Subjects: Subjects: Fuel prices; Army Reserves; UN Millennium Summit.
E&OE……………………………………………………………………………………
JONES:
Prime Minister Howard’s on the line. Prime Minister, good morning.
PRIME MINISTER:
Good morning Alan.
JONES:
Where are you Prime Minister?
PRIME MINISTER:
I’m in Ballarat, in Victoria.
JONES:
Nice and nippy?
PRIME MINISTER:
Very nippy. Nippier than Sydney, but bracing.
JONES:
Prime Minister . . .
PRIME MINISTER:
[inaudible] up early.
JONES:
Good on you, you’re always doing that. A Federal Parliamentary inquiry began yesterday into electronic and telephone banking fees and one submission to the inquiry said that most consumers claimed they were ignorant of how much they pay for electronic banking services and why they pay it. That’s true of what people do with petrol isn’t it? They’ve got no idea.
PRIME MINISTER:
Well many people don’t understand the pricing structure. They do understand though when the price goes up. And like every other person in Australia I don’t like the fact that the price of petrol has gone up. But it’s largely gone up because of overseas factors and . . .
JONES:
But you don’t, you’re the most experienced politician in this country and even you, and I won’t even ask you because it’s not possible, you couldn’t even tell me how a petrol, how they arrive at a price of 1.06 here or 99 cents there or 89 somewhere else. No-one knows.
PRIME MINISTER:
No, that is, that is true, but a lot of those variations are part of the normal marketing behaviour of oil companies and retailers. But the basic increase that’s occurred in the price of petrol and there’s no doubt there has been and I don’t like it anymore than your listeners, has been due overwhelmingly to the fact that the world price of oil has gone up. It’s also been due to the fact that the value of the Australian dollar against the American dollar, because world oil prices are set in United States dollars, the value of the Australian dollar has gone down therefore you need more Australian dollars for the US dollar equivalent to buy a barrel of oil. Can I just give you one figure, and I don’t want to blind you know people with a whole lot of figures, is that between April and August the retail price of petrol on average, this is capital cities, rose from 80.7 cents a litre to 92.6 cents a litre. Now that’s the average.
JONES:
Right.
PRIME MINISTER:
We know there are some above it, I accept that. Now that’s the average, now that’s a rise of 11.9 cents a litre. Now over the same period the refinery price, that’s the price that is paid for petrol before any taxes are added, now that’s to be stressed, rose by 12.2 cents a litre. That is in fact by 0.3 cents a litre more than the actual price at the pump. Now the point out of that is that the increase in retail prices over that period can be explained by the higher refinery prices which are in turn caused by the higher world prices. Now I know it’s easy at the moment for people to take shots at the Government and I accept the Government collects a lot of excise from petrol. This Government does, the Hawke and Keating Governments did, the Fraser Government did, all governments did. I don’t pretend for a moment that there isn’t tax collected from petrol. I don’t deny that it’s a commodity that has made a big contribution to the Federal Treasury for years, I accept that. But I do not accept that the recent increase has been due to taxes, that is wrong, completely wrong and the figures that I’ve given you just a moment ago clearly demonstrate that.
JONES:
Right, well let’s take another point you see because I am not absolutely certain that that is what the punter out there is worried about. Because I’ll just give you an extract from a letter and a letter, a person wrote to me and said, that he drove the Pacific Highway on Monday, and noticed all service stations displaying prices of 90.9 or 91.9 cents a litre. And then he says this, quote, having put in an honest day’s work on the trip home I was astounded to see all service stations displaying a price of 98.9 or 99.9 cents a litre he said. The Shell station at Chatswood deserves an honourable mention as its price had soared to 104.9 cents a litre. He said, quote you don’t have to be a brain surgeon to realise this has nothing to do with the price of crude oil per barrel, nothing to do with petrol excise, nothing to do with the impact of the GST. He said when are politicians as individuals or the Government as a whole, going to have the balls to make a stand to protect the motorist who is on a daily basis being ripped off either by the oil companies or by somebody. And that’s what they’re concerned about, no-one can explain how while that bloke is at work the price of petrol has gone up 8 cents a litre.
PRIME MINISTER:
Well, Alan I think he is concerned about that, but I think he’s also concerned about the fact that the price of petrol can’t be lower now than in the early 90’s whereas only a short while ago it was either in the late 70’s or early 80’s. I think he’s also concerned about that. Now there have always been variations in price between different outlets and that has always been the case with a lot of commodities. You will go to a Coles’ Supermarket or a Woolworths’ Supermarket or Franklins to be evenhanded against the big outlets, and you will buy something at a certain price, you will go to a corner store or more boutique deli and you will buy the same commodity at a much higher price. I mean there’s nothing uncommon within the marketing system we have in our country for those variations to occur.
JONES:
Yes, but they are profound variations, they are profound.
PRIME MINISTER:
Yes, but I have seen, I mean I have seen those variations, the variations you speak of, I’ve watched that as I’ve driven around my own electorate for example in places like Ryde and Eastwood. I’ve seen those sort of variations often . . .
JONES:
But I spoke to a service station proprietor yesterday who told me that Shell were charging him 99.34 cents a litre for unleaded petrol, $1.01 for leaded petrol, that’s before the bowser price. But the same company Shell, up the road are actually selling petrol for 89.9 cents a litre. Now what I am saying to you is I think haven’t we reached a point where there needs to be some understanding in the public about how these prices are set. Why wouldn’t you consider giving Alan Fels a commission to investigate the price structure of petrol?
PRIME MINISTER:
Well, he’s doing an investigation at the moment over allegations . . .
JONES:
Not on pricing.
PRIME MINISTER:
Pardon?
JONES:
Not on pricing.
PRIME MINISTER:
No, no, but we have had forty inquiries . . .
JONES:
Yes I know, but not on pricing.
PRIME MINISTER:
Well yes they have included pricing.
JONES:
See you used to have the Prices Surveillance Authority and they surveyed petrol prices every day, every day.
PRIME MINISTER:
They did, but you’ve always had some variation in price Alan. Now I mean I share the anger of people about these price variations, but to have a situation where you rigidly control at the retail level precisely the, the price to be charged is not realistic. And it will deny to a lot of people at the retail end of the market, the opportunity to compete for market, for market share. I mean there is, there is a level of competition between the oil companies for market share and those price variations are aggravating at the present time. If the world market were to go in the other direction then people would find that those sort of price variations could to be to their advantage because if the price of crude oil were to fall sharply and I don’t know what is going to happen in the future, then there would be a capacity for the oil companies and the retailers to engage in much heavier discounting and that heavy discounting would work to the advantage of the petrol consumer, to the motorist, to the average person.
JONES:
Let me just ask you, let me just ask you two questions that are central to all this. Peter Costello said on this excise that that’s the indexing and you’re just for the benefits of my listeners, the Government twice a year on February 1 and August 1, jacks up the price of petrol based on the previous six months consumer price index. Peter Costello said that was the price people had to pay for having pensions indexed. Prime Minister, when you drafted the Budget, if that were true, when you drafted the Budget, what was the crude oil price on which you made your Budget expenditure assumptions? And I am asking you that because I’m saying I venture to say that it wasn’t $US32 a barrel, $US33 a barrel.
PRIME MINISTER:
I know the question you’re asking, but with respect Alan the excise is fixed on the volume, it’s not fixed on the price. So therefore an increase in the price does not of itself affect the excise. You pay a fixed amount of excise per litre and if the, and that’s not determined by the price. It’s not increased or decreased if the price goes up or down. The GST component is affected if the . . .
JONES:
But my understanding is that for every one dollar of US, one dollar US increase in the barrel price that you pay, the Federal Government makes about $7 million a month in extra oil tax revenue.
PRIME MINISTER:
No, no the excise is a fixed amount.
JONES:
Well that’s not the only tax.
PRIME MINISTER:
No, but the other tax is the GST. And the GST will go up, but of course the GST under our arrangement is dedicated to the states, not to the Federal Government.
JONES:
All right, well let’s return to the inflationary issue. Let’s return to the inflationary issue then. You, when the GST came in, let’s take the inflationary issue, when the GST came in you made sure that pensioners weren’t going to be disadvantaged by the inflationary consequences of the GST by increasing pensions by 4%. Now come February 1 that inflation will have fed through and given that petrol prices are meant to rise according to inflation, surely to God it’s not fair to pass on that into the price of petrol in the excise on February 1. In other words, wouldn’t it be fair to cancel the February 1 excise?
PRIME MINISTER:
Well you could cancel that. The last indexation of excise in petrol added 0.6 cents a litre to the pump price of petrol. 0.6. So, what you are talking about is a cancellation of the 0.6.
JONES:
Well it would be more than that, won’t it?
PRIME MINISTER:
Hang on, can I just finish? I mean I think we’ve got to keep a sense of proportion here. Nobody is going to think that a variation in the price of 0.6 cents a litre is of enormous consequence.
JONES:
But that’s not my point.
PRIME MINISTER:
Beg your pardon?
JONES:
That’s not my point.
PRIME MINISTER:
Well I am sorry, what is your point?
JONES:
Well your point is that you admitted that there was a one-off inflationary consequence of the GST and that’s why you increased pensions by 4%.
PRIME MINISTER:
Yes.
JONES:
Now that one-off consequence of the GST is going to infect, affect the inflation figure on which you will decide to add excise on February 1.
PRIME MINISTER:
I am not denying, Alan I am sorry . .
JONES:
Well that’s very unfair isn’t it?
PRIME MINISTER:
I am not denying. Well when you say would it be fair to do that. I mean you could do it, but of course there would be a cost involved.
JONES:
Well you’re just making money out of the GST.
PRIME MINISTER:
No well when you say we’re making money out of the GST, I mean governments collect revenue and they spend it on roads and schools and hospitals and defence forces.
JONES:
No, but you’re passing on the inflationary consequence of the GST on February 1, into the petrol price.
PRIME MINISTER:
But the pension, but the people who get pensions and so forth, their pensions are further adjusted in accordance with any rises.
JONES:
No, but why would you pass on the one-off effect of the GST into the price of petrol?
PRIME MINISTER:
But Alan, when you say we make money out of something, that was all put in the Budget. There was no, there is no sleight of hand. We’re not getting, we’re not doing . . .
JONES:
I don’t think you understand the point I am making.
PRIME MINISTER:
Alan I do understand the point you’re making, and I don’t . . .
JONES:
There is a one-off impact of the GST, why should that one-off impact on February 1 be passed into the price of petrol. Wouldn’t it be fair to say there is a one-off component here on February 1 we will not add that into the price of petrol?
PRIME MINISTER:
Alan, you could do that, but of course if you did it with petrol, you would have to do it in relation to other . . .
JONES:
Cigarettes, and . . . grog.
PRIME MINISTER:
That would have very, that would have a significant cost to the Budget. Okay, I mean you can do that and it would have a cost . . . I’m not, I understand exactly the point you’re making, you could do that. But there would be a cost to the Budget and you would either be running down the surplus further, which at the present time would put upward pressure on interest rates.
JONES:
So there are no circumstances under which you would change the current excise arrangements as they affect the price of petrol?
PRIME MINISTER:
Well Alan we don’t believe it would be in the best interests of the overall economic situation to do that. We don’t and the reason is as I was about to say that there would be a cost involved in that and that cost would either be represented by a run down in the budget surplus which is bad at the present time because it would put upward pressure on interest rates and I don’t want that and I don’t think your listeners want that.
JONES:
Well in New South Wales we’ve got a three by three fuel tax which has been around for three of the longest years we’ve ever encountered. People in New South Wales are automatically paying an extra three cents a litre.
PRIME MINISTER:
Alan I understand that but I mean that’s something you might take up with the New South Wales government and leave me……
JONES:
I will. So there’s no circumstance under which you’d off the excise?
PRIME MINISTER:
Alan I answer for our policies. Alternatively you’ve got to find the money from somewhere else. I mean can I just say to your listeners Alan we can reduce the price of petrol by cutting the federal excise but if you want to make a noticeable impact on the price of petrol at the present time I reckon most of your listeners would want at least a five cent per litre reduction. Now five cents a litre would cost the federal budget $1.7 billion a year. Now no government in our position can just say well we’ll cut revenue by $1.7 billion without taking it out of somewhere else. Now in the end I’ve got to sort of answer these questions and I’ve got to say to people well yes or no. It’s easy for State premiers, it’s easy for motoring organisations, it’s easy for commentators to say we’re getting a certain amount of money for every litre of petrol that is sold. That has always been the case and it is true that the price of petrol could be cut if you cut the excise.
JONES:
Okay you made the point, you made the point. We better just take two things before you go. At the moment there are more than 500 Reservists serving as full-time troops overseas. They’ve got no guarantee as I understand it that they’ll have their normal jobs when they come back. Are you doing something about that?
PRIME MINISTER:
Yes. Later on this morning Bruce Scott, the Assistant Defence Minister, will be announcing some new arrangements which will provide greater support when we’re going to subsidise employers in relation to the costs incurred by those employers and also in relation to self employed reservists as a consequence of granting leave of absence to somebody who serves in the Reserve. And Bruce will also be making a number of other announcements. We’ve had a lot of negotiations with employer organisations. There’ve been discussions with the union movement as well and we are very keen to make it as attractive as possible to give……
JONES:
To be a Reservist.
PRIME MINISTER:
……to give people time off to serve in the Reserve and I think this announcement when it comes out will be very widely welcomed.
JONES:
Okay. And one other thing, plenty of talk about this Millennium Summit where the world leaders will gather in New York on the role of the future of the United Nations Wednesday September 6. Are you going?
PRIME MINISTER:
I am going and one of the main reasons I’m going is that I’ll be having a meeting with the South African President Thabo Mbeki and the British Prime Minister and the Indian Prime Minister and others to talk about the future of the Commonwealth. And the Commonwealth Heads of Government Meeting is coming to Brisbane next year, Australia is the host, and it’s very important as, along with those gentlemen, I’m on the working group discussing the Commonwealth’s future that I’ll be taking part in that in the margins of that meeting.
JONES:
Okay, thank you for your time.
PRIME MINISTER:
Okay.
[Ends]