4AUSTRALIA
PRIME MINISTER
FOR MEDIA 15 OCTOBER 1979
OPENING OF NATIONAL CONFERENCE ON ENERGY CONSERVATION
I am very pleased to be here to open this conference this
morning because it is an important one. Energy is a matter
that concerns Australia, it concerns every country around
the world.
International concern has risen to new heights in recent
times because of oil shortages, because of concern about
the availability of fuel to keep our industries moving, and
also because of the price of energy and the rapid increase
in that price.
The confej~ ence will increase public awareness of these energy
problems, and I hope also increase public awareness of what
is being done about it. It is an opportunity to get a
better understanding of the different ways of coping with
our energy needs.
I would like to turn back a little in history. In 1973-74
there was the first major energy crisis. oil prices
quadrupled in a short period. As a result of that, and as
a result of inadequate national policies, inflation in OECD
countries rose from an average of something under 8% to
between 13% and 14%. That had a very significant impact on
world growth, on world trade. I believe that many economies
haven't really worked their way out of the difficulties-. posed
by that first majo~ r increase in oil prices.
A change in economic policy was clearly needed in many
countries a much greater attack on inflation than in fact
occurred. Certainly a change in energy policy was needed
in many countries, and that also did not occur. It seemed
that the major industrialised world ignored the warning that
came from that first energy crisis. Economic policies weren't
changed, and energy policies weren't changed. The world chose
to prefer to believe that there wasn't really a crisis, that
there wasn't really a shortage, that it would not really occur
again. Last year of course made it perfectly plain that it could
occur again--from different causes--but the energy crisis,
from Iran's policies, is now with us.
The economic policies post the first oil crisis, continued
excessive government spending, had the result that by the
end of 1978 inflation was still too high. In many countries
it was starting to rise again. That long period of inflation
through the 1970' s weakened many countries, weakened major
industrialised nations, so that they were less well able to
withstand the difficulties posed by the current round of oil
price increases.
The energy policies that countries had continued t he excessive
useage of a scarce resource. A combination of the inadequate
economic and energy policies has meant very plainly that in
1978 the world was much less able to withstand what came out
of the Iranian crisis than might otherwise have been the
case. The world was ill-prepared for the shortage of oil
and ill-prepared for the increase in oil prices that were
inevitable results of it.
Over the last twelve months there has been a 50% increase in
oil prices. That has reinforced inflationary pressures, it
has re-emphasised the need for adequate oil and energy policies,
and in the grim reality of a world shortage and the problems
that can flow from that, the world is at last starting to act--
too late and probably still too little.
A number of countries have introduced energy conservation
policies. Most countries regard pricing as a central element
in any conservation program. Other policies of course include
grants and subsidies for energy research and development, for
energy conservation, particular policies designed to encourage
the use of alternative forms of energy. Tax incentives and
loan schemes are part of this general package of policies from
a number of countries.
The concern that is now felt around the world is epitomised by
decisions that were taken at the Tokyo summit conference last
July. That conference concentrated almost totally on energy
problems, on the problems of oil. Therefore there was
agreement to adopt oil import targets, to participate -in
international energy technology group, and to introduce a
registration system which willmonitor spot markets and make
for a more informed world oil market.
Again, with a little more foresight, we might have believed
that the major countries would have undertaken policies of
that kind much earlier. It also ought to be noted, that in
spite of the decisions taken at Tokyo, there are many who
believe there are still some serious deficiencies in major
countries' energy policies.
oil conservation policies should lead to a greater use of
alternative forms of fuel, a greater use of coal, of gas,
and a greater use of uranium. Many countries have a growing
dependence on uranium. President Carter said in his Kansas City
speech that nuclear powzer must play an important role in the
United States to make sure the United States energy future.
Nuclear power is already an important source of electricity
generation in countries like Belgium, Sweden and Switzerland.
In Belgium and Sweden 25% of their power is already dependent
upon nuclear sources.
The Australian Atomic Energy Commission forecasts that by 1983
of electricity generated in the E. E. C. will come from
nuclear power. For example, by 1985 France could be obtaining
of its electric power from nuclear generation; by 1981
of Switzerland's power is likely to be from nuclear generation.
The number of countries adopting nuclear power facilities continues
to expand. An inevitable process I believe has been begun towards
greater use of nuclear power. By the end of this century there
will be many countries that will be heavily reliant on nuclear
power for electricity generation. Countries such as Korea, the
United Kingdom, Brazil, and in the OECD area as a whole well over
of the power generated is likely to be from nuclear sources.
We are of course concerned with Australia's own energy policies
and the problems of energy within Australia. In the comprehensive
policy that we are now pursuing there are three main objectives:
conservation of a scarce resource, the greater use of alternative
sources of energy, and greater exploration and development within
Australia itself.
Whether we like it or not, world parity pricing is a central
element in pursuit of each of those major policy objectives.
oil is a scarce resource, We need to pay a market price
for it. We can't pretend that it is not a scarce resource.
A pricing policy is needed for conservation. If we had
alternative policies some kind of subsidisation, some kind
of artificially low price for oil there clearly would be
an excessive use. Clearly there would be many people who would
stay with oil when they should be going to alternative forms
of energy. That would lead to an inevitable massive dislocation
at some later point.
The Government made the decision that it was better to move to
world parity pricing so that the later problems for Australian
industry, for Australian consumers, could be minimised, so that
we can face the reality of the current situation. That obviously
means a short run of substantial increases in oil prices as we
have had. But we strongly believe that it is best, and indeed
important, for the long run health of the Australian economy.
I don't see any conflict between that pricing policy and the
fight against inflation, because some price rises are quite
inevitable. You don't really help the longer term fight against
inflation by suggesting that those pressures, those necessities,
don't exist where necessity has to be faced as it has been in
this country.
In the longer term if we are not prepared to pay world parity
pricing for oils produced within Australia, if we are to have
oil at all, we would have to pay oil parity price for oil
bought from overseas-atmuch greater cost to Australia's
balance of payments anid balance of trade, to a much greater
dependence on other oil producing and exporting countries.
I think we are much better to be pursuing our present policies
which will lead not only to conservation as time passes, but
also to greater exploration and to greater development within
Australia. It is also worth noting that even with world
parity pricing within this country, petrol is still cheap
compared with many other countries around the world. It
doesn't matter much if that is a result of other countries
having a higher level of tax on their fuel. The fact remains
that Australian petrol, at 2U'-30 a litre is not much more
than half the price in Britain, in Germany, the Netherlands,
in Italy where it is 60 in Japan where it is 62$, in France
where it is 64 a litre.
North America stands in marked contrast, with much cheaper
petrol than in Australia. But we all know that the United States
has not yet embraced a world parity pricing policy.
our policies are encouraging greater conservation, greater
use of alternative fuels: for example conversion to LPG;
tax incentives to switch from oil; greater research and
development; natural gas pipeline systems are being extended;
the spur line to Canberra is going to be built, connecting
at Gunning from the Moomba/ Sydney line, and the extension
from Young to Wagga and Cootamundra is proceeding, and
there is an " in principle" decision to extend that line to
Albury. That will create an Eastern gas pipeline grid connecting
the Cooper Basin and Bass Strait with Australia's major eastern
cities. That is important again in encouraging the use of
alternative forms of energy.
Exploration and development activity in Australia has been
increasing over the last year or two. Over the last two
years Bass Strait oil reserves have been proved up to an
extent of over 650 million barrels more than had earlier
been believed. That is equivalent to about three years'
additional consumption at current rates of usage.
In 1979 exploration and development is estimated to be.. a
record $ 390 million. That is a direct result of the Government's
petroleum energy policies.
Major oil development projects are underway. Additional
development expenditure of over $ 1 billion has been announced
for Bass Strait, Barrow Island, Dongara and the Cooper Basin.
There are increased refinery expansion programmes for Brisbane,
for Sydney, for Geelong and for Perth. The North-West Shelf
development a potential program of $ 3,000 million the final
feasibility study is nearing completion. I believe that
through the course of this year as each week has passed the
likelihood of that final feasibility study ending with a
positive result has grown.
The Government is increasingly optimistic of the outcome,
and has you know there has been considerable assistance
to foster the project, and a very considerable degree of
co-operation between the . Western Australian and the Commonwealth
governments. The joint ventures have reported a high level of
interest by utilities in Japan, the United States, and they
hope to sign letters of interest with Japan later this year.
I was speaking with my colleague, Doug Anthony, only a couple
of days ago in Japan, and the growing interest in Australia
as an increasingly important energy exporter is very evident
on all sides in that country, as I believe it is in many
others. In addition to 70% self-sufficiency in oil, Australia of course
has considerable quantities of coal, natural gas and uranium.
In an energy short world we need to ask ourselves how we are
going to develop those resources to Australia's greater advantage.
At present we are a net exporter of energy, one of the few of the
OECD countries. There is an enormous scope for an increase in
the straight export of energy in different forms. There is a
growing world trade in LNG, currently exporting about 1.7 million
tonnes, estimated to earn about $ 350 million this financial year.
With the North-West Shelf initial exports of 6.5 million tonnes
could come from that source in addition. That of course requires
the proper decisions launching the North-West Shelf, but we
believe that that will occur. At current prices that would earn
in the order of $ 1 billion a year.
We already export 38 million tonnes of coal a year, adding
billion to export earnings. Since 1976, with the policies
we have been pursuing, commitments to coal projects have added
or are in the process of adding a further 28 million tonnes to
our annual coal export capacity. Major new developments in
the Bowen Basin, major examples of which are Norwich Park arnd
Gregory, but there are numbers of others. The International
Energy Agency estimates Australian coal exports to rise to
200 million tonnes by the year 2000.
We have 20% of the world's low cost uranium, and the requirements
of the Western world are expected to triple by 1990. Australia
is well placed to meet its share of those particular needs.
There are major projects in the Northern Territory, Western
A-ustralia, and likely to be as I would believe in South Australia.
Safeguard agreements have already been signed with the-United States,
the United Kingdom, Finland, Korea and the Philippines, and now
it is up to the question of negotiating market contracts.
Apart from direct energy exports, we want to bring our great
resources together with abundant supplies of energy to gain
greater processing within Australia, to gain greater activity
within Australia. Quite plainly we don't want to be just a
" hole in the ground".
It is all the more important because the world economic situation
activity is likely to remain at low levels for some time. With
high inflation and no real sign that that inflation is going to
be mastered in a number of countries, world trade is likely to
grow at sluggish levels, around 4% a year, as it has through
most of the last decade, in stark contrast with the 8% a year
of the 20 years before 1972-73.
Against the background of a difficult world trading scene, we
in Australia need to develop policies that best help Australia
within a difficult trading world. That means bringing our / 6
energy sources together and our great natural resources and minerals
for greater processing, for greater development, within Australia.
A classic example of how this can be done is what is happening in
alumina and aluminium processing right at the very moment.
Processing of bauxite requires massive inputs of electricity.
This investment has been encouraged to Australia by adequate
supplies of coal-.-coal produced electricity--and as a result
there is $ 4 billion worth of investment firmly committed in
aluminium and aluminium development alone.
We are looking to see whether the same kind of bringing together
can't occur with different forms of resources, different natural
resources, exploiting the abundant energy supplies which are
largely coal-based electricity. I think this is one of the ways in
which we can secure a reasonable future for Australia through
the 1980s, even if the world trading scene is difficult and
hard. To be able to take full advantage of our resources we certainly
need greater development of power generation within Australia
itself. You probably will have heard of a major infrastructure
program in which States are, for the first time, given the
capacity to overseas funds to develop at a greater pace, major
resource projects within Australia. It is worth noting that a
very significant part of the initial approval has been for a
greater rate of development of electricity generation within
Australia. In New South Wales, the Eraring electricity project
of over $ 200 million; in Victoria, the Loy Yang electricity of
over $ 340 million; Queensland power stations of over $ 130 million;
and integrated power for the Pilbara of over $ 100 million.
Now, those sums all are in addition to the normal developmental
projects that would have been undertaken by electricity authorities
to enable a greater rate of electricity generation and development
to take place than would have otherwise been possible.
The Commonwealth is also proposing to appoint a committee of
inquiry into the feasibility of establishing a strongly-integrated
south east Australian electricity power-grid to give greater
security of supply and greater strength of supply to users in
the south east of Australia. It is worth noting that Victoria
and South Australia, and also Tasmania, are very interested
in that particular proposal. I would have thought that it
would be greatly improved if New South Wales were also
interested. I find it hard to understand why New South Wales
as a major industrial State, at this stage, proposes to stand
out in that particular study.
If we are to maximnise the opportunities for Australia
in an energy short world, if we are to bring together greater
development in Australia's great mineral resources, coupled with
greater use of Australia's abundant supplies of coal-based
electricity, we need to make sure that Australia pursues adequate
economic policies because without that, nothing is likely to occur.
Therefore, our objectives in economic policy have been over the
last four years, to establish the conditions for sound economic / 7
growth, to continue a downward pressure on inflation, to improve
profitability, to control the size of the public sector deficit,
and to increase business confidence. In all those arenas, I believe,
significant success is being achieved.
Over the last three years, the budget has held Government spending
virtually constant in real terms. It is the first time that has
happened for a very, very long while in Australia maybe
the first time for any government. I certainly note that the
States have not been able to pursue the same degree of restraint
over the last three years.
The Commtonwealth deficit four years ago was five per cent of
Gross Domestic Product. This year it will be less, on Treasury
advice, than two per cent, less than most O. E. C. D. countries,
and the domestic deficit less than half of last years. The money
supply has been controlled. Four years ago it was running around
percent -at the moment, between 10 and 11 per cent.
The policies we have been pursuing have been, and are, producing
results. Australia's inflation over the last six months of about
nine per cent, certainly new inflationary pressures that we do
not like, certainl. y we will see higher inflation in the September
and in the December quarters, but that is predicted. That is known.
The movements that will cause that have already occured and nothing
can be done about it. But Australia is restraining those increased
inflationary pressures a good deal better than a number of other
countries. European O. E. C. D countries now have an annual inflation
rate of between 13 and 14 per cent, the United State ' s around
14 per cent on the basis of the last six months' figures, the
United Kingdom of over 23 per cent. Australia's figure of
around 9 per cent compares favourably indeed with those others.
As a result, competitiveness has returned to the level of the
early 1970s and exports are growing strongly again as they
have not for many years. There is an improved trade
and current accounts. Mining and manufacturing investment,
fjrmly committed or in the final feasibility stage, now stands
at about $ 13 billion worth of projects right around Australia.
Overseas investment through the last part of last year, moved
more strongly into this country than in any period for nearly
ten years. All, of that shows increased confidence in
Australia, Australia's policies and in the Australian economy.
That becomes all the more relevant again when we take it that
it is the Government's objective to attract to this country
a greater than its normal share of investment and major resource
projects and putting those resources together with abundant
supplies of energy to secure greater activity and greater
investment and development in this country than would otherwise
take place.
This is particularly important in a world economy where there are
many unresolved problems where the trade growth is slowed
and is likely to remain slow because inflation is too high,
and in many countries, is rising. That in itself leads to
exchange rate instability in a number of countries overseas,
and on top of that, there are energy uncertaintities as a
result of the effect of Iran over the last 12 to 15 months.
8.
But against that total background, Australia is well prepared
to face the 1980s, and in a difficult trading world, we should
more than maintain our position in world trade against the
background of current policies. We do have many advantages
in this country great resources, abundant supplies of
certain forms of energy, policies that are designed to achieve
economic and political stability. Putting these things together
makes Australia one of the stronger economies of the world,
with stronger possibilities than many countries than maybe
almost any other country.
I think against that background, we need to face the future
future with a very great degree of confidence. Today's programme,
designed to emphasise the importance of fuel conservation, is
a very important part of our total approach to Australia's
future. There are real shortages of oil, and nobody can
suggest any more that it is a phony shortage or something
that is caused by the major oil companies to jack up prices.
I do not think there are many people who believe that kind
of story, at this point, as we approach the 1980s.
Therefore, it is important that we all do what we can to
achieve a greater conservation in the use of a scarce resource
and greater use of alternative forms of energy. Plainly,
Government policies can be important. In many cases they
can be quite criticial to the success of that conservation
programme, they can be quite critical to the success and the
achievement of alternative forms of energy. But, to the extent
that business industry and people right around the country
can co-operate in those programmes in the conservation of a
scarce resource, then not only is the Australian economy
strengthened but an important national objective is brought
closer This is not just an Australian national objective,
it is a part of a world-wide objective to achieve greater
care in the use of an important and scarce world resource.
So the contributions that individual Australians can make
can yield important national and international objectives.
This programme has the Government's full support, and
Mr Chairman, I wish you well during the period of this
conference, and during the period of the programme.
I certainly hope that it is thoroughly successful. I believe
that with the care and the preparation that has gone into it,
it certainly ought to be.
I have great pleasure in declaring the National Conference on
Energy Conservation, officially open.