Petroleum Bill

Extract from Hansard

Legislative Council
23 October 2001

Sandra Kanck
Deputy Leader Australian Democrats
Member of the Legislative Council

Parliament Index
2001 Autumn Sitting Index
Browse by Subject
Search all Democrats material
About the SA Parliament
Hansard on line

The Hon. SANDRA KANCK: I seek leave to make a brief explanation before asking the Treasurer a question concerning the Auditor-General's report for the year ended 30 June 2001.

The Hon. SANDRA KANCK: The Auditor-General's report states that the South Australian government will receive a total of $287.4 million in competition payments from the federal government between 2001-2002 and 2005-2006. What is the total amount of competition payments received to date? How much of the total figure paid to date is related to the market reforms of the South Australian electricity industry? How much of the future payments of $287.4 million are reliant upon the completion of the market reform of the electricity industry in South Australia?

The Hon. R.I. LUCAS (Treasurer): I think on average the government receives about $55 million to $60 million a year in competition payments. That is not divided up: you get $5 million for this reform and $2 million for that reform. So, it is not possible to answer the question, `How much of the $280-odd million is allocated for reform in a particular area?' Similarly, it is not possible to say that we received $X million in the past because of electricity reform issues.

The way it generally operates as I understand it-and I will take advice just to confirm it-is that there is a lump or aggregate of money that is provided. There is no doubting that reform in the utilities industries were key elements in the original competition payments. So electricity and gas, and probably water as well, but I would need to check that, were key components of the competition principles agreements that Labor prime ministers and premiers originally agreed on.

So I think it would be fair to say that the commonwealth government and the NCC in terms of this issue-as opposed to a whole range of others, like dairy deregulation, barley, the number of casinos you have in your state, or shopping hours-the utilities industries would take on much greater significance than those other issues. The way it seems to operate is that the NCC, if in the end it feels strongly about a particular issue, recommends, in essence, a penalty. That is about the only stage, as I understand it, that we get to come down to, okay, because of the lack of reform of the dairy industry, for example, in New South Wales, or the rice industry-I cannot remember-recommending a penalty of $10 million to $15 million.

So the NCC looks at an issue and makes a judgment about what the extent of the penalty should be. I know in relation to the shopping hours debate Graham Samuel argued at that stage that if they were to recommend a penalty for the state it would be in relation to the loss of consumer benefit in some way, some sort of measure that might come about as a result of that. That is a difficult enough question in relation to shopping hours but, nevertheless, they believed that they could come to a calculation which they could then recommend to the federal government. That is the last stage in the equation. The NCC recommends to the federal government, the federal government then has to decide whether or not it will reduce the competition payments by that amount or, indeed, something different to that amount.

So it is not possible to answer the honourable member's questions in relation to what aspects relate to electricity. I can check what the total amount of competition payments over the last X years has been, but, as I said, I think it has averaged about $55 million to $60 million a year, and I am happy to bring that particular part of the answer back for the honourable member.

1. Between the financial years 1997- 98 and 2000-01 South Australia received $104.4 million in competition grants. The table below shows the annual breakdown.

In the current financial year, 2001- 02, South Australia is estimated to receive $55.5 million in competition grants from the commonwealth government.

The pool of competition grants available for distribution in 1994-95 prices was $200 million in 1997-98 and 1998-99 (the first tranche), $400 million in 1999-2000 and 2000-01 ( second tranche) and $600 million in 2001-02 onwards (third tranche). These amounts are indexed annually by the inflation rate, then distributed to the states on a per capita basis.

2. Competition grants are not divided up into specific amounts for each reform. It is not possible to quantify the portion of South Australia's total competition grant that is related to market reforms of the South Australian electricity industry.

The commonwealth treasurer allocates competition grants on the basis of the National Competition Council's (NCC) assessment of the states' progress against an agreed reform agenda. The agreed reform agenda includes undertaking structural reform of public monopolies where competition is to be introduced or before a monopoly is privatised, and achieving effective participation in the fully competitive national electricity market.

The NCC may recommend that the commonwealth reduce or suspend competition payments to a state or territory if the NCC judges that compliance with the competition policy agenda has been inadequate. When assessing potential penalties, the NCC takes into account the economic impact of the state or territory's failure to undertake a particular reform. The NCC has to date conducted three formal assessments of states' compliance with national competition policy ( the first, second and third tranche assessments). South Australia received its full competition grant from the first and second tranche assessments- the commonwealth treasurer has yet to announce his decision in relation to the NCC's third tranche assessment recommendation.

3. The current estimate of competition grants to South Australia from the commonwealth over the period 2001-02 to 2005-06 is $287.0 million. This is slightly lower than the amount quoted in the Auditor-General's Report due to revised population and inflation forecasts.

As discussed in response to the previous question, competition grants are not divided into specific amounts for each reform. The NCC assesses a state or territory's performance based on their overall progress against the agreed reform agenda.