George Brandis (Queensland, Liberal Party) Share this | Link to this | Hansard source

Overnight, the price of Malaysian Tapis crude oil reached $US82.07 per barrel. It is the price of Malaysian Tapis crude which determines the landed Australian price of oil and ultimately the cost to Australian motorists of petrol. In this day and age, almost all Australians are sophisticated enough to understand that with oil being an internationally traded commodity its price is set by the international market. It is not a matter over which domestic politicians have any influence whatever. Where domestic politicians influence the price of petrol at the pump is by the level of taxes and government charges. Last Thursday, at the first hearing of the Senate Economics Legislation Committee’s inquiry into petrol prices, the chairman of the Australian Competition and Consumer Commission, Mr Graeme Samuel, tabled a document sourced from the International Energy Agency which charts the base price of petrol, net of taxes and government charges, and the aggregate price of petrol, including taxes and government charges, across the 28 nations of the OECD for the March quarter of 2006.

The data show two things. First, the base petrol price is substantially uniform across the OECD. There is only a few cents per litre difference between the lowest base price, in some of the European nations, and the highest base price, in Japan and South Korea. Secondly, there is a very great deal of difference between the actual retail price of petrol because the tax regimes of the 28 OECD nations vary so much. Thus, the most expensive petrol, in Norway and the Netherlands, in the March quarter of 2006 cost on average $2.20 per litre, expressed in Australian dollars, while the cheapest, in Mexico and the United States, cost some 85c per litre. The base price varied hardly at all. The variable is that, while Mexican and American motorists pay direct taxes on petrol of between 10c and 15c per litre, Norwegian and Dutch motorists pay taxes of about $1.40 per litre. The data also show that Australians pay the fourth lowest petrol prices of the 28 nations of the OECD, behind Mexico, the United States and Canada. That is simply because we have the fourth lowest level of petrol taxation.

It is often forgotten that the excise charged on petrol in Australia was reduced in 2000 and in 2001, in two stages, by a total of 8.5c per litre, to 38.1c per litre, and has been frozen at that level ever since. Petrol excise is a volumetric tax, not an ad valorem tax—in other words, the excise is a function of quantity, not price. Contrary to popular misconceptions, it does not increase when the price goes up. Indeed, although demand for petroleum is largely inelastic, to the relatively small extent to which higher fuel prices affect demand, increases in price actually reduce the amount of excise collected by decreasing the quantity sold. Treasury calculates that, as a result of the two decisions in 2000 and 2001—the significant reduction in the excise and the freezing of the rate—the pump price of Australian petrol is now about 16.8c per litre lower than it would otherwise have been.

So these are the key facts about the price of petrol: the base price is determined on an international market and is substantially uniform throughout the world; the retail price fluctuates widely among nations as a result of different domestic fuel taxation regimes; Australia has one of the lowest fuel taxation regimes in the world and, as a result, Australians pay less for their petrol than almost anyone else—as I said before, the fourth lowest of the 28 comparable economies of the OECD. When Australians see their petrol prices rise, as we are seeing at the moment and may see for some time into the future yet, it is important for us to remember that that is because of fluctuations in the international price which we cannot control, not because of any action of government, and that as the prices rise government does not collect any more revenue as a result—in fact, it collects less.

Nobody doubts that Australian families are hurting because of the increase in the price of petrol. I want to make these points today—rather elementary points about the petroleum market, to be sure—because we are at the moment witnessing in Australia, against the background of the rise in the crude oil price and the consequent pain of rising petrol prices, some of the most discreditable, contemptible, intellectually dishonest populist politics I have ever seen. Some Labor politicians, including the shadow Treasurer, Mr Swan, and Ms Gillard, with whom I debated this topic on Lateline last Friday evening, have even gone so far as to assert that the increase in the price of petrol is at least partly the government’s fault because it has not given the Australian Competition and Consumer Commission enough powers to oversee and investigate the oil companies. Disappointingly, some other politicians, including Senator Barnaby Joyce and Senator Andrew Murray, have joined the populist chorus. I am particularly disappointed with Senator Murray, who can usually be counted upon to be more intellectually rigorous and sensible. Even the Fairfax press has, uncharacteristically, fallen prey to the populist wolves, if the remarkably artless editorial in Monday’s Sydney Morning Herald is anything to go by.

I think I can claim to know something about the operation of the Australian Competition and Consumer Commission, having for some years now chaired the Senate Economics Legislation Committee, which has parliamentary oversight of the ACCC, and having, in my former life, very often appeared both on behalf of and against it and its predecessor agency, the Trade Practices Commission, in a number of large competition cases, several of which concerned the petroleum industry. I have nothing but disdain for the spurious claims of politicians like Mr Swan, Ms Gillard and others who only offer sound-bite solutions to complex problems and whose uneducated views about the Trade Practices Act and the Australian Competition and Consumer Commission will not be taken seriously by anybody who knows what they are talking about. Their contribution to this discussion is not driven by a desire to inform the public or to improve public policy but by the basest political motives: to suggest that there is some way in which the Australian government, which has no influence over the price of crude oil and superintends one of the world’s lowest petrol tax regimes, is somehow responsible for higher petrol prices. So they set up a straw man and say that the government has not given the ACCC enough powers. That is not the case. The ACCC has plenty of powers, not merely to monitor petrol prices but to investigate and, where appropriate, to prosecute anticompetitive conduct within the petroleum industry.

In relation to price monitoring, the ACCC monitors price movements at some 3,600 sites across Australia, including sites in all capital cities and 110 regional cities and country towns. Comparing the current monitoring regime to that which existed under the old Prices Surveillance Authority, Mr Brian Cassidy, the Chief Executive Officer of the ACCC, told the Senate’s petrol inquiry last Thursday:

… I would argue that we have a more transparent set of arrangements now.

Only yesterday, the Treasurer, Mr Costello, announced a further extension of the ACCC’s price-monitoring function to include the price of ethanol-blended fuel or E10.

In relation to the enforcement of the substantive provisions of the act concerning anticompetitive conduct, and in particular price-fixing, the inquiry heard that the ACCC has since 2004 brought proceedings under section 45 of the Trade Practices Act on three occasions: in the Brisbane market, the Ballarat market and the Geelong market. In both the Brisbane case and the Ballarat case, the court found collusive conduct to have occurred and imposed substantial penalties: in the Brisbane case, $470,000 plus costs, and in the Ballarat case, $20,105,000 plus costs. In the Geelong case, the hearing has been finalised and the court has reserved its judgement.

When asked last Thursday whether he was satisfied with the powers of the ACCC to enforce the provisions of the Trade Practices Act, Mr Samuel repeatedly told the inquiry that he was well satisfied, that there was no deficiency in the act for want of which the ACCC was unable to do its job properly. Nobody who knows Mr Samuel—and I have come to know him quite well—could possibly describe him as a timid person; the opposite is true. Nor could anybody who is familiar with the culture of the ACCC suggest that it lacks a vigorous enforcement culture; once again, the opposite is the case. In fact, it is not uncommon to hear the ACCC criticised for being overzealously prosecutorial. The spurious, meretricious claims of politicians like Mr Swan and others that the ACCC lacks the powers to enforce the act have been specifically refuted by the very regulators whose task it is to do so and would not be taken seriously by any person with a thorough knowledge of the field.

Nevertheless, Mr Samuel and Mr Cassidy did make two observations which should be heeded—although neither of them was directed to the extent of the commission’s investigative powers. First, Mr Samuel expressed concern at a recent trend of decisions in the Federal Court, and in particular a decision of the Full Court of the Federal Court, in the case of Apco Service Stations Pty Ltd v ACCC, from which the High Court has recently refused special leave to appeal, which has tended to limit the reception by the courts of circumstantial evidence to prove collusive behaviour in a section 45 action. Since collusive conduct is intrinsically surreptitious, that is understandably a matter of real concern to a regulator, since it can only properly commence proceedings if it is satisfied to an appropriate threshold of the likelihood of success.

If Mr Samuel is right, then the ACCC, in enforcing section 45, will be reduced to relying upon a whistleblower, a ‘smoking gun’ document which records a collusive arrangement, or the collapse of a witness under cross-examination in a section 155 examination. Its opportunities of proof should not be so limited, and I suggested to Mr Samuel that perhaps a provision analogous to subsection 46(7), which permits proof by inference alone in a section 46 case, might be included in section 45 as well. This is the first time that the ACCC has called attention to this issue.

The second reform Mr Samuel suggested is something upon which the government has already acted—the introduction of criminal sanctions for breach of the provisions of part IV of the act, as recommended by the Dawson report. The government has already announced acceptance of that recommendation, and an exposure draft of the bill has been, or is about to be, sent to the state and territory governments for consultation, in accordance with the Competition Principles Agreement.

But there is another area of reform of the Trade Practices Act, not mentioned last Thursday by Mr Samuel, which is awaited. Last year, the government introduced the Trade Practices Legislation Amendment Bill (No. 1) 2005. This was an omnibus bill which gave effect to the other recommendations of the Dawson report, including, among other things, the extension to the ACCC of search warrant powers and a further significant increase in the level of civil penalties for contraventions of part IV to the greater of $10 million, or three times the gain from the contravention, or 10 per cent of the corporation’s annual turnover, for each contravention. These would be amongst the most severe penalties for anticompetitive conduct anywhere in the world.

The bill did not pass the Senate in its original form. It was amended, in a manner inconsistent with the recommendations of the Dawson report, by a collaboration of Labor, Green and Democrat senators, together with Senator Barnaby Joyce. It is a crowning irony that those who are now making spurious claims about the powerlessness of the ACCC to enforce the Trade Practices Act against the oil companies are the very same people who last year blocked in this chamber legislation which would, among other things, have given the ACCC even greater powers than it now has and prescribed even heavier penalties for collusive conduct than presently exist.