SUBJECTS: Cartels, petrol prices, FuelWatch.
GARY HARGRAVES:
So the question today of course is do we still need to have this Fuel Commissioner, maybe we could save some taxpayers dollars and get rid of this whole Fuel Commission?
Well that's what I say, what do you think 131 332. The man in charge of all of this, he must of upset the Prime Minister himself, is the Assistant Treasurer Chris Bowen. G'day Chris.
CHRIS BOWEN:
G'day Gary nice to talk to you in a different environment.
GARY HARGRAVES:
Yes thank you, in a different environment, I'm sure you must miss me down there in Canberra some weeks.
CHRIS BOWEN:
We just wake up everyday wishing you were with us Gary but your successor does a great job.
GARY HARGRAVES:
Oh so he better, ha ha that's all I'll say.
Hey listen mate what is the story, do we really need this Fuel Commissioner? Minister, do we really need to keep the Fuel Commissioner?
CHRIS BOWEN:
I think we do Gary, absolutely. Look people of Australia want to know that there is somebody holding, what has been described by the ACCC as a comfortable oligopoly, to account. Now what we need is more transparency in the fuel market, and is the Petrol Commissioner enough? No of course not, but the Petrol Commissioner is a very good start and an essential start I think in what is very difficult circumstances.
GARY HARGRAVES:
You feel a little bit alone on that argument though? Because the RACQ, the NRMA, they all say it's all a bit of a joke really?
CHRIS BOWEN:
Oh no I don't think you'll find that they say the Petrol Commissioner is a joke. I think you'll find most of them supported the appointment of the Petrol Commissioner. And as you say Gary, the price of petrol has come down, that's due to the fall in the price of oil. It would of come down a lot more of course if the Australian dollar hadn't fallen, but we have seen the Australian dollar devalue substantially.
This is one of the funny things about economics, one of the reasons the Australian dollar is devalued is because commodity prices have fallen and we've been robbed of some of the benefit of that because of our reliance on petrol, of course. But for example Gary if you look at when petrol had it's peak in July, since then the price of Singapore petrol, which is what we assess ourselves on, has come down by about sixteen and a half cents. Now it would of come down by about forty cents if the dollar had stayed at its rate then. We have seen petrol come down by about fourteen and a half cents so there is a two cent a litre discrepancy there, roughly two cents.
GARY HARGRAVES:
So what do you do about that, do you chase this two cents?
CHRIS BOWEN:
Well the Petrol Commissioner has said to the oil companies I expect that to be passed on. He's asked them for explanations, we've also of course given the Petrol Commissioner increased powers so he can then now look behind what ever excuses the oil companies may give. And from time to time there will be legitimate reasons and other times there'll be excuses but he can go in and say "well I want to see you back that up. I want to see your books, I want to see your accounts" He's got those powers and I think that's important for people to know exists.
Now, of course the other thing. I don't expect you to agree with me on this Gary, but the other thing that I think is very important is FuelWatch. We have this situation where people say to me, I'm sure they say it to you, don't we have collusion in the petrol industry?
I think what we've got is tacit collusion or what the ACCC has described as, as close to collusion as you can get with it still being legal. So you get people putting their prices up, seeing what the other service stations do, they can check each others prices on the internet at a secret website where they share the information; which you and I don't have access to as motorists.
GARY HARGRAVES:
So they get an idea you know at two o'clock tomorrow I'm going to put the price up.
CHRIS BOWEN:
Well what they do is, they say lets try and put the price up five cents a litre and see what happens. If the others haven't put it up within fifteen minutes then we won't leave it there. But if the others put it up and match us, and we'll leave it there and we'll try it again.
So you get this tacit collusion. What the beauty of Fuel Watch is that it would mean we have locked in prices for twenty-four hours. So gone would be the days when you drive past a petrol station in the morning, you see a price and think ;oh geez that's a good price but I'm just a bit rushed getting to work at the moment, I'll catch it in the afternoon'; go home in the afternoon and it's twenty cents a litre dearer because you've had that tacit collusion happening during the day.
GARY HARGRAVES:
Well that's the argument isn't it, but of course there are those who turn around and say that he market might get a more responsive drop in the price in that same period of time as well.
CHRIS BOWEN:
What you need is a situation where service stations are obliged to put in their best price upfront. So if you were a service station and they think geez, if I'm a cent or a litre or two over the market tomorrow, if I'm a bit more expensive than the guy just down the road, and everybody can see my prices on the internet, then I'm going to lose a lot of business. So I'm going to make sure I've got my best possible price in, so I get maximum business. This is what Fuel Watch is all about.
GARY HARGRAVES:
Alright now where does this tie into your announcement of a package of measures about cartel's today, Chris?
CHRIS BOWEN:
Well two different response to two different problems. We're one of the few countries in the western world which doesn't have jail terms for cartels.
Now what's a cartel? A cartel is of course when businesses get together and fix prices or divide up the market between them. Saying look 'lets not cut each other's throats here, why don't you take that job and I'll take that job'.
GARY HARGRAVES:
So everyone's happy except the consumer. Everyone's happy except the consumer.
CHRIS BOWEN:
Yes, everybody's happy except the consumer. Well it's not good enough.
GARY HARGRAVES:
No I agree with you.
CHRIS BOWEN:
It's theft, it's white collar theft from consumers and there needs to be a very strong message sent. And that message is sent through a jail term.
Now we've announced today, that no longer will this just be a matter of fines but you'll have a ten year jail term. Now that will mean that Australia has equally the highest, the longest jail term, for these sorts of offences, ten years together with the United States. It's a well balanced package, we've spent a lot of time working it through; very vexed issues, very complicated but it's a big package, a major reform and a big step forward for ensuring that consumers don't get ripped off.
Now one of the problems with these cartels is that they're often secretive, so we are giving the ACCC the power to tap telephones in conjunction with the Federal Police. The Federal Police will do it on behalf of the ACCC. They'll seek a warrant from the judicial officer and they'll be able to tap telephones of the responsible people to prove in court that these cartels have been operated.
GARY HARGRAVES:
So Chris do you think most companies do the right thing or most companies do the wrong thing?
CHRIS BOWEN:
Without a doubt Gary, of course most companies do the right thing and this is really unfair to those companies who do the right thing, by those cartel operators. It's unfair to consumers. It's also unfair to businesses out there doing the right thing trying to get the best price and they're being unfairly disadvantaged by some businesses running cartels and price fixing. So it's about doing the right thing by consumers and also about doing the right thing by those businesses who are fair dinkum.
GARY HARGRAVES:
Well Chris Bowen is the Assistant Treasurer, he's also the Minister for Competition, Policy and Consumer Affairs in the Federal Government, nice to talk to you Minister.
CHRIS BOWEN:
Thank you Gary
GARY HARGRAVES:
Long way from that day we met in that little room at Fairfield there.
CHRIS BOWEN:
Well that's right.
GARY HARGRAVES:
About five years ago whenever it was.
CHRIS BOWEN:
That's right when you visited the Fairfield multicultural resource centre which is a great facility.
GARY HARGRAVES:
It is a great facility indeed. Alright, more strength to your arm on that cartel matter, Minister, thanks for your time. Chris Bowen nice to talk to you
CHRIS BOWEN:
Thanks Gary.