Transcript No. 2000/31

TRANSCRIPT OF

TREASURER

The Government will be introducing legislation as early as tomorrow, which will set up

a scheme under which grants can be paid to petrol retail stations in regional and remote

areas, which will allow a tiered grant, one cent a litre, and two cent a litre. If

necessary there could be a requirement for a three cent a litre tier. But one cent a litre

in regional, and two cent a litre in remote, which will ensure that for consumers, as a

result of tax reform, petrol prices need not rise. Now, for consumers, particularly in

regional and remote areas of Australia, that’s a benefit of some $500 million over

four years. And for consumers it means, whether you live in remote Australia or regional

Australia, you’ll have the benefits of tax reform, and petrol prices as a result of

tax reform need not rise. Of course, if you happen to be in business, wherever you are in

Australia, and if you’ve got a car in the business, and it’s used for the

business, then the costs will fall by about 10 per cent, because business gets all of its

GST back. And if you happen to be in rural or regional Australia, transport costs will

also be reduced because we’re reducing the excise on diesel used by trucks from 44

cents a litre to 24 cents a litre. So, that’s a $1.9 billion reduction in petrol and

diesel excise, plus $500 million benefit of grants to retail petrol stations in regional

and remote Australia, which will deliver in full the Government’s commitment to

ensure that petrol prices need not rise as a result of tax reform.

What will be the reduction in the petrol excise Treasurer?

The reduction in the petrol excise will be set for metropolitan area, so that the

reduction in the petrol excise will, with the introduction of the GST, will equalise the

price back to the price at the time we strike it. And with the grants in the regional and

remote area, equalise the price back on the same excise reduction.

Mr Costello, what (inaudible) that this will work when there’s been criticisms

made, say, in the South Australian scheme?

Oh, this will work because it’s a simple, straightforward scheme. In metropolitan

areas what you do is, you reduce the excise and add back the GST, so that prices need not

rise as a result of tax changes. In regional and remote areas, the price effect could be

one or two cents or less. And if you’re paying one or two cents per litre by way of a

grant, it equalises it back, and in some cases, could actually, when it is passed on in

full, be better for the consumer. But we want to make sure that you’re no worse off.

Some people will be better off, and that’s a bonus.

What’s your mechanism for ensuring it is passed on, because the criticism about

South Australia, and David Cumming from the RACV said, it isn’t passed on, grants

like these go into the hands of the operators?

Oh, you’ve got to make sure that the retailers pass the benefit on . . .

How do you do that?

. . . and we have set up a scheme with the Australian Competition and Consumer

Commission where people will be able to report on a hotline, where the Commission has

powers to prevent misleading deceptive conduct, and where there are $10 million fines

available. I think, the Minister for Financial Services and Regulation announced today

some of the actions that are being taken by the Australian Competition and Consumer

Commission. In relation to that, that’s a very active body with wide powers and heavy

fines at its disposal.

Mr Costello, on what basis have you determined that $125 million a year, $500 million

over four, will be sufficient to cut out the differential between the city and the

country?

On the basis of the prices in all of the areas where it’s currently collected at

the moment. The price of petrol is collected through hundreds of sites in Australia, and I

think it’s actually published, I’ve certainly seen those prices that are

collected. And if you look at those prices, we’re able to tell you quite precisely in

a particular location what the average price has been over a month, and so we are able to

quite precisely target to those petrol stations, a grant of either one cent a litre or two

cents a litre, which will ensure that in the regional and the remote, the price will be

equalised so that no one need be worse off after the grant has passed through in full.

How would you decide who’s regional and who’s remote?

We have a mechanism which we’ll be putting into the regulations which will define

this quite precisely, but the essential rule is, in regional, that is outside the suburbs

of the major metropolitan areas, it’s one cent a litre. In the remoter areas, where

the price is accordingly high, at two cents.

Treasurer, what does it do to the current differential between metropolitan and rural?

Will this formula maintain it with that same differential . . .

Should make sure that the current differential gets no worse. We’ve been putting

in place measures to reduce the current differential. And let me just remind you some of

the things that we’ve done. We accepted an ACCC recommendation that price should be

opened up to all comers by the oil companies. We got the oil companies to agree to that.

We also accepted the ACCC’s recommendation that you needed to get economies of scale

at the retail end, so that you’ve got more competition in retail areas in country

zones. And our proposal to allow that to occur was defeated in the Senate. The Labor

Party, as you recall, defeated that in the Senate, which as a consequence meant that our

proposals, which would have reduced the margins, were defeated. Politically defeated by

Labor in the Senate. So, we’ve had some partial success in implementing our policy,

but this is a policy which will ensure that the differential doesn’t widen.

How much is the whole scheme going to cost the Government?

$500 million over four years.

The whole three-pronged?

Well, if by the “three-pronged” you mean, the reduction in costs on diesel

transport and the reduction to business, the cuts which were featured in ANTS, the diesel

and excise cuts are $1.9 billion per annum. $1.9 billion in cuts in diesel and petrol. And

the grants scheme costs $500 million over four years.

What about costing the excise if the excise, in the election you talked about a seven

cent excise, it’s going to be struck at the time of this legislation, if it goes

higher than that there will be a cost.

It will be struck at the metropolitan rate at the strike date.

Which will be when?

Well, the Government’s going to retain flexibility to set the strike date.

It’s going to be before 1 July, I can assure you of that. But, we don’t want to

telegraph our punches, just in case anybody decides to try and drive up the price on a

particular strike date. I wouldn’t like to actually telegraph to producers or

retailers which day they could choose to drive the price up. So, I’m going to be

announcing it, which will be a price at a particular time, but it’ll be before the 30^th

of June. And I don’t recommend that people try and drive it up between now and the 30^th

of June, on every day between now and then, there’ll be a particular day.

Thanks.