Craig Emerson (Rankin, Australian Labor Party) Share this | Hansard source

I wonder if I might put an entry into the bumper sticker competition that the member for Parramatta has mentioned. I think it was Bill Clinton who picked up on the phrase: ‘It’s the economy, stupid!’ Perhaps we could put on bumpers: ‘It’s the infrastructure, idiot!’ That is just a thought. It certainly would fit. The Trade Practices Amendment (National Access Regime) Bill 2005, I am afraid to say, is a disappointing piece of legislation. Australia has been waiting for this legislation for more than three years, and it is pretty much a damp squib. I say that by referring, for example, to the objects of the bill:

(a) promote the economically efficient operation of, use of and investment in the infrastructure by which services are provided, thereby promoting effective competition in upstream and downstream markets; and

(b) provide a framework and guiding principles to encourage a consistent approach to access regulation in each industry.

You could hardly describe those objects as bringing a tough edge to this legislation—very general and not providing much guidance at all. But more importantly, although the legislation does pick up a set of pricing principles and they include a return on investment commensurate with the regulatory and commercial risks involved, the bill does not enshrine those principles. Instead, the principles are to be determined by the Treasurer and specified in regulations. Time and time again this government parades itself as a deregulatory government, as a free enterprise government, yet it cannot seem to let go. Here is an important set of pricing principles that should be enshrined in legislation but the Treasurer just cannot let go. If you look at this government’s behaviour, whether it is in the area of university education, the area of aged care or the area of health care, it feels that it has to control everything from Canberra as if it is some sort of central planning agency. Eminent economist Max Corden has described it as ‘Moscow on the Molonglo’. You would think we would be talking about a socialist government, and in many respects this government does display those features.

It should be a government that lets go where it can and allows market forces to prevail. Indeed, that was the whole ethic behind national competition policy—a major reform initiated not by the Fraser government but by the Keating government. National competition policy was another great instalment of the economic reform program of the Hawke and Keating governments. That program has delivered unprecedented economic growth on the back of very strong productivity growth. That is what it was expected to do and that is what it has delivered. When the government talks about what jolly good fellows they are that household incomes have increased by 15 per cent in real terms, there is one valid explanation for that. That explanation is the economic reform program initiated by the Hawke and Keating governments, including national competition policy. Yet, after years of delay, we get this damp squib legislation, which is a grave disappointment in my view.

The economic reform program to which I referred has led to the OECD ranking Australia as having one of the least regulated product markets in the world for goods and services. That itself has helped build the productivity growth which has created so much prosperity in the last few years. The financial markets were deregulated early on with the floating of the dollar, then there was the entry of foreign banks and further deregulation of financial markets, product markets began to be deregulated and, a little further on, the Keating government introduced national competition policy. There has been a lot of criticism of that policy, including at times from our side of politics. No-one would argue that everything that has been done in the name of national competition policy had clear net national benefits, but overall it has been very successful in lifting productivity growth.

Here we are debating some amendments to the national access regime, and I think it is really important to make the point that, in setting access terms for infrastructure that possesses characteristics of national monopoly, it is very easy for regulators to insist that that access be at a very cheap price in the name of competition. But we must always remember that the owners of such assets need an incentive to invest or reinvest in those assets, to enhance the assets or to replace the assets with better assets. If the return that they get on that investment is insufficient to warrant that extra investment or reinvestment, then of course it will not happen.

There have been cases in Australia in the recent past where that situation has applied. Dalrymple Bay, which is subject to the Queensland Competition Authority, is a classic example. We have been confronted with a situation whereby very valuable and very high quality coal exports have been held up at a port because it did not have the capacity to handle them. A fundamental reason for that was that the regulator was considering a rate of return on investment in that port which was insufficient to warrant any further investment in it. Fortunately, that matter now appears to have been resolved, but it is a really good case study of how easy it is for regulators to argue that the access terms should be very favourable to the company that is seeking access and unfavourable to the company that owns the asset—all in the name of competition.

Competition can only truly apply and prevail if we have assets in which investment is taking place. That is why it is important—and I do support in particular this part of the pricing principles—that they should include a return on investment commensurate with the regulatory and commercial risk involved. That is a wise aspect of this legislation. It is just such a pity that the Treasurer cannot let go and enshrine that particular principle, and the other principles, in legislation.

Australia is confronted by very serious problems in respect of infrastructure. There is no national infrastructure plan. We now desperately need in this country a new wave of economic reform. It is very hard to identify any cohesive comprehensive reform program of the Howard government, which very soon will have been in power for 10 long years. You would think that within 10 years a government could develop a national reform program, a key component of which is a national infrastructure plan, but frankly it has been too lazy to do that. I do not think it has even tried. It has been too lazy to develop a comprehensive new reform program to sustain productivity growth as a basis for ongoing prosperity in this country.

I have had occasion in the past to refer to the Intergenerational report released by the Treasurer in 2002. That report contains projections that Australia’s productivity growth will slip back from 2.05 per cent per annum—which, up until 2003, had been the sort of productivity growth that Australia had been achieving for almost a decade—to 1.75 per cent per annum. If that were to happen in combination with the impact of the ageing of the population, Australia’s economic growth per person from the decade of 2010 onwards would be the slowest since the decade of the Great Depression. That has to be a cause for grave concern amongst policy makers but, amazingly, it does not seem to be a cause for concern in the Howard government. Mr Deputy Speaker, recall that I said that 1.75 per cent per annum is the assumed productivity growth in the Intergenerational report, but it is not 1.75 per cent per annum now. It is not even one or zero per cent. Australian productivity growth, from the beginning of 2004, slipped into reverse, went negative and has been stuck there ever since.

Surely the government is concerned about that, but the Treasurer says the solution to low productivity growth—to Australia’s negative productivity growth—is almost complete deregulation of the labour market. As economists have pointed out, if the Treasurer happened to be right in saying that this would increase employment levels, it would in fact reduce productivity growth. So the Treasurer does not even have that right. I do not believe that this Work Choices legislation will improve employment levels. All it will do is make job security a thing of the past. If you have people worried about their jobs day in and day out, then you do not get the best out of them. You do not get the best out of working people when their jobs are insecure and when the relationship with their employer is so badly unbalanced. We will not get productivity growth as a result of the Work Choices legislation, so we need to look around and see where else could Australia get the much needed second round of productivity growth.

It will not be from this government, because we know that fundamental to productivity growth in the 21st century is investment in education, skills, ideas and infrastructure. This government has failed on all fronts. It has failed to invest in skills, with the problem manifesting itself in acute skill shortages. Major resource projects are now being delayed for two reasons: firstly, they simply cannot get skilled workers; and, secondly, if they tried to get skilled workers, that would continue to bid up the wages of those workers not only in those projects but also in all the other resource projects and associated projects around Australia—and Australia’s major resource companies are very worried about that.

The consequence is that these skill shortages are holding back Australia. They are holding back our economic growth. They are holding back our productivity growth. Indeed, they are holding back our export growth. It is just astonishing that the Minister for Trade walks into the parliament every second day boasting about Australia’s great export performance. Let me tell you about Australia’s export performance: it is the worst export performance since the Second World War, despite the best commodity prices for at least 30 years and perhaps 50 years. How you could achieve that result is amazing when you are blessed with such endowments as record commodity prices; yet Australia has put in its worst export performance since the Second World War.

As I was pointing out, there is no economic reform program. There is not the required investment in skills. In fact, in the 1997 budget—the only budget in which there was genuine spending restraint—the government reduced its investment in skills because it thought that was dispensable, and here we are today paying the price. There has been nothing on the skills front.

In relation to university education, Australia now has a situation where all of the growth in the last 10 years—in the 10 long years of the Howard government—all of the growth of enrolments in Australian universities has been from full fee paying foreign students. There has been no increase in enrolments by Australian students. Why? Because they are being priced out of a university education by the government continually increasing HECS charges or allowing universities to increase HECS charges, and also by its move to full fee paying Australian students. Young people are doing the calculations and they are coming to the judgment that it is just not worth it. As a consequence, we then have a situation where last year, for only the second time in 50 years, enrolments of Australian students in our universities actually fell. Early indications for 2006 are that that is going to happen again. So there is no investment in skills and no investment in our universities.

I will now go to investment in ideas. The government’s record in relation to investment in ideas and innovation is appalling. While the rest of the Western world is surging ahead in terms of business spending on research and development as a share of gross domestic product, Australia’s has just finally lifted a little, but the gap continues to widen. It is that gap that is relevant to our performance as an economy compared with those countries.

Productivity growth could also be gained through investment in infrastructure. This brings me back to this particular piece of legislation. There has been very little investment in infrastructure by this government. It is now well known that before the 2004 election the government went on a $66 billion spending spree. Add that to the extra spending that has occurred after the election and it is well over $100 billion. I have calculated that no more than $7 billion of that could be considered investment in Australia’s future—investment in infrastructure and education. It is around seven per cent on a generous interpretation. The rest of it is essentially consumption spending.

Here we have the government coasting on the prosperity created out of the reform program of the Hawke and Keating governments and created out of national competition policy and then squandering the proceeds on a consumption spending spree. Labor knows and understands that infrastructure possesses the characteristics of public goods. A technical term for it is ‘nonexcludability’—that is, that the owner of particular types of infrastructure cannot exclude all users. As a result of infrastructure possessing those features of a public good, if infrastructure is left purely to the private sector it will be underprovided. The government does not acknowledge this reality. Instead, it believes that the private sector has sole responsibility for the provision of infrastructure in this country, and the response is as you would expect. In economic textbooks, the underprovision of infrastructure is otherwise known as an infrastructure crisis.

These features of public goods and infrastructure mean that there are positive spill overs to the wider community from infrastructure investment, and these should really be taken into account in decisions on whether infrastructure investment should be supported by a federal government. This government does not take account of those spill-over effects and as a result we get this underprovision of infrastructure, except of course if the infrastructure happens to be in a marginal seat at the mouth of a river—for example, Tumbi Creek in the seat of Dobell. This is obviously regarded as vital national infrastructure by the Howard government and so it dredges a creek, the mouth of which had been opened up by rain just a few days before. It said, ‘No, we need to retain that marginal seat, so we’ll keep it open by dredging it again,’ even though that was a complete waste of money. That is this government’s idea of investment in infrastructure. It is an investment in getting re-elected, it is an investment in marginal seats, but it is not an investment in Australia’s future.

Labor, instead, supports the establishment of Infrastructure Australia, effectively an infrastructure authority that would be given the responsibility of developing a national infrastructure plan and coordinating and arranging the necessary investment in infrastructure. Australia desperately needs a national infrastructure plan and an infrastructure advisory council to provide that advice. We had a debate in this parliament just yesterday on the Future Fund. It would make good economic sense for some of the proceeds going to the Future Fund instead being invested in the implementation of a national infrastructure plan on the basis of objective advice, not of pork-barrelling. These are some of the contrasts between the coalition government and Labor.

We do have a commitment to a national infrastructure plan. We do have a commitment to securing that much-needed next round of productivity growth through investment in infrastructure, through investment in the talents of our people and through investment in ideas. It is time that the government got on with that particular crusade and developed such a plan. Our hopes are forlorn that that will happen and, therefore, the Australian people will have to wait for 2007 for a change of government to get the infrastructure investment that Australia so desperately needs.

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