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Thursday, 29 November 1973
Page: 2354

The PRESIDENT -Is leave granted? There being no objection leave is granted. (The speech read as follows)-

When the previous Government introduced the Airlines Agreements Bill 1972 towards the end of the previous Parliament, we who were then in Opposition expressed the view that it was inappropriate to enter into a further important agreement between the Government and Ansett Transport Industries Ltd and the Australian National Airlines Commission at that particular time. Nevertheless, the Parliament passed the legislation approving the 1972 Airlines Agreement.

One of the provisions of the 1961 Airlines Agreement broadly states that the Commonwealth, while implementing its policy of full recovery of the cost of facilities properly attributable to civil air transport, will not increase air navigation charges by more than 10 per cent in any one year. The 1972 Airlines Agreement reaffirmed this provision, but added a further clause in which the airlines agreed that the Commonwealth is entitled to fully recover from the air transport industry the costs properly attributable to the provision of facilities for civil air transport and that they would facilitate the implementation of measures taken by the Commonwealth for the purpose of achieving that objective.

Despite the clear reference to a policy of full cost recovery in the 1961 Airlines Agreement, the previous Government took very little positive action to achieve full recovery. In fact the recovery rate never reached 50 per cent. Also, notwithstanding the undertakings of the airlines in the 1972 Agreement to facilitate the implementation of Government measures to achieve full recovery, that Government did not increase air navigation charges last year by the full amount allowable under the agreements and in 1971-72 made no increase at all. Consequently, the deficiency of recovery of operating costs has continued to increase each year as is demonstrated by Table A, which I seek leave to have incorporated in Hansard.

This deficiency represents a subsidy, in varying degree, for each user of the civil aviation system. For instance, if considered from a view point of airline passengers and regarding each passenger carried as a separate individual, each of the 8 million passengers who travelled by air last year was subsidised by an average of $8.60 per journey. While this amount should be reduced to some extent to take account of other users of the facilities, it illustrates quite dramatically the extent of the burden borne by the taxpayers who do not participate in the aviation industry or avail themselves of the facilities provided.

Although the previous Government did not take the opportunity to increase air navigation charges to the fullest possible extent in the last 2 years, the limitation of any increase of the charges to Trans-Australia Airlines and ATI to 10 per cent in any year, as provided in the Airlines Agreements Act, did not permit the policy of full recovery to be effectively implemented.

The Government believes that the taxpayers who receive no benefit from the aviation facilities are entitled to seek relief from the burden of meeting the deficiency and that the Government would be remiss if it allowed the situation to continue unchecked. Therefore the Treasurer (Mr Crean) announced in his Budget speech the Government's conclusion that the cost recovery program should be expedited and that a positive target recovery rate of 80 per cent within 5 years had been set.

It was clear to the Government that, to implement this policy, the maximum increase in any one year to TAA and ATI of 10 per cent, as provided in the Airlines Agreements Act, would have to be increased. Accordingly these 2 airlines were advised of the Department of Civil Aviation forecasts of growth in the revenues and expenditure attributable to the operation and maintenance of airports and airway facilities and, to their credit, they readily agreed that an increase of more than 10 per cent was necessary. Calculations show that, if charges were increased by 1 5 per cent each year, there would be distinct prospects of achieving the target, provided reasonable growth of aircraft operation continued.

Amounts paid on aviation fuel tax have been included administratively as an item of revenue to offset the cost of operating and maintaining the aviation facilities. Here the aviation industry is in a favoured position when compared with road transport, because more than the amount received from aviation fuel tax is provided in aviation capital works whereas the fuel tax collected from road users is over 1.5 times the Australian Government's capital expenditure on roads. This is illustrated by Table B, which I seek leave to have incorporated in Hansard.

Also this Government has decided to spend $32.09m on upgrading urban transport. In 1972-73 capital expenditure on civil aviation works was $24.57m. In 1973-74 it is estimated it will reach $25. 22m. I make the observation that an average of about 23 million people use urban transport each week, whereas air travellers are a very much smaller cross section of the community, there being only about 160,000 airline passengers per week.

Trans-Australia Airlines and ATI have now entered into a further agreement with the Government under which it will be possible for the Government, if it considers it necessary, to increase air navigation charges by up to 15 per cent in any one year, including the year 1973-74. This agreement is attached to the Bill and is now submitted to the Parliament for approval.

Other provisions of the new agreement are to the effect that

(a)   any increase in air navigation charges will be considered in relation to submissions by the airlines for increases in air fares and freight rates;

(b)   the agreement itself will be reviewed in the second half of 1975 to have regard for the progress being made towards the desired cost recovery level;

(c)   international aircraft operators will be treated in the same way as the domestic airlines insofar as increases in air navigation charges are concerned; and

(d)   revenue from aviation fuel tax will be taken into account in assessing the level of cost recovery. This provision merely formalises the practice that has been followed for some time.

The new agreement does not mean that charges to TAA and ATI, who provide the bulk of the air navigation charges revenue from domestic airline operations, will automatically be increased by 15 per cent each year, nor does it depart from the principle contained in the 1961 Airlines Agreement that, in implementing the policy of full recovery, the Government will take into account the level of air fares, the rate of growth of the industry and the requirement of the airlines to provide a reasonable return on capital.

It may be of interest to honourable senators to know that the recent fare and freight rate increases granted to the airlines increased their tariffs by an average of 1 1.5 per cent, 8 per cent of which was a direct result of* increases in wages and salaries while 3 per cent resulted from increased fuel tax and half of 1 per cent from increased air navigation charges announced in the 1972-73 Budget.

In view of the substantial deficit in 1972-73, and the expectation that this deficit would increase in 1973-74 unless corrective action were taken, the Government has decided to raise charges from 1 December 1973 by 15 per cent, with additional increases related to the general aviation industry. These increases are embodied in the Bill to amend the Air Navigation (Charges) Act 1952-1972, which I will shortly present to the Senate for approval.

The Government is conscious that there is an obligation on it to ensure that expenditure on aviation facilities is kept to a minimum, consistent with safe and efficient operations. It has therefore instituted a very close scrutiny of the program of development of these facilities, with significant results. For example, capital works of the order of $3m which were included in the works program for the current year, will be deferred, and proposals for later years are being carefully examined. The Government believes also that it would be beneficial to consult with TAA and ATI on civil aviation works proposals each year to assist in minimising the costs which have to be recovered. The agreement provides accordingly.

The Government acknowledges the cooperation of the 2 major domestic airlines in entering into this new agreement, and recognises the need to administer its part of the contract in a responsible manner. However, it must have the option to increase air navigation charges by up to 1 5 per cent if it is to have a reasonable chance of moving towards the 80 per cent recovery objective during the next 5 years. The alternative is for the general taxpayer to continue to meet a substantial part of the rising costs of operating and maintaining the facilities used by those who travel by air.

This new agreement will provide for a more even handed approach to the question of meeting the costs attributable to civil aviation, with proper regard for the interests of the community as a whole as well as those of the airlines and the users of their services. I commend the Bill.



Debate (on motion by Senator Laucke) adjourned.

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