votes. He broke this promise just as easily as he broke so many others. The public perception of fuel prices by the Australian motorist is about to be shown to the honourable member for Capricornia through the ballot box. The honourable member for Capricornia is squirming about the price of petrol because the election is getting inexorably closer.

The Prime Minister promised anything in 1983 to win. He stuck his neck out by saying that he would lower the price of petrol but now we hear from the honourable member for Capricornia that the high price of petrol is all the fault of the States and the oil companies and that the Prices Surveillance Authority does not have the necessary powers to reduce it. What has been happening since 1983 if the honourable member has to squeal and look to weak excuses such as that so far down the track at this late stage? I can understand the concern of the honourable member for Capricornia; it is a concern for his seat. There is real anger out there in the community at the price of fuel. Every time one goes to the petrol pump one finds that it does not matter what Prime Minister Hawke said about reducing the cost of fuel, the price of fuel has gone up and up and up. The honourable member cannot tell me that the public will wear the eyewash that he wants them to wear by referring to graphs on what happened with Malcolm Fraser in 1975; they know what it is costing at the service station. They know that it is costing them a poultice to fill their tank and they are going to tell the honourable member for Capricornia all about that as soon as Prime Minister Hawke has the guts to face the Australian people.

Mr Wright —What about you? You are not even in the electorate. You are getting out.

Mr EVERINGHAM —Let the Prime Minister call an election.

Mr Wright —Come into Capricornia and have a go.

Mr EVERINGHAM —I will be doing my share of campaigning and the honourable member can be sure that there will not be any Labor member coming from the Northern Territory. I will be happy to campaign in Capricornia too. I will be able to tell the people of the electorate of Capricornia that in remote areas of that electorate they are paying more for their fuel because this Government has ripped apart the fuel price equalisation scheme. That is one of the reasons why people in remote electorates such as Capricornia and the Northern Territory are being unfairly victimised with the cost of fuel.

Almost everyone who has spoken in this debate has spoken about what fuel costs at the petrol pump. The subject of this legislation is the resource rent tax. The honourable member for Capricornia claims to have great experience about risk and reward. What he has ever risked and what his rewards have been I am not quite sure. Maybe he has a lot of experience in that area. He can enlighten the House about it if he wants to. When I was dealing with all sorts of minerals exploration and development companies on the introduction of a new minerals royalty regime in the Northern Territory my proposal was for a profit related tax based on the income generated from the development of minerals. Unfortunately, the industry does not seem to be swayed in this area by arguments that reach for rationality and logic. The industry prefers a royalty because it knows exactly where it stands. It wants a fixed royalty, not a profit-related royalty, because it can then say: `We know exactly where we are, we can count the cost and if we ever happen to strike it rich-the one in a thousand chance-out of a particular strike, we can at least keep a fair bit of the money with a royalty rather than with a profit-related regime'.

I have a particular interest in the Bill since the two Australian off-shore fields that will be principally affected by this legislation are off the Northern Territory-the Jabiru and Challis oil fields. We usually find that when this Government does anything to further dampen mineral exploration, development or activity it is directed-directly or indirectly-at the Northern Territory. The poor old Territory, so often criticised by this Federal Government for its reliance on Federal coffers, held high expectations for the benefits to be reaped from the Jabiru and Challis fields. Darwin was to have been the home base for the off-shore oil industry, creating employment and investment for our part of Australia. But a considerable uncertainty now hangs over that, one that this Government, I believe, has not even addressed.

Perhaps the Minister for Resources and Energy (Senator Gareth Evans) would like to use this opportunity to explain how the resource rent tax will affect current revenue sharing arrangements as set down in the off-shore constitutional settlement. The resource rent tax proposal was announced and introduced almost three years ago in mid-1984, yet the Territory and the States still do not have any clear idea of what the Federal Government intends to do about revenue sharing. Furthermore, during the inordinate amount of time that the Government has taken to bring on the legislation, circumstances have changed considerably-radically, one might say-in the oil industry. It was conceived at a time when the oil cartel, OPEC, was maintaining its grip and maintaining a fairly stable but high price structure. Today is no longer the case. This Government's determination to find every means to extract dollars from the industry to prop up its disastrous record of economic management threatens the very livelihood of the oil exploration industry. We have heard from the Minister what would seem to be very reasonable justification for the introduction of the petroleum resource rent tax. In summary, the argument is that it is the duty of government to extract maximum benefit for the community from community-owned resources such as oil. But that is not the only responsibility of government; there is also a responsibility to ensure the future prosperity and development of oil exploration.

Let me remind this House of some alarming facts. The most recent report of the Australian Bureau of Statistics reveals that in the last quarter on-shore and off-shore petroleum exploration was down 68.3 per cent and 63.4 per cent respectively. That is a drop of $157m on the same quarter in 1985. It has meant the loss of some 3,500 jobs across Australia. I do not claim that the Government has brought this situation about single-handedly, although it has certainly done its bit to worsen the situation. The collapse of the OPEC agreement on oil pricing has been a major factor. Since plans to introduce the resource rent tax were announced, the domestic price of Bass Strait crude has fallen from $43.71 a barrel in January 1986 to $29.37 a barrel in March 1987. Over the same period Australia's production outlook has changed dramatically.

In March 1984, the Bureau of Mineral Resources estimated that Australian oil production would rise by about 30 per cent by 1989 and hold at that level, before beginning to decline in 1996. This assessment was apparently based particularly on over-estimates of reserves in the Jabiru field off the Northern Territory, the speculation being that Jabiru contained 150 to 200 million barrels. This led some to believe that reserves off the north-west coast could be as high as 1,000 million barrels. Thus, the Government decision to pursue resource rent tax was made in the heady atmosphere of considerable optimism, not to say a touch of euphoria-at least euphoria for revenue raisers. But current estimates are for less than 20 million barrels at Jabiru and possibly 40 million barrels at Challis. This means that, instead of the anticipated 95 per cent self-sufficiency in crude for Australia in 1990, we can expect only about 65 per cent self-sufficiency in that year. The implications are considerable. At current world prices, and current dollar values, the oil import bill for Australia in 1990 could be as high as $3 billion, compared with just a $44m import bill in 1985-86. I need hardly emphasise what this will mean. We can be sure that, given the deterioration in Australia's terms of trade and escalation on gross foreign debt to more than $100 billion under this Government, a fast escalating fuel import bill will be a sure step in the direction of the Treasurer's banana republic. The priority now is to maximise our economic resources to reduce and, if possible, head off that oil import bill.

I return now to the Government's justification for the resource rent tax. No one would argue with the premise that petroleum is a community resource and that the community has a right to share in the profits available from the development or the utilisation of that resource, but we should bear in mind that in 1985-86 oil producers contributed more than $1 billion in company tax and royalties, better than $200m in State royalties, plus the $4 billion which went to the Government from the crude oil excise. We also need to bear in mind that a strong oil exploration base is essential to reduce future oil import bills. The Government has to stop viewing the industry as a bottomless well and as some sort of milch-cow from which it can extract the funds to oil its extravagant expenditures. It has to realise that there is a point at which the exploration industry will simply cease to explore rather than take the risks, with little or no certainty of overall profitable return. The Government has completely failed to take into account the cost of failures in exploration in seeking to impose this tax upon the successes. The resource rent tax concept, in effect, will take more tax from large fields and less from small fields. Thus, the likely effect of the tax will be to shift exploration away from projects which are most likely to add significantly to national reserves and towards lower risk and lower volume prospects. In short, it will dampen the overall risk-taking position of explorers, and Australia will be the loser.

I concede that probably neither Jabiru nor Challis would have been developed under the excise-royalty regime, and that further exploration on the same permit would not occur without the resource rent tax deductions. But that is more of an indictment of the total tax regime than it is a plus for resource rent tax. This Government has to take notice of the warnings that it has been receiving from the industry for some time. In April last year the Economic Planning Advisory Council was warned in no uncertain terms that the Government would need to cease its reliance on oil revenues. I quote:

The Federal Government cannot continue to rely on the petroleum production industry as a major source of revenue beyond the short term. If no major discoveries are made, and if prices flatten out or fall in Australian dollar terms, the urgency of restructuring the tax base to find an alternative source of revenue will increase.

We have now reached that situation, yet we are debating a Bill which will have as its main effect a dampening of future exploration. Small wonder that the Australian Petroleum Exploration Association now spends most of its time and effort putting submissions to this Government on alternatives for a future tax structure. Like other areas of Australian industry, it has concluded that the Hawke Government does not have the courage to tackle what is a priority task for the whole of Australia.