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Legislative Council - Fifty-Fourth Parliament, Second Session (54-2)
2020-07-21 Daily Xml
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Fair Trading (Fuel Pricing Information) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 1 July 2020.)

The Hon. F. PANGALLO (17:15): I rise to speak on the government's Fair Trading (Fuel Pricing Information) Amendment Bill 2020. I would like to thank the members of the Legislative Council who in the last sitting week of parliament voted to pass my private member's Fuel Watch Bill. My bill, which will soon be debated in the House of Assembly, provides for a 24-hour fuel price guarantee and mirrors the scheme that has operated successfully to bring fuel prices down and deliver price certainty to consumers in Western Australia for over 20 years.

Price-sensitive Perth consumers use FuelWatch to time their purchases to avoid price jumps and to seek out the lowest price station at a point in time. This model has delivered the lowest average fuel prices in Australia. My bill will break up the monopoly that fuel retailers have in South Australia now and give consumers the information, power and authority they need to get cheaper prices.

Under my bill, petrol retailers in a FuelWatch area are required to make a decision about what their fuel pricing is every 24 hours, with prices then locked in for 24 hours, dramatically changing the market and giving the consumer critical information well in advance. This is called the reverse auction principle and is argued to create downward pressure on pricing, as we have seen in Western Australia. It limits collusion to push prices up and incentivises more downward pressure.

My bill is all about delivering benefits to consumers, who in South Australia are not only weary of unpredictable price fluctuations, inexplicable price hikes and the constant chase for the cheapest fuel but are weary of waiting for over two years for the government to deliver upon a key election promise. Today, finally, because they could not continue to do nothing, or in response to the bill introduced by Frances Bedford in the lower house or my bill in the Legislative Council—who knows—the government has introduced its own alternative to my Fuel Watch Bill, the Fair Trading (Fuel Pricing Information) Amendment Bill.

In developing their bill, the government had two fuel watch schemes to choose from: my bill, which mirrors the proven, true, real-time Perth model, or the failed Queensland scheme, where fuel prices are the highest in the country. Guess which option they have chosen? You have guessed it: the failed Eastern States model that has delivered to Queenslanders some of the highest fuel prices in the country. I am in furious agreement with the government on the need for a fuel price watch scheme, but the actual model the government has chosen is the wrong model.

On the opposite side of the country, the average price of fuel is consistently cheaper in Perth than in Adelaide or Brisbane, so why would anyone choose the Queensland model? The South Australian Productivity Commission report released in March 2020 certainly did not recommend it. Indeed, it did not make recommendations at all. It left it to the parliament to decide. I have not been able to get a straight answer from the government about why they did choose it. In simple terms, this bill will deliver a fuel price monitoring scheme where only one group—the retailer—benefits.

The government's policy is therefore not to apply pressure to lower fuel prices but just to make known the cheapest price. Perhaps that is the reason they chose the Queensland model. I can only speculate as to their reasoning, as I have not been able to ascertain it from the government. By the government's very own admission, the scheme they have opted for may not work and could well lead to fuel price increases.

The Attorney-General has acknowledged that the Productivity Commission report suggested there was a real risk of there being a sustained increase in fuel prices under the Queensland model, as has been the experience in New South Wales, that is, the government bill would have the directly opposite effect to the commitment the government gave as an election promise.

The Attorney has already conceded that this model could put up prices, and if that happens she will, to quote her, 'have to think about whether we abandon that earlier, I suppose'. Come again! I am not comforted in the slightest by the Attorney-General's assurances in the House of Assembly that, if this scheme does not work during a two-year trial, then she would 'advocate to the government that they look at any other model that had a demonstrable success rate'. Is she serious? Are we going to have to go through this again?

I am sure South Australians will see straight through the get-out-of-election-promise card the Attorney-General has given herself. As Frances Bedford so eloquently put it in the lower house, the bill before us is a Clayton's bill, a fig leaf; it is the fuel price bill you have when you do not really want anything to change. Industry endorses it because it is passive and ineffectual, yet the Attorney-General has the temerity to dismiss ours as a stunt!

Unfortunately, I, too, must agree with the Hon. Tom Koutsantonis in the other place, who said that the government simply cannot accept that they are wrong. I met with the Attorney-General on Monday and it became apparent to me that she will press on with this bill regardless, with a system that is substandard and not as good as the crossbench have come up with.

As a journalist I worked on countless consumer stories and investigations. I would say that in the mid-1990s we at Today Tonight on the 7 network pioneered the tabloid supermarket consumer genre that has now become so prevalent in the media. We opened the eyes of consumers to what was really going on with the products they bought: pricing structures and the marketing tricks and secrets used to entice people to buy.

I recall that we were once mocked—I think it was in about 1996 or 1997—when I carried out laboratory testing on kitchen sponges, cloths and tea towels that we collected from households that revealed the presence of all types of bacterial nasties like salmonella and campylobacter. Manufacturers then put out warnings to customers to ensure proper use and hygiene care.

One topic we focused on consistently was petrol prices, a bain of consumers to this very day. I can spot a dud consumer idea when I see one, and the Attorney-General's bill is a dud in the making. I urge members to see through it and note that it will not deliver to consumers what I call the four Cs of consumerism: clarity, certainty, consistency and convenience. The member for Florey and I have backed up what we are saying with real data, real-time data that cannot be challenged for its accuracy.

We have shown to the government the prices collated over three months in Brisbane, Perth and Adelaide. Brisbane has consistently come out on top for having the highest average price of petrol than any other capital city in the country. Over the past 45 days, for instance, it has been 10¢ dearer than Perth and 7¢ dearer than Adelaide.

However, the Attorney-General thinks the Brisbane model, a flawed work that is still very much in progress, will deliver a better deal than the Perth model that we are supporting and which has been working very successfully in Western Australia for 20 years and which they do not need to touch because it works. It is backed by their motoring organisations.

That is why I am at a loss to explain why the RAA has thrown its lot with a government that seems to think they are the sage on this. Not every driver out there is a member of that organisation, although let me add that it is a fine organisation that serves its members, including me, very well. Interestingly, the RAA has not expressed an argument against the Perth model.

This is not about dictating the prices of petrol. We know big petrol can set any price they like. It is about giving consumers a fair go. The government's bill gives the state's petrol barons an armchair ride to still do what they want to do. There is no certainty or consistency with what they want to give us. As an example of this I kept a close eye on prices in the inner south and west from 4 July to 17 July, when the last cycle conveniently started and ended to coincide with the school holidays. It went from a low of $1.06 jumping by 40¢ before gradually coming down again to eventually touch $1.03 to $1.06 on Saturday morning.

I thought I could go back later in the day to fill up, but guess what? Within a couple of hours it was back to $1.47. This week it is hovering around $1.41 at the big three—Caltex, On The Run and Shell—while Mobil X and Liberty remain quite low at around $1.03, resulting in logjams of cars at locations like Cross Road, Anzac Highway and Henley Beach Road. Retailers, as I said, are free to charge as much as they want.

According to marketing experts like Barry Urquhart, who I have known and worked with for many years, consumers have found that with the discipline of having and knowing a set price it has a stabilising and determining influence on them. The consumers are advantaged. Is that not what we are trying to achieve here: empowering consumers? Price discounting does not change behaviour. It determines when they buy, not where they buy it. Price does not buy loyalty. Less than 20 per cent of consumers will drive to buy cheaper petrol. A 1¢ or 2¢ variance is not going to be a critical factor in their purchase.

Peace of mind purchasing is important; that is, where there is no stress or anxiety. In other words, you will go past one servo and notice the price, see another down the road at a slightly different price before you make a choice to buy. You will not necessarily go back to the one you have driven past on the driver side.

Barry says price is the fourth most important thing for consumers. Convenience is the single most important item. If it is accessible and you know it is there, that is where you go. He points out that the most successful retailers in the world—IKEA and Apple—do not have products constantly on sale. Walmart in the USA simply promises everyday lower prices.

In Western Australia, consumers can control when they buy fuel. They can budget for this grudge purchase knowing that the price will shift within at least a seven-day cycle. The average Australian household spends 13.8 per cent of its income on transport costs. Car loan repayments and fuel are the biggest expenses.

Do you want to buy fuel at a set price for the following 24 hours with notice being given the previous day, as my bill proposes, or with just 30 minutes' notice and where the price can fluctuate up and down like a yoyo several times in a day? I know which one I would prefer, and I am sure that if you put it to consumers they would agree and it would save them hundreds of dollars each year. Barry Urquhart says consumer buying habits are also strongly influenced by the release of weekly catalogues, with Sundays and Mondays now the most popular and targeted days for shoppers.

When you go into Woolies, Coles or Aldi you already know that their discounted specials will apply for an entire week advertised, not on the whim of an announcement at short notice. There is some comfort in knowing that if the price is going to be advertised at either 99¢ or $1.49 the next day, you have 24 hours to decide whether you are going to purchase it. The four Cs: clarity, certainty, consistency and convenience, that is what they want.

I would like to read out some of what CHOICE magazinehad to say about petrol pricing in its May edition this year:

Motorists have a right to feel ripped off when it seems they're paying too much at the petrol pump—especially when they probably are.

That's truer than ever in the midst of the COVID-19 crisis, when instances of what looks a lot like price-gouging are not hard to come by.

And with oil cheaper on the international market than it's been in a long time, motorists understandably expect a corresponding drop in petrol prices.

For the most part, that's happened in recent weeks. But prices haven't dropped as fast—or as consistently—as they should have.

The international price of oil has fallen by about $50 a barrel since the beginning of the year. The cost of petrol in Australia's five largest cities (Sydney, Melbourne, Brisbane, Adelaide and Perth) fell by about 45 cents a litre over the same time period.

With price drops of this magnitude, who's complaining? If you look closer, it turns out we all should.

A report released by the ACCC on 22 April makes the case that Australians were still being overcharged at the bowser long after the fall in oil prices filtered through the local petrol industry—especially if they lived in Hobart, Canberra, Darwin or many regional areas around the country.

In many cases, the overcharging may have been subtle. Five cents a litre more, for instance, may not seem like a lot until you analyse the $333 million in net profits Australian retailers made on petrol products in 2017-18 (the most recent period covered by the ACCC report).

It was a record high, but it works out to an average profit margin of just three cents a litre (Although that's almost double the average from 2008-09 to 2013-14 of 1.6 cents a litre).

So five cents a litre is a lot when you have the economies of scale that Woolworths, Coles, BP, Caltex, and 7-Eleven can bring to bear.

ACCC Chairman Rod Sims said, when the report was released:

'In the larger Australian capital cities, petrol retailers took too long to pass on the savings from the rapid drop in international…prices, and this did not reflect well on them…'

'Especially at this difficult time, retailers must not take advantage of the situation to increase their profits, but should pass on savings to motorists.'

Federal Treasury asked the ACCC to keep an eye on petrol prices in December last year. The April report was the agency's first under this revised direction. Along with making the case that petrol retailers have been overcharging customers during the COVID-19 crisis, the report shows that Australia's petrol retailers are making more money than ever.

Net profits across fuel, convenience store and non-fuel services were $616 million in 2017-18. Total industry net profits (including wholesalers, refiners and other players) for petrol products were $1.44 billion in 2017-18, or 4.2¢ a litre—the highest recorded by the ACCC. That is about double the profits for petrol products in 2013-14—$723 million or 2¢ a litre. Some interesting statistics are:

37 per cent of petrol retailer profits came from convenience store and other non-fuel sales in 2017-18; and

profits for 95 and 98 grade premium fuels were 5.8¢ and 5.9¢ a litre respectively, compared with 1.5¢ a litre for regular unleaded.

The national Australian Automobile Association endorses the use of modern technology like apps to get the message out there, saying that having access to more information not only leads to more competition and cheaper prices but also flushes out the rogue operators.

The AAA also suggests that petrol pricing transparency be taken a step further by having fuel dockets display the amount of excise tax the federal government collects for each litre of petrol and diesel sold, which currently stands at 42.3¢ a litre. This approach would follow the same transparency principle as grocery dockets displaying the amount the federal government takes in GST—and I firmly wish there was legislation that forces petrol companies to do that on their dockets.

In an effort to avoid a deadlock, and in a spirit of compromise, I have filed a number of amendments that I will outline as we come to them. Broadly speaking, they amend the government's bill to make it consistent with my bill and with the successful WA FuelWatch model. This legislation does not deliver the fuel watch pricing system the South Australian public deserves, and I sincerely hope the government can get over their egos to support my amendments. With those words I conclude my remarks, and reiterate that I will not be supporting this bill without my amendments.

The Hon. T.A. FRANKS (17:36): I rise to speak in support of the government's fuel pricing information bill, and to outline why the Greens are supporting a FuelCheck model.

The RAA has called for the government's bill to be implemented in South Australia as a priority; indeed, they wrote to us last sitting week, and we could have debated this matter and finalised it on the sitting Thursday. On the sitting Wednesday, when we debated the private member's bill, there were guarantees given at the time that the very next day we would debate the government bill. However lo and behold, and despite a story of Aesop's fables and rabbits and hares and comparing the government to one or the other, it turned out there were a few sloths in this chamber as well who did not want to debate the bill the next day at all, contrary to what they had said the day before.

As I said, the RAA has called for us to act with urgency; we did not last sitting Thursday, but I hope we will this sitting week. The reason they have done so is because this means that motorists are closer to getting real-time information to help them deal with the cost of living pressures of fuel. The RAA's research shows that Adelaide has the greatest variation in petrol prices of any state capital, the key reason they have been calling for this reform.

Under the government model reported prices will be aggregated electronically by the commissioner and published for public use. Information will be available on a website on how to access this data. Furthermore, the data will be available for use for free to third-party users, which means that existing fuel price apps will be able to access it and use it, and consumers who already try to track fuel prices will not have to download new apps: existing apps such as Fuel Spy and MotorMouth will be able to use this information. This is one of the reasons the Greens are supporting this bill.

As the commission notes in its report, 'the experience of other jurisdictions with fuel price transparency schemes suggests the take-up by motorists of government websites and apps is slow.' Indeed, after about two years in New South Wales when they introduced a similar scheme, the uptake was only 13 per cent, and the commission noted that it could be a more effective option to use other media to advise lowest petrol prices. This is enabled effectively under the government proposal. Conversely, under the FuelWatch model previously debated in this council, third-party users would have to pay to access and use that data.

Throughout this debate, we have seen proponents of the Fuel Watch Bill talk about the report of the Productivity Commission and, in particular, making a criticism of the fact that it did not make official recommendations. However, from the outset in the report, it is quite clear that this was not its purpose. The report, however, does have findings (while it does not have recommendations) and they are very useful for this debate, and I suppose they are convenient for some to ignore as they favour the government's model.

One of the other underlying ideas in this debate is that by providing greater price transparency, we are encouraging more competition between fuel retailers, leading to a benefit and lower prices for consumers. However, as is found in the literature reviewed by the South Australian Productivity Commission, the work that is required to comply with the WA-style scheme has the potential to restrict fuel retailers' ability to compete.

It is important to note that the commission concluded that evidence is inconclusive that price transparency schemes have any lasting impact on average price in price cycles. Further, even if we were to introduce a WA-style FuelWatch scheme, as is the alternative presented to this bill, there is no evidence to suggest that South Australia's fuel prices would fall under a similar weekly cycle.

Proponents of the FuelWatch model in this place most recently have taken to pointing out that in the last 45 days, Brisbane had higher fuel prices on average than Perth, trying to suggest that this is indicative that the FuelWatch model is better for consumers. This is naïve at best and disingenuous at worst, given we all know that there are a range of factors affecting fuel pricing.

Further, as I have just noted and as stated by the commission, there is no conclusive evidence that any scheme relating to price transparency has an impact on average fuel prices. This is, of course, not the only misinformation that has been thrown around in this debate. I have to say how bizarre it is as a Green having to be heated and invested in a debate on anything to do with fuel.

I want to address as well one of the other claims made about the FuelCheck model, where members opposite and in the other place have stated that by requiring retailers to update their prices within 30 minutes of a change, consumers will only have a few minutes of certainty if any at all, and might see prices change three or four times in a day. This is, of course, ridiculous, and a slippery slope; a fallacy in logic and a weakness in argument that does not stand up to the reality faced by both retailers and consumers.

No retailer is going to sit there and watch the fuel prices all day trying to catch out consumers by constantly changing their prices frequently throughout that day. They do not do it now and there is no evidence or logical reason why they would do it under the FuelCheck model. It is worth remembering as well that this is a two-year trial: we will be able to see at the end of it whether or not it has been successful and, if not, it can be tweaked or changed.

At this point it is worth noting that this may not reduce the overall cost of petrol, but it will help motorists make informed choices and find the cheapest prices at any given time. Furthermore, a price freeze, if it can be accommodated, can be introduced after the trial if it becomes clear that one is needed or would be an improvement on the scheme. Industry stakeholders consider the approach taken in Queensland to reporting price changes reduced administrative costs to retailers without compromising the integrity of information.

Finally, I would like to draw the chamber's attention to the conclusion of the commission's report which states:

The Commission notes WA is the only jurisdiction that has a 24-hour price freeze regime, which has been in place for almost twenty years. The New South Wales, NT and Queensland—all variants of the New South Wales Fuel Check Scheme—are much more recent, having been introduced within the past five years. The Commission suggests there is merit in adopting a model based on Option 1, largely because this model is pro-competition compared with Option 2.

All these jurisdictions, when seeking to implement their own fuel price transparency scheme reviewed the existing options, including the WA model, and all since the implementation of that model have chosen to not implement the WA model in their state.

As has been repeated many times throughout this debate, the WA model is 20 years old. It predates the existence of apps and of technological capability for real-time reporting. It might have served WA well but consumers in South Australia deserve a scheme that is modern enough to suit our modern needs, and our current price-watching habits, and that is what the government model achieves.

I note, of course, that there has been a lot of talk about the four Cs by the Hon. Frank Pangallo of clarity, certainty, consistency and convenience for consumers. Well, there is a fifth C that Andrew Barr, the Chief Minister of the ACT has raised and that is 'capping' prices and that is what we could be doing in this chamber should you really want to give that price certainty to consumers. I commend the bill.

Debate adjourned on motion of Hon. I.K. Hunter.

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