All of Our Markets are Free

(but some are more free than others)

Monday, 28 October 2002

The subject of using ethanol in petrol has been getting an intermittent airing on ABC news and current affairs lately. This issue first surfaced on The World Today on September 16. Since then the issue has been covered on the 7.30 Report on September 30 and on AM last Thursday.

The story in a nutshell is this: Sydney company Trafigura Fuels and Neumann Petroleum in Brisbane had a lot of potential investors interested in marketing ethanol in petrol. Unable to obtain domestic supplies of ethanol for test marketing from either CSR distilleries (who produce ethanol mainly for export) or the other major domestic ethanol producer Manildra Park Petroleum (which refines 90 percent of Australia's domestic ethanol from wheat) these companies purchased a ship load of ethanol from Brazil. While the ship was being loaded, the government imposed an excise on ethanol. And re-introduced a subsidy at the same rate for domesticly produced ethanol. Neumann's have complained to the ACCC, calling for an investigation.

As usual, there have been grubby revelations that the Manildra group has made substantial donations to the coalition parties, but we are assured by our Prime Minister that what looks curiously like a blatant interference in the market to support a local monopoly was arrived at by a proper process, and

it was the right decision.

It's been widely applauded, I might say, by the cane growers of Australia.

Perhaps we are seeing the beginnings of a major shift in the government's economic policy direction, towards a more interventionist approach, aimed at developing and nurturing new industries. I wonder if it will be endorsed by the ACCC.