Christian Porter (Pearce, Liberal Party, Parliamentary Secretary to the Prime Minister) Share this | Hansard source

It is a pleasure to rise and speak on yet another part of the coalition government's deregulation agenda—on this occasion the Telecommunications Legislation Amendment (Deregulation) Bill 2014. The deregulation agenda—as I have remarked previously and following on from the words of my learned predecessor—is about accumulation of a range of legislative, administrative and regulative changes that are meant to save money, time and costs in the economy.

I thought I might make this contribution by relying on a personal and bitter experience that I had in a previous position with regard to the costs of regulation and why this agenda is so important. Before I touch on that, I will just note that the savings in this particular piece of legislation, the Telecommunications Legislation Amendment (Deregulation) Bill, cumulatively over 10 years is $6.7 million. I would judge, looking at the overarching sweep of this legislation, that that probably fits in around about the bottom third of the cost savings in cumulative terms, but the cumulative cost savings build on other cumulative cost savings; they in turn accumulate, and this all goes to the very important measure in our economy of efficiency being total factor productivity. I thought I might move from a quick exposition of a personal experience about the cost of regulation and into total factor of productivity and make some observations about how the cumulative effect of all of the legislation that the coalition is putting through can help make inroads in this area.

The experience that I had was largely related to the mining industry in my previous position in Western Australia. What we experienced over the last six to seven years in Australia in total by virtue of a range of largely exogenous factors was that we had what I think could fairly be described as superheated commodity prices. What people do not realise is that, between about 1998 and 2000, during the time that Richard Court was Premier of Western Australia, per tonne iron ore was selling at about US$25 to US$30. To be colloquial and maybe a little hyperbolic, it was hard to give the stuff away, but there was a slow and steady increase in commodity prices. What we experienced in the last six to seven years was superheated commodity prices. We experienced, at its peak, iron ore selling at around US$180 to US$190 per tonne. Compare that to the 1990s when you were looking at US$25 to US$30 per tonne. We are now falling back down below the $80 per tonne barrier and to around the $60 per tonne barrier. That is a very, very significant difference. What that superheated commodity prices period meant was that we could paper over a lot of cracks in the Australian economy, such as things that were not working, costs that were too high and comparative inefficiencies.

I will give you one example that is probably the best example and the greatest canary in the coalmine of the Australian economy, which I must say personally shocked me. That was with respect to the Browse LNG project. That is, the Browse liquefied natural gas project. The grand plan was that that project would involve onshore construction of a liquefaction plant at a place in Western Australia called James Price Point. The work that led up to that expectation was years in the making and involved a range of very difficult environmental approvals and native title approvals. There was an extent to which costs were affected by issues of remoteness at James Price Point.

The reason that all of that intensity of effort—which occurred under the Barnett Liberal government in Western Australia and before that time—was put into it was that the project, had it been constructed onshore, would have been colossal. The original estimates of the construction costs were around about $52 billion worth of onshore construction. I must say, I find particularly it interesting in this place the amount of time, energy, effort and policy acumen that is devoted to industries which have had a history of failure and which have failed, but which in a qualitative sense are no more important—and, in fact, I would argue they are significantly less important—than some of the other industries that fail. The only difference is that the industries that are failing that we should be concerned about are the industries that we are very, very good at, in the sense that we have a comparative advantage in them.

The Browse LNG project at James Price Point was estimated originally at around about $52 billion worth of construction dollars onshore in Australia. Just to give some idea about the size of that, that represents construction in adjusted dollars for a project that would be five or six times bigger than the Snowy Mountains Hydro-Electric Scheme. Had this project gone ahead, that would have been representative of spending in the Australian economy of a quantum five or six times larger than the spending on the Snowy River scheme. I think that puts it in a reasonable context.

What happened ultimately was that the project did not go ahead and it did not go ahead because the joint-venture partners in the Browse Basin LNG project—Shell, Woodside and others—made an assessment that it may well be cheaper, possibly tens of billions of dollars cheaper, to attempt a floating LNG development rather than constructing an onshore plant at James Price Point near Broome. I am not of the view that offshore and floating LNG is necessarily a doom and gloom scenario. There will be multiplier effects out of that, but any rational economic assessment would have to land on a conclusion that onshore construction is far more valuable to the Australian economy and the Australian people than floating LNG for whatever benefits the latter might hold. To lose a project which was originally valued at $52 billion worth of onshore construction is a colossal failure and it is a real canary in the coalmine of the Australian economy.

Why did we lose that project? Why did this failure occur? Quite simply, it occurred because of productivity failures in the Australian economy. The JV partners basically did not build it because their original estimates of $52 billion, according to some sources, had escalated $80 billion by the time they came around to potentially making the trigger point decision about building the project. That was just viewed as far too high. The problem was a lack of productivity and immensely expensive onshore construction costs inside Australia.

The alternative that they are looking at, to again put this into perspective, is relatively speculative at this stage. It is a floating facility. At this scale, it is essentially untested technology. It is a floating facility that would comprise 260,000 tonnes of steel. That is more steel than what was used to build the Sydney Harbour Bridge. The vessel itself is longer than the Petronas Towers are tall and five or six times bigger than an aircraft carrier. But the JV partners, with respect to this gas field, made a decision that that alternative is a safe, cheaper and more cost-effective alternative than onshore construction in Australia.

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