Subjects: fuel pricing.
E&OE................................
Ladies and gentlemen, Mr Anderson and I have called this news conference to announce a number of decisions the Government has taken in relation to excise and related issues concerning the price of fuel in Australia.
The first announcement is that with effect from tomorrow, fuel excise will be reduced by 1.5 cents/litre. The ACCC will be given special power to monitor the passing on of the reduction in excise and also the delivery of the Fuel Subsidy Scheme that was introduced when the goods and services tax was introduced last year. We are also asking the ACCC to examine in consultation with those involved in the market place the feasibility of imposing a cap on fluctuations in retail fuel prices throughout Australia.
The next element of the Government's decision is that we will legislate immediately to abolish all future half-yearly indexation of fuel excise. So that if that legislation is passed by the Parliament, there will be no further half-yearly indexation of fuel excise. That will bring to an end the half-yearly indexation of fuel excise first introduced in Australia by the Hawke Government in 1983. It will impose what motorists will see as a very welcome discipline on future governments.
We propose to have an inquiry also into the total structure of fuel taxation in Australia. The terms of reference of that inquiry will be revealed after discussions with interested parties. The terms of reference will, amongst other things, impose a requirement that any recommendations observe the principle of revenue neutrality.
Before taking your questions, can I just underline the fact that in reaching this decision, the Government has had to balance the evident concern and anger of the Australian people about the price of petrol with a need to retain a Budget surplus and through that Budget surplus continue to signal the very strong commitment of the Government to responsible, economic management.
These decisions will be variously described by different people. Let me make it clear that I was plainly wrong in not understanding some of the concerns held by the Australian people about the price of petrol and I acknowledge that. And I think it's important that the response of the Government be seen in the context of it being willing to acknowledge that the priorities that it thought were right were not necessarily on this issue the priorities given by the Australian people.
We believe now that through a combination of the $1.6 billion of additional money into local roads and the changes that I have announced today, we believe that we have responded to the legitimate concerns of Australian motorists all over the country to the maximum extent consistent with economic responsibility. I don't pretend for a moment that this has been an easy issue for the Government. Mr Anderson and I who've had very lengthy discussions about it essentially came to the same conclusion at around about the same time, that there did need to be an additional demonstration of Government response and Government flexibility. I will be very happy to answer any questions.
JOURNALIST:
Mr Howard, you said you were wrong in not understanding the depth of feeling of the Australan people about the issue, were you also wrong when you argued so many times over the last few months that it would be economically irresponsible to act on both roads and fuel simultaneously?
PRIME MINISTER:
Well what we've done in relation to that is acknowledge that there'll need to be a further reordering of the Government's priorities. There will be some things that we would otherwise have done in the upcoming Budget that we'll no longer be able to do. The measures I've announced today will have an impact of $555 million on the Budget next year. The impact on the Budget will grow in future years as the impact of the abolition of automatic indexation accelerates. And that will impose in the eyes of many in the community a very welcome discipline on the budget-making of future governments. On the question of affordability, can I draw your attention to the fact that the underlying cash surplus for the next financial year, as projected in the mid-year economic and fiscal outlook was $4.7 billion. Since then the Government has taken a number of decisions, on a number of important issues, all of which were needed. Firstly there was the Roads to Recovery Programme; secondly there was the Innovation and Science commitment; thirdly there was the flood relief assistance package and finally there was the simplification package for the Business Activity Statement and the Pay As You Go system.
These policy initiatives together a number of other lesser initiatives are estimated, by themselves, to have reduced that underlying cash surplus to in the order of $3.2 billion. Given the fact that, although strong growth is still expected, there could be some further impact on that projection from a growth moderation, it would plainly not be prudent to go any further in relation to reduction in excise. We are very conscious of the need to preserve the balance between on the one hand fiscal restraint and on the other hand, sensitivity and understanding of the concerns of the Australian public. The reality is that for the average motorists, depending broadly on how you might define that person, using the average family car over the last three years the cost of running that car has probably gone up between $15 and $20 a week. And that has clearly had a very significant impact and incidentally that is relevant in relation to those people who argue that there is an automatic GST windfall as a result of increases in the price of petrol because you do have to make allowance for the substitution effect. If you're spending more on petrol you're spending less on other things and you therefore do not necessarily have increased goods and services tax collection.
JOURNALIST:
Why have you decided to act now, why now and not two weeks ago [inaudible]?
PRIME MINISTER:
Well there are a whole host of reasons for that Denis. We decided to act now because we believe that was undeniably public anger and you can interpret that in any way you wish. I won't endeavour to sort of beat about the bush regarding that. Of course there's public anger expressed in all sorts of different ways and anybody in my position who ignores that is being foolish. But in responding to it I have to do it within the parameters of economic responsibility. I can't be plainer than that.
JOURNALIST:
Prime Minister, you did say that you and the Deputy Prime Minister came to the conclusion at the same time, what precipatated that, was there an event.?
PRIME MINISTER:
Well we talk regularly. I mean Mr Anderson can speak for himself on that subject but we do talk very regularly.
DEPUTY PRIME MINISTER:
Well for my part, as indeed I said in places like Corowa last week, when we were faced with that difficult call last year about concern on the one hand over excise increases but the need to do more on local roads on the other, concluded that we felt that local roads was a priority. And I said at the time that I took that on the chin. But moving through a vast swathe of New South Wales last week, talking to people I came to realise that indeed the community view was just overwhelming that there'd been an issue of faith and understanding here that needed to be restored. The Prime Minister and I were talking about this regularly and I don't think he would mind me revealing that on Saturday we spoke, on Saturday morning and we'd both come to pretty much the same conclusion and pretty much the same view on what needed to be done if you like to re-establish that rapport between elected and electors. And that's incredibly important to the Government from my point of view. If the government's to function well and if people in my position are going to be able to communicate with the people they represent.
JOURNALIST:
Mr Anderson, would you characterise this change in policy.
PRIME MINISTER:
Are you addressing that to me or to Mr Anderson?
JOURNALIST:
No, Mr Anderson.
PRIME MINISTER:
I am sorry. I'd still like to hear it, though.
JOURNALIST:
Would you characterise this change in policy in the same terms that some of your colleagues were characterising the change in policy on the taxation of trusts as a win for the National Party?
DEPUTY PRIME MINISTER:
Oh no, look just the whole point really is that I think this is an issue that all Australians have been worried about and that both the Prime Minister and I as we've moved through the country and the cities, as we've talked to our own Members and Senators have reached the same conclusion on.
JOURNALIST:
Is the purpose of this not necessarily to significantly lower petrol prices but to re-establish that connection with.?
PRIME MINISTER:
Well that is . it is designed to do what governments should always do and that is respond to the strongly held feelings of the Australian community. The Australian community was, has clearly sent us a message that it's unhappy that we haven't done more - even though they recognise that the main reason petrol prices are high is because of the high price of crude oil, they recognise that - but they really think that we could have done a bit more. And they were obviously not persuaded about the argument on the cost savings last year when the GST was introduced. Even though when you look at the ACCC report you find there's plenty of evidence that there was an absorption of cost by the oil companies at the time of the introduction of the GST. So for all of those reasons we have come to the conclusion that we do need to recognise that concern, acknowledge that there has been an unwillingness for reasons they feel are well based to accept what the Government has said on that issue and others and through this not only to meet those concerns and re-establish that connection as John puts it very well, but also to make some contribution towards reducing the price of petrol at the bowser, I mean it will help a little. It's not going to cut it dramatically, I've never, you know, pretended that. The only way you can cut it dramatically is to see the world price fall.
But the good thing about this decision is that it just doesn't stop at the 1.5 cents. There's a lot of resentment in the community about automatic indexation of petrol, I know there's resentment about automatic indexation of alcohol and tobacco. I think there is some difference between petrol and those other two commodities because they are seen - no laughter - it's seen more as a necessity of life than perhaps the other two. And I think people will welcome the fact that governments are going to have to share the pain a bit more in the future in relation to increases in fuel prices. I think a lot of people felt, gee, this is a bit of a cop out for the Government. The world price goes up, that feeds into inflation, that has an impact through automatic indexation, we pay the bill and the Government collects more revenue through automatic indexation. Now, I think that's a pretty persuasive argument. And I think a lot of people will see what the Government has done, although it's going to impose quite a restraint on it in the future, it will be a restraint that the Australian public reckon they've had to live with and it's about time governments started to live with it too.
DEPUTY PRIME MINISTER:
Out in the bush, you know, when the pub runs out of beer, that's a worry, but if you can't afford the fuel, you haven't got the option of getting the transport or getting in a taxi - it's not just the pub you can't get to, you can't get your kids to school or anything.
JOURNALIST:
You've both mentioned beer and alcohol, are you planning to forego the 8% to 9% excise increase on beer?
PRIME MINISTER:
Our position on that remains the same. We're not announcing a willingness to forego anything in that area. I mean, we're still waiting.we'll put the legislation up in the normal way.
JOURNALIST:
Mr Howard, you talked about re-ordering.
PRIME MINISTER:
I'm sorry, can you start that again?
JOURNALIST:
Mr Howard, you talked about re-ordering, this would require reordering of priorities, does this mean income tax cuts are out now.
PRIME MINISTER:
Oh look, there's no point in my sort of talking about priorities that have been re-ordered when we haven't verbalised it even in the past. I'm not going to go into that. I just make the obvious point that this will limit the capacity of the Government to commit resources in other areas because there will be a budget.there's obviously a budget impact.
JOURNALIST:
Is there bad news for the welfare package?
PRIME MINISTER:
The welfare package will still be a big feature of the next budget. It's not bad news, no.
JOURNALIST:
Did the Ryan by-election play any part in this decision ?
PRIME MINISTER:
Look, I've tried to explain to you all of the factors that are involved. I can't really say any more or go any further than that. I mean, the reality is that whatever may have been the finite, discreet reasons as to why people voted in a particular fashion in particular States and why people reached particular conclusions, we had reached a situation where the public was clearly saying to us in a whole variety of ways, we don't think you've done enough on petrol, you can do a bit more and we think you can do a bit more consistent with economic responsibility.
JOURNALIST:
Prime Minister, are you concerned that voters may view this announcement with a degree of cynicism coming so close to the Ryan by-election?
PRIME MINISTER:
Well, look, I am at the mercy of whatever opinion voters form of any decision we take. I'm not a commentator, that is for you. I'm not going to make a judgement on that. I mean, I ask people to accept that we have genuinely tried to balance a desire to respond to the strong message they've sent us about the price of fuel and our sense of economic responsibility and we think we've got that balance right. We still remain the only government in Australia that will preserve Australia's economic strength but we do believe that we've found a way and a capacity to do a bit more because the Australian public wanted us to do a bit more because this is quite a painful economic thing at the present time.
JOURNALIST:
Prime Minister, if there is no automatic indexation from now on does that mean, you're saying it puts a discipline on governments, does that mean any rise in petrol tax has to be announced in a budget?
PRIME MINISTER:
It's got to be legislated, that's what it means and it's quite a discipline. I mean, bear in mind that.I mean, the former Coalition Government did not have automatic indexation. It was introduced by Mr Keating as Treasurer in the Hawke Government in 1983. I mean, this is abolishing an 18 year-old Hawke Government tax.
JOURNALIST:
Mr Howard, you've said the ACCC will monitor this, what do you say to retailers about their obligation to pass on the correct price cuts?
PRIME MINISTER:
Well, I would expect to see an immediate reduction and I think there will be a lot of people around Australia watching bowsers over the weekend - a lot, quite a lot, I mean, I invite them to do so.
JOURNALIST:
What special powers are you going to give the ACCC?
PRIME MINISTER:
Well, we're going to give them the sort of powers - I would have to look at the precise detail of this but the sort of powers that were were given to them in relation to the GST.
JOURNALIST:
Mr Howard, I'm going to ask you a question about the impact on the budget. Factored into this year's budget is I think $2.6 billion in spectrum sales which most market analysts believe the Government will be lucky to get 50% of. You've had this decision on top of the decision to abolish trusts. Aren't you putting a lot of pressure on interest rates through this decision.?
PRIME MINISTER:
No, I don't.well, I'm not going to speculate about the spectrum, you know, don't assume that I accept what you say about the spectrum.
JOURNALIST:
So you still think the $2.6 billion can be reached.
PRIME MINISTER:
Well look, I'm simply not going to speculate about that. We're in an auction situation. But all the advice I have is that the budget position is quite strong this year, quite strong this year. I mean, this year, the strength of this year's budget is not of concern to the government.
JOURNALIST:
Is there an estimate of the full cost of this package in terms of revenue.?
PRIME MINISTER:
Well the impact next year is $555 million. Well it grows in the outyears. I think in year...well I will make that available to you but it does grow in the outyears because there's a compounding effect both from the cut and also. But bear in mind that if you look at the mid-year economic and financial overview the outyears are very strongly in surplus.
JOURNALIST:
Can you explain, Mr Howard, please the exact position on indexation, is it that you have indexation each time, or the expectation of it and you have to legislate it each time, or are you abolishing automatic indexation?
PRIME MINISTER:
We're abolishing automatic indexation so that if you wanted.I thought I said that at the beginning that we are abolishing automatic indexation of excise in the future. In other words there will be no further automatic half-yearly indexation of fuel excise. I stress fuel excise. That will require legislation and what that means is that if a future government of whatever stripe wants to increase the excise on petrol that government will have to pass a bill to increase it. That's the point I'm making.
JOURNALIST:
When is the inquiry coming in and what options will be before that inquiry and will the Government be waiting for that before it decides the future of fuel tax?
PRIME MINISTER:
Well obviously if we're going to have it it wouldn't be a bad idea to listen to what it's got to say before we take any further fundamental decisions. But we've taken a pretty significant decision. I mean this decision today has what you might call a discretionary component and a structural component. The discretionary component is the cut, the structural component is the abolition of automatic half-yearly indexation. Now that is an enormous structural change in the area of fuel taxation and, I mean, for those who adopt a lazy approach to raising revenue this will not be welcome. But for those who believe that greater disciplines can be put on government it will be welcome.
JOURNALIST:
What is the inquiry, though?
PRIME MINISTER:
Well the inquiry will..the terms of reference of that we'll announce in the next week or two after we've talked to oil companies, we've talked to motoring organisations, we've talked to farm groups, other business groups, and also the service stations ? we'll always include them, a soft spot for service stations ?and make sure that they get a view as to how it ought to be conducted, and we'll get a representative group of people and then we'll announce the terms of reference. And I mean it will take some time to report. It's not something we expect to be done in three or six months.
JOURNALIST:
Mr Howard, in the last couple of weeks we've seen a backdown on BAS, we've seen changes in petrol and a backdown on trusts. The one issue that's still out there, which Mr Anderson has a strong interest in, is competition policy. When will the Government move on competition policy?
PRIME MINISTER:
Well we haven't..the government has no intention of abandoning competition policy but we do recognise that the way in which it is explained and communicated and the way in which it can in certain areas impact can be improved. But if you think we're going to abandon competition policy altogether, nobody's arguing for that. I mean if you abandon competition policy you'd have higher interest rates. I mean one of the reasons we have lower interest rates in Australia is because of an approach to competition. But that doesn't mean to say there aren't ways in which you can ensure that it is not seen as a niggly exercise in disturbance for local communities as distinct from providing overall competitive benefits. And I think there are ways in which its operation can be improved. Mr Anderson and I have had some discussions about that. But could I just say something about this whole business of backdowns, and you know, what I might call the you know the 'Mundine Syndrome' and so forth. Look any government that just sort of bends in the policy breeze is not very good. But equally any government that is so stubborn that says it's never wrong and should never be the least bit flexible is also not very good. And you've got to get the right balance. I mean we've put down some policy markers. We've put down, you know, surplus budgets, we've put down tax reform, industrial relations reform, lower interest rates, greater competition. Now we're not going to do anything to depart from those. But I'll tell you what we're going to be sensibly flexible where by being so we can respond to community concern and we can also maintain the integrity of our fundamental policy position. If you don't display a degree of flexibility you make your fundamental stance unsustainable and therefore the end result is much worse.
JOURNALIST:
With respect, Prime Minister, you wouldn't expect us to believe that the Government would be as flexible if there weren't these two devastating losses in Queensland and WA, surely?
PRIME MINISTER:
Once again, you're asking me to be a political commentator.
JOURNALIST:
But the rhetoric on petrol has only changed in the last week. I mean on Friday.
PRIME MINISTER:
I'm not going to have a debate with you, I mean you'll write what you will. I'm not going to be a commentator, that's for you. I'm not going to be a commentator on my own behaviour. The Australian people aren't interested in that, they're interested in what I can do as Prime Minister to address their concerns. And that's what I'm interested in doing. I'm not interested in anything else.
JOURNALIST:
[inaudible] Meg Lees [inaudible] supporting the GST?
PRIME MINISTER:
Look I think the best..I mean I respect Senator Lees. But the leadership of the Democrats is a matter for the Democrats. I don't think it helps for me to say anything. I've always found her can I say a person of great personal integrity and a person who's word is her bond. Beyond that I don't want to say anything else.
JOURNALIST:
Mr Howard, is there a message in this for the voters of Ryan?
PRIME MINISTER:
Look the only..I would like all of the Australian people to see this as the action of a government that has listened to their concerns and tried within the constraints of economic responsibility to do the right thing.
JOURNALIST:
Mr Howard, why do you think you so badly misread the public? Where you in fact out of touch as [inaudible]?
PRIME MINISTER:
Well once again that's asking me to indulge in a bit of commentary and I mean I can see a thousand columns as I look around and gaze at your faces and you know, a little nuance and a nip and tuck here and there. But that is really a matter for you to make that judgement. Look we have obviously gone through a lot of soul searching, we've obviously thought very long and hard about this and we've come to these conclusions. I mean, look it's been easy pickings for my opponent over the last couple of weeks, that's how things can be in politics. But as you know politics ebbs and flows and people come and go and people surge and slump. I've gone through a bad period, I've said that, and it's not likely to change for a while, but what you've got to keep doing is listening to people and addressing their concerns and that's what today's announcement is all about.
JOURNALIST:
Is the beefing up of the ACCC's powers an admission that the fuel sales grant scheme hasn't been passed onto country motorists?
PRIME MINISTER:
Well there have been some complaints. Mr Anderson would probably have more to say about that because he's certainly been going around listening to people on this, and he might wish to speak about that.
DEPUTY PRIME MINISTER:
Well just to make a comment, that it's actually quite a significant contribution to the wellbeing of country motorists. I want to ensure that it is working properly. We had a narrowing of the country-city differential after we introduced the GST, quite significant. I actually saw petrol prices in my hometown of Gunnedah, on individual days, at or below the price in the Prime Minister's electorate, which I have never seen before. But it's tended to, if you like, be something's that been a bit of a moving feast, and we want to make certain that the full benefit really is being passed on and continues to be passed on. Quite an investment by the Government.
JOURNALIST:
Mr Howard the most recent polls have had you on a dissatisfaction rating of something like 59%. How do you feel about that?
PRIME MINISTER:
Oh I've been in this game long enough not to sort of lose sleep about that, but look I read them, and I expect them to be bad at the moment. I'm not going to pretend to you I don't read polls, any politician who says that is kidding you. Of course we do, but by the same taken I also know there are great, sort of, fluctuations in mood and, you know, you just keep going. I don't, it's certainly not keeping me awake.
JOURNALIST:
Why will the mood change Mr Howard? Because of your actions?
PRIME MINISTER:
Well that's, well look, Michelle, once again you're asking me to give a commentary, and you're much better at that than I am.
JOURNALIST:
But you've invited this question because you say at the moment things are bad. What is going to make the change and why?
PRIME MINISTER:
Well, I'll answer that by sort of sticking to my last. And sticking to my last is taking good decisions for the benefit of the Australian people.
JOURNALIST:
Minister Anderson, just in terms of the ACCC, they already have been I think since August or November been looking into the fuel grants scheme. What extra powers..are they going to be given powers beyond that or be doing something extra?
DEPUTY PRIME MINISTER:
I don't think they need extra powers in that regard, they have a full capacity to look at it now.
JOURNALIST:
They've been looking for several months now.
DEPUTY PRIME MINISTER:
But that's right, and as I say, the gap has widened and closed a little from time to time, and that's concerning me. It came down well after the introduction of the GST.
PRIME MINISTER:
It did.
DEPUTY PRIME MINISTER:
There's been a bit of evidence that over the Christmas period it started to widen again. And we want to know why there isn't greater consistency frankly. And you know, I have to say, that, you know, you can understand why people in the community sometimes say the way these fuel prices fluctuate just doesn't make sense. Who's doing what? There's a lot of anger about that.
JOURNALIST:
Mr Anderson, do you claim credit, on behalf of your National Party constituency for pressuring your Coalition partner into doing this?
DEPUTY PRIME MINISTER:
No, look I was asked that question before. I mean there is a simple fact here, it's a recording of the fact. That we've work through these issues, we've listened to the people we have contact with, our own backbenchers, our own Senators, the people we move through. I have to say, from my own point of view, moving through a swathe of New South Wales, from the south to the north, as you know I did last week, drew me to a conclusion that happened to coincide and parallel very narrowly with the Prime Minister's, on this one. I think what that actually reflects is that the concerns were spread right across the Australia community, this wasn't a bush issue or a city issue, or one versus the other. And I just make the other comment, you know, that in the end, when you're asked to listen you have a responsibility to try and do that, I think, as elected members. And I do ask people in good faith, certainly, I think I speak for both of us when I say this, when we're asked to listen and you seek to respond, we do ask for a fair hearing on that.
JOURNALIST:
Mr Howard, you've had a succession of big hit policy announcements, which the polls would suggest people have not responded to positively. How big is the danger to you that the people aren't listening to you and won't respond to this?
PRIME MINISTER:
Well I'll ultimately find that out, I can't really say any more than that. I mean I'll ultimately find that out, but that's the immovable verity of politics. Thank you.
JOURNALIST:
Do you think you'll have a sixth anniversary?
PRIME MINISTER:
I'm working on it. But I'll tell you what, I don't take it for granted, I never have. I'm starting to see a little bit of hubris on the other side, you know, when we start talking about the Lodge and all that sort of stuff. I mean I have no idea of what the outcome of the election at the end of the year will be. And I just don't know. I've always said that, I think it will be very tough for us, I said that three months ago. And I haven't really changed, and I think the Australian public is quite capable of taking the right decision, and whatever decision they take it will be the right decision.
Thank you.
[ends]