Tuesday, 5 May 1987 The PRESIDENT (Senator the Hon. Kerry Sibraa) took the chair at 2 p.m., and read prayers. The Clerk —Petitions have been lodged for presentation as follows: To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned respectfully showeth: That we consider the 2 per cent discounting of Commonwealth Occupational Superannuation Scheme pension adjustments on 10 October 1986 to be a serious breach of trust by the Government. The Commonwealth has reneged on an established commitment as incorporated in Commonwealth legislation and benefit promise pensions are not being paid in full. In particular we resent the long-term effect of the discounting. The pension loss is compounded throughout the life of a pensioner and surviving dependants-into the 21st century for many. We consider this government-induced penalty to be out of all proportion to the short-term ``extraordinary circumstances of the economy'' given as the reason for the discounting. Your petitioners most humbly pray that the Senate, in Parliament assembled, should urge the Government to: 1. limit the pension discounting effect of the Superannuation and Other Benefits Legislation Amendment Act 1986 to the period 10 October 1986 to 1 July 1987 so that pensions are restored to the 9 October 1986 level as a base for the 1987 pension adjustment; and 2. consult with organisations representing pensioners before changing the terms and conditions of Commonwealth Occupational Superannuation Schemes. And your petitioners as in duty bound will ever pray. by Senators Robertson (from eight citizens) and West (from 17 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned respectfully showeth: That there is widespread concern by farmers and consumers, about the proposal to irradiate food in Australia. Your petitioners, most humbly pray that the Senate in Parliament assembled, should (1) Block the introduction of food irradiation into Australia. (2) Ban the import of Cobalt-60 and Caesium-137 and Caesium-134 to be used to irradiate food products. (3) Ban the import of all machinery used for food irradiation (electron beam, X-ray etc.) (4) Ban the importation and sale of irradiated food in Australia. And your petitioners as in duty bound will ever pray. by Senator Macklin (from 664 citizens). To the Honourable the President and the members of the Senate in Parliament assembled. The petition of the undersigned respectfully showeth: That we most strongly oppose the process of `food irradiation' by Cobalt 60 or any other radioactive substance. That we oppose the introduction of regulations that will facilitate the food irradiation process being permitted by State Governments. That we express our deep concern at this attempt to extend the use of radioactive substances and exposure of workers to radiation. Your petitioners humbly pray that the Senate ban the importation of radioactive Cobalt 60 or other radioactive substances for the purpose of food irradiation and disallow regulations permitting the irradiation of food in Australia. And your petitioners as in duty bound will ever pray. by Senator Sanders (from 360 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned respectfully showeth that: 1. There is no legal barrier to the importation of X-rated videos into the A.C.T. or to their sale in the A.C.T. 2. The Government has ignored the repeated protests of the Senate and the people of Canberra on this situation. 3. As a result X-rated videos are being sold from Canberra to other States, although they are banned in all States. Your petitioners therefore ask the Senate to put pressure on the Government to ban the importation and sale of X-rated video material. And your petitioners as in duty bound will ever pray. by Senator Reid (from 10 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned citizens of Australia respectfully showeth that: 1. the continued presence in Australia of the United States bases make this country a target for nuclear attack; 2. these U.S. bases are integral parts of the global nuclear war machine; 3. Australia should be governed in the interests of Australians and foreign bases are not in our interests. Your petitioners most humbly pray that the Senate in Parliament assembled, should: support the Australian Democrats' Foreign Bases (Pine Gap Base) Removal Bill which requires the Government to wind up operations at the Joint Defence Space Research Facility-better known as Pine Gap, by terminating the agreement under which it operates in Australia. And your petitioners as in duty bound will ever pray. by Senator Macklin (from 51 citizens). To the Honourable the President and members of the Senate in Parliament assembled: We, the undersigned citizens of Australia, being concerned that the association of smoking with sport makes smoking attractive to children; and that the tobacco companies are exploiting the loophole in the law forbidding the advertising of cigarettes on television; and wishing to remove any chance that tobacco advertising might influence children to take up smoking; respectfully call on the Government to enforce the law which forbids the promotion of cigarettes on television through sports sponsorship. And your petitioners as in duty bound will ever pray. by Senator Sanders (from 28 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned citizens of Australia respectfully showeth that: Moreton Island is an invaluable natural resource for Queensland and the world and that mining on Moreton would gravely compromise its unique flora and fauna and its outstanding recreational archaeological and scientific values. Your petitioners most humbly pray that the Senate in Parliament assembled, should: urge the government to use its proven constitutional powers to halt sand mining on Moreton by supporting the Moreton Island Preservation Bill. And your petitioners as in duty bound will ever pray. by Senator Macklin (from 135 citizens). To the Honourable the President and members of the Senate in Parliament assembled: the humble petition of the undersigned citizens of Australia respectfully showeth: The Hawke Labor Government's high tax policies and the introduction of any new taxes including a wealth tax on the net wealth of individual Australians and Australian business is totally condemned and opposed. Your petitioners therefore humbly pray that the Senate in Parliament assembled should: Not introduce an investment destroying wealth tax into the Senate. And your petitioners as in duty bound will ever pray. by Senator Robertson (from 20 citizens). Petitions received. Senator VIGOR(South Australia) —I give notice that, on the next day of sitting, I shall move: That the 89th Series of Variations of the Plan of Layout of the City of Canberra and its Environs, dated 28 April 1987, and made under the Seat of Government (Administration) Act 1910, be disallowed. Senator DURACK —I refer the Acting Minister for Foreign Affairs to comments by the New Zealand Prime Minister, Mr Lange, following the now well-publicised visit to that country by Mr Hayden last week. Is it true, as claimed by Mr Lange, that `contrary to some speculation, New Zealand was able to tell Australia more about Libyan intervention in the Pacific than Australia'? Without revealing details of intelligence reports received by the Government, can the Minister tell the Senate whether Australian and New Zealand assessments of the potential threat from Libyan incursion into the Pacific are wholly compatible? Does the Australian Government agree with the New Zealand Prime Minister that the Libyan interest in the region is `a containable situation'? Senator GARETH EVANS —The Australian Government believes that the situation is containable but is, nonetheless, one that demands the serious attention of all the countries of the region, and it is exactly that serious attention which the issue is now getting. To the extent that any overcoloured emotion has been expressed in this issue, I think it is attributable to the media rather than to the actions or reactions of any of the political participants in the recent consultative process. As to the question of which government has the better intelligence, I simply say on behalf of the Government that we are reassured that both governments feel that they are properly and fully informed on this issue. I certainly do not want to get into some kind of intelligence olympics as to who might be better informed on certain issues. That sort of speculation is wholly counter-productive and not at all helpful to the basic problems that exist in the region and that need careful and calm consideration by all of the countries of the region. I mention further that within the next few days a senior officer of the Department of Fo-reign Affairs will consult with every member of the South Pacific Forum on the issues involved in this matter in order that the discussion that takes place at Apia in a few weeks' time will be frank and fully informed. Of course, it was with that objective in mind that Mr Hayden met Mr Lange in the first place. I emphasise that the sorts of things that emerged from their discussions and the sorts of issues that Australia wanted to raise with New Zealand will be shared with every other country in the region. Senator AULICH —My question is directed to the Minister representing the Minister for Aviation. The Minister will be aware from media reports that a certain well-known Melbourne businessman and prominent Liberal Party office-holder is possibly endangering his own life and those of other passengers by continuing to fly around the countryside in his corporate jet while not complying in all respects with the relevant air safety regulations. Can the Minister advise the Senate whether this person's plane complies with the regulations, and, if not, what the Government intends to do about it? Senator GIETZELT —There was a statement in a weekly publication of several weeks ago, which was brought to my attention, that Mr Elliott has gold seat-belt buckles in his private jet. As Minister representing the Minister for Aviation in this place, I obviously checked with the Department of Aviation whether the use of that sort of metal would constitute some safety problems. Of course, it may well be a breach of air safety regulations. I am not a metallurgist. I do not claim to have any expertise in this area. But I know that it is a soft metal and it would not meet the structural requirements for seat-belt buckles, which the Department tells me must be rigid in order to avoid deformation in the case of an accident. It would certainly be distressful to me as well as to many other people if the Liberal Party of Australia were to lose its Treasurer and the future member for Higgins if he were trapped in the burning wreckage of the Elders IXL company aircraft because the gold buckle was defective in carrying out its proper safety functions. This needless sort of opulence and ostentatious consumerism is indicative of the self-interest of some conservative business leaders such as Mr Elliott, who keep calling for substantial spending cuts in government sector spending while, I believe, neglecting to pay their fair share of tax. It is a case of people like Mr Elliott calling upon us to tighten our belts while they tighten the gold seat-belt buckles in their private jets. Senator HAMER —My question is to the Minister representing the Acting Minister for Foreign Affairs. I refer the Acting Minister to brief reports on the Foreign Minister's visit to Indonesia. Can he confirm that one of the issues discussed by Mr Hayden in Jakarta was the question of renewed representation of Australian media organisations in Indonesia? If so, and in the light of the recent visit to that country by the Managing Director of the Australian Broadcasting Corporation, can the Acting Minister say whether there is any prospect of an early return of Australian journalists to Jakarta? Despite the difficulties of the past, does the Government place a high priority on resumption of such representation as an important part of a full and open relationship between our two countries? Senator GARETH EVANS —The Government recognises that it is the prerogative of the Indonesian Government to determine its policy in respect of the news media, including foreign media representatives in that country. But we have made it clear on innumerable occasions that we would welcome very much the lifting of the current ban on Australian journalists visiting or residing in Indonesia and that we are hopeful that that will occur. As to what transpired on that issue between Mr Hayden and Dr Mochtar, at this stage all that I know is what Mr Hayden has already told the Press-that is, that he raised with Dr Mochtar the question of Australian journalists residing in or visiting Indonesia, and suggested that there was a case for reconsidering the restrictions placed on their entry. The prospects for that actually occurring are, at the moment, difficult to assess. All that I can say is that Mr Hayden was obviously received very well. The conversations that he had with both Dr Mochtar and, more particularly, President Suharto were amicable. There was agreement between him and President Suharto that government-to-government relations were in good shape and working well, notwithstanding the difficulties that have afflicted that relationship during the past year or so. I hope that the groundwork has been laid for a resumption of that media relationship, which we are obviously very anxious to recreate. Senator ROBERTSON —I direct my question to the Minister for Finance. What demands for public expenditure are likely to result, in the medium term, as a result of the disallowance last night of certain provisions in the northern prawn fishery management plan No. 12? What are the implications for marginal operators in the northern prawn fishing industry of the disallowance of those sections of the management plan? Will the Minister consult with the Minister for Primary Industry on means for the Commonwealth to make operators in the industry aware of the consequences of the passing of that motion? Senator WALSH —On the second part of that question, relating to the Senate's disallowance last night of certain sections of the Kerin plan, I can tell the honourable senator that the implications for marginal operators are bad, just as they are bad for non-marginal operators. The simple reason for that is that, following the Senate's rejection of the package, the implications for the whole of the industry are bad. It means that operating costs will be maintained at unnecessarily and avoidably high levels, and income will probably be reduced because of the degradation of the physical resource itself-that is, the prawn fishery. What everyone agreed about the northern prawn fishery was that there is excess capacity that must be reduced. Mr Kerin put up a package of proposals that contained some elements that should not have been included, such as deliberate curbs on technical progress, limitations on the numbers of nets that a boat could carry-in other words, institutionalised inefficiency. They should not have been in the package, but Mr Kerin accepted them as part of a package that, had it been accepted in total, would have guaranteed substantial improvements in the economics of the industry. The package also provided for a voluntary buy-back of boats or capacity over the next three years, financed partly by government grant-which has already been given-and partly by an industry levy. It also contained the provision that, if the voluntary buy-back scheme did not work, in 1990 there would be an across-the-board cut in the authorised capacity of all those still in the industry. As a result of last night's act of economic sabotage, executed by a coalition of economic ignoramuses and political opportunists, that third part of the package has been removed on the ground that the voluntary buy-back scheme would be quite satisfactory and would achieve the objective. It was simultaneously argued that the third part provided for the seizure of property without compensation. The two arguments put forward are mutually exclusive in that, if the voluntary buy-back scheme worked, there would be no need for across-the-board cuts in 1990. The description of the across-the-board cuts as a seizure of property without compensation was also a gross misrepresentation of the truth. In other words, the objection to the across-the-board cuts provision was used by the various opponents of the Kerin plan as an excuse for doing what they did-yet it would, by their reasoning and proclaimed belief, have had no relevance anyway. So much for the logic of it! The Opposition left in the package all those bits which were dubious or which should not have been there and cut out the one bit which made quite certain that it would ultimately be effective. The evidence so far suggests that a voluntary buy-back scheme will not work. The likely financial implications of that are that there will be heavy demands on the Commonwealth taxpayer at some time in the future for another heavy cash injection into this industry in order to solve its problems, demands which could have been avoided by an internally financed process of adjustment which is probably no longer viable because of the actions of that gaggle of opportunists who defeated this measure last night. That is because thanks to their actions the industry is unlikely to have the capacity to generate from its own sources the revenue which will be required to buy out some of the present operators and get capacity down to an economically sustainable long term level. Senator ROBERTSON —Mr President, I ask a supplementary question. I thank the Minister for his answer so far; however, I draw attention to the final section of my question, which is of particular interest to me. I ask whether the Minister will consult with the Minister for Primary Industry on means for the Commonwealth to make operators in the industry aware of the effects of the passing of that motion. Senator WALSH —I will certainly do that. Every time I get the opportunity to do so, I will also draw attention to the fact that this new breed of self-proclaimed economic rationalists in the Liberal Party, having finally got the National Party lead out of their saddlebags, went to water the first time they had an opportunity actually to test their self-proclaimed economic rationalism and danced to the National Party tune in exactly the same way as they have danced to the National Party tune since the days of `Black Jack' McEwen. Senator HAINES —Is the Minister representing the Treasurer aware of the so-called prepaid section 23q scheme? Does this scheme involve a promoter setting up a borrower in a tax haven where an investor lends money to the borrower at less than commercial rates of interest, the borrower prepaying the interest for a period of, say, five years while the investor pays a small withholding tax? Is the income from this interest prepayment tax free under section 23q of the Income Tax Assessment Act when it comes into Australia? If section 23q is repealed under the proposed foreign tax credit scheme, will the five years of prepaid interest remain tax exempt? Has the section 23q scheme been promoted as a replacement for the use of short term redeemable preference shares as a tax avoidance measure and have hundreds of millions of dollars flowed out of Australia under this scheme? If so, what action does the Government intend taking? Senator WALSH —The first question I was asked was whether I was aware of the alleged scheme as outlined. The answer is no, I was not aware of it until I read Senator Haines's question a few minutes ago. I have not been able to get an opinion from the Treasurer in the time available as to whether the allegations are soundly based or whether the scheme is even technically or legally feasible. I will seek a response from the Treasurer on that. In the end I was asked: `If it is true, what action does the Government intend to take?' I expect that the Government-this is all on the assumption that it is true-would announce an intention to legislate with application from that day. It is the Government's preference to stamp out absolutely this type of tax avoidance, such contrived and fraudulent attempts to deprive the Commonwealth of revenue, by legislating retrospectively. Once the credible threat of retrospective legislation was in place, such schemes would never appear in the first place. I find it incongruous, to say the least, to have the Australian Democrats sanctimoniously pointing in the Parliament to alleged tax avoidance schemes when most of them will not vote for legislation which would ensure that such schemes were finished for all time. Senator Haines —If you were on top of things, they would not get away with it. Senator WALSH —There is more sanctimony from somebody who voted, every time retrospective tax legislation came before this Parliament, in favour of the tax evaders. At least she is better than Senator Harradine, who used to vote one way on one occasion and another way on another, depending on whether his vote was critical to the passage of the legislation. If Senator Haines is really serious about stamping out alleged tax avoidance of this type and if she will give us a guarantee of support if the Government brings in legislation to wipe it out retrospectively and thereby wipe out all such future attempts to defraud the Commonwealth of revenue, she will support it, I will certainly talk to the Treasurer about bringing in legislation to close off this alleged tax avoidance scheme retrospectively. Senator JONES —Is the Minister representing the Minister for Employment and Industrial Relations aware that, in early April, the Queensland Government moved to increase markedly the superannuation benefits payable to Queensland's senior public servants? Does this type of action assist the Federal Government in pursuing its policy of wage moderation in Australia as a whole? If not, what general effect does this type of action have on the wage policy? Senator WALSH —I am aware of the recent actions of the Queensland Government; indeed, somebody living in Queensland was kind enough to post to me a copy of the Brisbane Courier-Mail editorial of 7 April. The editorial, which was highly critical of the Queensland Government's actions, said: Last year, Queensland's senior public servants received a salary increase of about $20,000 a year to nearly $100,000. That is as much as the Australian Capital Territory doctors union is trying to grab for the part time job which its members hold. In Queensland, senior public servants actually received a $20,000 increase in one year, but at least it was for a full time job. Their salary increased to nearly $100,000, according to the editorial. It continued: At the same time, their retirement benefits jumped from about $624,000 to an estimated $784,000. That was last year. It continued: Now, with the increased benefits, the payout figure rises to about $830,000 with the possibility of going over the million-dollar mark if the existing terms of service are renewed. The editorial continues, but I think that I have quoted enough to make the point. Employer superannuation contributions are part of the total cost of labour. The Commonwealth Government has been striving to see developments in the employer superannuation contributions field harmonised with the tribunal-based wage fixing system. Sweetheart deals over superannuation of the type that the Petersen regime has done outside the wage fixing principles are as much a problem as sweetheart deals over direct wages for length of the working week, et cetera. Although the Petersen regime fulminates about containing costs, it does sweetheart deals on the side with some of its own employees, giving them superannuation payouts of up to $830,000. Under those circumstances, it is much more difficult for any responsible government to ask ordinary Australian workers to display wage restraint. It is essential, if such calls are to be successful, that highly paid privileged people, such as those who work for the Petersen regime in Queensland, are not doing the opposite and ripping off the system. In short, the Queensland Government's actions are irresponsible on both fronts and they demonstrated, yet again, the hypocrisy of the Petersen regime. Senator COLLARD —My question is addressed to the Minister representing the Minister for Employment and Industrial Relations. A report in today's Australian highlights the loss suffered by one of our major export industries, grain, due to unauthorised strikes and stoppages. In another article Mr Willis admits that proposed Federal Government industrial legislation will not effectively override the major part of the Queensland Industrial Commercial Practices Act. I ask the Minister: Will his Government waste the valuable time of this Parliament in debating the proposed legislation, which even the Minister acknowledges to be inadequate? Is the Government, by seeking to counter this Queensland law, showing its subservience to the union movement and supporting the extreme actions which have severely damaged the income earning capacity of our major export industries, such as the grain industry, as indicated in the abovementioned article? Senator WALSH —I saw the article in the Australian to which Senator Collard has referred, but whether it is accurate, I do not know. Senator Gareth Evans —Willis has said it is not. Senator WALSH —I am informed by Senator Evans that Mr Willis has said it is not accurate. It is, however, correct that industrial disputes associated with the transport of grain have been a problem for a number of years. They have been less of a problem in recent years than they were in immediately preceding years. Of course, the Government is concerned about that, as indeed it is concerned about disruptions to economic activity and wage increases that cannot be justified on either equity or economic grounds. The difference between the Government and the Opposition parties is that we are consistent. We oppose the sweetheart deal that the Petersen regime did with its senior public servants, although, unfortunately, we can do nothing but apply moral pressure. We oppose the doctors union's greedy attempt to rip off an extra $350 a week pay grab for the part time jobs that the doctors perform for the Australian Capital Territory Health Authority and we oppose excessive wage claims from white collar unions. We, the Government, are consistently opposed to attempts by unions, whether it be the doctors union, the Bjelke-Petersen regime's Public Service association or other unions to attempt to screw out of the system wage increases which we believe cannot be justified on moral or economic grounds. That consistent policy is one which I commend to the Opposition. Senator FOREMAN —My question is directed to the Minister representing the Treasurer. Is the Minister aware that both the Business Review Weekly of 10 April and Australian Business of 27 April ran issues with cover stories about tax shelters? Is the Government concerned about these two business magazines promoting tax avoidance in this way? Senator WALSH —I am aware that the articles were published. In reply, may I say that there are two types of tax advising. The first involves providing taxpayers with sufficient information about the workings of the tax system to enable them legitimately to arrange their affairs so that they can pay the amount of tax they ought to be paying but not more. The second involves encouraging taxpayers to enter into contrived rearrangements of their affairs with the goal of paying less tax than they ought to pay. The first, of course, is quite acceptable and the second is not. I understand that the two articles mentioned fall into the first category, although in the case of the Business Review Weekly article, the magazine cover might lead people to expect the article to come into the second category. The Australian Business article makes it clear that although the great days of tax avoidance in Australia are not entirely finished, the golden years are gone. The Australian Business article states: The authors, led by national technical director of tax, Geoff Lehmann- I interpolate that Geoff Lehmann is from KMG Hungerford's- admit the days of driving trucks through tax legislation are over, pointing out that the infamous ``RATS attack''- RATS being an acronym for reform of the Australian tax system- of September 1985 (the Federal Government's Reform of the Australian Tax System statement) has blocked most of the big loopholes. In contrast, when Mr Howard was Treasurer, he looked idly on while the country's tax system was subject to massive abuse. Now that it has been very largely cleaned up, instead of giving the Government credit for having done so, he promises to turn the clock back. If, for example, negative gearing were to be dequarantined and the capital gains tax were to be abolished, that would, once again, make income tax paying a voluntary activity among Australia's well-to-do. If one were an airline pilot or an Australian Capital Territory doctor-especially if the doctors got their $350 a week wage increase for their part time jobs, which the doctors union in the Australian Capital Territory is currently demanding-or someone in that sort of category with a very high income, it would be quite simple to buy some rental property with enough interest charges on the borrowings to wipe out most or all of one's tax liability and then sit back and wait to realise a tax-free capital gain on the property by selling to another airline pilot, another Australian Capital Territory doctor or whatever. Then, if one felt like it, to celebrate one could go to the most expensive restaurant in town and make the taxpayer pay half the bill for one's lunch. I think it is most unfortunate that some people are still giving solace to tax avoiders. It is not the BRW article or the Australian Business article but people such as Senator Messner, Mr Howard and Bjelke-Petersen who want to turn the clock back on this Government's tax reforms. Senator Jessop —I ask the Minister to table the documents from which he was quoting. The PRESIDENT —Will the Minister table the document? Senator Walsh —Sure. It is three pages. Senator SHORT —My question is directed to the Minister representing the Treasurer. I refer to the report in today's Sydney Morning Herald that the four State Labor Premiers have written to the Prime Minister and the Treasurer expressing concerns about possible severe cuts in State funding in next week's mini-Budget. The report says that three of the Premiers-Messrs Cain, Bannon and Burke-have stated that they will not adhere to the voluntary agreement between the Commonwealth and the States on borrowings if the mini-Budget pre-empts the forthcoming Premiers Conference by announcing details of the cuts in the mini-Budget. I ask the Minister whether these reports are correct. If so, has the Premier or Treasurer replied to these threats? If so, what was the nature of the reply? If replies have not yet been sent, what is the Government's attitude to this approach by the Labor Premiers and what implications would their threat have for monetary policy, including the level of interest rates? Senator WALSH —I did not, in fact, see the report in the Sydney Morning Herald, but I did hear something about it from another source. I have not spoken to Mr Hawke or Mr Keating about this matter today, so I do not know whether it is true or whether they have replied. Frankly, I did not think it was all that important because there is certainly nothing new about Premiers complaining about funding from Commonwealth sources. I do not mind predicting that before the end of this month there will be at least one Premier complaining much more loudly than any Labor Premier is complaining and, ironically, that it will be the Premier who, on every other occasion, demands that Government spending be reduced. I do not think one needs a degree in Australian politics to know who that Premier will be. Senator Robert Ray —Who is it? Senator WALSH —I think that is quite unnecessary, Senator Ray. The latter half of Senator Short's question referred to macroeconomic management problems which could ensue if the Premiers in total, or more than one or two of them, refuse to abide by overall limits on government borrowing. That, of course, would be a problem. If that happens, the Government will obviously have to try to deal with it. Finally, the substance of a major part of the alleged letter as reported this morning was a complaint by the Premiers that the details of the funding arrangements with the States would all be spelt out in the economic statement to be delivered on 13 May. It is not envisaged by the Government that the details of the State funding arrangements for the next financial year will be included in the 13 May statement. It will be put to the Premiers at the conference on 25 May. Senator CROWLEY —Is the Minister for Education aware that students throughout Australia, particularly in Sydney, plan to hold new protests beginning tomorrow against the Government's higher education administration charge? Can the Minister inform the Senate of the Government's response to the higher education administration charge monitoring committee report? Does the Minister have any advice to students who may be advocating disruption of the Department of Education's regional offices? Senator RYAN —I am aware that the media has carried reports of announced intentions by students to have a week of protests, to invade Commonwealth Department of Education offices in capital cities and so on. I have some comments to make on that. At the outset, I say that we in government recognise the rights of students, as of any other group, to make their views and criticisms of government policy known, but we expect them to do that in an orderly fashion. Since the higher education administration charge was announced in the August Budget last year, there have been numerous demonstrations, rallies and protests throughout Australia. I have seen virtually a continual stream of student delegations in Canberra and throughout Australia. Many of those protests have been orderly, or within the bounds of what is acceptable behaviour; others have not. For example, the rally that ended with a sit-in and demonstration in the Commonwealth Education Department office in Goulburn Street on 25 March was not an orderly demonstration. It resulted in a great deal of intimidation of the staff of my Department, and it resulted in damage to property, including computer cables, equipment, furniture, shelving and plate glass doors. The damage was later assessed at $6,000. As well as that, and perhaps of more interest to the students who seem particularly self-interested in this matter, employees of the Department whose sole job it is to assist students-to assess their applications for Austudy and so forth-were seriously disrupted in their capacity to carry out their duties. In that sense, as well as in many others, demonstrations of this kind are counterproductive. I hope that students will not engage in activities such as the kind that they engaged in in that office in Goulburn Street or in any other office of the Commonwealth Department of Education. I remind them that the people working there are working in their interests. They are committed to assisting students, and do greatly assist students. It is unfair in the extreme to intimidate or disrupt those workers in carrying out their duties. All of the issues, criticisms and complaints that students have about the charge are now on record with me. Not only that, the monitoring committee that was looking at the impact of the charge on different groups of students has reported to the Government and we will now take that report into account when making any further decisions in relation to the charge. So all in all I do not think there is any need for any further action on behalf of the students, but if they decide that they want to continue their protest, I hope that they will do so in ways that are within the law and do not involve intimidation of workers carrying out their jobs. In conclusion, students have gone as far as they need go to draw our attention to their views about the drawbacks and deficiencies in the $250 charge. Maybe it is time they turned their attention to the other side of the chamber and to the undertakings by Mr Shack, the Liberal education spokesperson whose policies I gather have not yet been made redundant by the recent demolition of the coalition, that any further places to be made available in higher education will be made available at full cost to the students. So I think that students might now turn their energies and their analytical and critical capacities to the fact that, as far as we know, the Liberal Party policy and indeed the National Party policy is to charge any future students, any students now aspiring to higher education, in the vicinity of $8,000 or $10,000 a year. I think it is time that the students paid a bit of attention to that. Senator VANSTONE —I refer the Minister for Education to the criteria by which Austudy applicants can demonstrate that they have been independent or self-sufficient for the required period and ask whether in addition to showing that they have been employed or that they have been in receipt of unemployment benefit they can also show independence or self-sufficiency by demonstrating that they have been in a range of other circumstances generally recognised as constituting independent living. If so, what are those other circumstances generally recognised as constituting independent living and what does the Department of Education consider to be adequate evidence of such circumstances? Senator RYAN —The criteria for a student acquiring independent status, that is, a status whereby he or she is assessed on his or her own income and not on the family income, mainly constitute evidence of employment over a period of two years or the equivalent of two years. Another way in which a student may acquire independent status is if the student is over the age of 25 years, and a further way is if the student is married or in a de facto relationship from which there is a dependent child. I am not aware that there are any other ways in which students may acquire independent status but, if Senator Vanstone has some specific examples and she brings them to my office, I will have them examined. Senator ELSTOB —My question is directed to the Minister for Finance and refers to the latest criticism of the administration of the Asian Development Bank, as reported in the Australian Financial Review of 21 April. Is the Minister of the opinion that the allegations contained in the article have some veracity, and that the particular livestock contract with Indonesia has been unreasonably delayed? Is the Minister satisfied that Australia's continued contribution to the ADB is an effective and proper allocation of our aid budget? Senator WALSH —Australia's executive director of the bank has sought comments from it and the Australian representative in Manila on several points raised in the article referred to by Senator Elstob. I will try to get those comments for Senator Elstob when they come in. In the meantime I draw his attention to the bank's reply published in the Financial Review on 30 April to the effect that there were good reasons for the delay in the awarding of the contract. Firstly, the bank stated that it could not proceed with processing tenders for the second Kalimantan livestock project because the Indonesian authorities had given it only the names of the local counterpart firms when it also needed to know the country of origin and sources of supply of the capital and other particulars. Secondly, a bank mission visiting Indonesia in early 1987 reported the high mortality rate among newly imported cattle. As a result, the mission recommended that either quarantine arrangements be improved to reduce the high mortality or further procurement of imported cattle under all ongoing bank finance projects be held in abeyance. Subsequently the bank agreed to process the procurement papers for the second Kalimantan project on condition, firstly, that the receipt of bid documents verified the source and origin of the cattle and the particulars of foreign suppliers; secondly, that the Indonesian authorities undertook to strengthen quarantine facilities before awarding the contract to the lowest evaluated bidder; and, thirdly, that the successful bidders provided superior transportation, shipping, quarantine, feeding and management of their cattle. The bank states that, if the Indonesian authorities provide these assurances and information, its procurement committee will resume processing the procurement request. Australia recognises that some questions have been raised about the project quality of the bank and is working within the bank along with other members to improve that situation. Senator REID —Is the Minister for Finance aware of the 16 April edition of the journal Army? In the official reply to letters from readers the Director of Service Conditions states: The 1987 increase of DFRDB pensions was reduced by 2 per cent to 7.2 per cent as a `one time' measure in the Budget context. Is this statement correct? If so, does it therefore mean that on 30 June 1987 the 2 per cent reduction will be restored to both defence force retirement and death benefits pensions and Commonwealth superannuation payments? Senator WALSH —The adjustment of the indexation factor for defence force retirement and death benefits pensioners, as I am sure Senator Reid knows, was part of a wider ranging package which included the same adjustment for Commonwealth superannuation scheme pensioners and for those in some other category that I cannot recall off the top of my head. It was in the context of a Budget which had imposed reduced entitlements on a very large number of people. The interpretation put on this by either whoever wrote that article in Army magazine or Senator Reid is, however, not correct. I have recently dispatched replies to a number of inquiries which say that it was not the Government's intention that that discount factor would apply for all time, but there was never any guarantee, implicit or explicit, from the Government that the 2 per cent adjustment to the indexation factor which was made in the last Budget would be removed in this Budget. As soon as economic circumstances permit a responsible government to do so, it is the Government's intention to put back that one-off discount of the last Budget into the pension base. Senator COOK —I refer the Minister for Finance to the National Farmers Federation Press release of 30 April proposing the abolition of all fuel excise and what the NFF estimated as $11 billion worth of expenditure cuts. Is the NFF proposal to cut funding for roads by $128m consistent with present financial arrangements for the Australian land transport program? Senator WALSH —I noted with considerable interest that the National Farmers Federation proposed the abolition of all excise on refined petroleum product. It claimed that that would lead to a consumer price index fall of 5.7 per cent. The first round fall would in fact be a little over 2 per cent and not 5 per cent. Simultaneously, the NFF proposed to take the Commonwealth Government almost entirely out of health care funding, which would cause an immediate increase in the CPI of about 6 per cent. With respect to the implications of that proposal for road funding, under the bicentennial road program and the Australian land transport program a portion of that excise is hypothe- cated for payment into the respective trust funds, from which in the last Budget some $1,250m in round figures was made available to the States and the Northern Territory for road construction and maintenance. It follows that if the National Farmers Federation policy were implemented that source of revenue would no longer be available for road funding. I wonder what the people who the NFF purports to represent will think when they realise that it is proposing the abolition of Commonwealth funding of road construction and maintenance. I suspect they will not be very pleased with the people who claim to speak in their name when they realise that that is one of the consequences of the NFF policy. With respect to the reference to $11 billion-worth of funding cuts, many points should be noted-but one is so important that I should mention it now. The NFF proposes to save $577m in the funding of the Australian Broadcasting Corporation and the Special Broadcasting Service, which is about $100m more than the ABC and the SBS spend between them. So it follows, of course, overlooking the $100m credibility gap that is still there, that the NFF is proposing the abolition of the ABC and the SBS. So the people that the NFF purports to represent will then have no roads, no wireless and no television, among other things. When they realise that, I anticipate a significant amount of discord out in the community that the NFF claims to represent, and a lot of criticism of its leadership pursuing its political and ideological obsessions instead of doing its proper job and acting in the interests of the people who are its affiliates and members. Senator PARER —My question is directed to the Minister representing the Treasurer. The Minister will recall that in August last year I asked a question relating to the application of the fringe benefits tax to companies that made ex gratia payments to relatives of employees killed while working. The Minister has recently forwarded to me a reply from the Treasurer indicating that these ex gratia payments are not subject to the fringe benefits tax. I thank him for that advice. Can the Minister now advise whether such ex gratia payments are tax deductible to the companies making those payments? Senator WALSH —I do have some, admittedly rather vague, recollection of the original question last August, but I do not know the answer to the additional question. I will get it from the Treasurer as soon as I can. Senator ZAKHAROV —I direct my question to the Minister representing the Minister for Transport. It relates to the safety of drive-through type ferries similar to the British ship Herald of Free Enterprise, which sank off Zeebrugge, Belgium, on 6 March this year. Since the Tasmanian Government-owned and operated ship, the Abel Tasman, is of similar design, can the Minister give an assurance that the safety of passengers on the Bass Strait ferry is not at risk? Senator GIETZELT —It is true, as Senator Zakharov has stated, that the Tasmanian Government owns and operates a ship, the Abel Tasman, which is of similar design to the Herald of Free Enterprise, which was tragically lost when it capsized and sank off Zeebrugge, Belgium, in March of this year. The construction and operation of such ferries are matters to which the Department of Transport has given a great deal of consideration following that tragic accident in order to make sure that there is no possibility that such a tragedy could be repeated in our operation in Bass Strait. Ferries of a similar design operate not only here but in many other parts of the world. I am advised that the Abel Tasman is constructed to international standards, is surveyed regularly by the Federal Department of Transport and is properly manned by qualified personnel. It has been proven in the past to be intrinsically safe. Proper operational procedures are followed, and as a consequence such vessels are regarded as being safe from a navigation point of view. However, having regard to the tragedy that took place, the Department has taken special steps to review the safety procedures with the shipping line that operates in Bass Strait. We are taking particular notice of the inquiries which are being conducted overseas to make sure that, when the coronial inquiry is completed, the Government is able to learn from any of the tragic experiences on that occasion. Proper operational and safety measures will be kept under review by the Australian Government. Senator WALTERS —I direct my question to the Minister representing the Minister for Health. As the Minister will know, the Minister for Health has been encouraging the States to supply free hypodermic needles to illegal drug users, in an effort to combat the spread of AIDS. Is the Commonwealth making any financial commitment in that regard? If so, will it also provide finance to encourage the States to supply free hypodermic needles to other members of our community-for example, diabetes sufferers-who, while not being within the AIDS `at risk' groups, nevertheless find the cost of buying hypodermic needles a great financial burden? Senator TATE —I am not sure that my brief is sufficiently comprehensive to enable me to answer Senator Walters's particular question about whether the Commonwealth is making a monetary contribution to a program for the exchange or free distribution of needles by State authorities, with the concurrence of the pharmaceutical industry. At the recent Australian Health Ministers Conference, Health Ministers urged the Commonwealth, States and Territories to consider removing any legal impediments to the increased availability of needles and syringes, to introduce needle and syringe exchange programs, to expand and introduce measures to address satisfactorily the issues relating to the disposal of needles and syringes, and to introduce educational programs designed to promote the availability of clean needles and syringes to minimise transmission of disease through intravenous drug use. I am sure that that provides some framework within which the question of Commonwealth assistance for the cost of the distribution of such needles might be met. However, I cannot answer Senator Walters's specific question. On the availability of needles at a reduced cost to, for example, diabetes sufferers, I understand that a proposal on that is before the Government. At the Perth Health Ministers Conference, Dr Blewett said that, shortly, there would be an announcement of arrangements under which diabetes sufferers may receive packs of needles at a very nominal cost. Senator ELSTOB —I direct my question to the Minister representing the Minister for Avi- ation. Can the Minister comment on the present position where local fruit exporters claim that increased air freight charges will jeopardise export markets? Senator GIETZELT —The general position of air freight in Australia is that the charges follow similar trends to those for sea cargo. In the past, Australia's inbound air freight rates were markedly higher than its outbound rates. Indeed, I am advised that that could be the case by as much as six to one, because we imported much more than we exported. Therefore, our inbound cargo rates were subsidising our outbound rates. It is no longer possible to continue a policy of cross-subsidisation of such trade invisibles. The rise in exports and the drop in inbound traffic was brought about by the effects of the J-curve. That means that outbound freight can no longer be subsidised, but must pay its own way and attract capacity in its own right. I am advised that the national carrier is only one out of 30 operating in Australia, and some airlines have actually chosen to leave Australia empty of cargo rather than be involved with freight rates that barely cover their costs. Therefore, there is a problem that the Government must recognise and address, and steps have been taken to determine how government intervention could assist. In November 1985, the Government announced changes to the freight charter policy to assist the development of export charter flights carrying primary products. That has allowed the operation of charter flights carrying mixed consignments of fresh and frozen fruit, vegetables, meat and dairy products. On 3 December 1986, the Government announced additional measures to assist further the viability of charter operations and to simplify the administration of policy. So the Government is aware of the difficulties that Senator Elstob has referred to and is taking whatever steps are available to it to improve our competitive position. Senator CHANEY —My question is addressed to the Minister representing the Minister for Employment and Industrial Relations. It follows the earlier answer he gave in which he gave his views on the pay claims of public servants and the Australian Capital Territory doctors. I refer the Minister to today's reports that unions and employers have reached agreement on a pay rise, which could be up to $52 a week, for 200,000 building workers. I ask: Is the Government aware of the details of the reported settlement and, in particular, whether it includes agreement to the claim by unions for a $20 a week severance pay loading? Is the Government confident that the agreement conforms to the new wage fixing guidelines which the Minister has talked a lot about in recent Question Times? I note, for example, that work practice changes apparently have yet to be agreed on. Is the Government confident that the pay claim can be contained within the building industry? I further ask: Is there any concern about the role of the Victorian Government and the Victorian Minister for Labour, Mr Crabb, in particular, in view of his support of a settlement in Victoria which is seen as having paved the way for yesterday's decision? Senator WALSH —As I understand it, the key features of the proposition are that the first tier involves a $10 a week increase backdated to March, plus whatever figure is determined at the national wage case later this year. For the second tier, State by State working parties have been set up to look at offsets. Nothing has yet been determined as to quantum, date of effect or other matters. When the working parties have done their job the agreement will be put before the tribunals. On the question of redundancy, a case is to go to the Australian Conciliation and Arbitration Commission and a working party has been set up to examine all relevant issues. So far as the Government's reaction to that is concerned, it welcomes the claim going to the Commission to be processed according to the principles. It expects that the offsets must be genuine. The Government will determine its position on redundancy when it sees what the building workers and employers are proposing. Of course it welcomes the news that bans are about to be lifted by the building workers union. We would also welcome the lifting by the Australian Capital Territory doctors union of the work ban which it has had in place for the last six weeks in its pursuit of what was originally a $430 a week claim, now modified to $350 a week, for a pay increase for the part time services which its members perform for the Australian Capital Territory Health Commission. The building workers union had a total claim of around $52 a week for a full time job. The Australian Capital Territory doctors union has a current claim of $350 a week for a part time job. Both were pursuing their claims with industrial action and, specifically, the imposition of work bans. Senator Elstob —Disgraceful! Senator WALSH —It is absolutely disgraceful. If the Government were to capitulate to the greedy, militant Australian Capital Territory doctors union, which is going for a pay grab of $350 a week for a part time job with an industrial campaign based on work bans, we would have absolutely no moral authority to deal with the building workers union, the plumbers union or any other union which used industrial campaigns or imposed work bans in pursuit of pay claims which are, by the standards of the Australian Capital Territory doctors union, extremely modest. Once again, I invite the Opposition to adopt the same even-handed approach to these matters as the Government adopts. Senator GIETZELT —Yesterday Senator Knowles asked me a question without notice concerning the handover of the coastal surveillance contract from Skywest Airlines Pty Ltd to Amann Aviation. I pointed out at that time that I had no brief in the information provided to me by the Minister for Transport and Minister for Aviation. The Minister has now advised me that the contract currently held by Skywest expires on 30 June 1987, but Amann has until mid-September, under the terms of the contract, to have its operation completely in place. Negotiations have commenced between the Department of Transport and Skywest for it to continue providing coastal surveillance services, phasing out progressively as Amann's operation is put into effect. A definite schedule for commencement of Amann's operations in Darwin, Gove, Cairns and Broome has not yet been finalised. Senator TATE —Some days ago Senator Peter Baume asked a question which expressed concern about alleged substitution of imported computers for locally produced computers in the electorate offices of senators and members, and in another place the viability of the company contracted to supply the computers was questioned. In answering any question concerning Australian content of government purchases, it is important to realise that it is a complex issue. For example, Australian content will include research and development, product testing, and the labour used in addition to the actual components made in Australia which go into making up the end product. Thus, in considering products which have nominally the same percentage of Australian components, important differences in Australian content can emerge. The issue of what is Australian content is addressed many times by Commonwealth Government purchasers. To help in this matter, a Commonwealth Government purchasing manual has been produced. In chapter 8, annex H, there are guidelines to assist in calculation of the level of the Australian and New Zealand content. New Zealand is included because of the closer economic relations agreement between our two countries. Any allegations concerning the level of Australian content of products purchased by the Commonwealth will be investigated according to the guidelines set down in the purchasing manual. I have requested that, as a matter of urgency, officers of the Department of Local Government and Administrative Services investigate the allegations which have been made. I am concerned to ensure that, as a local supplier, the company is afforded an opportunity to answer the allegations. Until the investigations have been completed, it would not be appropriate to comment on the future of the contract. Senator PUPLICK(New South Wales) —by leave-I move: That the Senate take note of the response given by the Special Minister of State. I seek leave to continue my remarks later. Leave granted; debate adjourned. Motion (by Senator Robertson)-by leave-agreed to: That Senator Richardson be granted leave of absence for the period 28 April to 29 May 1987 inclusive on account of parliamentary business. Senator REID(Australian Capital Territory) —On behalf of the Joint Committee on the Australian Capital Territory, I present the report on proposals for variations of the plan of lay-out of the city of Canberra and its environs-ninetieth series, together with the minutes of proceedings. I seek leave to make a statement relating to the report and to incorporate the statement in Hansard. Leave granted. The statement read as follows- The report I have just tabled deals with the 90th Series of Variations to the City Plan, as well as one item from the 88th Series of Variations, namely the construction of the Eastern Parkway from Isabella Drive through to MacArthur and Newcastle Street, Fyshwick. I will first deal with the outstanding item from the 88th series. The Committee deferred approval of this variation in October 1986 because it was not satisfied that it had been provided with sufficient information on which to make an informed judgment regarding the design or costing of the proposed road. As part of the Committee's consideration of items in the 90th Series of Variations, the NCDC was asked to return before the Committee to expand on its original briefing on the Eastern Parkway. The Committee is satisfied that it has now been provided with the appropriate details and approves the variation, noting that the preliminary stages of roadworks will improve traffic conditions on several dangerous intersections and ease traffic levels on adjoining arterial roads. I now turn to Items contained in the 90th Series of Variations. The Committee approves all Items in this series except Item 2 which deals with the addition of roads and the realignment of an existing cyclepath adjacent to Lake Ginninderra to allow development of the area for commercial purposes. The parcel of land under consideration is located within the Belconnen Town Centre Zone on the western foreshore of Lake Ginninderra. The Committee is prepared to approve construction of the majority of proposed roads and relocation of the cyclepath but is not convinced of the need to develop Section 149, which is a relatively small and attractive parcel of land immediately adjacent to City gardens. This is a potentially popular extension of this section of lake foreshore area and not considered a suitable site for a motel development. A commercial development of this nature could more appropriately take place on Section 65 or the adjoining Section 86. Therefore, the Committee does not approve the portion of road addition proposed within Section 149. Variation 3 deals with the degazettal of portions of Wakefield Gardens to provide two sites for the development of small scale professional or commercial offices at the Ainslie Local Centre. The Committee is not satisfied that adequate consultations with neighbouring residents have been carried out in relation to this proposal and approves the variation on the basis that this be done. In the Committee's consideration of the Parliamentary Mall, which is Variation No. 4, support is given for development of this Mall as it is considered to be an essential feature of Burley Griffin's plan and the development of the Parliamentary Triangle. During discussions of the proposal, the question of the proposed location of the Bicentennial Music Bowl at Regatta Point was raised. The Committee is concerned that it was not consulted at an earlier date about the proposed siting of this venue and considers that it may have been more appropriate to locate it on a more prominent area of national significance and close to Parliament House. The Parliamentary Triangle has become an accepted location for musical performances associated with official celebrations and this may have been a more appropriate site for the proposed bowl. Senator GILES(Western Australia) —I present the 271st report of the Joint Committee of Public Accounts. I move: That the Senate take note of the report. I seek leave to continue my remarks later. Leave granted; debate adjourned. Bills received from the House of Representatives. Motion (by Senator Gareth Evans) agreed to: That so much of the Standing Orders be suspended as would prevent the questions with regard to the several stages for the passage through the Senate of the Bills being put in one motion at each stage and the consideration of such Bills together in the Committee of the Whole. Ordered that the Bills may be taken through all their stages without delay. Bills (on motion by Senator Gareth Evans) read a first time. Second Readings Senator GARETH EVANS(Victoria-Minister for Resources and Energy)(3.10) —I move: That the Bills be now read a second time. I seek leave to have the second reading speeches incorporated in Hansard. Leave granted. The speeches read as follows- CUSTOMS TARIFF BILL 1987 The Customs Tariff Bill 1987 which is now before the Senate proposes the replacement of the current Customs Tariff Act with a completely new document that represents the culmination of work which began in the early 1970s. At that time, the Customs Co-operation Council in Brussels, with Australian participation, undertook to modernise its international tariff nomenclature and to promote its use in other areas of commercial activity. The legislation provides that the new Act come into effect on a date to be fixed by proclamation. While it is expected that the actual operative date will be 1 January 1988 this depends on that date being the date of entry into force of the relevant international convention-that is, the International Convention on the Harmonised Commodity Description and Coding System. Amendments to take account of Government decisions made before the new Act comes into effect, and to provide for changes necessary following negotiations on trade commitments, will be made by Gazette notice after proclamation but before the date of operation of the Act. Before commenting on the more significant aspects of the actual Bill, for the information of senators I will provide a brief outline of the new international nomenclature and its development. The International Convention of the Harmonised Commodity Description and Coding System provides a new nomenclature for the classification of goods in international trade. The Convention has been developed by the Customs Co-operation Council to replace its existing and outdated nomenclature, which has been the basis of our national tariff since 1965. The Council approved the new Convention on 14 June 1983, and, for it to enter into force on 1 January 1988, a minimum of 17 contracting parties are required by 30 September 1987. The Customs Co-operation Council confidently expects that most major trading nations including Japan, the EEC and the United States of America will become contracting parties before that date. It is proposed that Australia also become a contracting party at the same time. It is important to note that the United States and Canada will be using an internationally-based tariff for the first time. The new system aims to provide international uniformity in the classification of goods in customs tariffs; make it easier to collect, analyse and compare world trade statistics, both import and export statistics; and provide a common international system for coding, describing and classifying goods for commercial purposes-for example, freight tariffs, transport requirements, documentation and so on. The basic structure of the harmonised system is much the same as the current international nomenclature but it has been extensively modernised and extended in detail to take account of trade and technological changes and to provide a uniform international basis for collection of trade statistics. The new system has 97 chapters, compared with the current 99 chapters, and 5,019 mandatory international references, compared with the current 1,009. The translation into the Australian Customs Tariff Act has followed public circulation of draft structures by the Australian Customs Service and a subsequent Industries Assistance Commission inquiry and report. The IAC, in its report, proposed two options for consideration. Option 1 resulted from an item by item examination of the existing tariff. It aimed at minimising unnecessary complexity and fragmentation in the new tariff while at the same time avoiding significant effects on the level of assistance to Australian industries. This option retained a considerable number of complexities and sub-divisions which greatly increased the number of national tariff sub-headings over the number of new standard international provisions. Option 2 removed all the major tariff complexities and brought the Australian tariff very much closer to the standard international requirements. While the changes to duties under this option were greater in certain cases than under the IAC's option 1, the net effect on levels of assistance to Australian industry as a whole is considered to be minimal. It had clear advantages for both the public and private sectors through improved administrative efficiency and cost saving from a less complex, less fragmented tariff. The Government has, therefore, adopted option 2, with some minor modifications to meet industry policy and trade commitment obligations, for the new Australian customs tariff. Returning to the Bill itself, I will now outline the more important provisions and changes from the current Customs Tariff Act. The Bill comprises 29 clauses and 6 schedules. While many of the clauses are similar in application to the current sections of the Customs Tariff Act, some significant revision and simplification has been undertaken. For example, sections 5 to 9 of the current Act refer to the status of off-shore installations for the purposes of customs Acts generally and do not have specific relevance to the customs tariff. Consequently, they have not been included in the new Bill but will be covered more appropriately by a separate Bill. Current section 10, relating to the measurement of alcohol, is considered more appropriately located elsewhere in the Customs Tariff Act. It now forms part of Schedule 3 to the Bill. The complicated provisions, in various sections, currently required to provide for preferences to `declared preference countries', have been removed as these countries no longer require specific reference in the new tariff. Should the need be seen for specific preferences to be given to such countries in the future, adequate provision exists under the proposed new special rates clauses. The ministerial discretion relating to duties applicable to substitutes and imitations-current section 25-has not been carried forward to the new Bill. The normal method of utilising the provisions of the IAC Act, including the public inquiry process for duty alterations, is regarded by this Government as the more appropriate and visible method of dealing with any such cases. Powers under the current section have not been exercised for several years. I do not propose to go into detail on those clauses of the Bill which are very similar in impact to current sections. Details of these are available in the explanatory memorandum presented with this Bill. However, specific mention should be made of some of the more significant clauses to the Bill. Clause 10 provides for the application of the interpretation rules which are fundamental to application of the harmonised system nomenclature to ensure international uniformity in the determination of the classification of goods. To provide specific guidance in this regard, the intended coverage of the headings and sub-headings of the nomenclature is laid down by the Customs Co-operation Council in its `harmonised system explanatory notes'. The actual texts of the rules are set out in Schedule 2 of the Bill. Clauses 12, 20 and 23 are provisions necessary for the application of a new system for determining duties for goods the subject of tariff quota restrictions. The actual duty structure is provided in proposed Schedule 5. This new system was considered necessary to avoid unacceptable fragmentation and complexity of the main duty schedule-Schedule 3. It also allows for the determination of both the `within quota' rates and the rates applying for such goods not meeting quota requirements-`penalty rates'-by reference to a single schedule rather than the current system which necessitates consultation of both current Schedule 3 and Part II of Schedule 4. While the scope of existing quota provisions has not been significantly altered, considerable administrative and tariff simplification will result from the new provisions. I present, at this point, a brief outline of the coverage of each of the Schedules of the proposed Bill to assist honourable senators in their consideration of the structure of the new customs tariff. Schedule 1, as with current Schedule 1, lists the classes of countries and places to which special rates apply. These are limited to Forum island countries and developing countries in the proposed Bill. As indicated earlier, special provisions for declared preference countries are not required in the new tariff. Schedule 2 covers the general rules for the interpretation of the harmonised system. I have previously indicated the importance of these principles in promoting international uniformity of classification. The first four of these rules are essentially the same as the rules provided by Schedule 2 in the current tariff. Rule 5 is a new international rule governing the classification of cases, boxes and similar containers and packing materials and packing containers. Rule 6 has been introduced to ensure uniform application of the rules and notes at the new harmonised system sub-heading level. The principles of both these new rules have always been applied in application of the current Australian customs tariff. Schedule 3 is, as for the current tariff, the principal schedule for the purposes of determining the classification and rate of duty applicable to imported goods. Although the systematic structure follows the same pattern as that of the current tariff Schedule 3, there are extensive changes to reflect the more detailed and updated harmonised system. Schedule 4 provides for the concessional entry of goods meeting certain prescribed conditions. This Schedule is similar to the current Schedule 4-Part I-provisions of the customs tariff. Some restructuring for simplification and rationalisation purposes has been undertaken but no significant duty changes will result. Current Schedule 4-Part II-provisions form part of the tariff quota schedule, Schedule 5, of the new Bill. Schedule 5 is a new provision for determining the duties applicable to goods the subject of tariff quota restrictions. The purpose of this Schedule has been explained earlier in connection with my comments on clauses 12, 20 and 23 of the Bill. The provisions of current schedule 5 of the customs tariff which listed the rates of duty applying in relation to New Zealand goods have been included in the main Schedule-Schedule 3-of the proposed Bill. Schedule 6 is similar to the current Schedule 6 and is simply the provision necessary for listing acts repealed by the legislation. In summary, the new Australian customs tariff proposed by this Bill reflects the culmination of a mammoth effort both nationally and internationally to produce the most rational, simple and modern tariff seen for decades. It represents a move away from the long-standing `tailored' nature of the Australian tariff which has developed over the years in response to the special competitive needs of particular Australian products or narrow industries. A more neutral environment for investment and trade decisions is anticipated as a result. While changes to tariff rates for particular imports are inevitable, the net effects on levels of assistance to Australian industry as a whole will be minimal. The harmonised system of classification on which the tariff is based will be of major benefit to Australia and its major trading partners in a number of ways. It will reduce doubts as to the description and coding of goods, a significant source of error which today affects the accuracy of trade statistics and the application of tariffs. It will improve the quality of trade data which, in turn, will assist the process of international trade negotiations. It will facilitate the international collection and dissemination of trade data and its common language will remove the cause of many interruptions to the movement of goods between countries, thus reducing the cost of trading transactions. Financial Impact The likely financial impact of the proposed new tariff is difficult to assess. However, the IAC report indicated that its option 2 proposals would result in a slight increase in the average general import weighted tariff rate of 0.7 of a percentage point. This increase would be marginally less with the modification to the option proposed by the Government. Administrative costs involved in implementing the new system will be mainly once only printing and dissemination costs of $0.9m. There will of course be initial costs to the community at large in converting to the new system but these are expected to be minimal. I commend the Bill to the Senate and present the explanatory memorandum to the Bill. CUSTOMS TARIFF (MISCELLANEOUS AMENDMENTS) BILL 1987 The Customs Tariff (Miscellaneous Amendments) Bill 1987 amends the following Acts: Administrative Decisions (Judicial Review) Act 1977; Bass Strait Freight Adjustment Levy Act 1984; Bounty (Agricultural Tractors and Equipment) Act 1985; Bounty (Books) Act 1986; Bounty (Computers) Act 1985; Bounty (Electric Motors) Act 1984; Bounty (Injection-Moulding Equipment) Act 1979; Bounty (Metal Working Machines and Robots) Act 1985; Bounty (Ships) Act 1980; Consular Privileges and Immunities Act 1972; Customs Act 1901; Customs Tariff (Anti-Dumping) Act 1975; Customs Tariff (Stand-By Duty) Act 1985; Excise Tariff Act 1921; Sales Tax Assessment Act (No. 5) 1930; Sales Tax (Exemptions and Classifications) Act 1935; Subsidy (Cultivation Machines and Equipment) Act 1986; Subsidy (Grain Harvesters and Equipment) Act 1985. The Bill is complementary to the Customs Tariff Bill 1987 which I have just introduced and contains necessary citation and other consequential amendments to legislation containing references to the Customs Tariff Act 1982 or containing provisions linked to that Act. Apart from consequential changes required as a result of the introduction of the Customs Tariff Bill 1987, the opportunity has been taken to clarify and simplify sections 151 and 151a of the Customs Act. A new section 151 to the Customs Act 1901 to define the criteria under which goods will be considered to be the produce or manufacture of a particular country or group of countries forms part of the Bill. No changes in application of the provisions of the current sections will result. Financial Impact This Bill will have no financial impact. I commend the Bill to the Senate and present the explanatory memorandum to the Bill. CUSTOMS TARIFF (INSTALLATIONS AT SEA) BILL 1987 This Bill is complementary to the Customs Tariff Bill 1987 which I have just introduced and will come into effect on the same day as that Bill. The purpose of this Bill is to continue the application of current sections 5 to 9, inclusive, of the Customs Tariff Act 1982. In very general terms, these sections provide that when an installation becomes attached to the Australian seabed, the installation shall be deemed to be part of Australia and it, and any goods on it or taken to it, shall be deemed to have been imported. Likewise, on being detached from the Australian seabed for the purpose of being removed from Australian waters, the installation and any goods on it shall be deemed to have been exported. These sections are not included in the Bill which will replace the Customs Tariff Act 1982 as they are not considered to be appropriate to the concept of the new legislation. Accordingly, it has been decided to create a separate Bill. There is, however, no change in the scope of the legislation. Financial Impact The Bill has no financial impact. I commend the Bill to the Senate and present the explanatory memorandum to the Bill. Debate (on motion by Senator Reid) adjourned. Consideration resumed from 1 May. Clauses 1 and 2-by leave-taken together. Senator CHANEY(Western Australia-Leader of the Opposition)(3.11) —I will make a number of remarks while we deal with those formal parts of the Equal Employment Opportunity (Commonwealth Authorities) Bill 1987. The Senate has already dealt with a second reading amendment which sought that the Bill be set aside and be submitted for proper examination by the Business Regulation Review Unit. There was some confusion in the debate on this matter, which was occasioned by the Government which, in the House of Representatives on 26 March, through the mouth of the Minister for Employment and Industrial Relations, Mr Willis, who was responsible for the Bill, said: It is true that this legislation does not have a regulation impact statement, but this legislation has been not to the Business Regulation Review Unit but to the businesses themselves. We found, after that statement was made in the House of Representatives on 26 March, that in the Senate on 28 April the Minister for Industry, Technology and Commerce, Senator Button, said: The Business Regulation Review Unit was given the opportunity to comment on the new regulations involved in the Government's equal opportunity reforms as drafted in the Equal Employment Opportunity (Commonwealth Authorities) Bill 1987. I understand that the Business Regulation Review Unit was also given the opportunity to be involved in discussions on this and other policies the Government has introduced in the equal opportunity policy area. I am not certain of the comments made by the Business Regulation Review Unit in this instance as it is its usual practice not to make extensive comments in areas which affect mainly public sector management. My purpose in rising at this stage of the debate in the Committee stage, when we are looking at clauses 1 and 2-which give the title and the date on which the Bill will come into operation-is to say that the Opposition does not regard what Senator Button had to say, or what the Minister had to say in the second reading response, as covering the point which was made in the amendment which I moved and which has already been defeated in the Senate. There honourable senators will find that we requested, in accordance with the procedures announced by the Government on 9 January 1987 for the review of government proposals affecting business regulation, that the Bill should not be proceeded with until the Act had been dealt with in that way and until the Department of Employment and Industrial Relations prepared a regulation impact statement on the proposals contained in the Bill. We certainly do not regard that statement of Senator Button or the statement of the Minister as in any way satisfying our requirements. I indicate at this stage of the Committee's consideration of the Bill that for that reason we do not feel that the Bill can yet have our support. I mention that now because the Minister may decide that the Government wishes to rectify or remedy that difficulty, which would be a matter of very considerable satisfaction to the Opposition. I thought I should at least provide that opportunity for the consideration of that point. Clauses agreed to. Clause 3 (Interpretation). Senator CHANEY(Western Australia-Leader of the Opposition)(3.15) —I move: (1) Page 2, clause 3, definition of `employee', line 29, leave out paragraph (b). This amendment relates to the fact that the Bill, in its definition clause on page 2, refers to an employee as: . . . a natural person appointed or engaged: (a) under a contract of service whether on a full-time, part-time, casual or temporary basis; or (b) under a contract for services; This is a similar clause to that which has been included and which now forms a section of earlier legislation that has been dealt with in this place, and on at least one earlier occasion the Opposition has moved the same amendment. Our concern is to ensure that the restrictions which are contained in the Bill apply to employees and that it does not limit the situation of independent contractors or, indeed, the capacity of the bodies, the Commonwealth authorities, which are the subject of this legislation, to freely contract with people with whom they wish to deal on the basis of their being independent contractors. I do not wish to labour the point or spend a great deal of time on it. It is a position that has been adopted on an earlier occasion by the Opposition. If the Bill is to become law, we believe it should apply only to the employees of Commonwealth authorities and it should not be a means of restricting the capacity of these authorities to enter into contracts for services of the sort which would be affected under the existing paragraph (b). Senator POWELL(Victoria)(3.17) —The Australian Democrats will not be supporting the Opposition's amendment because this clause does not impose any requirements on independent contractors in respect of their own employees; it applies only to an individual who is working for a statutory authority under contract for services. We believe that these people, like many others, should be taken into account in ensuring that discrimination does not occur; that is, that groups covered in the Bill should also be able to be employed on the basis of merit by way of contract for services with a statutory authority. We believe that the inclusion of this definition does not interfere with the terms and conditions of employment between the independent contractor and the statutory authority and, therefore, we will not be supporting this amendment. Senator GARETH EVANS(Victoria-Minister for Resources and Energy)(3.18) —I just make it clear on behalf of the Government, and for essentially the same reasons as Senator Powell has just expressed, that we will not be supporting the amendment. The Bill treats natural persons who are engaged under contract for service as employees to whom equal employment opportunity programs shall apply. The Bill extends the same protection to people engaged under contracts for service as to employees. However, there are no obligations to develop equal employment opportunity programs which are imposed on such people. The Bill does not impose any terms and conditions on the employment of independent contractors. The definition is, in effect, the same as that in the Affirmative Action (Equal Opportunity for Women) Act 1986. That Act defines an employer as a person who employs a natural person under a contract of service or a contract for services. Under those circumstances and for those reasons, we reject the amendment. Senator SIDDONS(Victoria)(3.19) —I, too, will not be supporting the amendment proposed by the Opposition, because it would seem to me to be quite clear that the provisions of the legislation do not apply to independent contractors. I wholeheartedly support the general thrust of this legislation. It is a great pity that it is necessary for legislation such as this that seeks to promote people according to their merit and to ensure that they are not unfairly discriminated against to be brought before the Senate. That the Bill seeks to stamp out discriminatory work practices against people in certain sections of the community such as women, Aborigines, Islanders, migrants and disabled people is fine, but it is very narrow in its concept. One would hope that at least this legislation will have the effect of setting an example to others in private industry and to subcontractors to ensure that discriminatory practices are not applied in the work place, that equal opportunities are afforded to all and that promotion is made strictly according to one's merits. I will not support this amendment. I wholeheartedly support this Bill. As one who has been a long-time advocate of fair work practices, an advocate of industrial democracy and of other practices, I think that this Bill is very much in line with that general approach. Amendment negatived. Senator CHANEY(Western Australia-Leader of the Opposition)(3.21) —To save the Committee's time, I indicate that, whilst the Opposition proposes to call divisions on subsequent amendments I intend to move, we did not intend to divide on that one. I just want it to be clear for the record that I think I can say on behalf of the Opposition that the whole of the Opposition supported that amendment. Clause agreed to. Clauses 4 and 5-by leave-taken together. Senator WALTERS(Tasmania)(3.22) —I wish to ask a question on clause 4, which states: Nothing in this Act shall be taken to require any action incompatible with the principles that employment matters should be dealt with on the basis of merit. The CHAIRMAN —I do not think that is in clause 4. I think it is in clause 3, sub-clause (4). The Committee has already passed clause 3. Senator WALTERS —I am sorry, I thought it was clause 4. I am sorry I mistook that. Senator Chaney —I will be coming back to that because it is relevant to our interpretation of clause 6. Senator WALTERS —If we are coming back to that clause I will be happy to wait until then. Clauses agreed to. Clause 6 (Contents of program). Senator CHANEY(Western Australia-Leader of the Opposition)(3.23) —by leave-I move: (2) Page 5, paragraph 6 (g), leave out the paragraph, insert the following paragraph: ``(g) to set objectives and make forward estimates in the program;''. (3) Page 5, clause 6, at end of clause, add the following new subclause: ``(2) In subsection (1): `forward estimate' means a quantitative measure or aim, which may be expressed in numerical terms, designed to achieve equality of opportunity for women in employment matters, being a measure or aim that can reasonably be implemented by the relevant employer within a specified time; `objective' means a qualitative measure or aim, expressed as a general principle, designed to achieve equality of opportunity for women in employment matters, being a measure or aim that can reasonably be implemented by the relevant employer within a specified time.''. This amendment really gets to the nub of the concern which was expressed by the Opposition and which gave rise to our decision to oppose this legislation unless amendments were made. I said in response to the intervention by Senator Walters a few moments ago that I would refer back to clause 3, sub-clause (4). I think the wording of that clause which has already been passed by the Committee is in fact relevant to the view which we take of the impact of clause 6 which we are seeking to change. The Opposition sees the nub of the problem in clause 6 that we are currently debating. It gives rise to what has been variously described as a de facto quota, a `trend towards' quota, the establishment not of a formal quota but of a target which will in effect give rise to an affirmative action approach in this area. The Opposition has made it quite clear that while it totally supports equal opportunity it is opposed to affirmative action. I notice that Senator Siddons in his contribution to the Committee debate a few minutes ago expressed his regret at the necessity to bring forward legislation of this sort. I assume from what Senator Siddons said that he regrets that it was necessary or thought to be necessary to legislate in an area where one would have hoped that equal opportunity would already be applicable. I note that Senator Siddons is nodding; so I think I have correctly interpreted what he was saying. It is very important in understanding the Opposition's stance on this matter to understand that there always has been concern in the Opposition that this sort of directive, legislative approach is the less desirable means of going about the achievement of equal opportunity. In the second reading debate I referred to the debate way back in 1975 on racial discrimination. I think it would be true to say that in respect of any piece of legislation which the Parliament has had to deal with from that time to the present which has set out by legislative means to achieve the removal of discrimination-whether on the grounds of race, sex, religion or whatever-there have been a significant number of senators and members of the other place who have had a very strong reservation about the capacity to legislate for morality, for attitudinal change and for the imposition of further bureaucratic controls in areas which are so sensitive. As someone who has worked in Aboriginal affairs for close to 30 years I can only say that there is at least some evidence that some of the attempts to improve the situation of Aborigines have proved counterproductive. I well recall examining the impact of Aboriginal studies programs, for example, when I was Minister for Aboriginal Affairs and being surprised to find research which suggested that the effect of some programs aimed at increasing student understanding of, and sympathy for, the Aboriginal cause actually had a negative result. Instead of attitudes getting better they became worse. Senator Peter Baume, in a speech which has been referred to a number of times in this debate, moved on 12 June 1986 on behalf of the Opposition a second reading amendment including these words: But in fully endorsing the principle of equal opportunity in employment and career advancement through merit- happily, I think that that is common ground in the chamber- the Senate believes that (a) voluntary co-operation rather than additional government regulation is the preferred method of achieving equal opportunity in employment. The amendment then went on to make various suggestions about building on good will and expertise developed with private employers during the voluntary pilot program and referred with concern to the additional cost burdens of business and so on. Again, as I mentioned during my own second reading contribution to the debate in the Senate, I was very interested to find that Mr Raymond Steele Hall, who crossed the floor in the other place in the sense that he voted for the legislation when the Opposition was voting against it, said in his contribution to the debate: . . . if I were in the position of directing this program, I would adopt a more educative attitude. I would not be forcing the pace as much as it is being forced in the Bills that have been brought to the House in these successive years. I would take a longer term view. I would have a similar aim, guided by the principles contained in the platform of my party; but I would have a longer aim of an educative and educational program. A little later, having referred to the fact that he felt that he had to vote for the legislation because it conveyed a signal to Australian women, he said: Whilst, as I have said, I am sceptical of programs forcing the pace beyond that which the community is willing to accept and develop, I nevertheless believe that the signal that the Parliament gives to women to help them take their rightful place in the community, free of discrimination, is extremely important. I quote those words because I think, in determining a view on this, one is making a judgment about the efficacy of the approach which is the statutory and directive approach set out in this legislation. In looking at this legislation the Opposition took the view that it went just a little too far. We seek to take the legislation back. The amendments that I have moved, the third amendment in particular, would take the wording back to the wording in the 1986 legislation. That legislation passed with the support of the Opposition and with a second reading amendment moved by Senator Peter Baume on behalf of the Opposition. What is it that we are concerned about in this legislation as against the earlier legislation? What we are concerned about has been described by some as a significant difference and by others as nitpicking. It seems to me that beauty is in the eye of the beholder. Let me refer to the three pieces of legislation on this matter that we have dealt with. In 1984 we dealt with the Public Service Reform Bill. The equivalent words we were concerned about in that Bill in the definition of `program' were `the quantitative or other indicators against which the effectiveness of the program is to be assessed'. In other words, in the 1984 legislation, which we supported, there was reference to quantitative indicators but the disjunctive `or' was used. This at least gave those running the program the capacity to use other than quantitative measures or indicators to check its effectiveness. Somebody said to me in the course of discussions on this Bill that the difference between the two provisions is only one word. I think that the difference between `or' and `and' is quite significant. The Affirmative Action (Equal Employment Opportunity for Women) Bill 1986 refers, in relation to the programs, to `qualitative measure'-not quantitative but qualitative-`or aim, expressed as a general principle', and `a quantitative measure or aim, which may be expressed in numerical terms'. Again, there is a great deal more room to move within that definition than it appears to us is left in the legislation before us today, which refers quite simply to the `quantitative and' other indicators against which the effectiveness of the program is to be assessed. So, put quite shortly, we are really saying that this Bill leaves the administrators of the programs which are required under it no choice but to have quantitative indicators. That is a firm and fixed requirement under clause 6 (g). We would like to see that requirement reduced in the way in which our amendment proposes, which is to go back to the form of words which was used in 1986. The relevance of clause 3 to all this is that we see the Government defending what is being done on the basis that we cannot possibly have any even implied or de facto quotas because clause 3(4) incorporates the merit principle. It reads: Nothing in this Act shall be taken to require any action incompatible with the principle that employment matters should be dealt with on the basis of merit. That is fine. That sub-clause ensures that the legislation does not require any action which is incompatible with the principle of merit. In other words, it is permissive. It does not direct that one should take action against the principle of merit; nor does it direct that one cannot take action which is incompatible with the principle of merit. None of us would deny that people who will be involved in these programs will have a deep commitment to their vision of equal opportunity. The public servant or servants involved in the program may say, for example: `By gosh, progress is slow. Look at that dreadful Postal Commission. Here we have a report today saying how bad the Postal Commission is. It does not treat the Vietnamese properly and it does not treat women properly. Really, we have to do something about this'. The managers may start getting worried about the reports that can go back and forth with respect to these things. The fact is that quantitative measures can be set under clause 6. One does not have to be unduly afflicted with the idea that the world operates by conspiracy. I am not suggesting that for a moment; what I am saying is that all of the pressures will lead to the point where it will be quite easy for people-perhaps with the very praiseworthy desire to get the numbers up-to start making decisions which are not based on merit but which are based on the pursuit of the targets which have been established. To suggest that that is not possible under this legislation would, I think, be very unfair. That is why we prefer to go back to the form of words which we agreed to last year and which to my view still gives rise to some of that danger because it is still possible under the previous wording to have some quantitative measure. I am not suggesting that that is completely out of the question and may not be there for the purpose of assessment, but there is a difference. I am suggesting that we support this amendment because it is less likely to give rise to the sort of affirmative action quota approach which has been steadfastly opposed by the Opposition in all its dealing with legislation of this type. I hope I have made that point clearly again. I do not want to have to go back and forth at great length on this issue on which people have fairly clear minds but on this clause I think I can say again that I speak for the Opposition in saying that we prefer the earlier form of words because it reduces the suggestion which is in the present form of words that since there must be quantitative indicators against which to judge the effectiveness of the program that in itself will be a temptation and indeed will give an opportunity for over enthusiastic people administering these programs to give rise to abuses which we would not wish to see occur. Senator SIDDONS(Victoria)(3.36) —As I have been referred to in Hansard on the fortuitous or otherwise nod of the head, I just want to make clear that I support this legislation absolutely and that I do not support the Opposition's amendments. The point that Senator Chaney was making, and certainly one which I make, is that it is very unfortunate that a Bill of this sort has to be introduced into the Parliament to stamp out discrimination in the work place. That there is discrimination is beyond doubt. As has already been quoted in this debate, of the 2,500 managers of the Commonwealth Bank only 29 are women. That is obviously discrimination against women. Nobody is suggesting, I hope, that women cannot be as competent managers as men in the Commonwealth Bank. It is necessary for legislation such as this to pass through the Parliament. My hope is that this legislation will create an example through the departments, statutory authorities and so forth that this Bill applies to, so that further legislation to stamp out discrimination in the work place will be unnecessary. Senator POWELL(Victoria)(3.38) —In dealing with these two Opposition amendments we have met with the dreaded quota argument, which was to be expected. Senator Chaney has taken maximum time in order I think to attempt to address the very rational arguments against the proposition of the Opposition majority, at least, that this Bill does in fact include a quota provision. I fear he has been unsuccessful. In the other place Mr Neil Brown was wont to call them pseudo-quotas at least. We probably heard a pseudo-argument from Senator Chaney on this matter. He has failed, I think, to address the coherent arguments of his colleagues who are prepared to stand firm on this legislation. Of course, I agree with Senator Chaney that legislation is perhaps the least desirable way of dealing with problems such as this in our society. However, I think it is also important to recognise that if we are to have reform-as many speakers have said, we need reform in this area of our society; there is no question about that-such reform is dependent on action in a wide range of fields, including the legislature. There is a leadership role here but it is not exclusively something which can happen in the legislature. I do not think that the Government, by proposing this legislation-and certainly not the Australian Democrats by supporting it-believes that this is the end of the problem by any means, but it is one of the steps along the way. As Senator Chaney has said, attitudinal change is important. This legislation is part of attitudinal change and it is important that that change does take place in the community. Indeed, one can only take encouragement from the attitude of a number of men who are members of the Opposition and who are prepared to stand firm on this, to show a measure of leadership and to show that they support this attitudinal change. Of course, equally, it is disappointing that on the other side of things so many of their female colleagues are not prepared to do the same thing. In support of this legislation, a major contribution is being made to that long term educational process that Senator Chaney cited as the preferred approach of Mr Steele Hall, as expressed in the other place-as, indeed, it is of all of us. I am sure we would all prefer that long term educational process, but for women and members of other designated groups for whom discrimination is a fact of life, other actions also need be taken. I point out that Senator Chaney's arguments, such as they were, have not been convincing. It is a fact that the wording of the 1984 amendment to the Public Service Act was virtually the same as this wording, as was the wording of the Affirmative Action (Equal Employment Opportunity for Women) Bill. Senator Chaney concluded his remarks by suggesting that by virtue of this wording we must have quantitative indicators. I do not believe that that is a correct interpretation. The accusations of nitpicking are absolutely correct. What has happened is that one word in this legislation has been picked up. That word is in the clauses that the Opposition proposes to amend. It has been picked up out of political opportunism by a political party which at the time locked itself into what is an undesirable negative attitude to legislation which, if it had been thinking clearly and in the best interest of the long term attitudinal change of society, it would support. One should perhaps have some sympathy with a political party which, having locked itself into that position and having lost the battle, is not now prepared to go back to its former position-a position which was morally defensible, which was progressive and which would have been of great benefit in contributing to that attitudinal change out in the community. The Australian Democrats have no problem with the wording in this legislation. Again, I refer to clause 3.4, the merit clause, as the safeguard provision. I do not believe that it does in any way fail to obviate any possibility that one could interpret a quota system as being part of this legislation. The merit clause is there. All decisions must be made on merit, and that is the safeguard for those who are tentative on this issue. The Australian Democrats will not support these amendments. Senator CHANEY(Western Australia-Leader of the Opposition)(3.44) —I am sorry to rise again but I am faintly irritated by the fact that Senator Powell chose to open her contribution by misrepresenting what I said. I, therefore, have a duty to rise and correct that. She suggested that I was going beyond what was said by Mr Neil Brown, who spoke on behalf of the Opposition in the House of Representatives. I expressly made reference to the fact that the matter of quotas had been described as giving rise to de facto quotas, and I used various other expressions. There was certainly never any claim by me that the Bill set down de jure quotas. But, since Senator Powell chose either not to listen to the argument or could not understand it, let me very quickly go back over some of the ground. The difference that Senator Powell writes off as meaningless indicates at least one thing-that she has no legal training. The difference between the words `quantitative or other indicators' and `quantitative and other indicators' seems to me to be quite important. The fact is that people charged with duties under this legislation would have a duty to set quantitative and other indicators whereas under the previous Act that is a matter in which they have some judgment. As Senator Powell will know, this legislation will be administered by people, some of whom may have an aversion to the program and some of whom may have a deep ideological commitment to it. If Senator Powell looks at page 8 of the Public Service Board's `Equal Employment Opportunity Report 1985-86'-I suspect that she perhaps has-she will find that it states: Provisions for evaluating the effectiveness of Programs are often inadequate. Very few agencies set numerical targets to be used as indicators of progress. The Board will be placing greater emphasis on the development of appropriate quantitative performance indicators during the coming year. There we see some emphasis on this question of numbers. Also, as I have mentioned in earlier debates, in the Equal Times document which was brought out in, I think, March this year, there was reference to the sensitivity of this question of numbers and quotas and some sensitivity about the idea of the setting of targets. The simple point that Senator Powell either refuses to recognise, cannot recognise, or for political reasons chooses to misrepresent-I do not know which is the case-is that what this legislation provides is that there shall be quantitative measures. That is quite clear. Anybody administering a program will have a great deal of latitude. To say that it is impossible that decisions could be made other than on the basis of merit because of the operation of clause 3.4 again just shows either an appalling lack of attention to the legislation or a refusal to examine the argument-or, again, a political preparedness to misrepresent the wording of the clause. There is nothing in clause 3.4 that places a positive requirement that decisions be made on merit. If I were not wary of wasting a lot of time on people who will not listen to arguments, I would refer the honourable senator to the quite different approach in the Public Service Reform Act, in which quite positive requirements are put upon those dealing with questions of promotion-positive requirements which are laid down, which cannot be escaped and which could be the subject of action if somebody tried to get behind them. What we have here is a permissive situation-something which is no guarantee; the clear requirement that numbers be set. To suggest that zealous officials could not use these provisions to obtain decisions more related to numbers, and therefore to quotas, than to merit is in our view to fly in the face of the clear meaning of the words of the Bill with which we are dealing. Senator WALTERS(Tasmania)(3.47) —Perhaps I may explain to Senator Powell the difference between the words `or' and `and'. She said that the meaning is virtually the same and that the difference is one little word. I think that Senator Powell would understand if she had been charged with a criminal offence and could be sentenced to a fine of $40,000 or six months gaol, or a fine of $40,000 and six months gaol. I dare say she would then recognise the difference between the words `or' and `and', which is a very important difference. Senator RYAN(Australian Capital Territory-Minister for Education)(3.48) —The Government will not accept the amendments moved by Senator Chaney. Although the reasons have been set out on numerous occasions during this debate, since Senator Chaney went to some lengths to restate his position, I should explain why the amendments are not acceptable and the arguments put forward by Senator Chaney are not acceptable. Firstly, Senator Chaney challenged the claim that has been made by me, by various other speakers in the debate, by the Australian Democrats, by his colleague Senator Peter Baume and by many others, that the merit clause would prevent employment being offered on the basis of anything other than merit. Apart from the fact that the Government's intention on this has been made quite clear on numerous occasions, I remind Senator Chaney that, even if his very far-fetched interpretation were a possible one-that is, that it would be possible that a job could be offered or some benefit of employment could be provided other than on the basis of merit-that action could be challenged under the Sex Discrimination Act or the Racial Discrimination Act. It is important to consider all of these legislative measures as part of a package. It is the Government's view that it is not possible under the legislation currently being debated for employment to be provided on any basis other than merit. In our view, the merit clause is overriding. Even if an individual manager-for example, the individual manager Senator Chaney dreamt up for the purposes of his argument-tried to interpret that clause so that employment could be provided on any other basis, both of the other anti-discrimination measures are in place, and that decision could be immediately and successfully challenged on that basis. Senator Chaney has also made great play of the fact the Affirmative Action (Equal Employment Opportunity for Women) Act 1986 did not say `and', but said `or', in regard to measuring the outcomes and other non-quantitative measures of success of the program. I draw his attention to section 8(1) (g) of the Act, which sets out the contents of the affirmative action program that all employers are required to develop, and which states that one of the steps to be taken is: and make forward estimates in the program. Therefore, `and' is included, and the two ways of assessing the program are provided in that Act. I also draw the attention of Senator Walters to that fact, as she is under the mistaken impression that only one assessment, and not the other kind of assessment, is required; both kinds are required. Should either honourable senator be in any doubt about the meaning of `forward estimates', I draw their attention to section 8 (3), which states: `Forward estimates' means a quantitative measure or aim, which may be expressed in numerical terms, designed to achieve equality of opportunity for women in employment matters, being a measure or aim that can reasonably be implemented by the relevant employers within a specified time. It should be clear to both honourable senators that both non-quantitative and quantitative measures are required under that Act, as they are required under this Bill. Of course, that has nothing to do with quotas, and cannot be used by any sensible person to invent a quota requirement, be it de facto, spurious or any other quota. There is no quota requirement. Let us consider the meaning of `quota'. It means selecting people for jobs on the basis of the groups to which they belong, rather than on the basis of merit. It is a commitment to hiring or promoting a fixed number of people from a certain group, even if they are not the best people available for the jobs. We know that some legislation in the United States of America requires just that, but whether that is right or wrong in that particular context is a debate for another time. However, we know that such a provision can be put in legislation. Our Government chose, as Senator Peter Baume knows very well, not to go down that track. Had we wished to go down that track, had we considered it to be the best way ultimately to achieve equal employment opportunity, we would have been open about it, discussed it and defended it. We would not have used some sneaky or back-door way of taking employers-statutory bodies at this stage-down that track. We decided to abandon that method. I shall not go into the reasons for that at this stage, but we did not choose it. Had we done so, we would not have been able to insist, as we have properly and legitimately been able to do at every stage of the equal employment opportunities legislation, that we are asserting the supremacy of merit as the criterion for employment. Under the definition that I have just given of quota, that would be contrary to selection on merit. As Senator Powell pointed out, clause 3 (4) of the Bill makes it absolutely clear that there is no intention to introduce quotas. Senator Chaney —But it does not prohibit merit appointments. Senator RYAN —It is my interpretation that it prohibits anything other than merit as the basis for employment. I have already pointed out to Senator Chaney that, even if we could find some manager who would take that interpretation and act on it, that decision would immediately be challenged under other existing legislation. The question may be asked: `What are the quantitative indicators if they are not quotas?'. Paragraphs (g) and (h) of clause 6 mean exactly what they say-that authorities will be required to develop methods of assessing the effectiveness of their programs. That is the same requirement that applies in other areas of administration. There is no point in having a program unless it is meant to achieve something; there is no way of managing a program sensibly unless its effectiveness is evaluated. The Bill requires the use of quantitative and other indicators to assess results. That is obviously quite different from using numerical quotas to produce results. Basically, the Bill is saying that authorities should check the facts about employment of the EEO groups in their organisations, and those facts should include both statistical and other information. First, they should check the facts when they are planning their programs and identifying the problems that need to be solved-I refer to clause 6 (e) and 6 (f). Secondly, they should check the facts again when they evaluate their programs. They should ask whether their programs have been effective in solving the problems. I refer now to paragraphs (g) and (h). Obviously, checking the facts is better than relying on vague hunches about what is happening. I draw the Committee's attention to a weakness in the amendments moved by Senator Chaney, especially relating to the words that he wishes to insert in place of certain other words. The Opposition has forgotten, as it has forgotten during several stages of the debate, that the EEO plans apply not only to women but to other designated groups. Opposition amendment No. 3 proposes a new sub-clause: (2) In subsection (1): `forward estimate' means a quantitative measure or aim, which may be expressed in numerical terms, designed to achieve equality of opportunity for women in employment matters . . . It then defines the meaning of `objective'. That new sub-clause would, in fact, remove a large part of the effect of the Bill which is to require statutory authorities to have EEO plans for other designated groups. All these matters have been traversed many times during the course of this debate and the debate in the other place. However, I went into some detail again to explain to Senators Chaney and Walters why the Opposition amendments are not acceptable to the Government. Senator WALTERS(Tasmania)(3.58) —The explanation given by the Minister for Education (Senator Ryan) was that clause 6 (g) referred to objectives and making forward estimates. The definition of `objective' is a qualitative measure or aim, while the definition of `forward estimate' is a quantitative measure or aim. If we are setting in legislation objectives of a qualitative nature and forward estimates of an aim, certainly numerical terms are not required. That is wholly different from the piece of legislation before us, and it is for that reason that the Opposition has put forward amendments. With the power of ministerial direction which is granted later in the Bill, a situation could easily arise where a manager of a Commonwealth authority is directed by the Minister to increase the numbers of the designated groups in his authority. Because he is not keeping up with the numbers required by the Minister he could quite legally take a certain course under clause 3 (4). It states: Nothing in this Act shall be taken to require any action incompatible with the principle that employment matters should be dealt with on the basis of merit-- To fit in with the ministerial direction, the manager could employ people on the basis of sex or designated groups. There is nothing in the Bill that would stop him fitting in with the Minister's direction. Indeed, the temptation to do so would be considerable because pressure on the manager would be quite considerable if the Minister directed him to fulfil a certain required number. Question put: That the amendments (Senator Chaney's) be agreed to. The Committee divided. (The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 25 Noes . . . . . . . . . . . 35 —— Majority . . . . . . . . . 10 —— Baume, Michael MacGibbon, D. J. Baume, Peter Newman, J. M. Boswell, R. L. D. Puplick, C. J. G. Brownhill, D. G. C. Reid, M. E. (Teller)Carrick, Sir John Sheil, G. Chaney, F. M. Short, J. R. Collard, S. J. Teague, B. C. Guilfoyle, Dame Margaret Townley, M. Hamer, D. J. Vanstone, A. E. Hill, R. Walters, M. S. Jessop, D. S. Watson, J. O. W. Kilgariff, B. F. Withers, R. G. Knowles, S. C. Aulich, T. Macklin, M. J. Bolkus, N. Maguire, G. R. Childs, B. K. Mason, C. V. J. Coates, J. Morris, J. Coleman, R. N. Powell, J. F. Cook, P. F. S. Ray, RobertCooney, B. Reynolds, M. Crowley, R. A. Robertson, E. A. Devlin, R. Ryan, S. M. Elstob, R. C. Sanders, N. K. Foreman, D. J. Sibraa, K. W. Georges, G. Siddons, J. R. Gietzelt, A. T. Tate, M. C. Giles, P. J. Vigor, D. B. Haines, J. Walsh, P. A. Jones, G. N. (Teller) West, S. M. McIntosh, G. D. Zakharov, A. O. McKiernan, J. P. Black, J. R. Alston, R. K. R. Colston, M. A. Durack, P. D. Richardson, G. F. Messner, A. J. Evans, G. Archer, B. R. Button, J. N. Parer, W. R. (Senator Lewis did not vote, to compensate for the vacancy caused by the resignation of Senator Grimes). Question so resolved in the negative. Clause agreed to. Remainder of Bill-by leave-taken as a whole. Senator CHANEY(Western Australia-Leader of the Opposition)(4.07) —by leave-I move (4) Page 6, after subclause 9(3), insert the following new subclause: `(3a) Where a relevant authority has lodged a program report with the Board, the responsible Minister shall: (a) if the report fails to satisfy the requirements of this Act, by notice in writing, request the authority to lodge a further report with the Board within such period as is specified in the notice; and (b) if the report or further report, as the case may be, satisfies the requirements of this Act, cause a copy of the report or further report to be laid before each House of the Parliament within 15 sitting days of that House after the day on which the Board receives the report or further report.'. (5) Page 6, subclause 9(4), at end of subclause, add, in which case the Minister shall cause a copy of the annual report to be laid before each House of the Parliament within 15 sitting days of that House after the day on which the Minister receives the annual report. (6) Page 7, after subclause 10(4), add the following new subclause: `(5) Where a relevant authority has lodged a special report with the Board, the responsible Minister shall cause a copy of the report to be laid before each House of the Parliament within 15 sitting days of that House after the day on which he or she receives the report.'. The amendments are to clauses 9 and 10 of the Bill. They all relate to the reporting requirements which the Bill sets out. The 1986 Act requires private employers-the Act deals with private employers-to prepare a public report on their affirmative action programs each year and to lodge that report with the Director of Affirmative Action. The Act also requires employers to prepare a separate, confidential report containing more detailed information. The public report, as the name implies, can be made available only by the Director to a member of the public on application and it may also be used in reports that the Director makes to the Minister. So a heavy obligation to meet reporting requirements is placed on employers by the earlier legislation. The present Bill to some extent repeats those obligations but the existing provisions appear to relieve some Commonwealth authorities of the same burden. The Bill provides that the authorities which are governed by this Bill may elect to make their reports on the progress of the equal opportunity program either to the responsible Minister in charge of the authority or to the Public Service Board. The Bill then provides that if the authority elects to report to the Minister, the Minister must table a copy of the report before each House of the Parliament within 15 sitting days. There is, however, no obligation on the Minister or on anyone else to table in the Parliament reports made by the authorities to the Public Service Board. It appears, therefore, that an authority may elect to report to the Board rather than to the Minister, knowing that if it reports to the Board its report will not be made public. I have had some sceptics suggest to me that there will be lots of interest in reporting to the Ministers rather than to the Board because authorities are more likely to get from the Minister an impartial exercise. I just pass that on to the Minister as a bit of gossip about the Bill which I picked up around the corridors. If the report goes off to the Public Service Board it is more likely that it will fall into the hands of people who perhaps have a rather more doctrinaire commitment. But that may be just a bit of scuttlebutt. As private employers are required to make a public report, it seems to the Opposition that all statutory authorities should do likewise and have their reports made public. Therefore, an amendment has been put forward to the effect that if an authority elects to report to the Board, the Minister responsible for Public Service matters must table that report before each House of the Parliament within 15 sitting days. Furthermore, the Bill entitles the responsible Minister, or the Board, to request a special report from an authority. If an authority lodges a special report with the responsible Minister, the Minister is to table the report before each House of the Parliament within 15 sitting days. Again, there is no requirement for the tabling of a special report if it has been submitted to the Public Service Board, and an amendment is put forward to remedy that. Further, the Bill entitles the responsible Minister or the Board to make a recommendation in writing to an authority on action it should take to improve the effectiveness of its program. There is no provision for the tabling of such recommendations in the Parliament. In light of the discussion that there has been about numbers and the extent to which there may be some move towards de facto quotas, the making of the reports public is in the public interest; certainly, it is in the interests of those who wish to see the effective operation of the legislation. Therefore, there is an amendment which gives effect to that. I will not read the amendments which I have moved because copies are available to all members of the Committee. I think that they in no way derogate from the operation of the legislation. I would be interested to hear from the Minister why, if at all, she does not feel able to agree with these extra reporting and tabling requirements. Senator POWELL(Victoria)(4.12) —The Australian Democrats, in not supporting the amendments, would point out that we believe, particularly in the case of amendment No. 4, that they are not necessary since a report to the Public Service Board, if that is the election in any case, becomes a report to the Prime Minister which is then tabled in the Parliament as part of the annual report of the Public Service Board. In the case of amendment No. 5, we would point to clause 9 (4), which imposes a three-month time limit. We believe that that ensures the tabling of a report. The same would apply in relation to amendment No. 6. On the basis that the amendments are, in our view, unnecessary, we will not support them. Senator RYAN(Australian Capital Territory-Minister for Education)(4.13) —As Senator Powell has pointed out, the reporting procedures that the Opposition seeks to secure by its amendments are not necessary. There are adequate reporting opportunities provided for in the Bill. Two different reporting procedures are available. This reflects the fact that the reports of authorities that elect to report to their portfolio Ministers are not subject to scrutiny by an independent agency, hence the Minister's additional power to issue directions and to demand further reports. The Public Service Board's powers under the Bill were based on its powers under section 22b of the Public Service Act. The Bill provides for Parliament to be advised concerning equal employment opportunity programs. The mechanisms are somewhat different for authorities which report to the Public Service Board-in the Public Service Board's annual report-and those which elect to report to portfolio Ministers which leads to the tabling of reports in the Parliament. However, in both cases, Parliament will be informed concerning the programs. The amendment would require Ministers to table and take responsibility for reports for which they do not otherwise have responsibility. Given the Public Service Board's role, the arrangement outlined in the Bill-that is, reporting in the Public Service Board's annual report-is the only workable reporting arrangement for authorities that choose to report to the Public Service Board. Similarly, regarding amendment No. 5 as moved by the Opposition, I would make the comment that the amendment is unnecessary. The existing provision contains a built-in time limit requiring that reports should be lodged with Ministers within three months after the end of the period to which the program report relates. Amendment No. 6 is unnecessary as the Bill provides that the Public Service Board will report to the Parliament concerning the operations of the legislation, to the extent of its involvement. Therefore, reporting responsibilities are adequately covered and the Opposition's amendments are not acceptable. Senator CHANEY(Western Australia-Leader of the Opposition)(4.15) —I am a little puzzled by part of the Minister's response. Therefore, I wish to direct a question to her in Committee. Clause 9 (3) puts a quite simple and straightforward obligation on a Minister where a relevant authority lodges a program report with the Minister rather than with the Board. I would have thought that, administratively, nothing could be more straightforward than the prescription in clause 9 (3), which states: Where a relevant authority has lodged a program report with the responsible Minister, that Minister: . . . . (b) shall . . . cause a copy of the report or further report to be laid before each House of the Parliament within 15 sitting days . . . In other words, the Minister has a simple statutory obligation to receive the report and to pass it on within 15 days. The Minister suggests that, under section 22b of the Public Service Act, which was put in place as part of the Public Service Reform Act 1984, the effect is to ensure that, where a report is made to the Board and not to the Minister, there will be some form of annual report which will bring all these together. I do not have a note of what she said, but my recollection is that she suggested that was required administratively and was the sensible administrative way to go about it. I am puzzled as to why it is any more difficult for the Board than it is for the Minister simply to pass the reports on and make them public and available to this Parliament within 15 days. That seems to be straightforward administratively. On the other hand, what is being proposed by the Government is a more complex and slower procedure. It means that there will be much longer delays in exposing these matters to public view. I am very curious as to what possible administrative convenience is served by going through section 22 of the Public Service Act rather than simply accepting our amendment, which would place no burden on the Board at all and would give the public earlier knowledge of what the reports contain. Senator RYAN(Australian Capital Territory-Minister for Education)(4.17) —One of the aims of drafting the legislation in the form it is drafted is to establish consistency, as far as possible, with the treatment of statutory authorities and the treatment of Commonwealth departments. As Commonwealth departments will be reporting via the Board, so it will be possible for statutory authorities to do the same thing. Senator CHANEY(Western Australia-Leader of the Opposition)(4.18) —I do not know what purpose is served by that. Private industry is also caught up in the reporting process. One might say that a more proper comparison can be made between Telecom Australia and Broken Hill Proprietary Co. Ltd than Telecom and, say, the Department of the Prime Minister and Cabinet. In the interests of people knowing what is going on in this area, I ask why it is that a procedure that is perfectly acceptable for the private sector is not acceptable for public trading corporations, particularly, given the conversion that has undergone the Government, as we are likely to see them privatised in the near future. I would have thought that the Minister, given the predilection of her Government for selling off the family silver, as demonstrated in the lead-up to the mini-Budget, might well want to see greater uniformity between the private sector and these great public trading corporations. Senator RYAN(Australian Capital Territory-Minister for Education)(4.19) —From Senator Chaney's last remarks, one assumes that he is not very serious about pursuing this matter. Under the Affirmative Action (Equal Employment Opportunity for Women) Act, private employers do not have reports on their operations made separately to Parliament; there will be a report from the Affirmative Action Agency. Similarly, statutory authorities can either have direct reports made or report to the Public Service Board when an overview of all of the programs can be brought forward. Senator CHANEY(Western Australia-Leader of the Opposition)(4.19) —Will those reports be available to the public in the same way as private reports, without any delay, or will we all have to wait until the Public Service Board chooses to report? Senator RYAN(Australian Capital Territory-Minister for Education)(4.20) —The relevant parts of those reports will appear in the annual report from the Public Service Board, so the overall performance will be available to the public and the Parliament. Senator CHANEY(Western Australia-Leader of the Opposition)(4.20) —I think the Minister misses my point. My point is that the other reports, as I understand it, are available for search on inquiry without awaiting the publication of some annual reports. It seems to me that there is clearly a delay in the procedure which the Minister is putting forward in this Bill in terms of when a member of the public would be entitled to have access to this material. Senator RYAN(Australian Capital Territory-Minister for Education)(4.21) —I am advised that the information that would go in the report from the statutory authorities to the Board would also be available in the annual reports of the statutory authorities themselves. So I think we can conclude that information will be widely available. Senator CHANEY(Western Australia-Leader of the Opposition)(4.21) —I hope the Minister is not seeking to avoid answering the question. My question quite simply is that as I understand it the 1986 Act requires employers to prepare a public report of their affirmative action programs each year, which must be lodged with the Director of Affirmative Action. As I understand it, from that time the report is available to a member of the public who wishes to have access to it. I instance a problem that I see in the procedure that the Minister is promoting under this Bill: Let us assume bad faith. We actually have had some examples of bad faith under the Racial Discrimination Act. There has been very severe criticism of the actions of officers. So let us not always assume that people are doing the right thing. Let us assume that a public authority is reporting and that it decides that it is not very keen for people to know what is going on, so it chooses to report to the Public Service Board, and it may well be nine or 10 months, for all I know, before the Public Service Board report is likely to come out. That, on my reading of the legislation, would quarantine this report for as long as 10 months. On the wording of this legislation during that time it would not be available to the public. I do not think that the Minister at the table and her advisers are trying to promote a cover-up, but I would like some assurance that there is a clear and statutory right for people to have access to those reports as speedily as they have access to the reports of private corporations. Senator RYAN(Australian Capital Territory-Minister for Education)(4.22) —I think I should draw Senator Chaney's attention to the information which can be made available under the Affirmative Action (Equal Employment Opportunity for Women) Act 1986. It is very limited information. It is information which provides statistics and related information concerning employment by the relevant employer, including the number of employees of either sex and the type of jobs undertaken, or by job classifications of employees of either sex and an outline of the processes undertaken by the relevant employer, and in the case of the employer's first report, initially to develop and implement the employer's affirmative action program and in any other case further to develop and implement the program. So it is very summary information and it is information in relation to any statutory authority which is readily available. Senator CHANEY(Western Australia-Leader of the Opposition)(4.23) —I would have thought that if, for example, the Women's Electoral Lobby was very concerned to pursue what it saw as inadequate performance in equal opportunity for affirmative action in Australia Post, it may well find itself in a situation where the sort of quite basic information, which the Minister has just outlined, would be in these reports, might not be available for it for a very long time, whereas the same information would be immediately available for it if it were trying to chase the same goal with respect to the Broken Hill Proprietary Co. Ltd. I suggest to the Minister that she might examine that, because I doubt that that is her intention. I would have thought that it would, therefore, warrant either her acceptance of our amendment or an undertaking that she will examine the matter and try to ensure that public authorities cannot engage in a cover-up which is not open to private companies. Senator RYAN(Australian Capital Territory-Minister for Education)(4.24) —Senator Chaney is perfectly aware that public statutory authorities cannot engaged in a cover-up because in any event the information in a statutory authority's report would be available under the Freedom of Information Act, which is not a procedure available to somebody trying to discover what BHP is doing. So there is that very obvious distinction between public and private authorities. So at the very least that access is available. But the advice from the officers is that the information can be either made available in the statutory authority's own annual report, which is tabled in Parliament, it can be made available as a separate report tabled by the Minister, or it can be made available to the Board and the Board will table all relevant information annually. In the third case I agree with Senator Chaney that there may be some delay, but given the nature of the information sought I see no reason to believe that any member of the public seeking that information would not be able to get it. However, Senator Chaney is so obviously concerned about this and in order to facilitate the progress of the debate I will undertake to have the relevant Minister, the Minister for Finance, Senator Walsh, look at his concerns. Senator CHANEY(Western Australia-Leader of the Opposition)(4.25) —I thank the Minister and ask her to let us have some public response when she has dealt with Senator Walsh. I also remind the Minister that in the course of this brief Committee debate she has told us that, if people have a problem because clause 3 sub-clause (4) does not work, of course they can go off and seek a remedy under the Racial Discrimination Act or the Sex Discrimination Act. Now we are being told that, if these clauses do not work, they can go off and seek a remedy under the Freedom of Information Act. I just want to say that I find that a very unsatisfactory set of responses from the Minister. She should be trying to give us in this legislation something which, on its face, will work and not require expensive recourse to other tribunals on the part of people who may well not be quite as familiar with the great mass of legislation which is available in this area as is a Minister of the Crown. Question put: That the amendments (Senator Chaney's) be agreed to. The Committee divided. (The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 25 Noes . . . . . . . . . . . 35 —— Majority . . . . . . . . . 10 —— Baume, Michael Lewis, A. W. R. Baume, Peter MacGibbon, D. J. Boswell, R. L. D. Newman, J. M. Brownhill, D. G. C. Puplick, C. J. G. Carrick, Sir John Reid, M. E. (Teller)Chaney, F. M. Sheil, G. Collard, S. J. Teague, B. C. Guilfoyle, Dame Margaret Townley, M. Hamer, D. J. Vanstone, A. E. Hill, R. Walters, M. S. Jessop, D. S. Watson, J. O. W. Kilgariff, B. F. Withers, R. G. Knowles, S. C. Aulich, T. McKiernan, J. P. Bolkus, N. Macklin, M. J. Childs, B. K. Maguire, G. R. Coates, J. Mason, C. V. J. Coleman, R. N. Morris, J. Cook, P. F. S. Powell, J. F. Cooney, B. Ray, RobertCrowley, R. A. Reynolds, M. Devlin, R. Robertson, E. A. Elstob, R. C. Ryan, S. M. Evans, Gareth Sanders, N. K. Foreman, D. J. Sibraa, K. W. Georges, G. Siddons, J. R. Gietzelt, A. T. Tate, M. C. Giles, P. J. Vigor, D. B. Haines, J. West, S. M. Jones, G. N. Zakharov, A. O. McIntosh, G. D. (Teller) Alston, R. K. R. Black, J. R. Short, J. R. Button, J. N. Durack, P. D. Colston, M. A. Richardson, G. F. Messner, A. J. Parer, W. R. Walsh, P. A. (Senator Archer did not vote, to compensate for the vacancy caused by the resignation of Senator Grimes). Question so resolved in the negative. Remainder of Bill-by leave-taken as a whole, and agreed to. Bill reported without amendment; report adopted. Motion (by Senator Ryan) proposed: That the Bill be now read a third time. The Senate divided. (The President-Senator the Hon. Kerry Sibraa) Ayes . . . . . . . . . . . 42 Noes . . . . . . . . . . . 18 —— Majority . . . . . . . . . 24 —— Aulich, T. McKiernan, J. P.Baume, Peter Macklin, M. J.Bolkus, N. Maguire, G. R.Childs, B. K. Mason, C. V. J.Coates, J. Morris, J.Coleman, R. N. Powell, J. F.Cook, P. F. S. Puplick, C. J. G.Cooney, B. Ray, RobertCrowley, R. A. Reynolds, M.Devlin, R. Robertson, E. A. (Teller)Elstob, R. C. Ryan, S. M.Evans, Gareth Sanders, N. K.Foreman, D. J. Sibraa, K. W.Georges, G. Siddons, J. R.Gietzelt, A. T. Tate, M. C.Giles, P. J. Teague, B. C.Haines, J. Townley, M.Hill, R. Vigor, D. B.Jones, G. N. West, S. M.MacGibbon, D. J. Withers, R. G.McIntosh, G. D. Zakharov, A. O. Baume, Michael Knowles, S. C.Boswell, R. L. D. Lewis, A. W. R.Brownhill, D. G. C. Newman, J. M.Carrick, Sir John Parer, W. R.Chaney, F. M. Reid, M. E. (Teller)Collard, S. J. Sheil, G.Crichton-Browne, N. A. Vanstone, A. E.Guilfoyle, Dame Margaret Walters, M. S.Kilgariff, B. F. Watson, J. O. W. Black, J. R. Alston, R. K. R.Colston, M. A. Durack, P. D.Richardson, G. F. Messner, A. J.Walsh, P. A. Short, J. R.Button, J. N. Hamer, D. J. (Senator Archer did not vote, to compensate for the vacancy caused by the resignation of Senator Grimes). Question so resolved in the affirmative. Senator KILGARIFF(Northern Territory) —by leave-The senators on this side of the House who were paired with Government members, and who would otherwise have been present to vote, are Senators Alston, Durack, Messner, Archer, Short and Hamer. Bill read a third time. Debate resumed from 28 April, on motion by Senator Button: That the Bills be now read a second time. Senator DURACK(Western Australia)(4.42) —We have before us a package of legislation which seeks to implement the Government's proposed petroleum resource rent tax. This proposal was spelt out in some detail by the Government in a statement that was made by the then Minister for Resources and Energy, Senator Walsh, in July 1984. Yet it has taken this Government at least 2 1/2 years-since July 1984 until a few weeks ago when this package was introduced in the House of Representatives-to introduce the legislation. That is an inordinate amount of time and it is my first major criticism of the Government's proposal. The industry, already groaning under the burden of this taxation, has not been able to make important investment decisions because it has not seen the full details of the legislation. The Petroleum Resource Rent Tax Assessment Bill 1987, the Petroleum Resource Rent Tax Bill 1987, the Petroleum Resource Rent Tax (Interest on Underpayments) Bill 1987 and the Petroleum Resource Rent Tax (Miscellaneous Provisions) Bill 1987 will add yet another taxation burden to those already borne by the Australian community. In particular, they will add to what is already one of the most discriminatory tax regimes any industry has to work under in Australia, even compared to regimes that the petroleum industry works under in other countries. This legislation will result in disincentives for the industry at the very time when the Government should be providing a fair and equitable taxation regime that would encourage oil and gas exploration in Australia. In considering the taxation of the petroleum industry in general, what strikes the observer is the great range of taxation measures, many of them discriminatory. Not only is the industry subject to company tax, royalties, fringe benefits tax, capital gains tax, but also it has to pay excise on production and a resource rent royalty in certain cases. Now the Government proposes a new tax, a resource rent tax, to take the place of excise and royalty in some off-shore areas. These taxes were levied on the industry at a time when the world price of crude oil was forced to stratospheric heights by the actions of the oil cartel of the Organisation of Petroleum Exporting Countries. In this environment governments of oil producing countries around the world did not believe that they, or the communities they represented, were getting a high enough return from indigenous petroleum resources. Governments were receiving increased revenues from royalties and company tax but decided that, as the price of oil had been forced up by OPEC rather than through the action of market forces, a proportion of the extra income generated, and a large proportion at that, should accrue directly to the Government and through it to the community. That may have been all right in an environment where a barrel of oil was worth in excess of $US30, but now the spot price of Saudi light oil has fallen to around $US17.30 a very different situation applies. In real terms the price of oil approximates the price it held during 1973. A rise to $US22 per barrel is needed before it would equate to the price received between 1975 and 1979. The Government, therefore, should realise that the major fall that has occurred in the value of petroleum has reduced the value of that resource base and has thereby reduced the capacity of producers to pay high and discriminatory levels of taxation. Other governments around the world have recognised this and have modified their taxation regimes accordingly. Canada, the United States of America and the United Kingdom have all made concessions to the industry that reflect the decreased capacity of the industry to be a major source of government revenue. The Australian Government badly needs to recognise this also. Today we have seen headlines about the success of the Australian company Hartogen in oil exploration work it has done in the Philippines. It has been successful, but why has it been in the Philippines? Why is it not exploring in Australia? It is because of the more favourable tax regime in the Philippines. It has been getting an equitable return from its oil exploration under that regime, and because of that it has been successful, as we know. Senator Evans has at least recognised, in a recent speech to the Australian Petroleum Exploration Association conference, that the total Government take from existing production in Bass Strait is relatively high in comparison with that of other countries. He also stated that for new on-shore and off-shore projects the total Australian tax take is in an intermediate position. However, we must contrast this relatively high or intermediate tax position with the levels of prospectivity that apply in Australia with the levels that apply to other countries. It has to be recognised that Australia's prospectivity is low. We have large geological basins and an unsophisticated and relatively undeveloped geological database. In terms of world oil resources and cumulative production, Australia compares badly. The only conclusion that can be drawn from the data is that large discoveries are unlikely and that oil companies, when deciding where to invest scarce exploration funds, will direct them to an area where the return is attractive. I asked Senator Evans a question yesterday arising from a speech made by Brian Griffith, the General Manager for petroleum exploration of Broken Hill Proprietary Co. Ltd. In a speech to the Australian Institute of Mining and Metallurgy last week Mr Griffith said: In assessing Australia's prospectivity it is perhaps relevant that in the past thirty years or so, only some four billion barrels of oil have been discovered in the country, and the great bulk of this volume was discovered in a relatively short period of time in one very small area of the Gippsland Basin. In the face of statistics such as this it is perhaps not surprising that the undiscovered oil resource base of Australia has been assessed at a relatively low level. In assessing an exploration proposal two factors are of the utmost importance-prospectivity and the level of producer realisation, that is, what the producer will get out of it after all expenses, including taxes, have been paid. Australia has a low level of prospectivity when compared to other countries. The Australian Government has not, unlike those other countries, acted responsibly to reduce the taxation burden in the light of falling oil prices. There are two factors that affect the level of producer realisation-the price the producer receives for the oil produced and the level of tax imposed by the Government. Australia is not in a position to exert any pressure on the price of oil. We produce a tiny amount of the world oil production, most of which is absorbed on the domestic market. When in government, the Liberal Party recognised that Australia had only small reserves and that the most economical way to allocate those reserves, and to encourage exploration and production, was to price Australian oil at world price levels. That major decision, taken by the Fraser Government in 1979, was known as the import parity price policy. The essence of the decision was to price Australian oil at world parity prices. This policy was very successful in terms of encouraging increased exploration. There were great increases in exploration during those years until this Government took office. It must be realised that the tax rates that were applied during the high oil prices of the late 1970s may not be appropriate now under low oil prices in the late 1980s. They are not appropriate because they have forced the level of producer realisation so low that exploration has fallen dramatically and indeed production in many cases has proved not to be economical-even in Bass Strait. The Government has already partially recognised this in that it has given some relief on the crude oil excise. Undoubtedly that is a matter which must be kept under further review. The level of self-sufficiency attained in oil production in Australia will have an important effect on our economy. We are not saying that self-sufficiency at any cost should be our objective. We should not provide subsidies for the exploration industry, and companies in industry should pay their way by making a proper taxation contribution. As I have said, it was the Fraser Government which, when the IPP scheme was brought in, also introduced the excise on production. So we are not saying that companies should not pay proper taxation contributions. In this debate we are arguing what constitutes a proper taxation contribution in the light of the effect which current taxation levels are having on the exploration industry and which they are likely to have in the future, as indeed they have already had because of the greatly increased taxation imposed by the Hawke Government. Liberal Party policy is certainly not to impose new sectoral taxes on future oil discoveries. That was known as the new oil policy, and also accompanied the IPP policy. To put all this into perspective I will briefly outline the situation in regard to Australia's self-sufficiency. The Department of Resources and Energy, using Bureau of Mineral Resources figures, has in its discussion paper on the regulation of crude oil marketing indicated that by 1992-93 the gap between supply and demand to be met by imports could be as much as 320,000 barrels per day. In Australian dollars this would cost some $3 billion per year at 1987 dollar rates. The price of oil is expected to rise through the 1990s as non-OPEC production declines so that by the 1999-2000 period we could be importing some 390,000 barrels per day, which may well by then at current rates amount to some $A4.5 billion in added import costs. The economic costs of these declining levels of self-sufficiency are quite high-indeed, astronomical. The Victorian Department of Industry, Technology and Resources has undertaken some study of the general economic costs of declining self-sufficiency with the assistance of the National Institute of Economic and Industry Research. That research shows that as the crude oil gap widens over the 1990s and the Federal Government is forced to use contractionary monetary and fiscal measures to cope with balance of payments problems the most likely effects could be a decline in the gross national product by the year 2000 of around $A7.7 billion in 1979-80 prices, a fall in employment of over 200,000, a fall in manufacturing output of up to $A3 billion, and a fall in wage rates of about $24 per week in inflation adjusted dollars. However, a lot of other research has been done which confirms this sort of dramatic impact on our standard of living as a result of our loss of self-sufficiency or major decline in it. The Centre for South Australian Economic Studies, a joint centre of the University of Adelaide and Flinders University, has looked at the economic impact of oil exploration on expenditure in South Australia. The simple conclusion of the study is that for each $1m reduction in expenditure on exploration and development activity some 20 fewer jobs were supported in South Australia. In 1985 direct expenditure by Delhi was shown to support 3,000 jobs in South Australia in addition to those directly employed by Delhi. Of course this relates to exploration in the Cooper Basin area. The revised exploration and development budget of Delhi in 1986 supported nearly 1,500 fewer jobs as a result of the decline in exploration. So the decline in self-sufficiency has major national economic effects. Senator Gareth Evans and the Hawke Government would seem to want to rely on the vast resources that we have still in the ground, that is, our general mineral resources. Unfortunately such an approach is wishful thinking. We simply cannot rely on those developments to replace the loss of our self-sufficiency in oil. We must confront that problem. Senator Evans is also ignoring the fact that export revenue from coal is declining. Where he will find this extra windfall is of course problematical. And what about uranium? The Hawke Government has successfully killed off most of the uranium exploration and indeed development by refusing to sanction any further uranium mining developments other than Ranger, Nabarlek, which is just about finished anyway, and Roxby Downs. On the one hand, the Federal Government is saying: `We need not worry because we have all these minerals'; yet on the other hand it is putting every impediment in the way of the exploration and development of these minerals. We had another example of it last week in the Government's Kakadu legislative package. Clearly the Government does not wish to face up to the economic problems that are on the horizon as a result of our declining oil self-sufficiency. They cannot be swept under the carpet as part of its pre-election `she'll be right' attitude. The studies that I have mentioned show that there is a lot of economic pain being caused by loss in self-sufficiency. Mr Keith Orchison, the Executive Director of the Australian Petroleum Exploration Association, in a recent speech to the Australian Institute of Mining and Metallurgy, announced the results of an activity review that had been recently completed by APEA. That review showed that only 52 on-shore exploration wells and five off-shore wells are likely to be completed in the first half of 1987 and only 7,000 kilometres of on-shore seismic work and 2,000 kilometres of off-shore seismic work are forecast to be recorded in the first half of the year. This compares with 72 on-shore and 19 off-shore wells completed in the same period last year, when seismic activity was 100 per cent greater on-shore and 600 per cent greater in off-shore areas. APEA has prepared a fiscal year comparison between 1986-87 and 1985-86 which is also very telling and very depressing. In 1985-86 213 exploration wells were completed-173 on-shore and 42 off-shore. In 1986-87 activity was more than halved with only 82 on-shore wells and 15 off-shore. The picture for seismic work is even worse. At the end of March this year only nine on-shore drilling rigs out of a fleet of 43 were at work, and three of the five drilling vessels in Australian waters were stacked and half the seismic crews idle. This depressed picture is unlikely to lead to any substantial additions to the quantity of our oil reserves and the low level of seismic work suggests that the drilling effort will continue to be depressed over the next two years at least. APEA has also released the results of its latest survey of exploration activity. This indicated that about $A165m would be spent on off-shore exploration this year compared with $A278m in 1986. In 1987 expenditure is forecast to fall 24 per cent below 1986 and 54 per cent below 1985. The resource rent tax is just the latest in a series of secondary taxes imposed on the industry. Despite replies from Senator Evans to me, the industry has opposed the tax from the beginning and informed the Government of the negative effects that the tax will have on the exploration efforts. It is clearly having an effect. It is not just the low price of oil; it is the fact that the RRT will greatly affect producer realisation. This tax is not the profits based tax that was promised. The very way in which it is structured will lead to a significant disincentive. Government members are fond of using Jabiru as a peg on which to hang their RRT arguments. We had an example of this from Senator Gareth Evans the other day. They suggest that the Jabiru development would not have gone ahead without an RRT. This is simply not true. The industry wanted the RRT to apply in this area because of the Government's taxation on new oil discoveries. New discoveries would have had to pay royalty only, and it is more likely than not that Jabiru would have gone ahead. It proceeded not because of the RRT but because the RRT system replaced the discriminatory new oil tax. The inescapable conclusion to be drawn from the way in which the RRT is currently structured is that it is not truly profits based. It has significant structural defects-the major one being the limitation imposed on the deductibility of exploration expenditure. The version of RRT that we have before us is structured to limit deductibility of exploration expenditure to within an exploration permit or where a retention lease is granted to within the retention lease. This will alter the incentives that apply to drilling wells and undertaking exploration expenditure. If exploration expenditure on unsuccessful exploration is deductible against only the results of successful exploration within the same permit area this will clearly discourage risk taking activity. Exploration projects that previously might have taken place-they may have been geographically dispersed-will not proceed because of this. If a company has a successful project further projects within that exploration permit area will be viewed more favourably as the expenditure will be deductible for RRT purposes. Therefore there will be a misallocation of resources and exploration may not take place. In taking a decision to explore, the companies are hoping to find a large field. That is what impels them. Companies do not explore if all they expect to find is a small field. The costs of exploring off-shore are too great to be justified by finding a small field. The decision to explore is made after evaluating whether the company can expect a find that will produce revenue well in excess of the cost of drilling the well. There are many unsuccessful wells in Australia, off-shore in particular. Whilst probabilities will be applied according to the production history of the area, three different outcomes are the basis of all decisions. They involve looking at the probability of there being no find. The chance of this is usually large off-shore from Australia. There are usually small prospects of a small find. The prospects of a large find in Australia are usually very small indeed. The possibility of a large revenue stream, even taken with the small probability of a large find, often is enough to make the decision to explore positive. However, with the RRT having its largest effect-approaching 40 per cent-on large finds, it can be expected that many previous decisions to explore made viable by the possibility of a large find will no longer be viable. Therefore self-sufficiency will decline. The declining pattern of exploration will only accelerate as a result of the imposition of an RRT. Thus, despite assertions to the contrary by some economists during the initial examination of the RRT concept, the RRT will depress the incentive to invest. Allowing wider deductibility of exploration expenditure effectively lowers the cost of drilling and makes it more likely to achieve a positive expected value of return. But that is not what the concept of this legislation permits. Exploration in Australia is more expensive than in any other comparable country, as the Chairman of Minora Oil NL, Mr Max Roberts, reminded us all at the recent Australian Petroleum Exploration Association conference. Those costs have to be incurred against the background of price uncertainty and in the context of a very high taxation regime and an even higher one as a result of this RRT proposal. In many marginal discoveries there is a significant down side risk in development and producers need to be assured of a reasonable risk loaded rate of return before committing to development. The RRT thus does not provide an adequate level of return to offset this risk. As I have said, it is clear that Australia is facing a self-sufficiency decline of crisis proportions. That decline will have broad scale economic effects that will act to reduce our living standards. To combat the fall in self-sufficiency we will have to rely on more exploration. In concluding, I wish to refer briefly to the nature of the industry. Public perceptions are very often incorrect, particularly when it comes to the oil industry. It is not a hugely profitable industry dominated by multinationals-certainly not on the exploration side. Whilst the most recent industry statistics are somewhat out of date, it is hard to imagine that following the collapse of the oil price conditions have improved. The Chairman of APEA in his 1984 address referred to the Coopers and Lybrand survey of the industry. He stated that the industry earned a net profit on average shareholder funds of almost 19 per cent. However, the net profit on average funds employed was only 10 per cent. The industry as a whole was left with a net profit of around $A621m from which to pay dividends and put funds aside for exploration. In the light of inflation and the returns available on no risk investment such as treasury bonds, a 10 per cent return is quite inadequate. Almost 300 companies are involved in the exploration business in Australia. Only about 90 of those spend more than $A2m a year. Therefore, there are a large number of small investors in the oil exploration business. They have taken a huge hammering over the past 12 months because of the fall in oil prices and the effects on exploration I have already indicated. The heart of the industry consists of some 50 to 60 companies which account for some 80 per cent of the investment. A large number of these companies are Australian; they are not multinationals, as Labor supporters seem to imagine. There are some 300,000 shareholders in listed oil exploration companies and the Australian Mutual Provident Society and National Mutual both have substantial direct or indirect investments in the industry on behalf of all their investors. Many Australians thus have a direct stake in a healthy oil industry, not a subsidised one or one that cannot pay its proper and equitable contribution in taxation but rather one that is itself healthy, self-sufficient and treated equitably by government. This Government has not treated the industry in this way. As I said, it has imposed upon it a whole range of new taxes-the fringe benefits tax, the capital gains tax, a new oil tax and a cash bonus bidding system in off-shore areas. Those taxes have made a lot of exploration uneconomic. The threat of RRT, without details, hanging over the head of the companies over the last two and a half years has been a major disincentive. I hope I have shown that the proposed RRT does not act equitably, because, in particular, of the restricted deductibility it provides and the way in which that will militate against exploration. For the reasons I have indicated, the Opposition will oppose the legislation. We hope that a majority of senators will support us in throwing it out. Debate interrupted. Senator SHEIL(Queensland) —I ask leave of the Senate to make a personal explanation. Leave granted. Senator SHEIL —I thank the Senate. In the division on the Equal Employment Opportunity (Commonwealth Authorities) Bill 1987 Senator Florence Bjelke-Petersen was absent. That was due to an oversight following the disruption of the coalition when there were certain teething problems among the Whips. Senator Bjelke-Petersen is away today as the wife of the Queensland Premier to attend celebrations. Senator Cook —I thought that you were making a personal explanation. Senator SHEIL —Yes, as the Whip. This is the fortieth anniversary of her husband's election to the Queensland Parliament. I know that she would want it recorded that she would have voted against the Bill. Debate resumed. Senator SANDERS(Tasmania)(5.10) —I think we can operate on some basic premises in this nation. One is that the Hawke conservative Government will not allow anything to take place that will be disadvantageous to its rich and powerful friends in the transnational companies. Therefore, we can take it that the Petroleum Resource Rent Tax Assessment Bill 1987, the Petroleum Resource Rent Tax Bill 1987, the Petroleum Resource Rent Tax (Interest on Underpayments) Bill 1987 and the Petroleum Resource Rent Tax (Miscellaneous Provisions) Bill 1987 have the approval of the transnationals and the oil companies in general. Of course, the oil companies are screaming about the legislation, but they scream about anything, almost out of habit, and they have paid lobbyists who are making quite a bit of money from apparently opposing what the Government is doing. Of course, the Opposition is opposing this Bill because it is in the business of opposition, and I suppose it feels that this is a reasonable operation. But this Bill is very favourable indeed to the oil industry. Senator Cook —That's right. Senator SANDERS —Senator Cook agrees with me that it is favourable to the oil industry. An article in Australian Business of 15 April 1987 refers to what Senator Gareth Evans said at a recent conference of the Australian Petroleum Exploration Association and states: He added that the benefits of a resource rent tax would only be understood when it was compared with the tax it replaces. It was pointless and unrealistic to say that no tax would be preferable, he said. In other words, he was telling the oil industry that this is a good tax for it. The second reading speech on the Petroleum Resource Rent Tax Assessment Bill states: Particularly in light of the current volatility of world oil prices, the resource rent tax system thus offers considerable benefits to the petroleum industry. Senator Crichton-Browne —Try and tell them that. Senator SANDERS —The oil industry knows it. As this discussion progresses, we will find out that it knows it all too well, and it will have to make some adjustments. Of course, this Bill has been coming for some three years. Apparently, the oil industry has been operating on notice that this Bill would eventually arrive on the scene. I think that notice was contained in a Press statement. Negotiations have been going on for three years, during which the Government has basically caved in to the industry's demands. During these negotiations the Government agreed to raise the threshold rate from about 25 per cent, which was the long term bond rate plus 10 percentage points, to the current threshold of about 29 per cent, which is the long term bond rate plus 15 percentage points, and to reduce the tax rate from 45 per cent to 40 per cent. In other words, the Government has given the oil industry everything that the oil industry wants. We find that the Senate Standing Committee for the Scrutiny of Bills found some specific difficulties with this Bill. The Committee looked at the legislation and was quite critical of it in a number of areas. One area of concern was retrospectivity. The Committee states: Although the Bill contains no clear statement as to its real date of effect, it appears that in certain respects it will have retrospective effect to 1 July 1984. Profits from the recovery of petroleum in areas covered by production licences granted on or before that date are expressly excluded . . . . . . . The Second Reading Speech indicates that it is not anticipated that any petroleum resource tax will be received before the 1989-90 financial year. However because any tax that will be payable will be determined after taking account of past project receipts and expenditure the Committee draws the retrospective application of the Bill to the attention of the Senate under principle 1 (a) (i) in that it may be considered to trespass unduly on personal rights and liberties. The Australian Democrats are very much against retrospective legislation, as, I think, are all fair-minded people. We simply cannot run a country on the basis of changing the laws that exist. If a person does something, in good faith, which is legal when he does it, it is simply unjust for the Government to change the law some time down the track to make it illegal. Retrospectivity is just not on in a democratic society. The Scrutiny of Bills Committee has other complaints about this legislation. One of the more major ones in my opinion is contained in the following statement from the Committee: The Committee therefore draws clause 107 to the attention of the Senate under principle 1 (a) (i) in that by providing for entry on land or premises and the inspection of documents without a search warrant it may be considered to trespass unduly on personal rights and liberties. Once again it mentions trespassing on the rights and liberties of the Australian public. The Committee also states: The Committee therefore draws paragraph 108 (1) (b) to the attention of the Senate under principle (1) (a) (i) in that by failing to stipulate that the times and places at which persons may be required to attend and answer questions must be reasonable it may be considered to trespass unduly on personal rights and liberties. So, once again, the Senate Standing Committee for the Scrutiny of Bills has said that this Bill will unduly trespass on the rights of Australian citizens. The idea of a resource rent tax is a good one. I believe that the people of Australia, who own these resources, should have proper recompense from the companies which extract the resources. After all, it is the people's resources that the companies are using and making profits from. But the resource rent tax, which is basically a tax on profits rather than on productivity, must have proper threshold rates in order to operate correctly; that is where this Bill falls down. The Government has raised the threshold rates and reduced the tax rates to the point where, while in name it is a resource rent tax, in practice it is not; it is a give-away tax, a give-away to the oil companies. Basically, unless one applies the same principle to all taxpayers-that is, the payment of no tax until a minimum rate of return is earned-the petroleum companies have an unfair advantage. That is what happens. They do not pay any tax until they reach a profitable situation. The petroleum companies have some very clever and creative accountants. We can be sure that if they are doing their job-and they will be because they are highly paid and quite clever-the petroleum companies will pay no tax whatsoever. They have paid none in the last three years in this respect. I put it to the Senate that they will never pay any tax on this, and the Government knows this. Because of the retrospectivity aspect of this Bill, with which we do not agree, and for a number of other reasons, we are unhappy with this legislation. We feel that this Bill pays no attention to renewable resources. It is time that we in the Senate, the Government and this country took some cognisance of finite world economics. We are still living in a fool's paradise. We still feel that the earth is made of minerals, of oil, of uranium or whatever. But it is not. These things will all run out. We are still planning our economy and our taxation schedule on infinite oil reserves. We do not have infinite oil reserves. We do not have very much oil left. Even if exploration were subsidised even more heavily than it is, and if the oil companies received even better tax incentives than they now receive, sooner or later we will run out of oil. It is that clear. We must go to renewable resources. This Bill does not address that. It makes no provision for channelling any of the funds gained-if they are ever gained-from the resource rent tax into renewable resources. There is nothing about this in the Bill. At the moment we should be keeping our oil in the ground and using our technology and scientific resources to develop renewable resources so that we can use the oil wisely in the future in parallel with our renewable resources. The Democrats will vote against this Bill-which will put the cat amongst the pigeons, because the oil companies thought we would vote with the Government. The oil companies have thus allowed the Opposition to oppose it. It will be quite interesting to see the Opposition do its flip-flop when the oil companies go to it and say: `Look, if the Democrats oppose this Bill and the Opposition opposes this Bill, it will not pass and the oil companies will not receive all the benefits that the Government has written into this Bill'. It will be interesting to watch the Opposition do its backflip to protect its masters in the oil companies. What the Australian Democrats want is a true resource rental system, with effective threshold levels that will benefit the people of Australia, not the oil companies. The Australian Democrats do not support this Bill in its present form. Senator WATSON(Tasmania)(5.20) —We are debating cognately a number of Bills relating to a resource rent tax on specified off-shore petroleum projects. As honourable senators will be aware, the resource rent is a profit-based tax which is intended to replace the current system of crude oil excises and royalties. It will not apply to areas covered by production licences that were granted prior to or on 1 July 1984. In effect, that exempts the North West shelf permit areas and permits in the Bass Strait that are held by Esso and Broken Hill Proprietary Co. Ltd. Existing excise and royalties will continue to be applied in those areas. Consequently, should this package of Bills pass the Senate, Australia will have two separate arrangements for secondary taxation of petroleum products. I am pleased to note that, with Senator Sanders's comments this afternoon, the Bill is now unlikely to pass the Senate. The oil companies will be delighted by that prospect because they do not want a resource rent tax. The resource rent tax would have had the potential to worsen Australia's already critical balance of payments problems. As the tax is profit based rather than production based, it might, at first glance, appear to be an improvement on the existing arrangements. However, there are substantive problems with the proposed tax which, in combination, make it unacceptable and justify its rejection by this chamber. What are the problems? Firstly, it has taken more than two years from the time that the Government first foreshadowed the implementation of the tax for it to reach the Senate-and, as all Australians are bitterly aware, there have been considerable changes in the Australian economy during that time. Secondly, the implementation of the tax would establish a barrier to much needed exploration in the petroleum industry. Thirdly, as a result of the downturn in exploration, Australia could justifiably expect to be less self-sufficient in crude oil production in the next few years than it might otherwise have been, thus increasing our dependence on imports. I can only ask whether a country with a severe balance of payments problem can afford such a move. The answer must surely be no. Under this Hawke Government, companies have already been subject to a succession of additional tax imposts-fringe benefits tax, capital gains tax and the increase in company tax as of 1 July from 46 per cent to 49 per cent. Now, the petroleum industry is faced with the potential of yet another burden in the shape of a resource rent tax-and at a time when external taxes, combined with domestic conditions, mean that they can least afford the imposition of such a new tax. `Unintended consequences' is a term with which we have become familiar with regard to the tax policies of the Australian Labor Party Government. Yet again, the implications of this Bill will have harmful effects on the Australian economy and those operating within it. Nevertheless, the Government is set to pursue a course on which it embarked so long ago-despite the risks that have been repeatedly outlined by a succession of academics and by industry delegations. I want to take some time to examine the impact of the legislation. Conditions have changed substantially since it was first promulgated in 1984. No one can deny that much has changed in the Australian economy since initial plans for the resource rent tax were introduced. The conditions in the Australian economy have changed markedly and have deteriorated, with interest rates reaching an all-time high. Our burgeoning foreign debt has become a major constraint on economic growth and living standards. We need only ask the average man in the street for confirmation of the decline in living standards. Australia's crude oil production outlook has deteriorated and our long term potential for self-sufficiency has had to be substantially revised. It is important to note in regard to the proposed legislation that world oil prices have collapsed. The domestic price of Bass Strait crude fell from $A43.71 in January 1986 to $A29.37 in March 1987. The average price has likewise plummeted from an average figure of $29.07 in early 1986 to $22.85 in the latter part of the year. The result of those substantial movements in price has meant that reserves of commercial viable crude oil have decreased, the number of existing exploration prospects with positive financial returns has diminished considerably and company cash flows have dropped sharply, thus making it considerably more difficult to attract equity capital. For those reasons, the industry is already exhibiting a reduction in high-risk, high-cost exploration activity-something that this country can ill afford. In fact, off-shore exploration expenditure fell by 25 per cent between 1985 and 1986, and it is expected to undergo further significant changes and reductions during the current year. Further, it has now become apparent that estimates made in 1984 of Australian crude oil production were vastly overoptimistic. That is primarily due to the failure of production from the North West Shelf of Australia to live up to the expected exploration levels. It is now known that returns from the Jabiru fields will be about 20 million barrels, not the estimated 150 million to 200 million barrels. The Challis field will return some 40 million barrels, while the Eclipse well-estimated to have contained as much as 1,100 million barrels-was dry. Those are significant reductions indeed. It is patently obvious that Australia's capacity to be self-sufficient in crude oil production has been severely affected by those realities. The outlook for Bass Strait is that 1992-93 production levels will be just over half the current rates. That is also contingent upon the fact that as yet underdeveloped fields meet expected yields. However, as we are aware, projections for those areas are highly speculative. In a nutshell, Australia can realistically expect to be 50 per cent to 65 per cent self-sufficient in crude oil by 1990, rather than the 95 per cent projected in 1984. It is a severe reduction. At current world prices, and given the value of the Australian dollar and the necessity to increase imports, that will result in a manipulation of our balance of payments problem. We need to encourage investment in Australia and increase exports; we do not need to adopt policies that will prove to be serious disincentives to investment and necessitate currency outflows of huge proportions. At a time when traditionally important agricultural exports are suffering from international trends towards protectionism, we can ill afford to increase our dependency on imports in other areas. Therefore, if self-sufficiency is to be maximised, much more expenditure will have to be concentrated on exploration in the next few years. Yet it is in this environment that the Government is intent on imposing a resource rental tax that will reduce incentive to embark on new exploration by further limiting returns. It has historically been the case in Australia that exploration activity is linked to profit margins. It is through proper management of the taxation system that the Government may, in some measure, restore industry's capacity to embark on high risk exploration activity. This must be encouraged and not diminished. Whilst the Bill at hand allows expenditure related to exploration to be offset against receipts prior to the assessment of the tax-Part V, Division 3-it allows only deduction of expenditure directly related to the specific project-clause 32, Division 3. In effect, this means that a company undertaking high risk exploration in a particular area and committing the vast sums necessary for such activity to this project will not be able to offset losses incurred in this area against receipts from other projects. This will be absolutely disastrous. Consequently, companies may be paying resource rent tax, despite the fact that they may not be earning an aggregate profit. That is completely unfair. This Bill carefully excludes as deductible expenditure a number of items which, in other circumstances, would be quite legitimate claims: Payments of principal or interest on borrowings, payments of dividends, repayment of equity capital, payments of fringe benefits tax. The list goes on and on. Assessable receipts will generally be held to be amounts received from the sale of petroleum or of marketable petroleum products. This seems reasonable. But when we read clause 24 (d) we find that such products constitute assessable income even before they are sold. Clause 24 (d) refers to: . . . any marketable petroleum commodity produced . . . is or was not sold at or immediately after the point at which it is or was produced-so much of the market value of the commodity at that point, or, where there is insufficient evidence of that market value, of such an amount as, in the opinion of the Commissioner, is fair or reasonable, as is taken . . . to be derived by the person. That is, perhaps, somewhat unfair so far as the oil companies are concerned. The point is that every opportunity is seized by this Government to maximise assessable receipts, while many expenditures are disallowed as deductions. That summarises the Government's attitude towards incentives, towards investment. The Government is taking every opportunity to maximise assessable receipts while, on the expenditure side, many expenses are disallowed as deductions for income tax purposes. A tax applying to profitable licences, but giving inadequate opportunity to offset the cost of failure will inevitably inhibit the willingness of companies to engage in high risk exploration. Again, this is unfortunate. It is a disincentive to high risk exploration, to what is known in the trade as wildcat exploration. The costs involved in off-shore exploration, as you will appreciate, Madam Acting Deputy President, coming from Western Australia, are enormous. Success is very much dependent upon a number of natural factors. Despite the highly advanced technology that is possessed in this area this basic fact cannot be altered: Company returns must reflect both the high cost of exploration and the benefit that shareholders will expect to accrue for committing funds to a high risk project. It is critical, therefore, that companies engaged in exploration should be free to offset the costs of unsuccessful activity against successes, or exploration is unlikely to proceed. At best, under the proposed system, companies will be encouraged to confine their activities to existing leases where they can offset losses against revenue for resource rent tax purposes. This restriction will have a detrimental effect on exploration. I submit that this will be particularly so in Australia, where the success rate of off-shore exploration, unfortunately, has been relatively low. By placing an extra impost on the petroleum industry in this fashion, the Government is also encouraging Australian based companies to expand their interests overseas where taxes are considerably lower. Employment opportunities could be expected to decrease correspondingly as businesses move off-shore into other areas. When I refer to `off-shore' I do not mean off the Australian coastline-because this legislation essentially refers to that-but other areas, in the South China Sea, and so on. I wonder how this measure fits with the Government's commitment to encourage investment in Australia. So often we hear of contradictions in government policy. Surely this measure is a manifestation of another such contradiction. The governments of Canada, Norway, China and Indonesia are currently reducing tax imposts in order to maintain exploration activity severely affected by the collapse of world prices. Significant producers like Australia are doing the very opposite of what this Labor Government is doing. They are reducing costs and lifting incentives. The Australian Petroleum Exploration Association has been able to compile a list of some 50 Australian based companies engaged in overseas exploration activity in Indonesia, the United States, Papua New Guinea and a number of other countries. Provided the incentives and opportunities were there, many of those companies, I believe, would like to be putting that money into Australia-like all good Australian companies. But this Government is forcing them overseas with unnatural legislation. Despite what is happening overseas, and despite Australian companies going overseas, this Labor Government insists on increasing taxation burdens. Let me list a few: The capital gains tax, the fringe benefits tax, the increase in company tax from 46c to 49c in the dollar. These measures have all increased the total tax take by this, the highest taxing government in Australia's peacetime history. Even the foreshadowed tax imputation laws will disadvantage companies engaged in exploration activities with accumulated tax deductions, as when these deductions are offset against revenue and the corporate tax rate is reduced, dividends paid to shareholders will be proportionately subject to taxation. I think in the newspapers today we read that one company, Caltex Australia Ltd, would not be able to have fully franked tax dividends for quite some time because of its accumulated loss position. I submit that the tax imputation provisions will be of more importance to the private companies than they will be to the public companies of Australia. Many of them will not get much advantage from them because their tax rates are to go up from 46c to 49c in the dollar. So what help is that to Caltex? Its shareholders will find, certainly in the initial years, that they will not get the full benefit of imputation. So few investors will be willing to sink funds into high risk enterprises when the alternative is a safer investment that may return tax free dividends. This area is very important. The imputation legislation will be a further impediment to people investing in high risk industries, including the petroleum exploration industry. People will want a fully franked dividend. They will want, in effect, a tax-free dividend provided by imputation. This is another example of the Government not thinking through the consequences of its legislation. I would suggest that the introduction of a resource rent tax at this point is not only highly inappropriate but also it will be very damaging to an already weakened Australian economy. I take this opportunity of complimenting the Australian Democrats on their change of heart. At last they have realised the danger that this tax will have on the exploration industry. Senator Durack —You are being too kind to them. Senator WATSON —I believe that, whatever may have been the motivation for their change of heart, the change will be in the best interests of the Australian economy and of the oil exploration industry. It has been estimated that, in the year 1985-86, the petroleum industry contributed $1.06 billion in company tax and royalties to the Federal coffers-that is a huge amount of money-while the States received over $200m in royalties. Employment opportunities have been created that would not be available should Australia be forced to rely less on domestic sources and more on imported crude oil. Those are the hard facts of life-facts of life that have been ignored by our Treasurer (Mr Keating), our Minister for Finance (Senator Walsh) and so on-and they are catastrophic. I support the proposition put forward by the Opposition that it is better to abandon this new tax and to stimulate exploration and production. It is through the reduction of our future oil import bill and the security of a greater measure of self-sufficiency that this community can be best served in this instance. I reject thoroughly a resource rent tax. I only hope that the Democrats do not change their minds before the night is over so we can have a vote on the legislation and reject the proposed resource rent tax. Senator COOK(Western Australia)(5.42) —I wrote down the extraordinary statement made by Senator Watson-he is in the chamber, so he can correct me if I wrote it down incorrectly-that the Government has not thought through the implications of this policy. The second thing he said which bends the mind to extraordinary disbelief was that it is better to abandon this legislation and to stimulate exploration. When those two statements are held up to what has occurred in terms of consultation, debate and discussion in the industry, and indeed what the economic effect will be if the legislation is defeated, they are the total opposite of the true position. I am quite prepared to put that statement boldly on the table now and let it sit there during this whole debate, because we can show that I am right and Senator Watson and those members of the Opposition who argue against the legislation are wrong with a capital W. The legislation comes forward when the two major debates in Australia in the political sphere are the May economic statement, which is due to be put down next week, and the disorganisation, division and dishevelment in the Opposition in the post-coalition years. They are the two outstanding factors. Let me turn to the first. In the May economic statement we will be targeting a reduction in the deficit; we will be cutting expenditure and we will be continuing with a sober, steady, responsible economic policy geared, in our macro-settings, for a reasonable degree of growth, full employment, a lowering of inflation and a reduction in interest rates, while holding the Australian dollar value at a reasonable level. I believe that when the May economic statement comes out it will show that that is, in fact, the case. Shortly on the tail of the May economic statement will come the 1 July tax cuts when, in the last step of our two-step amendment to the taxation system, we will bring marginal rates of income tax into a more orderly and reasonable level of impost on wage and salary earners. We will be cutting the levels of taxation that wage and salary earners pay now. The legislation, if passed, will enable us to reduce the tax burden on companies producing oil out of holes off-shore around Australia. That will sit with our total review of taxation in this country stemming from our Tax Summit two years ago and the legislation that has flowed since then. It will sit in perfect harmony and symmetry with what we have tried to do to make the taxation system in this country fairer, more simple and more efficient. I believe that that will be demonstrated as we move through the debate. I notice that some half a dozen or so Opposition senators are yet to grace the Senate chamber with their contributions to the debate. What I ask them to address their minds to is this: Will they please solve the great mystery in terms of Opposition economic policy and tell us once and for all what the Opposition's tax policy is? John Elliott does not know what it is; he has called for the Opposition to release it. The Liberal Party's friends in the ex-coalition do not know. The National Party of Australia has all sorts of flat tax policies and the Liberal Party is running around with an 8 per cent consumption tax proposal. The big unsolved mystery about which the Australian electorate would like to know is what does the Liberal Party, as an Opposition, propose to do in terms of taxation reforms; what are its specific measures? The Opposition comes into this chamber as carping, aged critics of the reform, the vision and the courage that this Government has shown in bringing forward a comprehensive review of taxation. It criticises each measure and reveals its position in reaction to the positive initiatives we make, but it never says what its own position is. Perhaps subsequent speakers in the debate will solve the mystery. If they would do so, they would serve some sort of purpose and be of some value to Australian voters generally because we would be able to evaluate it. Instead of sitting back and criticising, let the Opposition tell us what its position is so that we can examine and compare it. That is what voters are entitled to do. The Opposition's mystery of taxation reform probably amounts to the fact that it does not have an idea between itself to rub together, so it has nothing positive to put up. One of the fascinating comments made in the debate was made a moment ago-I think that I recall it correctly; Senator Watson has inadvertently corroborated it-by Senator Sanders. He made a quite extraordinary speech, in many respects, in which he said that he-and I took it the other Australian Democrats-would vote against the legislation. If they do so, and if the Opposition holds to its current course, the legislation will be defeated. The Opposition accuses us of not having thought through the implications of our policy, so it is fair to ask the Opposition whether it has thought through the implications of a defeat for the legislation. The Opposition has waxed long and boringly, often inaccurately, about incentive. If incentive consists of lowering the tax burden on this industry then, by defeating this legislation, we will be maintaining a higher tax payout by the companies affected by the legislation than would otherwise be the case. Those who have hitched their wagon to the incentive star will be denying what possible incentives there will be by our progressive legislation. They should think about the implications of that. They will not be able to show themselves anywhere in industry and pretend that they have served its needs. Senator Messner —How much is it going to cost the revenue? Senator COOK —Senator Watson said, firstly, that it is better to abandon- Senator Messner —Tell us how much you are-- Senator COOK —Senator Messner will get a chance to speak in a minute. Senator Watson said it is better to abandon the legislation and to stimulate exploration. What Senator Watson has failed to address is, if the legislation is defeated, how the hell does he propose to stimulate exploration. Senator Messner —How much are you going to give away? Senator Tate —Madam Acting Deputy President, I raise a point of order. Is Senator Messner out of his seat and is he interjecting, both of which are disorderly, particularly when they occur at the same time? The ACTING DEPUTY PRESIDENT(Senator Coleman) —He is out of his seat, and he is interjecting. I draw his attention to that fact. If he wishes to interject or to participate in this debate, he should move to his own place. Senator COOK —I do not mind where Senator Messner sits or what he says by interjection, because he is supposed to be the architect of the Liberal Party's tax package. He has sat on that package now for about two years, and we have never heard a peep out of him as to what it contains. So all of his interjections are no doubt as empty as the tax package that he is supposed to have the responsibility of bringing forward. The point that I was rounding off on, when the interjections reached a level at which it was quite proper for the Minister at the table, the Special Minister of State (Senator Tate) to take a point of order, was that Senator Watson, by wanting to defeat this legislation, has not thought about how he proposes to stimulate exploration and oil production in this country. It does not automatically follow that if a higher tax regime is imposed on companies they will be encouraged to explore and develop positive finds and shows where they occur. Senator Watson may well sit back and contemplate that. I hope he does and that he finally comes around to accepting what was accurately described by Senator Sanders as a reduction in the taxation burden of this section of the industry. The fundamental concept upon which this legislative measure rests is that there is an economic rent for the resources that are exploited by private companies in the exploration and development areas. We have called it a resource rent. We take the view, consistent with many countries, that the resources beneath the earth, or in this case off-shore, beneath the sea, belong to the people of the country and the Government has to answer for their exploitation. It is proper, therefore, to encourage companies that make a profit out of the exploitation of those resources to pay into the public coffers for use by the Government in serving the needs of the community not only company taxation, as they are required to do, but also an economic rent for the resources that they exploit. The economic rent principle is an established one. It operates elsewhere and it is a principle that we in Australia want to apply in this area. The effect of this legislation will be to substitute an economic or resource rent tax for the existing system. It applies to those areas of Commonwealth jurisdiction off-shore and it does not apply, as has been correctly pointed out, to the North West Shelf. It does not apply on-shore. We are negotiating to bring down agreements in concert with a State government for the on-shore areas. Senator Boswell —Your own State Government would not cop it. Senator COOK —We can legislate only for the areas that we have constitutional authority for. If Senator Boswell wants to ask us to legislate for the areas that we do not have constitutional authority for, that proves that he is a member of the National Party, but it does not prove anything else. The three principles of taxation reform that we in the Hawke Government have based our whole strategy on are: That we should produce a fairer tax system; that the system we introduce should simplify how the tax operates; and that we should have an efficient measure of collecting it. On the first point-the question of a fairer tax system-this is, in fact, a fairer measure. It is a tax based on profit and not a tax based on production, as currently applies. I do not think we will find a voice in the industry raised in saying: `Take us back to a production based tax'. We will find voices raised in saying: `We think it is fair to base it on what we can make out of what we can produce, rather than impose a tax per litre or per barrel produced'. In terms of simplification, two provisions apply in place of this one-royalties and excise. This will bring one in the place of two. That is quite clearly a simplification which makes an easier and more manageable operation. One has to go to the inner workings of how this tax will apply to understand the efficiency gains to be achieved by its implementation. The proposal in the legislation is that the long term bond rate, plus 15 per cent, be set as a benchmark figure. The current level of the bond rate is, I think, about 15.5 per cent. So we are looking at a benchmark figure of 30 to 30.5 per cent. Any profits earned above that benchmark figure are taxed at the level of 40 per cent. So there is no tax on the profits up to the benchmark figure, there is a tax only on the profits above it, and then at a lower rate than the company tax rate, a rate of 40 per cent. The tax by this measure is first deducted from taxes payable by the companies concerned and then the company tax is payable. But this amount is deducted from the total amount of company taxation, so that overall, we have a more efficient taxation mechanism. This satisfies as well a fourth condition, which does not apply in terms of our general principles but which ought to apply in particular industries, and that is that it recognises the needs of the industry. In this industry most costs are incurred at the beginning of the development of a well and well before returns on barrels produced can be obtained. The costs are in the first, second and third years of development until the profits begin to flow further down the line. This tax is so cast that a company will be able to carry forward the losses that it makes in year one to year two and through the system, so that it may well be in a situation where, given that it is a profits based tax, it will have been earning a reasonable profit for some years before the carry through write-offs catch up and it actually meets payments under this system. I will illustrate that point. I admit that it is a bit complex and I see Senator Boswell looking a bit dazed. The Jabiru field in the Timor Sea, which started production last year, is currently producing about 13,000 barrels per day. Under the existing regime, a regime not brought in by us but by the Opposition when it was in power, on that type of production a company would be paying about $8m in excise and $12m in royalties-that is, $20m altogether. They are the current provisions which Senator Watson hopes to retain. Under our provisions-it is a rough rule of thumb-it is not likely that the operators of that field would be paying tax until the 1990s. The Opposition talks about incentive. Them's the facts! The Opposition can argue with them and make a case for incentive on its side of the argument if that situation is to prevail. What Senator Sanders has put fairly for the Opposition to decide is whether it really wants to give this industry some incentive or whether it wants to have a blocking type vote in order to maintain the higher level of impost upon these companies. I believe that the way in which we have cast this legislation, by enabling companies to carry forward losses-I will go so far as to say that I think the industry in its heart of hearts believes this too-provides a vastly better system. They will have more money for reinvestment and more money to explore and to develop. The only way in which there would be even more money would be to pay no tax at all. I do not know whether people have actually come out and boldly asserted that this industry should be a tax free industry, but if they have they ought to explain it to the rest of Australians because I do not think they would get anyone to support them. As I said, the Government has conducted full and thorough consultations with the industry on how this tax is first to be figured and its final stages of preparation. In December 1983 a document entitled `A Discussion Paper on Resource Rent Tax in the Petroleum Sector' was produced under the authorship of the then Minister for Resources and Energy, the present Minister for Finance, Senator Peter Walsh. Senator Gareth Evans, since taking over the portfolio from Senator Walsh, has continued those discussions in great detail. What we seem to be debating here is a last gasp effort to turn over what really, in the industry's heart of hearts, is an acceptable position. If there were some privately held views in the industry that it was not an acceptable position, it is the responsibility of the Government, nonetheless, to make a decision in the public interest to say what is fair and reasonable. In making that decision, I would rely on all the things I have put in the debate thus far but, in addition, turn to what are reasonable and respectable international comparisons. It is proper for a country like Australia, when making a decision such as this, to look at economies of similar style to our own that are oil producing economies and see what sorts of provisions they make. As a comparison, if one casts one's eye over the taxing measures in similar economies-in this case, as a comparison Indonesia as well-one will see that Australia is proposing a resource rental tax. The United Kingdom, the home of the ultra-dries-Thatcher-land-has a petroleum revenue tax which is pretty damn similar to the tax measures that we are proposing. It is a measure that the Thatcher Government inherited. It is a measure on which the Thatcher Government has certainly considered some amendments. But if those sitting on the ultra-dry John Howard new front bench of the Liberal Party want a benchmark, they should turn to their godhead, Margaret Thatcher. Under her Government a measure similar to this applies. The United States of America has a windfall profits tax; Canada has a profit royalty tax; Norway has a special tax which is not unlike the tax we are talking about; and Indonesia has a production sharing contract form of tax. In terms of the order of magnitude-the amount of impost in taxes that those countries levy on producers-it is fair to say, if one were to take a broad analysis across the plane of all those countries, that it is roughly in the same order of magnitude when we allow for the idiosyncratic taxing measures in each of those countries, all of which are a bit different. On that basis one would say that we do have, quite apart from the legitimacy in Australian terms of what we are proposing, some other international guideposts to chart our course to the legislation. If one were to complete one's analysis, one would ask: What is the distinguished economic view? We would not have to go past the distinguished economist, Mr Clunies-Ross, to see that there is large scale support from his pen and for his public utterances as an expert in the field on this measure too. I have noted a number of arguments that members of the Opposition have put forward. The prime argument, with which I have dealt during this address, has been on incentive. I have said a number of things about that. I do not need to go much further other than to say that the incentive to explore at the moment is not at the level with which this Government feels comfortable. We would like to see a higher level of exploration. By reducing the tax impost we will help to achieve that, but we are not fooled into thinking that it is the level of tax that determines this. The major factor determining the level of exploration and prospectivity for oil that goes on in this country is the price obtained for it when it is discovered and produced. We all know that in 1985-86 the price of a barrel of oil was around $A40, but the bubble burst and the price declined rapidly, and the price of a barrel is now down to $A27.82. As a consequence, the cash flow for producing a barrel of oil has been reduced as well. That is the major problem. The way to resolve that problem is not exclusively through domestic taxation policies but through operating on a world level to improve the price. The situation in which we find ourselves at present-the one that we hear members of the Opposition bleating about in terms of disincentive-is the one members of the Opposition, when in government, imposed on us in the 1970s. They imposed it on us with the undertaking that any new oil discoveries would be left alone. We only knew of it with respect to Bass Strait; that is, that there would not be anything applied on new oil. Anyone who knows anything about what the market operators view was will know that the practical men in the field took the view that the reason why the then Fraser Government was bold enough to make those assertions was that no new oil was being discovered and therefore it could blithely say that if some oil was discovered the Government would not tax it. But the hard men in the market took the view that if it were discovered in reasonable quantities, the Bass Strait standards would apply. They figured their funding for their operations on that basis. We are now changing that. Finally, I refer to the amendment. It is a fairly cute piece of footwork by the Opposition. It is another way of achieving its goal-having no tax at all. It is a back-door way of achieving that, by writing off exploration expenditures in terms of all the exploration permits that might be held as against the work that is being done on the production permit. That is the effect of the Opposition's amendment. It is a back-door way of avoiding payment of any tax at all. Senator Messner —No wonder we are not producing oil in this country if you have that attitude. Senator COOK —Well, considerably reducing it. Maybe a little tax would be paid, but not much. We believe the amendment should be defeated on those grounds. As I conclude, I hear the bleating of the Opposition once again. I have one final entreaty. This legislation should pass. Those opposite know that it should pass. In the event of its being defeated-if the old standards were to prevail; the Australian Democrats may cause them to prevail-those opposite would take the responsibility and the industry would not thank them one jot for it. That is the fact of this legislation. To Opposition senators my entreaty is: For God's sake, tell the Australian people what your tax policies are so that they can be properly judged. Senator BOSWELL(Queensland)(6.07) —The National Party of Australia is firmly opposed to the resource rent tax. I suppose it is the brainchild of the Left. It has been one of the things that Senator Walsh has been carrying through the Senate. I often wonder about Senator Walsh. If the Government wants to find out whether this resource rent tax is acceptable to the industry, I suggest that it should pick up the phone, ring up half a dozen people in the oil industry, and ask: `What do you think this will do to you?' But the Government does not do that. It brings in this legislation helter-skelter and then it finds that the oil companies are forced into running advertisements such as this: `Australia is running out of oil. Do not tax us any further. Do not bring in any resource rent tax'. That is what the advertisements are saying. But the justification from the Labor Party is that the natural resources belong to the community and compensation should be received for the private exploitation of these non-renewable resources. I can see some logic in that argument, but the resources are absolutely of no value until they are extracted. The community does not contribute to the discovery and the evaluation of those resources. The resource sector contributes more than any other industry to the community. These are the offsetting reasons why I do not believe that the National Party can support this resource rent tax. Senator Walsh has been flying around Australia promoting the resource rent tax for a long time; at least since I came to the Senate in 1983. I met him on an airliner on his way somewhere to promote the resource rent tax. Unfortunately, Senator Walsh is not a good salesman; he does not have the winning way. He could not even convince his own State Labor Party colleagues that the resource rent tax was a viable proposition and one that would distribute wealth. The Western Australian Government would not have a bar of it, nor would any of the other Labor governments. So Senator Walsh and the Labor Party were forced to remove the resource rent tax off-shore. Even so, it has met strong opposition from every sector of the exploration community. The very threat of this legislation has caused considerable consternation and unrest in the industry since it was first discussed, and that was when I first came into the Senate in 1983. Exploration activity has consequently dropped in anticipation of this legislation, at a time when lower projections of future oil prices have been reducing the expected profitability of the exploration industry. The Australian Petroleum Exploration Association pointed out in January 1985 that a resource rent tax could harm Australia's exploration effort and correspondingly reduce our oil self-sufficiency. I think it is an opportune time to discover just what has happened. Have APEA's predictions come true after all? It works with the industry. It warned the Government that this would happen. It openly pleaded with the Government not to impose a resource rent tax. Total exploration drilling declined from 49 wells in 1983 to 43 wells in 1984 and to 38 wells in 1985. The drop in the wildcat wells was particularly sharp. Off-shore seismic activity in 1984 remained at less than half the average for the five years 1979 to 1982. Off-shore exploration expenditure fell from $586m in 1983 to $540m in 1984 with an expected further decline to $412m in 1985. Drilling vessels declined from 10 to four within the first 12 months of the initial discussions of this legislation. One would have thought that this Government would have realised that it was on the wrong track. All it had to do was to look up a few statistics. But no, it adopted the attitude we saw last night-`Let's crash or crash through'. Generally it crashes and it will crash again this time as I believe that the Australian Democrats will see the light as an election becomes imminent. They are also starting to respond to the electorate and to the needs of the oil industry. The Government has not taken on board the figures that have been coming out since 1983-84. Consequently, oil exploration has dropped right away and that is despite the evidence right before its eyes. The Government has refused to take heed and withdraw this Grim Reaper legislation brought in by the Grim Reaper himself, Senator Walsh. It has not realised the longer term negative effect of the resource rent tax on exploration activity and hence oil discovery. Lower production rates will lead to a decline in government revenue. Senator Cook was saying that the oil companies wanted this legislation. I ask him: `How much will it cost the Government in revenue to bring in this resource rent tax?'. Obviously, if the explorers want-- Senator Cook —I said that in their heart of hearts they would prefer it. Senator BOSWELL —If they wanted it in their heart of hearts I do not know why they would spend $3,000 or $4,000 for a page in a prominent newspaper to say that they do not want it. I cannot understand the logic at all. Common sense never seems to reign in the Australian Labor Party. High risk investment by an industry, particularly one characterised by current low commodity prices, requires legislation to act as an incentive, not as a disincentive, which is precisely what the resource rent tax is. The Government cannot fail to see the harmful results of a further decline in supply. A severely impaired self-sufficiency status will leave Australia open to being placed in an uneasy and unnecessarily vulnerable position as a purchaser on world petroleum markets traditionally characterised by violent fluctuations and politically unstable suppliers. That is the position we are heading for as our explorers, our oil companies and the number of wells decline. We will become more reliant on overseas exports. It will be another disgraceful day for this Government if this nation, with the resources it has, cannot get its act together and if, because of legislation such as this resource rent tax, we end up importing at great cost a commodity that can be extracted domestically. The result will be a downturn in the benefits due to the economy. The facts are that self-sufficiency is projected to decline before the end of the decade unless larger and newer reserves are discovered to offset the fall in Bass Strait production. Australia's capacity to supply domestic refined crude oil requirements is projected to decline to around 42 per cent by 1993-94. In order to sustain the exploration momentum, the industry requires a supportive regulatory environment, including a stable, non-discriminatory tax system which recognises the need for a high-reward high-risk ratio. That is the opposite to what this legislation does. A decline in petroleum exploration investment and hence a decline in the domestic crude oil supply will further hasten the demise of our current account deficit. We will end up paying an estimated $3 billion by 1990 as opposed to what we are paying now for the import bill of around $44m. That, of course, will increase the deficit and will ultimately further increase interest rates unless we can produce our domestic oil requirements. Our current account deficit has now widened to 5.75 per cent of gross domestic product in the first half of 1986. That is according to a March 1987 economic survey by the Organisation for Economic Co-operation and Development. This country cannot afford to introduce any measures such as the resource rent tax which will worsen the situation. The effects of the resource rent tax will be to add to the already extravagant cost of servicing this nation's ballooning international debate which is cited in the OECD March economic survey as being one of the primary contributors to the deficit. The potential export earnings of this industry will consequently suffer, once again hurting Australia in the one area where she most needs to improve her performance. This resource rent tax legislation is rapidly emerging as `raise revenue today and forget about tomorrow' legislation. There is some validity, I believe, in the assertion that by exporting our reserves today to extract overseas revenue we are evaporating tomorrow's needs. The Government should look at that proposition. It is a very near-sighted proposition to export our oil today when our needs will not be met in the very near future. The Government has also chosen to ignore the reduced activity in the petroleum exploration sector which has contributed so much to the Australian economy in the past. That can have only a denigrating snowball effect on vital areas of the internal economy which this Government is not addressing at the moment. Unemployment, business confidence, investment and ultimately our standard of living will be lowered if we do not continue to find new oil fields. Senator Cook —Do you want to provide a real incentive? Senator BOSWELL —We need to provide a real incentive. Senator Cook —Get Joh to cut the rail freights. Senator BOSWELL —We are discussing oil freights at the moment. The rail freight issue in Queensland is not something that should concern the Senate. It is a matter that concerns-- Senator Cook —It applies anywhere in Australia. Senator BOSWELL —I will take the opportunity to discuss the rail freights, which are a form of royalty. The Queensland Government does not accept high royalties, but it has offset the royalties against rail freights. So it does not give a true picture of what the rail freights are because they are a form of royalty. An argument that the Government is fond of espousing in its attempt to defend the legislation is that a resource rent tax will enable the Australian community to reap its fair share of benefits from the exploitation of Australia's resources. As I said before, if that were correct it would be a proposition that I would not find any difficulty in accepting. However, what we are really doing and what is really happening in the real world is that we are decreasing self-sufficiency in our basic energy resource. We are adding unnecessary inflation to the current account deficit and imposing resulting burdens on the taxpayer through the Government's faltering attempts to finance the country's escalating debt. We have forced unrest, shaken the confidence in a vital sector of the economy, leading to distortion of the industry's direction and growth, and scaled down the petroleum exploration industry with a corresponding scaling down of its contribution to the economy in areas such as employment and trade, and we are adding to the costs and long lasting administrative tangles in tax administration. I suggest to Senator Cook and to the Government that this legislation will not create any excess in oil exploration. In fact, it will have the absolute reverse effect. In 1990 the motorists and the small businessman will feel the pinch with escalating interest rates-if it is possible for them to escalate any higher than has been the case under this Government. The whole proposition of a resource rent tax is opposed by this side of the Senate: Senator Sanders has stated that the Democrats will not accept it, the National Party certainly will not accept it, and the Liberal Party will not accept it. The oil industry does not want it either. It seems to me that it is some left wing hang-up that all resources belong to the community. Sure, that is a proposition-but first you must extract them before they are worth anything. The Government cannot place one tax burden after another on the industry and still expect it to perform. We have already seen company tax increase from 46 per cent to 49 per cent; and we have seen the introduction of fringe benefits tax, which is a tremendous burden on the mining industry because it must provide meals, housing, accommodation and transport for the people who work on the oil rigs. Senator Gietzelt —Your Party in Queensland has been very active in getting money out of the mining companies. Senator BOSWELL —I would not worry about Queensland if I were the Minister. He is elected to this place to represent the people of the Commonwealth of Australia-not to promote interference with the Queensland Government, which he seems to do all the time. Senator Cook —What about the taxes and charges in Queensland? Senator BOSWELL —I would not worry about that if I were Senator Cook, because he is elected to represent the Australian Labor Party in the Senate, not to be in de facto opposition to the Queensland Government. The Queensland Government can handle itself very well. The Federal Government has added one tax after another in every productive sector. Even last night we saw the Grim Reaper, Senator Walsh, come in here and try to give the fishing industry the kiss of death. However, he was rolled, just as he will be rolled again today. I do not know-it has not been a good week for the Government so far; it has not had a win yet. I know that the frustration is telling on the Government as one piece of legislation after another is rolled. I know that the Government must be very frustrated, so it reaches out in anger and attacks the Queensland Government. I feel sorry for the Federal Government because it has not had many wins as all the Opposition parties on this side of the Senate continually see the light of day and block the Government's legislation. That is as it should be because the Opposition parties represent the industry and the people of Australia while the Labor Party represents some left wing hang-up that resources belong to everyone. Resources are worth nothing to anyone until they have a value, and they have absolutely no value when they are left in the ground. Unless those resources can be extracted, sold and turned into petroleum, dieseline or distillate they are not worth anything to anyone. I cannot believe that the Labor Party would implement this legislation when Australia is in such a perilous economic situation. Not only is it in a perilous economic situation; we need every oil well and as much mining exploration as possible so that we can earn overseas income to pay for our ever expanding overseas debt. When the Government brings legislation of this type into the Senate it is just flying in the face of what Australia really needs; that is, to create more jobs and more wealth so that we can pay our overseas debt, which is growing by $14.3 billion every month. The only way that we can provide a future for our young Australians is to create the jobs and wealth so that they have a future. While the Government continues to bring legislation like this before the Senate the Government is offering them absolutely no future and no hope. I conclude my contribution by saying that the National Party of Australia is very firmly opposed to a resource rent tax. Sitting suspended from 6.28 to 8 p.m. Senator PARER(Queensland)(8.00) —This evening we are debating the Petroleum Resource Rent Tax Assessment Bill 1987 and allied Bills. I have two problems with this legislation. The first is that it imposes a secondary tax to which, as a matter of principle, particularly in this area, I am opposed. The second problem is that the tax is not truly a tax based on profit as it does not allow deductions incurred for exploration outside designated permit areas. Twenty years ago there was great concern within the Australian community about the lack of oil in Australia. As everybody knows, oil and oil products, with current technology, are the lifeblood not only of this nation but of the world. About 20 years ago the then Government was greatly concerned because of the import bill that would be looming in the years to come, the effect on the balance of payments and also the natural concern that every country has in respect of the source of supply of this vital material. The prospect of oil supplies being chopped is very real. The foresight of the then Government led to the discovery of the relatively significant resources in Bass Strait. Over a decade ago a shortage of liquid fuel throughout the world was predicted. The Organisation of Petroleum Exporting Countries got together and as a result we had two oil crises in the 1970s. These had an enormous impact on the oil-dependent industrialised countries. The price of oil skyrocketed and problems in the Middle East put at risk continued supply from major oil provinces in the world. Because of Bass Strait we in Australia were largely insulated against the worst of those oil shocks. In fact, as a nation we gained because of the switch by the industrialised countries from oil dependency to dependency on coal and uranium. There was a transfer from generation of electricity from oil to generation from coal. Uranium came to the fore because it was recognised as a source of energy which did not need to be transported in large volumes. This brought about the so-called resources boom which brought with it howls about windfall gains. Federal and State governments could not contain themselves in their enthusiasm to apply secondary taxation. As a result, coal prices increased. There was a massive demand for steaming coal which had been in the doldrums for many years. Governments of the day decided that they wanted to share in the so-called windfall gains as though this boom would go on for ever. We saw the Queensland Government repudiate agreements that it held with various mining companies. It increased royalties under the pretext that if it did not do so the Federal Government would take the money anyway. The Whitlam Government imposed a coal export duty which over the years has been reduced. Today, only one company pays that export tax. The domestic oil producers also attracted a plethora of new taxes. Some governments continued to apply these taxes after the boom was over. That was inevitable because governments start to rely on these sorts of taxes for revenue. They are either unable or unwilling to remove them when the boom is over. Of course, companies must take reduced prices where supply exceeds demand. This means that they cannot make a profit, any future development ceases and expansions come to a halt. Surely, we should learn from history. It is a nonsense to apply secondary taxation to these sorts of resources. Yet that attitude still pervades the thinking of governmental people. In the second reading speech by the Minister for Industry, Technology and Commerce (Senator Button) he said: Petroleum resources are, in their most basic sense, community property and the Government believes that the community as a whole should share in the potentially high returns from the exploitation of these scarce, non-renewable resources. The Department of Resources and Energy tells us that by 1990 or 1992, unless we discover more oil, we will be importing something like $3 billion worth of oil per annum. The Government talks about the community sharing in these potentially high returns, but if the industry is prevented by silly taxation from exploring and finding new reserves the community will pay very dearly for the imports. Let us look at the position in Australia. It has been claimed by oil explorers-these are the people who know because they take the risks-that Australia is not a prospective continent for oil. I can recall 20 years ago talking to overseas geologists here. This was before Bass Strait was discovered. I asked what chance there was of discovering oil in Australia. They always told me that it was very slim. In fact, I can recall being told that the only prospective area, from their geological knowledge of the day, was the Bonaparte Gulf. As I mentioned earlier, the first major oil discovery was Bass Strait. Some people would say that it was discovered more by good fortune than anything else. Australia is not a greatly prospective continent for oil. It does not have the sorts of geological structures that everybody knows are a feature of the Middle East. It has been suggested by Broken Hill Proprietary Co. Ltd that the assessed resource base, which might range from two billion barrels to four billion barrels-that potential presumably is off-shore-offers the potential for a large exploration target. Such a target could have substantial implications for the nation's level of self-sufficiency and economic well-being. That is what we have to think about. Our oil resources are diminishing and we should make every effort as a country to encourage more people to put down more holes in the hope that sufficient resources can be discovered at least to keep us somewhat self-sufficient into the future. I turn to the figures on oil reserves of different countries. The United States of America has 34.5 billion barrels, Mexico has 48 billion and the United Kingdom has 13.2 billion. In the Middle East, Saudi Arabia has 166 billion. Australia has two billion barrels. Our share of total reserves is 0.2 per cent. Estimated undiscovered crude oil reserves are very limited in Australia. From the charts that have been produced by various authorities, it would appear that our undiscovered crude oil reserves are in the order of 1.8 billion to two billion barrels, as compared with the 42 billion of the Union of Soviet Socialist Republics and the 26 billion of the United States of America. Unfortunately, the technical risk to which all oil companies are exposed is exacerbated by matters such as the resource rent tax, which threatens high risk off-shore exploration both by its high rate and its failure to embrace a broader base of deductibility for unsuccessful exploration. Senator Cook was in the chamber prior to the dinner break and he made a remark on which I must comment. He said that the Petroleum Resource Rent Tax Assessment Bill would mean a reduction in tax. I know that Senator Cook has some expertise in this field, but somehow he has not read the policy in respect of new oil. There is no secondary tax on new oil. His comments are very similar to comments that I hear in my State of Queensland. The State Government makes remarks from time to time about giving concessions to the coal companies as though it was giving subsidies when in fact the companies are taxed out of existence. The State Government makes a remark about giving a concession to the industry-this is similar to the remark that Senator Cook made-so that the general public, quite incorrectly, thinks that the Government is doing a favour to the companies. There are no favours involved. The danger is that people will not spend their money looking for oil because of the punitive measures introduced by this Government at a time when we need to find more oil. It is not as though there is a mass of it out there and as though people are queuing up to try to exploit it. There is no such thing. It would be worthwhile for honourable senators to reflect on the fact that one of the minor oil companies in Australia, but a totally Australian oil producer, Crusader Oil NL, made an announcement just two or three days ago that it intends to go to Canada rather than persist with exploring for oil in Australia. In its announcement, the Crusader company blamed the Australian Government's neglect of the industry for its move to Canada. The Chairman of Crusader said that Canadian Government incentives and lower interest rates prompted the move. The availability of highly prospective exploration and development acreage in Canada and low operating and drilling costs also encouraged the buys. He also said: The Canadian Government has recently announced a subsidised incentive program for exploration and development drilling in which the Government provides the direct funding for one third of the cost of a well up to a maximum of $C3.3 million ($A3.5) a year for each qualifying company. So Canada, concerned about its future reserves and self-sufficiency, is offering incentives to companies to go there and look for oil which would be to the benefit to Canada in the long run. On the other hand, we have here this archaic thinking that a massive resource is out there, just waiting to be found at no risk and so the Government says: `Let's get them'. Although the Government may believe that it is a little difficult, its attitude is still the same. The attitude of the Minister is: `We believe that the community should share in the potentially high returns'. If oil is not found, there will be no high returns. Not only that; the community will pay dearly if we are looking at a further import bill somewhere in the early 1990s of another $3 billion or more on top of our existing balance of payments deficit. I do not know what we will do. It might be argued down the track that we have alternatives; that if somehow this oil is not discovered, if somehow supplies from our traditional suppliers are chopped off-for example, if there were a blow-up in the Middle East-we have alternative sources of supply. No doubt people will point to the oil shale in Queensland or the liquefaction process of getting oil from coal. All I can say is that such projects have been around for a very long time, and the only country in which they operate is South Africa, at the plant established by SASOL-the South African Coal, Oil and Gas Corporation. That was not an economic decision; it was a political decision taken many years ago. Oil from coal has traditionally been like the carrot in front of the donkey-the donkey never gets to it. That is simply because of the prices that exist at a particular time. I think I heard Senator Cook say earlier: `What needs to be done?'. I will give a few things that need to be done. Firstly, we must find more oil in Australia, otherwise we will have diabolical problems in less than 10 years time. Secondly, we must give encouragement to people to find oil-not introduce additional taxes, resource rent taxes or any sort of secondary taxation that will be an impediment to people going out and risking their money. Some people may say that there really is not a risk because we have prospective areas. But the rate of success in discovering oil off-shore throughout the world is very low, and the risks are very high. In Australia the situation is even worse. The prospectivity in Australia is even worse. No doubt the figures are debatable, but I have heard that only one in 90 wells is likely to produce a viable resource. What we need to do is to add to this nation's reserves, not introduce impediments that will stop the major companies from seeking out resources that can be used for future benefit of every Australian. Mr Griffith of BHP Petroleum Pty Ltd made a remark at a recent conference of the Australian Petroleum Exploration Association. I know that BHP will be put down for saying this but it is what it believes. Of course, BHP is a very great Australian company. Mr Griffith said: . . . recognising the size of the continent, and the poor data base generally available, the search for such a target or targets will be costly and, by definition, high risk. Unfortunately the technical risk has now been exacerbated by RRT, which threatens high risk offshore exploration both by its high tax rate and its failure to embrace a broader base of deductibility for unsuccessful exploration. He went on to say-this is the point that we should all keep in our minds: Certainly BHP will now seriously reconsider its attitude to higher risk ventures in the Australian offshore, given the increasingly stringent criteria controlling exploration investment. The leakage of BHP funds overseas could well increase as a consequence. Finally, to point out the importance of discovering more oil, of retaining our self-sufficiency and of not relying on what in the future could be very uncertain sources of supply, it is worth my referring to the various charts that have been produced in respect of liquid fuel demand and exports. On current prices of around $18 a barrel-let us bear in mind that there is a possibility that that price will go up-without any future discoveries, it is expected that by the year 1990 we will import just over $3 billion-worth a year of liquid fuels. If the cost were $25 a barrel, that would take the cost to $5 billion a year. It is not beyond the bounds of possibility that there could be disturbances in the great oil provinces of the world that could force the price up to that figure. It is not a very high figure when one considers the price in the late 1970s and early 1980s. At prices of, for instance, $36 a barrel, that gives a figure of more than $7 billion a year. To repeat what I said at the beginning of the debate, we are opposed to the resource rent tax; we believe that secondary taxes distort the market. Every encouragement should be given to companies to drill and to find oil that can be used for the future benefit of Australia. If companies are frightened off by disincentive-and the resource rent tax will be a disincentive-and we do not discover oil, we will have problems in not too many years. This Government, and anyone who supports the legislation, will be held responsible for those shortages. Senator SHORT(Victoria)(8.21) —I wish strongly to support the Liberal Party and the Opposition in their opposition to this package of Bills, as outlined by Senators Durack, Parer and others. We are debating a package of four Bills, the main impact of which is to impose a petroleum resource rent tax that will apply to profits from the recovery of petroleum in off-shore areas where the Commonwealth Petroleum (Submerged Lands) Act 1967 applies, other than in areas covered by production licences granted on or before 1 July 1984, and the permit areas from which those production licences were drawn. The resource rent tax, which is effective as of July 1984, is to be implemented on off-shore petroleum projects licensed since then. The tax will be levied at a rate of 40 per cent on the net assessable receipts from individual projects-that is, it will be levied not on the company's total income, but separately on each project. That in itself raises several very considerable administrative, technical and conceptual difficulties. Company income tax is not an allowable deduction for the purposes of resource rent tax, but resource rent tax payments are deductible for company tax purposes. This is designed to tax a project that earns more than the minimum competitive threshold return, or one that earns a so-called windfall profit. In the fields where it applies, the resource rent tax will replace the existing secondary taxes-crude oil excise and the royalty system. Petroleum is defined to include any naturally occurring hydrocarbon, whether in gaseous, liquid or solid states. Therefore, some products that were previously excluded from the crude oil levy, such as natural gas, will be subject to the new tax. It is to apply only where there is an excess of project-related receipts for a financial year over both project-related expenditure for that year and undeducted expenditure of previous years brought forward at a compound rate. There are various reasons why the Opposition decided strongly to oppose the legislation. Firstly, it is an additional tax on the petroleum sector-and, therefore, on industry-that cannot be justified if the industry is to be encouraged to explore further. Taxation revenues arising from the resource rent tax, which is a secondary tax, are, in effect, a penalty on profit and a disincentive to future investment. Secondly, there will be several unintended consequences of the legislation. It will have a negative impact on investment decisions in resource areas; it will end up being an additional burden for the petroleum industry; and it will have a detrimental impact-potentially very severe-on the balance of payments in the longer term. Because the petroleum industry is a key Australian industry, any efforts to stifle it are, in effect, efforts to stifle Australian industry as a whole. There are enormous, widespread uses of petroleum right through the whole range of industry in Australia and, indeed, in every aspect of community life. In the long term, therefore, the legislation is certainly against the public interest. Being a secondary tax on oil, it will also be a new tax on user or downstream industries, such as petrochemicals, plastics and the like. It will almost certainly have a severe unemployment effect within the industry. The philosophy behind the Government's proposal appears essentially to be two fold. The primary rationale given by the Minister during his second reading speech was that: Petroleum resources are, in their most basic sense, community property and the Government believes that the community as a whole should share in the potentially high returns from the exploitation of these scarce, non-renewable resources. In other words, the Government is enacting a bit of old Australian Labor Party philosophy-that there is a fundamental schism between the interests of business and the interests of the community at large, and that it is only by the paternal actions of a socialist government that that imbalance can be corrected. Senator Button —That is short-talk humbug. After seven years in government, you should not come out with that sort of rubbish. Senator SHORT —The Minister knows as well as I do that the Bill is reiterating an old ALP, worn out socialist philosophy. One of the key assumptions of the Minister's statement is that the community is yet to reap the benefits of the activities of the resource industry. But what about the taxes that this industry already pays, and has paid for many years, such as company tax and royalties? In addition to those normal taxes on industry, it has paid a very high levy on crude oil production. It is estimated that in 1985-86, oil producers contributed some $1.06 billion in company tax and royalties to Federal revenue, and more than $200m in State royalties. If there had not been a crude oil excise of about $4 billion, company taxes and royalties would have been $2.6 billion higher. However, it is not only by virtue of those taxes that the Australian community has benefited from the activities of its domestic oil industries. Each time that an exploration venture or an oil rig is set up, there is an associated infra- structure, including employment for those directly employed in the technical expertise involved in such ventures. That would not be provided by crude oil imports. In addition, domestic oil exploration, discovery and drillings have spin-offs for many other sectors of the Australian economy. All those employed by the oil industry must, of course, be provided with the normal essentials of living. As I said before, the downstream users of the oil industry are enormous. Therefore, the Minister for Industry, Technology and Commerce (Senator Button) is incorrect when trying to sell the legislation on the ground that it will ensure that the wider community will benefit from Australia's resource wealth. On the contrary, recent developments overseas and the downturn in local conditions have put severe pressures upon the industry. Therefore, this proposal, as an instance of fiscal policy, will strangle the industry rather than maximise remaining production. In the long run, the wider Australian community will be the net loser. That this Government can glibly assume that the so-called excess profits of Australian industry in general, and the oil industry in particular, are more equitably distributed in its hands is a travesty of the truth. That is only too obvious when its record of extravagance and wasteful expenditure of taxpayers' funds is laid bare for all to see. There have been numerous, never ending examples of that during recent times-indeed, during the whole four years of the Hawke Government. There may be a sound case for a mechanism to be put in place whereby the wider community does share in the returns from the exploration and recovery of non-renewable resources-in fact, both the Liberal Party and the industry happen to share that belief-but this proposal is certainly not the way to achieve that end. The other rationale provided by the Minister in his second reading speech for a resource rent tax was that it is a more efficient and equitable secondary taxation regime than the excise and royalty system that it is to replace. There is no need to worry about the resource rent tax, so the argument goes, because it is a profit based tax, not a production based tax and so it offers considerable benefits to the petroleum industry. But there are several points to note in that argument. The first is that the tax is to replace an existing secondary system of taxation; that is, one that is in addition to the normal taxes that private enterprise pays in the normal course of its operations. It is an additional tax. The argument here is that because the oil industry enjoys windfall profits the Government is justified in taxing it to the hilt. The theory is that taxing returns in excess of the minimum required to make an investment attractive-in other words, the concept of economic rent-will not cause a desirable investment to become undesirable in the eyes of the investor because the investor, so the argument goes, would go on investing on the ground that the resource rent tax impost will not affect anticipated ordinary profit or return on the investment. However, the legislation under debate tonight will not and cannot achieve this effect, even if it were a desirable effect, which in itself is a question for another time. It will not and cannot because it will have several inevitable consequences for oil exploration and production in Australia, consequences to which I have already alluded. It will have a negative impact on investment decisions in resource areas, it will end up being an additional burden on the industry and it will have a detrimental impact on Australia's balance of payments in the longer term. The tax is essentially a tax on risk taking. At the very best it will act as a disincentive to Australia's petroleum industry. It could well cause its demise. As the legislation stands, the Government will share in all instances in which returns turn out to be more than acceptable but it will not share in them when they are not. The tax will have the greatest impact on the riskiest projects and project phases, the riskiest commodities, geographical areas, production techniques and marketing and sales methods. Marginal projects for which expected returns are barely enough to make it worth while to take the risk will almost certainly be scrapped. In introducing this legislation the Government has failed to take full cognisance of the deterioration in several key areas of the oil industry which makes the future of that industry bleak indeed. In the nearly three years since the tax was first announced the price of oil has fallen dramatically. The world price has fallen and the domestic price of Bass Strait crude oil has fallen, following it down. The price of Bass Strait crude oil has fallen since January 1986 alone from about $44 a barrel to less than $30 a barrel at present. The average price of oil fell from $29 in the first half of 1986 to less than $23 in the second half of the year. Senator Button —Are you attacking our muslim brothers, Senator? Senator SHORT —No, not at all-not on this occasion. The effect of the slump in oil prices has been to reduce the gains to producers and, therefore, act as a disincentive to further exploration and production. The upshot of this is that currently exploration is dragging to a halt. The petroleum industry last year laid off some 6,400 people, who represented 42 per cent of the total number of people employed in the petroleum industry. They consisted largely of professionals-physicists and geologists. They are the sorts of people we can least afford to have out of work in their professional areas. The impact of the resource rent tax on employment and on the industry, admittedly, will not be felt until a little further down the road. But when it is felt, it will be extremely damaging for the industry and it will be reflected in a major decline in the exploration effort and the resource and development effort of this country. In the first three months of this year only 28 wells were drilled, which is the worst exploration drilling performance since 1981. Seismic activity, the basis for future drilling programs, has all but ceased. In the first quarter of 1987 a very limited amount of seismic activity took place, only about one-ninth or one-tenth of the amount that took place in each of the two previous years, 1985 and 1986. As well, company cash flows have more than halved. So raising equity capital to finance high risk exploration has become extremely difficult. At current world oil prices the proposed 40 per cent resource rent tax rate and threshold rate will exacerbate the present poor outlook for exploration and will render all but a few high risk exploration prospects totally unattractive. The Esso-BHP shutdown in production in Bass Strait because it had become uneconomic last year highlights the dramatic decline in the industry as oil prices have collapsed. At the same time marginal production realisation dropped to its lowest level in 10 years, around $3 a barrel, and exports ceased. In 1984, when the tax was first put forward, the hue and cry was that Australia's oil production would rise by about 30 per cent by 1996 and that 2,000 million barrels of crude remained to be discovered, of which 1,800 million barrels could be brought into production by the year 2000. But subsequent developments have forced the Bureau of Mineral Resources, which made these predictions, to be much more sober in its forecasts. This year the Government has radically revised the 1984 rosy forecasts for the industry. Production is now forecast to be 20 per cent lower in 1989-90 than it was in 1983-84 and producers have recently indicated that it may not be commercially feasible to proceed with Bass Strait developments. Rather than the optimistic 1984 forecast of 95 per cent self-sufficiency in crude oil by 1990, the Government is now estimating 65 per cent self-sufficiency in that year. If the Bass Strait developments do not proceed, this figure could fall as low as 50 per cent and quite possibly even lower. This dismal outlook for Australia's oil industry has enormous ramifications for our future balance of payments situation. At the current world oil price and value of the Australian dollar, crude oil imports in 1990 could cost this country some $3,000m compared with a net crude oil import bill in 1985-86 of $44m. In 1985-86 imports of crude oil and other refinery feed stocks were about $1.2 billion but exports were of almost the same amount. So the net import bill was only $44m. The implications of going from that situation to a deficit on the oil side of our balance of payments of $3 billion within a period of two to three years are absolutely staggering, particularly when one considers the enormity of the balance of payments situation facing Australia at the moment. Rather than encourage exploration, which is a vital ingredient for future levels of oil production, the proposed resource rent tax will discourage it. At a time when there has been a 35 per cent downturn in total private exploration expenditure, both on-shore and off-shore, in the past year, this tax is the last thing the industry needs or can afford. As the bulk of Australia's undiscovered reserve potential is estimated to be in `Greenfield' off-shore areas, this conclusion is underscored. The resource rent tax is out of step with the rest of the world. The response of other governments to the oil price collapse has been to foster, not to deter, exploration. For instance, Canada, China, India, Malaysia, Norway and Nigeria are all relaxing their tax terms and conditions by variously abolishing or reducing petroleum taxes and royalties to facilitate industry activity. Given Australia's naturally adverse conditions for oil exploration, that relatively greater expenditures are needed to locate oil, it is sheer madness for the Government to impose a resource rent tax at a time when prices are at their present state and the outlook for the industry is so appalling. In conclusion: The Opposition very strongly opposes this package of legislation. It believes that it is very damaging not only to the industry but also to the interests of our nation. In the long run it will severely constrict the activities of our domestic oil industry, causing a demand for more and more imported crude which, in turn, will adversely affect our balance of payments and drive the nation into ever increasing levels of debt. It is an irresponsible piece of legislation which fails to take into account the circumstances facing the industry and our nation. It is being imposed for old, worn out socialist philosophies and also as an attempt to raise more revenue at a time when the last thing that the Government ought to be doing is that, as distinct from cutting its own spending. The risks and costs involved in this exercise for the industry and the nation are immense. The legislation deserves to be defeated, and I hope that it will be. Senator SIDDONS(Victoria)(8.41) —I oppose the present resource rent tax, not because I am unconscious of the need to protect a rapidly diminishing natural resource, nor because I am unconscious of the fact that all Australians should be able to share in the natural resources of this country, but because it is an ill-conceived tax and does not achieve the objective of conserving our natural resources or giving an equity in those natural resources to all Australians. It is a tax that can be very easily manipulated and, in the process, it would have a quite disastrous effect-the reverse effect to the purpose of the tax. For instance, all a company has to do is to sell oil produced in Australia to a subsidiary in some other country at a very low price, thereby reducing its own profits in Australia-reducing the resource rent tax as presently drafted-and it escapes the tax virtually entirely. In the process of doing that, it would also be selling oil below the going price of world oil and, as such, would be depriving Australia of foreign exchange. The legislation is an incentive to sell a scarce natural resource cheaply overseas and an incentive to create low profits in Australia so companies can escape the tax. The very purpose for which the resource rent tax legislation was introduced can be avoided very easily. I was delighted to hear that the Australian Democrats are seriously considering supporting the rejection of this tax. Equally, I was surprised to read in the Press just a few weeks ago a statement by Senator Janine Haines, the Leader of the Australian Democrats, that they may support this resource rent tax. I was surprised because the Democrats have had a very clear policy on this issue which has been enunciated since 1978. The Democrats' policy states: Application of the resources tax based on company profits was rejected because of the possible distortions or manipulations to taxable profits brought about by external market forces, internal accounting practices or non arms-length sale transactions. The Democrats' policy was very clear. They opposed a tax on profits for the simple reason that profits can be easily manipulated and there is an incentive to reduce profits by reducing the price of the commodity being exported-in this case oil. I believe that there is only one reasonable position which any responsible senator can take on this tax; that is, to reject it outright. There has been some suggestion by the Government that it is merely a matter of changing one form of tax for another. I believe there has been some sort of promise that the net effect of the change in taxing of our crude oil reserves will be nil. One would have to be very naive to take much notice of that point of view. Why change a tax if the net result is to be a nil increase in revenue to the Government? By far the better way of taxing crude oil reserves and, in fact, mineral deposits in this country is to have a well head or pit head tax-to tax the resource as it comes out of the ground. That is a common practice in most countries round the world; there is no real problem with it. It has some distinct advantages. For instance, the tax can be varied on the basis of the value of the mineral or the crude oil and on the life of the field. A tax can be imposed which encourages exploitation of fields which, under normal circumstances, it would not be profitable for a company to exploit. By the simple process of taxing the resource as it comes out of the ground, there is a great opportunity to be versatile-to vary the tax as the situation requires-and to ensure that one knows, at all times, precisely what is going on. The thing that will happen with this resource tax is that the Government will not know what is going on. This also raises the question of transfer pricing. If this Government and previous governments can be subjected to any fundamental criticism it seems to me that the most fundamental criticism is that they have not bothered to redress the wide gap in our legislation which allows enormous tax rorts to be perpetrated through transfer pricing. There is virtually no control over the sale of components or raw materials from one subsidiary to another round the world. This simple device enables enormous transfers of profits to be made at will. Of course, this process of transferring profits from one subsidiary to another has been practised for virtually the entire life of the oil industry. It is well known that oil companies sit back and say: `We will take our profits in the country where the oil is being produced or, if that is not convenient, we will take our profits in shipping by making shipping very expensive and get our profits in that way or, if that is not convenient, we will take our profits through the retail trade chains which we own'. There are various ways in which the manipulation and transfer of profits have taken place by oil companies over the years. This legislation to tax profits merely plays into the hands of the oil industry in the sense that it asks it to transfer profits out of Australia and make them in a country other than where the resource exists. For all these reasons I believe that we have a responsibility to reject this legislation outright. As Senator Short pointed out, it is another tax. Surely by now the Government would have learnt that industry has had its fill of additional taxes in whatever form. I hope that the Senate will deal with this legislation as it deserves, with its outright rejection. I hope that the Democrats will join in that stand, as they certainly should if they are to be true to the policies that were enunciated in the very early days of the formation of the Democrats, policies which, to my knowledge, have never been changed, altered or renounced. Clearly they are there and I believe that if the Democrats are to respect the wishes of their members they have no option but to reject this legislation outright. Senator BROWNHILL(New South Wales)(8.51) —I rise to support Senator Durack and other speakers from this side of the chamber who have preceded me in this debate. I also take pleasure in hearing that Senator Siddons agrees with the Opposition parties in this debate. The purpose of the Petroleum Resource Rent Tax Assessment Bill 1987 and its allied Bills is to assess and collect the resource rent tax on profits from certain off-shore petroleum products. The Bill was opposed by the Liberal Party and the National Party of Australia in the House of Representatives, but was passed in that House on 25 March of this year. The tax is to apply to taxable profits from the recovery of petroleum in off-shore areas where the Petroleum (Submerged Lands) Act 1967 applies, other than in areas covered by production licences granted on or before 1 July 1984 and the permit areas from which those production licences were drawn. There are four Bills in the package. The Petroleum Resource Rent Tax Assessment Bill 1987 provides the framework of the tax and defines where the tax will apply, how it will apply and how it will be paid. The Petroleum Resource Rent Tax Bill 1987 will formally impose and declare the rate of tax at 40 per cent. The Petroleum Resource Rent Tax (Miscellaneous Provisions) Bill 1987 will amend other legislation, including the Excise Act to which the RRT applies. The Petroleum Resource Rent Tax (Interest on Underpayments) Bill 1987 will impose an interest charge in respect of underpayments on the petroleum rent resource tax. Crude oil production is subject to Commonwealth excise duty and to State royalties. The rate of excise varies depending on whether the field is an old or new field. But as with royalties, the amount of excise payable is directly linked to the amount of production. The main difference between the existing excise and resource rent tax is that the resource rent tax is based on profits earned and will rise and fall with profits, thereby allowing the Government to share in any windfall profits that may arise. The purported profit based tax, designed by this Government to replace the crude oil excise and royalties system, is just another government disincentive to an important Australian industry. The rate of tax will be declared at 40 per cent by the Bill and will apply where there is an excess of project related receipts for a financial year over both project related expenditure for the year and the undeducted expenditure of previous years brought forward at a compound rate. During debate of the Bill in the House of Representatives the Liberal and National parties argued that a resource rent tax would further increase and complicate Australia's taxation laws. Of course, in this legislation we have 60-odd pages of confusion adding to the tax laws. This industry is already highly taxed. In fact, Senator Gareth Evans has recently admitted that the Government's take from Bass Strait is relatively high in comparison with that of other countries. The petroleum industry is taxed in a most discriminating way with a wide range of taxes; not only this tax of course but also company tax, capital gains tax, fringe benefits tax and royalties, and it has always had to pay an excise on production. Now it is being threatened with the resource rent tax to take the place of the excise and the royalties in some off-shore areas. All these taxes may have been sustainable when the price of a barrel of oil was approximately $43. But Bass Strait crude is no longer worth anywhere near that amount. It is now worth only some $29 a barrel. When the Government insists on taxing industries out of existence, of course it also drives those industries out of the country and to other countries such as the Philippines. The Government has also driven this industry to countries such as Canada and the United Kingdom. The governments of those countries have recognised the need for oil exploration and have given encouragement to the companies to go there. The large drop in the price of a barrel of oil is fraught with a great deal of danger because the money that is being spent on oil exploration is falling. In fact, this year the Australian Petroleum Exploration Association said that the money spent last year on oil exploration was some $278m. This year only $165m is being spent on oil exploration. That is a fall of some 40 per cent on oil exploration expenditure in the last two years. Of course this Government, which is so worried about taxing an industry out of existence, should also be worried about the loss of jobs in the petroleum exploration industry. Some 3,700 jobs were lost in the oil exploration industry in 1986 alone. I suppose that has a little to do with the fact that the number of off-shore exploration wells has fallen from 49 in 1983 to 43 in 1984, to 36 in 1985 and to 29 in 1986, and the forecast for 1987 is only about 14. The Government's disincentive to the industry and the falling prices in the industry do not bode well for Australia's future. The new tax will mean that new oil discoveries will attract a tax of something like 70 per cent, taking the company tax plus the resource tax into account. That compares with only 56 per cent before this tax was mooted. As I have already said, other countries are encouraging oil companies to go to them and if that trend continues we will not have an oil exploration industry in our country. I will quote from an article by Frank Colyer in the most recent National Australia Bank Ltd publication. It states: Without replacement oil, says APEA, we could be importing oil at $US40-100 per barrel (1987 dollars) by 2000. The strain on the Australian economy of importing oil at $US100 per barrel does not bear thinking about; and oil priced at $US40 per barrel would be no lightweight either, particularly with self-sufficiency down to 40 per cent. There is an imminent decline in Australia's level of self-sufficiency and this will have an horrendous effect on the economy. I think the views of the industry should be taken into account. It is totally opposed to this legislation. The fact that this legislation has been contemplated by the Government for some two years does not do the Government any credit whatsoever. The legislation is going to have all the disincentives that I have already mentioned. It is going to have an effect in future years because of the lack of overseas income. Because we will be importing so much oil our own resources will not be fully utilised. I think that is to the great discredit of this Government. The Opposition is totally opposed to the resource rent tax and will be voting against it. I trust and hope that the Australian Democrats and all the Independents in this place will vote with us to make sure that the Bill is defeated. Senator VIGOR(South Australia)(9.02) —The Petroleum Resource Rent Tax Assessment Bill, the Petroleum Resource Rent Tax Bill, the Petroleum Resource Rent Tax (Interest on Underpayments) Bill and the Petroleum Resource Rent Tax (Miscellaneous Provisions) Bill do not introduce a real resource rental tax, as the term is widely understood in the world at large; rather, they introduce a profit tax at a rate of 40 per cent on oil produced in some new off-shore licensed projects only. This profit tax replaces royalties and excise duties and is deductible as a cost from income tax. The legislation is a disgraceful attempt by the Government to hide from Labor Party members and voters another sellout by the Hawke Government of Labor policy. The Australian Democrats are opposing it and will vote against it at the second reading. By naming this secondary profit tax as a resource rental tax, the Government has tried to deceive us into accepting the tax as an implementation of Labor policy when I believe that it is not. It is a soft option income tax for the oil industry. It replaces part of its income tax and allows much more creative accounting to be applied to the results which it obtains before any tax is paid at all. The legislation is yet another sellout of the Government's responsibility for managing the economy and it is yet another betrayal of Australian interests to the greed of large corporations for instant profits. Historically, people have only mined and used oil in large quantities since the turn of the century. With the development of increasingly efficient means of production of liquid fuels, and of motorised equipment, and with the universal distribution of petrol supplies throughout the world, prices of both oil and of equipment using oil have dropped and usage has risen. It was not until the 1970s that the price of oil started to rise again as people became aware that oil is, in fact, a limited and non-renewable resource and that world oil supplies are likely to run out in the early years of next century. Until then, it was assumed that more oil would continue to be discovered to meet future needs and that provided exploration was maintained at a reasonable level we would have absolutely no problems. This philosophy, to some extent, continues to influence the Government's attitude to oil exploration and production even to this day. The idea that we will be right if we just encourage the oil companies to explore and to produce is the guiding policy of this legislation. However, I must point out to the Senate that nothing could be further from the truth. Energy 2000, the Department of Resources and Energy's Policy Review Paper No. 2 on review of the national energy policy for petroleum, summarises Australia's position in the following way: Production from known reserves will decline from the present level equivalent to about 95 per cent of Australian crude oil requirements to 20 per cent by the year 2000. However, there is likely to be an increase in known reserves through further discoveries and . . . there is a 50 per cent chance that the level of self-sufficiency will be around 50 per cent in the year 2000. True to its title, this policy review looks no further ahead than the year 2000, and that is just before the real crisis hits us. No attempt is made to take account of the fact that only the Organisation of Petroleum Exporting Countries will have significant oil reserves beyond this particular point. No attempt is made to come to grips with the fact that even the OPEC resources are likely to run out beyond the year 2020. The Government policy assumes that Australia will be able to meet its excess oil requirements very easily by importing the difference. The following statement is made: As an importer of a significant proportion of requirements at that time, Australia could be more vulnerable with respect to both price and physical supply than now. Increased oil imports would also place a further burden on the balance of payments: At present prices and exchange rates, a decrease of self-sufficiency by 10 percentage points would increase imports by about $5m a year. However, there are a number of policy options which the Government could exercise to reduce the gap which is expected to emerge between demand and indigenous supply during the 1990s. They include more vigorous measures to reduce petroleum demand by means of substitution and conservation and also the enhancement of indigenous oil supplies and measures to develop synthetic liquid fuels to replace our current need for petroleum. Without explicitly saying so, the report then chooses the short term option to enhance indigenous oil supplies through encouraging exploration. Conservation measures, even restraints on export of oil, are discounted on the ground that this would discourage petroleum exploration and development. Substituting other forms of energy is discounted on the ground of the current low price of oil, and no consideration is given to government intervention to make substituted energy much more attractive to those people who are seeking sources of new energy. The resulting departmental policy is to leave free market forces to operate and to intervene only to make oil exploration more attractive in Australia even at the price of running down our known reserves in order to discover new ones. The basic economic assumptions underlying the policy recommendations of the Department of Resources and Energy, I would uphold, are very highly suspect. While the Department quite correctly uses a discounted cash flow technique to estimate the cost to the oil companies of saving oil, it fails to account for the higher price which this oil will bring if it is saved until a later date. It accepts unquestioningly the present drive by oil companies to keep oil prices low, to keep world oil consumption high, and to accelerate the pace at which the world is running out of oil. I repeat: The world is running out of oil. The misleading statement is made that the value of the oil saved must be discounted at an interest rate which reflects the time adjusted value of the total sales revenue. The enhanced value of the oil, because of its world-wide scarcity, is in no way taken into account. Throughout this study it is assumed that oil prices will not rise by the year 2000 and all comparisons are made in terms of today's prices. As shown by this legislation, Government policy also assumes that we need not worry provided we continue to encourage exploration and production of oil to the greatest possible extent up to the year 2000. There are certain principles which have to be followed and which the Australian Democrats believe in following in this area. It is very useful to maximise exploration to enable us to assess and control the oil resources in Australia. However, we should minimise production and maximise returns from production per unit of oil resource and conserve oil as far as possible. We should divert profits towards searching for alternative low impact, renewable energy resources so as to achieve a sustainable economy and a sustainable environment. We believe that Australian citizens must retain the right to the main benefit from the loss or the use of resources, whether they be renewable or not. Where resources are non-renewable, adequate compensation is required to be invested for the benefit of future Australians as well as for the present population. In line with this, we have developed the following policy arising from those particular principles which we would implement if we were in government: We treat exploration as research and development and we would give incentive to explore for oil and minerals. We treat extraction as a separate production industry from exploration and require royalty payments for oil on a per barrel basis which will discourage wastage and sale at low prices and encourage thriftier maximisation of returns by the exploiting companies. In order to encourage research and development into and promotion of alternative renewable resources, we will ensure that sufficient royalties from oil production are invested in research and development as well as in incentives for exploration. This will be done so that Australian oil is used for the benefit of all Australians as well as for the rest of the world rather than just for the few people who have shares in the large oil companies. The Government seems unable to recognise the difference between returns to specific individuals and returns to the nation as a whole. However, Senator Sanders has spoken to this point earlier. The petroleum resource rent tax has a number of implications. The policy of the Democrats is for a charge on production, not on profit. We need that charge to be sufficient to encourage development and to encourage the use of alternative renewable energy supplies. The `Energy 2000' report points out that the main holdup preventing alternative energy use is a disincentive to change because of the current low oil prices. Alternatives are available. For example, fuel alcohol produced from our excess sugar could be used as a petrol additive in cars. Brazil has for some time required its motorists to use alcohol-petrol mixtures and has achieved a considerable saving in petrol as a result. In fact, it produces a slower burning petrol with a higher octane rating. Considering the plight of Australia's sugar producers, I find it quite incomprehensible that the Government has not channelled industry assistance through the sensible conservation measure of encouraging fuel alcohol production and its use in Australia. Senator Siddons —Or ethanol out of natural gas. Senator VIGOR —Or ethanol out of natural gas; there are a number of other options, as Senator Siddons points out. Similarly, an oil production tax, a genuine resource rent tax, would, I believe, encourage conservation measures and would continue to keep the waste of oil in check. It was not until the Organisation of Petroleum Exporting Countries united to raise the price of oil in the 1970s that used sump oil was recovered and recycled. We have to consider those types of options. In fact, it was because OPEC countries failed to predict that great cutback in the demand for oil caused by their price rises that they failed to stabilise their economies at realistic levels. They believed that the initial bonanza would continue and that demand would continue unabated in spite of price rises. Their dependence on oil revenue is now being exacerbated by the Iran-Iraq war which is putting a great strain on their economies and is encouraging the breakdown of the OPEC production restraint agreement. The oil wars of the 1980s are only the precursors of the international economic stress that will happen when once more oil shortages begin to cause another sharp rise in world oil prices and affect the economies of all the developed countries. The Australian Government is short-sighted in accelerating the production and export of oil when the whole world is heading towards economic disaster through the uncontrolled and the uncontrollable greed for oil. I seek leave to incorporate in Hansard a table showing the increased exports of Australian oil since world oil prices have slumped, and our decreased imports over the same period. Leave granted. The table read as follows- AUSTRALIA'S BALANCE OF TRADE AND NET CRUDE OIL IMPORTS (In $A million) Crude oil exports Crude oil imports Net crude oil imports National balance on merchandise trade 1983-84... 203 1,666 1,463 185 1984-85... 1,265 1,587 322 -855 1985-86... 1,152 1,196 44 -3,383 Source: Australian Bureau of Statistics Catalogue No. 5406-0. The Treasury-Round-up, February 1987 Senator VIGOR —It is shameful that we are not using the current situation to encourage conservation of our resources. Instead, we are encouraging oil use by adding to the world surplus of oil which is available for sale. Oil conservation is not merely desirable; it is essential in order to insulate Australia from the chaotic times when the world must come to grips with oil shortages. Oil substitution by renewable energy sources is likewise not a pie in the sky dream. It is an economic necessity and a unique opportunity for Australia to develop an industry which will be of vital importance to both the world economy and world peace. It is essential that we face these developments. This is an infant technology which we can work on and which we can develop. We can be there as our technology matures and as oil runs out. This legislation proposes a petroleum resource rent tax, so-called, which is profit-based and which is much lower than the royalty and excise charges on production which it replaces in most cases. This decrease in charges on oil production goes against both Labor and Australian Democrat policy on a fair price to be charged for Australian oil. By lowering the cost of oil in these particular areas for some time the new tax fails to achieve the Australian Democrats' principle of minimising oil production while maximising Australia's revenue from the oil which is produced. A production-based tax would be much more effective in ensuring that oil is only produced locally when its cost, plus tax, is less than that of the oil available on the oil market. A higher tax would guarantee that Australian oil is used properly and is exported only when demand is high, so that we do not throw away our non-renewable resources on a low market as has been happening recently. Because this tax applies only to new licenced off-shore projects and will be less than royalties and excise on current production in such areas, it discriminates against the existing production and favours those who have rights to proven off-shore areas. This tax will enhance the monopoly status of licence holders to the new proven off-shore oil and gas fields. What is more, by applying a profit-based tax on oil rather than a production-based charge, the Government is leaving itself open to the argument that this is merely a discriminatory corporate income tax. Should these Bills be passed and a profit tax imposed on the industry on top of the regular income tax, the pressure will quickly mount to dispose of the tax altogether. Our taxation system is already overburdened and this particular tax adds very little to revenue and a fair amount to the complexity which will be the delight of the creative accountants who work for the oil companies. If this legislation were passed it would be an enormous headache for Government accountants. The Government seems to have cold feet about its current balance of payments problem and I believe that is quite justifiable. The Government is worried about Australia's failure to balance its books in trade. However, selling off Australia's oil reserves on the cheap is no more the answer to our long term needs, nor even to our short term needs, than is selling off our other assets on the cheap which also seems to be part of its current breakneck policy. Australia's balance of trade problems in large part are the result of this Government's short-sighted policies in selling off our resources to foreign interests. The Government believes that it can balance the books in the short term before the next election, by encouraging foreign money into Australia, so that on paper the trade deficit and, even worse, our invisibles deficit is no longer apparent. What the Government fails to acknowledge is the enormous harm it is doing to Australia and to Australians in the long term, and the enormous harm it is doing to our exporters even in the short term. It is doing this by keeping the interest rates high, by keeping the value of the dollar higher than the value of other primary exporting countries, and by failing to restrain the United States of America in its trade war with Japan and the European Economic Community. The Hawke Government has made it impossible for Australian exporters to compete for trade on world markets. This type of measure will make it even more difficult if it comes into effect because every export has an effect on our currency and is competing in the currency market. The Hawke Government seems to have embarked on a sell Australia campaign world-wide-not sell Australian products but sell Australian assets. Its continued attack on the Foreign Investment Review Board, its continued sell-out of Australia's media to foreign interests, its encouragement of foreign purchases of Australian industry and real estate while they are groping for cash to meet their interest repayments and while prices are lower, its devaluation and then revaluation of the Australian dollar in a free for all which it calls `market forces' which has enabled foreign banks to buy into Australia cheaply and to capitalise on their operations for nothing, and its failure to contain transfer pricing and tax haven rorts have given an enormous advantage to large foreign corporations operating in competition with Australian enterprises. I believe that this is a sell-out. This Bill is part of that sell-out which will leave Australia with an enormous debt in dividends and interest payments in the future and will disrupt and discourage our export industries, not encourage exploration, as the Opposition has made very clear; and it will result in a long term loss of technology and enterprise for years to come. This Bill discriminates by not allowing deductions for costs of exploration in non-productive areas. The whole point of encouraging exploration is to recognise that it is a high risk operation and actually to give people encouragement for doing something in risk areas. The Bill thus works against encouraging full exploration and proper assessment of Australia's oil reserves. The industry has argued that a profit tax, by allowing write-off of exploration costs against income before a tax is applied, will in fact encourage exploration. However, the boundaries which the Government has put on means that even the industry has lobbied us to oppose this Bill. It is for this reason that the Government has chosen to make what was originally intended to be a real resource rental tax into a soft option income tax, a profit tax. However, the Government has failed to please the industry because of its discriminatory application of the tax. Because the petroleum resource rent tax is profit based but does not allow deductions of exploration costs outside the project areas which are specified, it discriminates against the less hopeful exploration outside proven oil deposits. The current industry opposes the tax, which would, if passed, effectively discriminate against the areas where it has been concentrating its exploration. The provision to allow short term carry-forward and compounding of exploration costs would encourage rapid development of known off-shore reserves. The long term carry-forward of exploration costs compounded at lower rates will nevertheless discriminate against those producers who have undertaken real exploration in other areas within Australia. So we are actually discriminating against our own producers. This discrimination against our existing oil producers is indeed not supported by the Australian Democrats. Existing oil producers have in fact lobbied the Australian Democrats to throw out this Bill. No provision is made in the Bill to allow moneys raised through the proposed tax on oil profits to be used to promote development of alternative renewable energy resources-no statement is made to that effect. In our view this is an essential aspect of any charge on oil production. Unfortunately, it is essential to write it into law in order to keep governments honest, and in particular it will keep them honest during election years. There are alternatives to the petrol resource rental tax in its present form. In order to maximise exploration while minimising oil usage it would seem practical to separate exploration and extraction of oil into two separate industries. Exploration is a high risk operation producing a saleable asset in the form of a known resource in a particular area. Rights for production can be bought and can be sold. The Australian Democrats would like to see incentives for exploration, possibly similar to those for research and development in other industries. The Australian Democrats would encourage a policy which encourages exploration and which buys for Australia sufficient equity and interest in the oil discoveries that we make so that explorers do not seek immediate extraction while world prices are at a low ebb. However, the current system-and the system in this resource rental tax makes it even worse-actually encourages them to sell while the market is low in order to cover their cash flow. Extraction is a low risk though possibly a high cost operation for which a charge can be levied on the quantity of the basic resource extracted. That is a real resource rental tax. The Australian Democrats favour a government or public charge on the exploitation of our oil resource sufficient to ensure that oil is not wasted, to ensure that oil is not exported when world prices are artificially low. We expect the use of a non-renewable resource such as oil, which I remind the Senate is the property of all Australians, to return sufficient to the Australian people so that we can use the proceeds to develop alternative renew- able energy resources to keep our wealth and our assets and so that we are adequately compensated in the future and our children are adequately compensated for the loss of the oil which is extracted. This Bill fails on all these criteria and we oppose it. We would support a well-head tax, a tax on the resource as it leaves the ground, a per barrel and not a profit tax which is in fact subject to the major rorts which creative accountants have managed to import into every single area of taxation. We reject the Bill because it is going to lead to more complexity in the taxation system and because it does not achieve any of the desirable aims for a sensible energy policy. It is out of date and it is based on a set of premises which are no longer relevant in this world. It is selling off on the cheap a resource which belongs to all Australians and it is our responsibility as a responsible political party, as a potential alternative government, to show how it would be possible to derive suitable levy revenue from our oil resources rather than the type of charade which is presented to us in this Bill. This Bill is unacceptable to the Australian Democrats and we will join with the Opposition in opposing it at the second reading stage. The ACTING DEPUTY PRESIDENT(Senator Coleman) —Before we continue I point out that I have called Senator Vigor to order in the past for reading his speech, just as I will take any senator to task for reading his or her speech. I remind you, Senator Vigor, of standing order 406, which specifically states that no senator shall read his or her speech. This is a mark against you. I suggest that if you have an objection to that standing order you have a particular committee of the Senate to which you can put a submission. I am not going to allow you to take up the time of the Senate by reading your speeches. (Quorum formed) Senator CRICHTON-BROWNE(Western Australia)(9.31) —The Senate is debating the Petroleum Resource Rent Tax Assessment Bill 1987, the Petroleum Resource Rent Tax Bill 1987, the Petroleum Resource Rent Tax (Interest on Underpayments) Bill 1987 and the Pet- roleum Resource Rent Tax (Miscellaneous Provisions) Bill 1987. These Bills introduce a new petroleum tax for off-shore wells where the production licence for those wells was granted after 1 July 1984. It is to operate instead of the existing taxation by way of royalties and crude oil excise. The aim of the legislation was to move the taxation system from one in which the amount of tax depended on the amount of oil produced to one which depends upon the price that is derived by the petroleum industry. Ignoring for a moment the question of the total level of tax imposed upon the petroleum industry, if there were a true switch from tax being levied upon the amount of oil produced to a system of taxation being dependent upon profit that would be a significant improvement about which one could not complain. Under the present system as we know it excise can be levied even when petroleum is not being produced profitably. A profit-based system would allow the amount the Government takes to rise and fall depending on the state of the oil industry as a whole and the viability of various and individual projects. Unfortunately, the Bills contain a number of minor faults and one vitally important fault which totally and absolutely undermines the Government's claims that the new tax is a profit-related tax in the pure and real sense. I will come to that matter later. I shall briefly describe this tax. It will operate where companies have had production licences which have come into effect since 1 July 1984. The companies will be allowed deductions for expenditure that they make, whether of a capital or a revenue nature, and they will be assessable for the income that they earn. Once again, irrespective of whether it is capital or revenue earning expenditure, the taxation will be based on expenditure of both kinds. In any one year where the amount of the expenditure exceeds the amount of income from the project, the excess deductions can be carried forward at a compounding rate for future years. If the expenditure occurs within five years of a year in which the tax is paid, it is compounded at the long term bond rate plus 15 per cent, which at present would be about 29 per cent. If the expenditure occurs more than five years before a year of tax it compounds at a rate equal to the implicit price deflator for gross domestic product. When a year occurs when the revenue derived from a project exceeds the level of expenditure carried forward, the excess is taxed at a level of-- The ACTING DEPUTY PRESIDENT(Senator Coleman) —Order! There is too much audible conversation. I can hardly hear Senator Crichton-Browne. Senator CRICHTON-BROWNE —Thank you, Madam Acting Deputy President. I understand what you are missing by being deprived of my view. When a year occurs when the revenue derived from a project exceeds the level of expenditure carried forward the profit or the difference is taxed at a rate of 40 per cent. That is the essence of the definition of a resource rent tax. A resource rent tax is paid before income tax but it is later allowed as a deduction against income tax. In other words, it is a deduction against income tax. Madam Acting Deputy President, with your indulgence, perhaps we can examine some of the specific faults of these Bills and then examine the state of the oil industry to show why the Bills, if enacted in their present form, will do the type of damage that I perceive them to do. The first point I make is that this particular Government's approach to taxation matters on-- Senator Kilgariff —Senator Tate, you had better go back to your Minister. It is not a Whips' agreement. Senator CRICHTON-BROWNE —Madam Acting Deputy President, am I interrupting something? The ACTING DEPUTY PRESIDENT —I think you might be interrupting a private conversation. If the Opposition Whip would not mind, I ask him to carry on his conversation outside the chamber so that at least Senator Crichton-Browne and I can have this conversation between ourselves. Senator CRICHTON-BROWNE —I understand that if I go past my 30 minutes-- The ACTING DEPUTY PRESIDENT —I will call you to order. Senator CRICHTON-BROWNE —I understand that the Government will agree to an extension of my time. With such a riveting contribution that I have to make that is perfectly understandable and natural. The ACTING DEPUTY PRESIDENT —If you address your remarks through me, Senator, we will get on much better. Senator CRICHTON-BROWNE —Madam Acting Deputy President, I can think of no finer person to whom I would wish to direct my comments. This Government announced that it would introduce a resource rent tax in 1984. It then dillydallied for three years before it finally produced this legislation. Then, promptly, in keeping with the spirit of the heart and soul of Senator Walsh, for one, it was backdated to the time of its announcement. Of course, this procedure makes planning far more difficult for companies which are subject to this tax. This legislation can only be described as a taxation reform. Senator Walsh should be dealing with the Bill, not Senator Gareth Evans. In my view the Government has by fiat announced a complex, complicated, difficult and now, of course, convoluted piece of legislation. It announced it by fiat, by Press statement, in 1984, in a vague way, and now it expects the Senate and the Parliament to accept it and endorse it. It expects the companies to be able to so arrange their affairs and their exploration programs in accordance with the perceptions of what a capricious government is likely to do. In my view, that is a contemptible way for any government to govern. What the Government intends to do ought to be manifested properly and expeditiously in legislation, not by fiat. The resource rent tax that this Government seeks to impose is an absolute threat to the continued development of the Australian oil industry. The Government may wish to try to pretend that the tax takes only economic rents-that lovely word that Senator Walsh is so fond of-that is, the profits that are so far above a normal rate of return that their confiscation by the Government will have no adverse effect on production decisions. That is the general definition that Senator Walsh loves to give us. That is the proposition that has been put to us tonight-that the legislation will screw the industry just so far, but no further, so as not to inhibit or mitigate against the likelihood of its future and further decision-making. That may be the case once a well is up and running. But it is certainly not the case at the most strategically important stage for the industry, the exploration stage. At that point it is the future expected returns from the successful wells which will determine the level of risk the industry is prepared to undertake when exploring. If the returns are high, it is worth exploring in highly speculative areas, safe in the knowledge that when a commercial well is found its profits will pay for the many dry wells and the many non-commercial wells that have had to be passed over in the normal pursuit of oil exploration. If we cut that expected rate of return from successful wells by 40 per cent-as this Government wants to do-it is immediately apparent that companies will not be able to afford to explore in the high risk areas. When the combined effect of the resource rent tax and the present rate of company tax is levied on oil companies, they pay firstly 40c-as Senator Cook will know-in every 100c-- Senator Cook —I know you are making a dreadful mistake. This legislation will lighten the tax load on companies. Senator CRICHTON-BROWNE —Then allowing that as a deduction and applying company tax at a rate of 49c-not 46c-they pay approximately another 30c. Altogether the taxes will cost the companies 70c in every 100c that they earn. Senator Cook, you would leave the companies with a miserable 30c, having screwed them for 70c. You are trying to tell me that the companies agree with this legislation. I have to put it to you that you are obviously talking to the shop stewards and not to the shareholders. Senator Cook —I put it to you that you are wrong. The companies are better off under this legislation under the present regime, and you must know that. The ACTING DEPUTY PRESIDENT —Order! Senator Crichton-Browne, will you please address your remarks through me and then I can control the rest of the Senate. Senator Cook, will you please stop interjecting. Senator CRICHTON-BROWNE —The problem with Senator Cook is that every time someone speaks he immediately assumes they are criticising him. That is what comes from having an inferiority complex because of an incompetence to deal with Bills. I turn to the specific problems visited upon us by the Bill. The fundamental problem is that it does not switch to profit based oil taxation, as it purports so to do. Senator Cook —Yes it does. It switches from a production base to a profit base. Senator CRICHTON-BROWNE —Madam Acting Deputy President, with respect, that is a distortion of the truth. The major weakness of the Bill is that it fails to recognise that the true expense of discovering an oil well is not merely the amount that is expended on that particular well-on the one successful well-but expenditure that has taken place on perhaps dozens of wells prior to finding a commercial well. Exploration deductions under the legislation-I am sure Senator Cook knows the legislation intimately-are confined narrowly to the producing project, with combinations of more than one project being allowed only with the approval of the Minister; only with the permission of the Minister can they be combined. Under those circumstances, the general criteria as shown in the Bill are that the projects must be geographically, geophysically and geochemically found to be combined or to be common before the Minister will grant the approval. Let me just talk for a moment about project groups. Project groups can only occur within one exploration permit. Of course, that is totally at odds with the way the oil exploration industry functions. In my view the only logical, fair and economically rational way that the tax can be applied to the profits of oil companies is if the companies are allowed to set against profits all expenditure costs for all exploration. Senator Cook —To rort. Senator CRICHTON-BROWNE —Senator Cook says that it would be to rort. I put it to you, Madam Acting Deputy President, that that is exactly how the assessment of income tax for oil companies is made under the Income Tax Assessment Act. Senator Cook may not be very well informed of the contents of that Act, because he has only ever been a hack in his life and only ever drawn an income from other people's sweat and endeavour. But the truth is that that is how the taxation legislation applies at present. Even that Act, which is not normally known for its logic, recognises that-- Senator Cook —I take a point of order, Madam Acting Deputy President. Senator Crichton-Browne has made an unfair reflection on me, and I think he should withdraw it. The ACTING DEPUTY PRESIDENT —Senator Crichton-Browne did say that you had only ever drawn a salary from the sweat of someone else's brow. Was that the expression used? Senator CRICHTON-BROWNE —I think it was slightly more sophisticated than that, Madam Acting Deputy President, but, yes, that is the import of what I said. The ACTING DEPUTY PRESIDENT —It is not unparliamentary. There is no point of order. Senator Cook —It was bloody offensive-and so are you. Senator CRICHTON-BROWNE —Madam Acting Deputy President, I take a point of order. I draw your attention to the statement that Senator Cook finds me offensive. I find that unparliamentary and contrary to standing orders, and I ask that he withdraw it. The ACTING DEPUTY PRESIDENT —Senator Crichton-Browne, I really do not find that there is a point of order. Perhaps I may suggest that you get back to your speech on the Bill and that other honourable senators in the chamber either listen to the debate or leave the chamber. Senator CRICHTON-BROWNE —As I was saying before I was interrupted in a vulgar fashion by someone from the other side, even the Income Tax Assessment Act, which is not known for its logic, recognises that extensive exploration work may be done in many areas before commercial operations can begin. It gives taxation deductions for the total cost of all exploration work performed. The Income Tax Assessment Act, to use its own language, says that all previous exploration work is `necessarily incurred in earning income'. Madam Acting Deputy President I seek leave to incorporate in Hansard a table from the Bureau of Mineral Resources indicating off-shore activity in basins around Australia and the percentage of success that has been achieved in the wells that have been sunk. The ACTING DEPUTY PRESIDENT(Senator Coleman) —Is leave granted? Senator Robertson —Has the table been shown to the Minister? The ACTING DEPUTY PRESIDENT —Has the table been shown to the Minister on duty in the chamber? Senator CRICHTON-BROWNE —No, because I was required to speak earlier than I had anticipated. Otherwise, I would have shown it to the Minister. It is a simple table that can be found in the Parliamentary Library; it is not something that I have constructed. Leave not granted. Senator CRICHTON-BROWNE —I think that that, in itself, is a reflection of the integrity of the debate offered to us by the other side. The Government has refused to allow me to table a statistical document that shows the success of the wells that have been drilled in Australia and in off-shore Australia. In some cases, the success rate has been as high as 20 per cent, which is abnormally high for oil exploration in Australia. In other cases, there has been no success at all. Of course, we all understand that it is not a question of being successful in locating oil or natural gas; it is a question of finding it in commercial quantities. There are even more restrictions in the Bill. For instance, under clause 5-something about which Senator Cook would know nothing because he would not have read past the first clause-deductions can occur only for exploration undertaken under an exploration permit while that permit is in effect. If a production licence or a retention lease is subsequently taken out, as I understand the legislation, exploration carried out under the previous arrangement would close and then have to continue under the new arrangement. Likewise under clause 5, if a production project ceases to operate and further exploration in the same area is carried out, that expenditure cannot be offset against prior revenue. In other words, if exploration continues past the exploitation of oil, there can be no offsetting of the exploration costs against the exploitation under that permit. Those costs have to be carried forward until more revenue is found. Of course, that may never be found and the company is left with a useless tax credit with no revenue against which it can be deducted. That is the effect of such a tax. Clearly, if deductions for exploration expenditure are to be allowed only in areas closely associated with producing wells, the incentive will be to work only in areas of known resources. The tax provides absolutely no incentives to go to new areas, with higher risks involved, to try to find new oil. The effect of the tax will be to contract sharply the already markedly diminished level of exploration in Australia. There are other problems with the Bill that concern the claim that the tax is a profit-related tax on petroleum. They include the reduction in the rate by which past expenditure is compounded if it occurs five years before the granting of a production licence. The simple explanation is that recent expenditure-that is, expenditure within the past five years-would be compounded by the long-term bond rate for which, if nothing else, we can thank the Government, plus 15 per cent, making a current figure of about 29 per cent. However, if expenditure occurred five years before the production licence was granted, it is compounded at a rate equal only to the implicit price deflator of gross domestic product, which is about 9 per cent. Added to that, there are certain expenditures, such as overhead expenses relating to accounting and administration costs, that are not allowed as deductions. If this Bill goes ahead as currently drafted, it will viciously attack the most sensitive area of the industry-that is, exploration-by not allowing proper recognition of the fact that exploration plans are formulated to cover wide areas, and that, as we all know dry wells are one of the costs of finding production wells. In addition, the Bill will apply a tax at a rate of 40c on an industry that is the most taxed in Australia. By this legislation, we are seeking tonight to impose another 40 per cent taxation on an industry that is already reeling from the downturn in prices. I find that wholly inappropriate, especially when there has been a dramatic reduction in the price of crude which has already slashed the level of exploration in Australia. If the current state of the oil industry-and, for that matter, the entire Australian economy-is examined, the absurdity, the absolute lunacy, of imposing a tax that strikes at the very heart of exploration is revealed. Prior to the major oil price falls that occurred during the early part of 1986, the rate of excise levied on oil depended on when the oil was discovered and the rate of production. Old oil-that discovered prior to 18 September 1975 primarily from Bass Strait-was taxed at the highest rate, allegedly to provide the Australian community with some of the windfall profits that flowed from increases in the price of oil in the late 1970s. New oil found after that date was, under the 1985-86 Budget, subject to a far less stringent tax. Intermediate oil was, of course, originally old oil, in that it was discovered before 18 September 1975. It was subsequently reclassified if there had been no development since 23 October 1984. It was provided with concessional rates of excise compared with old oil, although not as low as those applying to new oil. I seek leave from the Senate to incorporate in Hansard a table from the 1985-86 Budget Paper No. 1 illustrating the rates of excise for oil. Leave granted. The document read as follows- Annual Production Range Megalitres '000bb1 Excise Rates (As per cent of Bass Strait Import Parity Price) `Old' Oil (a) Marginal Excise Rate Average Excise Rate (d) `Intermediate' Oil (b) Marginal Excise Rate Average Excise Rate (d) `New' Oil (c) Marginal Excise Rate Average Excise Rate (d) 0-50 0-315 0 0 0 0 0 0 50-100 315-629 5 2.50 0 0 0 0 100-200 629-1259 15 8.75 0 0 0 0 200-300 1259-1888 20 12.50 0 0 0 0 300-400 1888-2517 40 19.38 15 3.75 0 0 400-500 2517-3146 70 29.50 30 9.00 0 0 500-600 3146-3776 80 37.92 50 15.83 10 1.67 600-700 3776-4405 87 44.93 55 21.43 20 4.29 700-800 4405-5034 87 50.19 55 25.63 30 7.50 800+ 5034+ 87 n.a. 55 n.a. 35 n.a. (a) `Old' oil is oil discovered before 18 September 1975. `Old' oil prescribed production areas are identified in Excise By-law 97. (b) The `intermediate' excise scale will apply to production from fields that were discovered before 18 September 1975; were undeveloped as of 23 October 1984; and are areas specifically excluded from resource rent taxation arrangements. (c) `New' oil is oil produced from naturally occurring discrete accumulations discovered on or after 18 September 1975. `New' oil prescribed production areas are identified in Excise By-law 99. (d) Average excise rates at the top of each production range. Senator CRICHTON-BROWNE —I thank the Senate. At that time, the Commonwealth excise take was equivalent to about 58 per cent of the average price then prevailing of $37.73 per barrel. In addition there was the petroleum products excise levied on motor spirit of around 10c per litre. In late 1985 and early 1986, as we all know, the price of oil fell very dramatically. I seek leave to incorporate in Hansard a table showing the prices of Saudi light crude, although I do not suggest that Saudi light crude is the yardstick we use now. Leave granted. The table read as follows- Table 3 ARAB LIGHT CRUDE OIL NETBACK PRICE AS AT END OF THE MONTH $US PER BARREL Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1984 . . . . . . . . . . . . . . 27.08 27.96 27.17 26.63 26.41 1985 27.36 27.73 27.32 25.19 24.04 23.94 24.54 25.52 26.86 26.98 27.45 24.64 1986 18.63 16.36 13.27 11.89 10.13 9.61 7.96 12.08 11.70 11.42 12.04 14.78 1987 16.21 13.41 16.00 15.81 . . . . . . . . . . . . . . . . Source: London Oil Review data base accessed through I. P. Sharp Associates. Senator CRICHTON-BROWNE —Clearly, if one examines the table one will see that the industry's revenue has been dramatically slashed. The ACTING DEPUTY PRESIDENT(Senator Coleman) —Order! The honourable senator's time has expired. Senator Kilgariff —Because of the interruptions which occurred during Senator Crichton-Browne's speech, I move: That Senator Crichton-Browne be granted an extension of time. The ACTING DEPUTY PRESIDENT —The question is: That the motion be agreed to. Those of that opinion say `aye'. I ask Senator Kilgariff what period of time he has in mind. Senator Kilgariff —Ten minutes. The ACTING DEPUTY PRESIDENT —Before I put that question, Senator, I have to draw your attention to the fact that interjections did not take up 10 minutes of Senator Crichton-Browne's speech. The time taken up would actually not have exceeded two or, perhaps, three minutes. I think Senator Crichton-Browne said all he had to say. If he has anything further he wishes to add he may care to indicate to the Chair whether that is so. Senator Tate —Madam Acting Deputy President, I indicate that I am quite willing for Senator Crichton-Browne to finish the paragraph he was engaged in. I took some time agreeing to the insertion in Hansard of a couple of tables by leave. Perhaps if he took one or two minutes to conclude that paragraph that would be acceptable to the chamber but certainly not the extension that was suggested by the Opposition Whip. Senator Kilgariff —What time is the Minister considering? Three minutes? The ACTING DEPUTY PRESIDENT —I draw attention to the rules as to the time limits of speeches, which clearly state that no senator shall speak for more than 30 minutes in any debate, that any senator may move that the time limit of 30 minutes be extended for 15 minutes and that such motion shall forthwith be put without debate. I will now put the motion that has been put to me. Senator Kilgariff —The motion has been put and agreed to. The ACTING DEPUTY PRESIDENT —The motion was not agreed to. I put the ayes-I did not put the noes-before I asked you what time you were considering for the extension. I will now put the question: The question is that under sessional order Senator Crichton-Browne's time be extended for a period of 15 minutes. Question put. The Senate divided. (The President-Senator the Hon. Kerry Sibraa) Ayes . . . . . . . . . . . 26 Noes . . . . . . . . . . . 33 —— Majority . . . . . . . . . 7 —— Archer, B. R. Knowles, S. C. Baume, Michael Lewis, A. W. R. Baume, Peter MacGibbon, D. J. Boswell, R. L. D. Newman, J. M. Brownhill, D. G. C. Parer, W. R. Carrick, Sir John Puplick, C. J. G. Collard, S. J. Reid, M. E. (Teller)Crichton-Browne, N. A. Sheil, G. Durack, P. D. Short, J. R. Guilfoyle, Dame Margaret Teague, B. C. Hamer, D. J. Vanstone, A. E. Hill, R. Walters, M. S. Kilgariff, B. F. Watson, J. O. W. Aulich, T. McKiernan, J. P. Bolkus, N. Macklin, M. J. Button, J. N. Maguire, G. R. Childs, B. K. Morris, J. Coates, J. Powell, J. F. Coleman, R. N. Ray, RobertCook, P. F. S. Reynolds, M. Cooney, B. Robertson, E. A. (Teller)Crowley, R. A. Sanders, N. K. Devlin, R. Sibraa, K. W. Elstob, R. C. Siddons, J. R. Foreman, D. J. Tate, M. C. Gietzelt, A. T. Vigor, D. B. Giles, P. J. Walsh, P. A. Haines, J. West, S. M. Jones, G. N. Zakharov, A. O. McIntosh, G. D. Alston, R. K. R. Black, J. R. Chaney, F. M. Colston, M. AWithers, R. G. Richardson, G. F. Messner, A. J. Evans, GarethBjelke-Petersen, F. I. Ryan, S. M. (Senator Jessop did not vote, to compensate for the vacancy caused by the resignation of Senator Grimes). Question so resolved in the negative. Senator Crichton-Browne —I seek leave to incorporate in Hansard the balance of the speech of which the Senate has been deprived the knowledge. Leave granted. The speech read as follows- Before discussing the industry's recent history I would like to quote for the benefit of senators part of a speech which Senator Gareth Evans made to a Trade Development Council/ACTU Seminar on the oil industry in June 1986. Senators may wish to contemplate Senator Evans' words as they listen to the decline which has hit the industry and which this tax will only compound. Senator Evans said: Anything which reduces the rate at which oil is being discovered should be of concern to the community, given the declining self-sufficiency we face in the 1990's as Bass Strait production falls. However the Government believes that the pursuit of self-sufficiency at any cost is not affordable. What Senator Evans meant by ``at any cost'' must have been obvious to the industry by June last year. The reductions in crude prices not only cut profits for oil companies but it threatened to cut the amount of revenue which the Government could draw from the oil industry. As we now all know, the Government allowed the crude price to drop but picked up the vast majority of lost revenue by virtually doubling the amount of excise it receives from petroleum products. Later it also reduced the top rate of excise for old oil from 87% to 80%. Clearly, when Senator Evans says not at ``any cost'' he means self sufficiency will not be pursued if it will cost the Government revenue. The reduced price led to reduced pumping. Bass Strait production fell from 511,000 per day in September 1985 to 380,000 barrels by the middle of the year. The Kingfish ``A'' platform which produced at about 30,000 barrels was shut down. The effect of the falls in the price of oil have devastated the exploration industry. The Bureau of Mineral Resources advises that whereas in the December quarter of 1985 there was a total of 118,700 metres drilled onshore and offshore in the petroleum industry, in the December quarter of 1986 there was only 59,000 metres. Actual spending on exploration for the December quarter 1985-86 was $185m. For the December quarter 1986-87 it was a mere $76m. In the first three months of 1987 there were only 28 wells drilled making it the worst period since 1981. There was only 2,400 kilometres of seismic activity conducted in the first quarter of this year compared with 18,491 kilometres and 22,193 kilometres in the same periods of 1986 and 1985 respectively. Keith Orchison from the Australian Petroleum Exploration Association said in March this year that seismic activity last year was down by 57% on the previous year. A recent survey by the Australian Petroleum Exploration Association indicated that activity will be severely depressed in 1987. The survey found: Between 15 and 25 offshore exploration wells would be drilled this year, compared with 29 in 1986 and 36 in 1985. Offshore seismic activity would plunge to between 5420 and 8420 km. This compares with 24,000 km in 1986 and 41,066 km in 1985. Between 137 and 182 onshore exploration wells would be drilled this year, compared with 107 in 1986 and 228 in 1985. However between 24 and 34 of this year's wells would be drilled for gas in South Australia's Cooper Basin. Expenditure on exploration this year would be worth between $320m and $400m. This is similar to the amount spent in 1986, but only half the annual sum spent between 1982 and 1985. In 1985 exploration expenditure totalled $773.6m. Tragically, as Rick Wilkinson, the oil writer for Australian Business Magazine pointed out, the prime drilling contract in 1987 was to be conducted by the New South Wales Water Board for sewage works. Drill ships are leaving Australia. Again in November last year, there was reported to be 30 drill ships and 100 supply ships in Singapore unable to find work. At the end of 1986 service companies in Australia had about 75% of their crews and equipment idle. The cost to Australia in lost oil production and lost exploration activity can be noticed almost immediately. What is far more difficult to gauge is the loss of skills as people leave the industry. Employment has already declined. An estimated 3,700 industry personnel lost their jobs in 1986. When those people find new work the skills that they take with them will quite possibly be lost to the industry forever. This is even more likely in the offshore industry. It would be quite understandable if a person, having worked onshore, shows a marked reluctance to return to offshore work. The reduction in seismic and exploration activity and the loss of skills in the industry as a result foretell difficult times ahead for the Australian oil industry. It is also a grim outlook for a nation which is currently suffering a balance of payments crisis. Australia can never reach absolute self sufficiency because it requires Middle East crude as feedstock to mix with Australian crude. In late 1985, it was able to reach effective, net self sufficiency because it was exporting as much oil as it was importing. This is no longer the case. Our demand for oil continues to increase while our remaining reserves are depleted. Today Australia consumes about 210-220 million barrels of crude per year. The Department of Resources and Energy expect that the demand for crude and condensate will increase to 248 million barrels per year by 1991-92 and 281 million by 1999-2000. Production from existing resources is expected to fall to 102 million barrels per year by 1991-92 and to 51 million barrels by 1999-2000. Production from new wells is expected to provide another 29 million barrels by 1991-92 and another 102 million in 1999-2000. On these figures Australia will need to import 117 million barrels of crude in 1991-92 and 128 million barrels by the turn of the century. If the price of oil is assumed to be $US18 the expected import bill in 1991-92 is $3.2 billion. Thus far Australia has discovered somewhere in the vicinity of four billion barrels of oil. The majority of this was in the Gippsland Basin or Bass Strait. The Bureau of Mineral Resources expects that there is a 50% chance that there are 2.6 billion barrels of crude undiscovered. In the three years from 1984-86 inclusive, there have been only 100 million barrels added to the known crude reserves. This compares with an historic average of 70 million barrels per year over the past fifteen years. Clearly oil is getting harder to find. What the Government must realise is that it must now adapt its oil taxing policies to world oil pricing conditions in the same fashion that the oil companies have adapted their operations. Australia no longer lives in times where the oil industry was little more than a cow waiting to be milked. Our reserves are being depleted and demand is rising. Australia will face a further restructuring of its national income if it has to import increasing amounts of crude oil. It will be at the mercy of foreign suppliers in perhaps the most strategic commodity in the world today. The effects of any devaluation of the dollar will ricochet dramatically throughout the economy if we are forced to import a large percentage of our oil requirements. Our insurance against this is a high level of oil exploration and seismic activity. In a climate where oil is becoming harder and harder to find the potential returns from oil discovery need to increase to stimulate further exploration. I am not suggesting that the Government can move immediately to abolish its dependence on oil excises. I am suggesting that it must begin to move in that direction as quickly as it can. The imposition of a 40 per cent resource rent tax is not the way to do it. It amounts to a refusal by the Government to make sacrifices itself. Even more outrageous is the strict limitation of deduction for exploration. Either the Government has no concept of how the industry operates or it has again decided that it will sacrifice the industry again in a desperate revenue grab. The Government must recognise that as under the Income Tax Act any exploration expenditure wherever it occurs is deductible because it is all part of ultimately finding that increasingly elusive commercial well. It ought to be the same under the resource rent tax. Senator SHEIL(Queensland)(10.10) —I am very happy to speak to the Petroleum Resource Rent Tax Assessment Bill, the Petroleum Resource Rent Tax Bill, the Petroleum Resource Rent Tax (Interest on Underpayments) Bill and the Petroleum Resource Rent Tax (Miscellaneous Provisions) Bill. In my experience, the front row men in the development of any country have been the mining men, the men who have gone out and have developed the resources that have supplied other resources for people to develop. Once those mines have been developed, the rural industries have followed and the whole expansion of the country has come about. The whole idea of the proposed tax is to stop the development of mining and drilling. Whatever one says about mining and drilling, they do create the wealth and the economy from which other industries can develop. I remember a story about uranium mining in the United States of America. All the environmentalists were out and about and they said: `This is a shocking thing; Geiger counters are all over the country'. When they were out in the west of America they came across an Indian chief sitting on a rock. They asked him: `What do you think about all this mining development and all those fellows with Geiger counters who are taking over your country?'. The Indian chief replied: `I remember that in the days of my forefathers we lived on the country. We hunted the buffalo and we had the trees, the grass and the land. Then the white man arrived and, all of a sudden, he shot all the buffalo and left just the trees and the rocks. Then he went away. When he came back he cut down all the trees. He went away again and left only the rocks. Then he came back for the rocks'. But that is a sign of the development of modern times. We cannot deny the developments that are going on. Australia needs fuel, energy and oil, and oil is the basis of energy at the moment. Yet the Government wants to tax the people who discover those resources before they have discovered them. That seems an upside down way to go about the development of our country. Why should we tax something before it exists? The resource rent tax is to be applied before any profits have been made. Surely, if we are to tax anything, we would tax something that exists. Senator Cook —That is wrong. Senator SHEIL —Let us have another look at that. Senator Cook —Why don't you read the Bill? That would be a good place to start. Senator SHEIL —Let me say to Senator Cook: Are people working in the industry to pay payroll tax? Of course they are. A payroll tax is a pre-profit tax. Senator Cook —No, they are not. The employer will pay the payroll tax. It is a State tax, not a Commonwealth tax. Senator SHEIL —It is a tax, is it not? It is a government tax. It does not matter which government imposes it. As far as the industry is concerned, it is a government tax. Senator Boswell —Fringe benefits tax. Senator SHEIL —There is the fringe benefits tax and all the other taxes. The taxes that are killing the mining industries of today are the pre-profit taxes. They are an expense that is built into the company that does not belong to the expense of the development of that industry. That is what the Australian Labor Party is all about. It wants to tax people and put it in as an expense against the development of the industry, and that cripples the industry. The Government does that so it can bring in social welfare benefits-its enlightened and progressive benefits. The Government talks about its beautiful programs, but those programs are not worth two bob if the money is not available to fund them. If development does not take place, the Government does not have the money. That is the size of the whole deal. These social reformers and people of Left socialistic economies complain about the administration of their countries and are labelled as defectors. However, they are still communists; they are still socialists. All they say is that the wrong people are running their economies. How could a person possibly invest in the development of a mining industry in Australia if he knew that these taxes were ahead of him. The legislation will cause delays in exploration and development. It is a ridiculous proposition to suggest that the-- Senator Cook —Have you read the Bill? Senator SHEIL —I have read the Bill and I know it very well. I know the aims behind the Government's proposal. The Government wants to stop development in Australia. It wants to tax every well or mine that is developed in Australia, whether it hits high grade oil or overburden, as we call it. Who would want to go into such a business when the Government taxes successful mines at the well head, well before anything is delivered to the people? The Government proposes to tax the successful mines and neglect all the other mines that have been drilled. My father was a mining engineer. I remember that about one mine in a thousand was successful. The Government wants to tax only the successful ones and not the others. It will not even allow tax deductibility for the losses incurred while the companies try to find something. In other words, the Government proposes to tax exploration, development and expansion in this country on the ground that it will provide social welfare benefits to those who do not produce anything. All the Government wants to do is to take the money off people who have earned it and give it to those who have not earned it. That is the principle behind the resource tax Bills that are before the Senate tonight. I cannot be a party to such a thing; I must oppose the legislation. After all, I am part of the development of this country. Since I was a boy I have been used to a sense of excitement when development occurs. We have a marvellous country, a huge country with a wealth of resources, and few people. However, they do have the ability to develop it. All the Government wants to do is to parasite it, blood-suck it, take it to the death and sell it to somebody else. I do not want to be part of that. I want to be part of the development of this country. I want to see success. I want to see mines and wells that are profitable and successful, which provide energy and resources for the country and, out of that, benefits for the people. If the Government taxes companies before profits are made, if it puts a brake on the system, on the incentive to take a donkey and a pick and to ride over the hills looking for a place that is worth mining, to take a risk, it is killing incentive in the country. That is what such a tax is about. The Government is assuming that mines, oil wells and so on exist. They do not exist. People have to go out, find them and develop them. Senator Tate —Your father was one of the greatest. Senator SHEIL —My father did it. Even after he retired, I can remember him going out with my mother, catching a big plane to Western Australia, then a smaller plane, and finally getting a donkey and a pick and going into the mountains. They actually found a diamond. I can remember my family saying: `You should not let your mother and father go out there and search for things'. But they were never happier than when they were out doing that. As I said, they found a diamond in the Lenthall River and they traced it back to where it belonged. That spot actually became a diamond mine. It was bought by international interests and lost to Australia. My father fought against that because he wanted that industry for Australia. That industry is now lost to Australia. Senator Elstob —What was the donkey's name? Senator SHEIL —That is the sort of question that a socialist would ask. I do not know, but my mother and father went out and did that and I did not stop them because I thought that they were never happier than when they were developing and discovering something. But all the socialists want to do is tax people before they go and do something like that. That is what the Government is doing in these Bills now. It wants to introduce taxes before the companies make the money, and that is a criminal thing to do to Australia. This country has few people, huge resources, enormous areas and neighbours who need our resources and our sources of energy. This Government is stopping this country realising its potential development. I do not want to see that and that is why I do not want to see these Bills coming in and crippling a country that could be great. Senator Elstob —What do you mean `could be'? It is great. Senator SHEIL —No, it is not great. We are going well down the ladder. At the turn of the century and soon after, this country's standard of living was at number eight in the world. Now I think it is at about number 23 and it will keep going down while we keep taxing the initiative, the imagination and the resources of the people who want to develop it. We do not have to prostitute it, cripple it and destroy our natural resources, or cut down all the rainforests and mine all the sand resources. There is a case for balanced development. Heaven knows, we should have learned enough by now to be able to develop this country without causing damage to its treasures. We do have treasures in this country, and I am one of the first to recognise that and to want to preserve them. Speaking again of my father, I must say that he did nothing to damage those treasures. He was brought up with the horrors of Captain's Flat, near Canberra, the pollution of rivers and the desecration of forests. But he did not do any of that. He helped to preserve and build. If honourable senators look at a few of the things that he produced in Australia today they will be very proud of them, including the Somerset dam in Queensland and the Mount Morgan mine. Australia can be proud of those things. I think we can marry technological expertise to the preservation of our environment. Australia at one time must have been crawling with dinosaurs, but now they are all dead. We did not kill them. Nobody else here killed them. The Aborigines did not kill the dinosaurs, but they are all gone. But that has not altered the progress of human advancement in this country. What can we say about these things? Cataclysms occur and we have never taken account of the fact that man is part of the environment. Sure, while man was clawing a living out of this earth he may have desecrated part of it, but we are more enlightened about that sort of thing and we are taking steps to stop desecration of the environment. We are doing the best we can but no one can stop the development of a country in a balanced economic way, in order to achieve development. I remember having to go up to Bat Cleft. I will bet that not many honourable senators here have ever heard of Bat Cleft, but it was concerned with the mining of calcium at Mount Etna in Queensland. Everyone was worried about the survival of the bent-winged bat. I must confess that I had never heard of the bent-winged bat, but I thought I had better look at it because it was such an important part of our heritage. So I went up to Bat Cleft. It was quite a difficult climb for a fellow like me up those limestone cliffs that drew blood. One could go up only at night time. At dusk out flew all these bats. I can remember being terrified by the movement around my feet, which happened to be that of carpet snakes and green frogs. As the bats flew out the carpet snakes stood up and waved themselves. This is true, I saw it happen. They caused more desecration than the mining industry ever did. Senator Gietzelt —They ought to employ you as a script writer. You are doing very well. Senator SHEIL —This is true. It happened to me when I went up there. Each snake had three bats in its coils and one in its mouth and the frogs jumped on any others which they had knocked down. I can tell honourable senators that the snakes and the frogs caused more damage than the miners ever did. When I and the environmentalists who were with us went into this subject we found out that the mining company, Central Queensland Lime and Cement, had looked into the history and life cycle of bats more than the environmentalists had ever done. That company had brought out international experts and made a great study of them. It is 10 years since I was at Bat Cleft but the bats are doing better now than they ever did before. Senator Elstob —I'll bet you were doing some high stepping. Senator SHEIL —The bats were doing well and they are very adaptable bats. Let us look at what has happened to the flying foxes on the banks of the Brisbane River. There are more flying foxes in Australia now than there were before. That is because of their association with what is going on now. We have only to look at how birds have adapted to man. There are many adaptations which should, must and do take place. I do not want to fight that. I think that we can all get on together. The DEPUTY PRESIDENT —I do not want to interrupt Senator Sheil but he is getting a long way from the resource rent tax. Senator SHEIL —I was. Senator Macklin —The mining of Bat Cleft is within 50 metres and it will be destroyed. Senator SHEIL —Yes. People have been saying that for 10 years, but that 50 metres is very important. Senator Macklin —A place for every year. Senator SHEIL —I will bet that Senator Macklin has never been to Bat Cleft. Senator Macklin —I have been to Bat Cleft, and done the climb. I am a lot fitter than you are and I did not draw blood. Senator SHEIL —I doubt that the honourable senator is fitter than me. Senator Macklin —I have been there at night. Senator SHEIL —Well, I am surprised. The honourable senator could see the evidence before his eyes that Central Queensland Lime and Cement has done more to preserve the bent-winged bat than environmentalists have ever done. There are more bent-winged bats today than there have ever been. The bent-winged bat is surviving. Mr President, I am happy that honourable senators have heard my contribution to these resource rent Bills. Debate (on motion by Senator Jones) adjourned. Senator TATE(Tasmania-Special Minister of State) —I table a supplementary explanatory memorandum to the Commonwealth Electoral Amendment Bill 1987. The PRESIDENT —Order! It being 10.30 p.m., under sessional order, I put the question: That the Senate do now adjourn. Question resolved in the affirmative. Senate adjourned at 10.30 p.m. The following paper was tabled: Lands Acquisition Act-Statement by the Minister describing land acquired by agreement under subsection 7 (1). The following answers to questions were circulated: (Question No. 1614) Senator Vallentine asked the Minister representing the Minister for Defence, upon notice, on 18 February 1987: (1) What naval exercises have been conducted between-(a) US and RAN forces; and (b) Royal Navy and RAN forces in the years 1982 to 1986 in the Pacific and Indian Oceans. (2) What were the dates of the exercises and the names, and which ships were involved. Senator Gareth Evans —The Minister for Defence has provided the following answer to the honourable senator's question: (1) and (2) The information required is as follows: Exercise name Dates Forces involved Area Royal Australian Navy/United States Navy Beacon South 82-1 22-23 Feb 82 USN-USS Constellation, Truxtun, Oldendorf, Bagley, Somers. Indian Ocean RIMPAC 82 8-20 Apr 82 RAN-HMAS Hobart, Brisbane, Yarra, Swan, Onslow, Otway, Supply. USN-USS Ranger, England, Fox, Paul F. Foster, Schofield, Duncan, Goldsborough, Davison, Ouellett, Whipple, Rathburne, Brewton, Cimarron, Ashtabula, Kiska, Pelileu, New Orleans, Cleaveland, Ogden, Mobile, San Bernadino, Cayuga, Tuscaloosa, Peoria, Bristol County, Los Angeles, Guitarro, New York City, William H. Standley, Jouett, John Young, Bronstein, Albert David, Gray, Stein, George Philip, Bolster Pintado, Haddock, Aspro, Henry B. Wilson Downes, Merrill, Barbel, Sea Dragon, La Jolla, Drum. USNS Talluga, Kawishiwi, Ponchatoula. Pacific Ocean Sandgroper 82 15-26 Nov 82 RAN-HMAS Supply, Stalwart, Perth, Yarra, Swan, Otway. USN-USS Francis Hammond, Knox. Indian Ocean Valiant Usher 84-2 4-8 Nov 83 RAN-HMAS Hobart, Canberra and Torrens. USN-USS Pelileu, San Bernadino. USNS Fort Fisher and Mispillion. Indian Ocean RIMPAC 84 30 May-29 Jun 84 RAN-HMAS Supply, Adelaide, Parramatta, Oxley, Ovens. USN-USS Brewton, Robert E. Peary, Whipple, Worden, Jason, Arkansas, Implicit, Sacramento, Enhance, Conquest, Esteem, Pledge, New Orleans, Carl Vinson, Enterprise, Okinawa, Alamo, Barbour County, Buchanan, Constant, Denver, Durham, George Philip, Gridley, Ingersoll, Jouett, Mahlon S. Tisdale, Robinson, Schenectady, Vancouver, Oldendorf, Bradley, Flint, Gallant, California, Roanoke, Kiska, Texas. Pacific Ocean Sandgroper 84 12-27 Oct 84 RAN-HMAS Stalwart, Supply, Torrens, Sydney, Canberra, Stuart, Brisbane, Yarra, Geraldton, Cessnock. USN-USS Paul F. Foster. Indian Ocean Marcot 85-2 9-20 Sep 85 RAN-HMAS Hobart, Darwin and Orion. USN-USS Meyerkord, Stein, Bronstein, Bagley, Albert David, O'Callahan, Implicit, Pledge, Conquest and Enhance. Pacific Ocean Valiant Usher 19-23 Sep 85 USN-USS Okinawa, Cleveland, Durham, Fort Fisher, Midway, Reeves, England, Towers, Cochrane, Kirk, Oldendorf, Knox, Kansas City, San Jose. USNS Kilauea, Hassayampa and Mispillion. Indian Ocean RIMPAC 86 18 May-30 Jun 86 RAN-HMAS Darwin, Sydney, Ovens and Onslow. USN-USS Gridley, Leahy, Jouett, William H. Standley, Vinvenness, Ranger, Carl Vinson, Paul F. Foster, John Young, Goldsborough, Berkeley, Meyerkord, Robert E. Peary, Brewton, William H. Bates, Queenfish, Olympia, Rentz, Gray, Flint, Camden and Roanoke. Pacific Ocean Valiant Usher 86-5 10-15 Sep 86 RAN-HMAS Swan and Stuart. USN-USS Tarawa, Fresno, Juneau, Tuscaloosa. USNS Navasota. Indian Ocean Royal Australian Navy/Royal Navy Valiant Usher 84-2 4-8 Nov 83 RAN-HMAS Hobart, Canberra and Torrens. RN-HMS Invincible, Rothesay and Aurora. RFA Plumleaf. Indian Ocean RIMPAC 86 18 May-30 Jun 86 RAN-HMAS Darwin, Sydney, Ovens and Onslow. RN-HMS Beaver, Manchester, Amazon and Swiftsure. RFA Olmeda and Bayleaf. Pacific Ocean (Question No. 1682) Senator Bolkus asked the Minister representing the Attorney-General, upon notice, on 19 March 1987: Is the Attorney-General aware of allegations of a video training film having been commissioned by the Director of the Office of the Director of Public Prosecutions, Ian Temby Q.C.; if so, can the Attorney-General provide the costs involved in the making of the video, who is making the video, the sum being paid to the film-maker, and the perceived need for the video. Senator Gareth Evans —The Attorney-General has provided the following answer to the honourable senator's question, based on information provided by the Director of Public Prosecutions: The Director of Public Prosecutions has commissioned the preparation of two training videos as part of an induction training program for new members of the Office. The proposed videos are to be used in conjunction with written material within the framework of existing induction structures. One video will serve as an introduction to all staff, legal or otherwise, joining the DPP. It will outline its organisation, the nature of its work, the need for compliance with appropriate procedures for file management and organisational security and the rights and entitlements of employees of the DPP. The other video provides an introduction to legal staff dealing with matters of a more specific nature than the first video, including the functions and powers of the DPP, the responsibilities (legal and ethical) of legal officers working as prosecutors for the DPP and their relationships with their supervisors, client departments and counsel. The Director has commissioned Robyn M. Duncan LLB MA (Ed) of Duncan, Purcell and Associates Pty Ltd, Sydney, for the production of the videos and the written material to be used in conjunction with them, for a total cost of $29,540. Of this sum, $14,000 has been paid by Duncan Purcell and Associates Pty Ltd to a film maker, Audio Visual Communication Services, for the making of the two videos. Senator Walsh —On 19 February 1987 (Hansard, page 267) Senator Powell asked me, as Minister representing the Treasurer, a question without notice concerning overseas debt. The Treasurer has provided the following information in answer to the honourable senator's question: There are no statistics available which provide a breakdown of the corporate sector's external debt according to the purpose for which it is used. The method of financing takeovers and the sourcing of loans, whether in Australia or overseas, are essentially commercial decisions and beyond effective direct Government control. Insofar as loans for takeovers are genuine business expenses, the associated interest charges are legitimately deductible for taxation purposes. Any measures designed to restrict the tax deductibility of interest expenses associated with takeovers, whether limited to interest on loans sourced overseas or on loans for takeovers generally, in an effort to curb takeover activity would have no sound basis in taxation principle. Moreover, it is likely that they would often be easily circumvented in practice and that they could do serious damage to the operation of equity markets. To the extent that the present taxation system provides an incentive for companies to use debt in preference to equity financing generally (and not just for takeovers), any such bias should be substantially reduced by the introduction of a full imputation system of company taxation in July 1987. This system will ensure that company income, net of associated deductions, distributed to the individual resident shareholders of companies will bear one layer of tax, generally at the shareholder's rate of tax, irrespective of the deductions claimed at the company level. Some illustrations of the tax revenue implications of share acquisition are presented in Attachment A of Treasury Economic Paper Number 12, `Some Economic Implications of Takeovers'. I have arranged for a copy of this Paper to be sent to the honourable senator. Senator Walsh —On 20 February 1987 (Hansard, page 383), Senator Sanders asked me a question without notice in my capacity as Minister representing the Minister for Primary Industry. His question concerned a number of issues regarding the orange roughy fishery. I have received further advice concerning both the questions on fish quality, and the reasons for setting the initial catch limit at 20,000 tonnes per annum. The Minister for Primary Industry has supplied me with the following additional information: Initially, when large aggregations of this fish were discovered, there were problems of spoilage due to the large quantity of fish being taken. At that stage neither the fishermen nor processors had adequate systems for storing and processing of the volumes involved. However, processors quickly informed fishermen that they could not handle the catch and this resulted in a more rational approach with a resultant reduction in spoilage. To date in 1987, up to 25 containers of orange roughy fillets have been exported to the USA from Tasmania, Victoria and New South Wales. The greater proportion being exported through the port of Sydney. Each container carries between 10 and 20 tonnes and this gives the total export of around 300 tonnes. As indicated by Senator Walsh the Department of Primary Industry has not, in investigations to date, found substance in reports that United States authorities have rejected shipments of Australian orange roughy as unfit for human consumption. Investigations are, however, continuing. Prior to setting the catch limit at 20,000 tonnes per annum I considered a report from the South Eastern Trawl Management Advisory Committee and its scientific committee. The scientific committee is composed of representatives from the four States involved as well as scientists from the CSIRO and the Department of Primary Industry. They considered a preliminary report from the Chief of the CSIRO Division of Fisheries Research who had personally assessed the fishing grounds adjacent to Sandy Cape off the north west of Tasmania. They also considered information available from New Zealand where a very valuable orange roughy fishery has been developed over the last 6 to 7 years. The scientists concluded that there are no biological reasons for a closure of the Sandy Cape or other fishing grounds. They also pointed out that although there appears to be a very large biomass of orange roughy in the area off Sandy Cape, the long term sustainable yield may be no more than 5,000 to 10,000 tonnes per annum for this particular area of the fishery. The Management Committee accepted the scientific advice but considered it prudent to immediately evaluate the longer term management options. Although there was no agreement on the need for action at this time, many considered that industry required advice as to the maximum claim current licence holders would have on the orange roughy resource. This would allow industry to undertake investment in plant and equipment in a more secure environment and it would also discourage speculation that unlimited supplies of orange roughy are available to current licence holders. Taking into account the advice from the scientists and the fact that a number of other areas besides the area off Sandy Cape, contain aggregations of orange roughy, the Government decided that a safe catch level at this time is 20,000 tonnes per annum for the whole south eastern trawl fishery. If the resource can sustain higher annual catches, the Government will need to decide how to allocate the surplus. New Zealand has established annual catch quotas for orange roughy at about 55,000 tonnes and is auctioning the surplus of this and other fish resources for the benefit of the wider community. The CSIRO and the State scientists will be conducting further research and Senator Sanders may be assured that management arrangements will be adjusted from time to time on the basis of the best scientific advice available. Senator Walsh —On 24 February 1987 (Hansard, page 493), Senator Watson asked me a question without notice in my capacity as Minister representing the Minister for Primary Industry. His question concerned the orange roughy fishing quota. The Minister for Primary Industry has supplied me with the following additional information: Prior to setting the catch limit at 20,000 tonnes per annum I considered a report from the South Eastern Trawl Management Advisory Committee and its scientific committee. The scientific committee is composed of representatives from the four States involved as well as scientists from the CSIRO and the Department of Primary Industry. They considered a preliminary report from the Chief of the CSIRO Division of Fisheries Research who had personally assessed the fishing grounds adjacent to Sandy Cape off the north west of Tasmania. They also considered information available from New Zealand where a very valuable orange roughy fishery has been developed over the last 6 to 7 years. The scientists concluded that there are no biological reasons for a closure of the Sandy Cape or other fishing grounds. They also pointed out that although there appears to be a very large biomass of orange roughy in the area off Sandy Cape, the long term sustainable yield may be no more than 5,000 to 10,000 tonnes per annum for this particular area of the fishery. The Management Committee accepted the scientific advice but considered it prudent to immediately evaluate the longer term management options. Although there was no agreement on the need for action at this time, many considered that industry required advice as to the maximum claim current licence holders would have on the orange roughy resource. This would allow industry to undertake investment in plant and equipment in a more secure environment and it would also discourage speculation that unlimited supplies of orange roughy are available to current licence holders. Taking into account the advice from the scientists and the fact that a number of other areas besides the area off Sandy Cape, contain aggregations of orange roughy, the Government decided that a safe catch level at this time is 20,000 tonnes per annum for the whole south eastern trawl fishery. If the resource can sustain higher annual catches, the Government will need to decide how to allocate the surplus. New Zealand has established annual catch quotas for orange roughy at about 55,000 tonnes and is auctioning the surplus of this and other fish resources for the benefit of the wider community. The CSIRO and the State scientists will be conducting further research and Senator Watson may be assured that management arrangements will be adjusted from time to time on the basis of the best scientific advice available.