Wednesday, August 27, 2008

On the QT: Nelson beggars belief

Unfortunately due to a stack of meetings, I wasn't able to catch today's QT - though apparently Nelson kept going with the "why are Australians worse off" line. And Rudd in turn responded by asking how the Libs could talk about economic management while blocking $6 billion of tax revenue from alcopos and condensate in the Senate.

This morning on Fran Kelly Nelson denied the LNP was blocking the budget, he also said the reason the LNP was voting against the alcopos excise rise and the condensate rise was that "we believe in low taxes; we're Liberals". So it is good to know he believes in something. Because he obviously doesn't believe in logic.

Let's quickly look at the alcopos excise. Nelson's position is that premixed alcohol should have a lower excise than straight spirits. Why? Well he doesn't really know, other than he suggests raising the price of alcopops will raise inflation, and it isn't reducing alcohol consumption. Which suggests the good doctor must been having a fair few bottles of alcopops before he decided on his policy.

Consider if there was tax on food - would you expect the tax on lettuce, carrots and tomatoes to be the same as that on those prepackaged salads you can buy from Woolies or Coles? Of course you would - and you certainly wouldn't think the pre-made salads would get less tax. But apparently such lack of logic is fine when applied to alcohol (at least for Nelson it is).

Now the alcohol companies are against it. Gee I wonder why? Probably for the same reason Coles and Woolies want you to buy pre-made salads (and the reason you don't) - the mark-up on them is huge and you're better off buying the lettuce, carrot and tomato and making it all yourself. The alcohol companies are making out like bandits with alcopos - not only is their mark-up higher than with straight spirits, they're paying less excise on them. Are you still wondering why they're against the rise in excise?

Look don't believe me; read this rather perceptive article by Laurie Oakes. In it he also points out that the raise in excise is reducing alcohol consumption:

According to the tax office, sales of RTDs (ready-to-drinks) fell by 54 per cent in the three months, and - while full-strength spirit sales did rise by 7per cent - there was a fall of 23 per cent in overall alcohol sales.

But look, let's put the health argument to one side; Nelson has told us he is against tax (he's a Liberal remember). Well if he is so against tax, why doesn't he argue the straight spirit excise be brought down to be equal with that levied on alcopops? Riddle me that one.

Now on the condensate issue, one would think Nelson could not be less logical. But yes he can. (The guy just continues to surprise me!) What is the issue? Well condensate (a form of light crude oil) is exempted from the excise that is charged on other crude oils (gee that sounds familiar... if you're confused just think of condensate as the alcopos of crude oil).

So what did Dr Nelson think of the idea of raising the excise of condensate? Here's him on 19 August:

"It will clearly have a significant and negative impact on Woodside [Petroleum]," he told reporters. "I'm advised that, in part, that it's not likely to have any impact on domestic gas prices."

So eight days ago he's not so worried about the ability of Woodside Petroleum to absorb the cost, and he thinks it's an appropriate policy. How long do you think he maintained that position? Not long?'s him today:

"It beggars belief that you can take $2.5 billion off the bottom line of a company like Woodside and not have that passed onto Australians in other ways."

So I guess what he's saying is what he said 8 days ago "beggars belief".

Yes poor, struggling Woodside Petroleum, it needs our sympathy... Oh wait, what's this news you're announcing today? Your profits have increased by 67 percent?!

Yep; get this:

"Australia's second largest oil and gas producer posted a first half net profit of $1.016 billion, 67 per cent higher than the $610.1 million reported in the corresponding period of 2007."

Gee I wonder if the fact they don't have to pay any excise on one of their products (could that be condensate) has anything to do with the size of their profit??

And yet this is what the Chief Financial Officer of Woodside Petroleum had to say 2 days ago:

the oil and gas giant could not simply absorb the cost of such a massive tax increase without a potential impost to customers. “In order to stay competitive, businesses seek to pass cost increases on to their customers,” he said.

Can't absorb the cost... 6 months profit of $1.016 billion... yep they obviously need our help. Please take a gift from the Australian people (which is what not paying excise on condensate is for them); we can see you're struggling to make ends meet; I'm sure we can find $2.5 billion from some other industry that isn't doing it so tough.

It reminds me of a favourite quote by JFK:

My father always told me that all businessmen were sons of bitches, but I never believed it till now.


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