Kelvin Thomson (Wills, Australian Labor Party, Shadow Minister for Public Accountability and Human Services) Share this | Hansard source

Australia’s monthly trade deficit for March 2006 was $1.5 billion. This is the 48th monthly trade deficit in a row. This means that for four years now the value of Australia’s exports has been exceeded by the value of our imports. By November 2004, Australia’s trade deficit of $2.6 billion was the highest on record. It is a record that we have, regrettably, come close to equalling on a number of occasions since. For example, in February the monthly trade deficit reached $2.4 billion. Australia’s annual trade deficit for the calendar year 2005 was close to $20 billion. These record trade deficits have contributed directly to record current account deficits. In the federal budget, the government forecasts export growth in 2007 of seven per cent. But it is an optimist of Olympian proportions who would set any store by that forecast.

The government’s record on export forecasts over the past five years has in fact been hopeless. In 2001, they forecast five per cent export growth; exports fell by 0.8 per cent. In 2002, they forecast six per cent export growth; exports fell, again, by 0.8 per cent. In 2003, they forecast export growth of six per cent—undeterred; exports grew by barely more than one per cent. In 2004, bloodied but unbowed, they forecast eight per cent export growth, whereas exports grew by only 2.5 per cent. In 2005, they forecast seven per cent export growth; again, exports grew by barely two per cent. So, over the past five years, the government have overforecast growth in exports by an average of 5½ percentage points every year. So, if we are lucky this year, we will get export growth rather than export falls. Continually forecasting six per cent, seven per cent or eight per cent growth is surely a triumph of hope over experience.

The root cause of Australia’s parlous external balance is Australia’s recent performance on exports. If that external imbalance is not addressed, there is every potential that interest rates will suffer as a consequence. Rather than looking at a comprehensive solution to Australia’s export problems, the government is focusing its attention squarely on the resources boom. There is no doubt that Australia should take advantage of its resource stocks to enhance its export performance, but we should not throw all of our eggs into the resources basket. The 2006-07 budget papers effectively hauled up the white flag on manufacturing exports. Budget Paper No. 1—Statement 3: Economic outlook—states:

Other categories of exports—

that is, other than resources—

are forecast to pick up 2006-07, although they are unlikely to grow at the strong rates experienced in the 1990s. Exports of elaborately transformed manufactures are forecast to grow moderately over the next two years ...

In fact, the total value of manufactured exports is now $2 billion less than it was at its peak in 2001. Such a performance is simply not good enough.

Australian manufacturing exports were one of the great success stories of the 1980s and 1990s. Between 1986 and 1996 the volume of exports of elaborate manufactures increased by 13.9 per cent per annum, whereas between 1995 and 2000 they dipped to an annual average growth rate of 7.2 per cent. Manufacturing remains the largest sector in the economy, accounting for 13 per cent of value added activity, but as a share of the economy this is less than the 15 per cent of 10 years ago and the 18 per cent of 20 years ago. It also does not compare well with other developed countries. The manufacturing sector accounts for 20 per cent of GDP in Italy, 19 per cent in New Zealand and 17 per cent in the United Kingdom.

In 2004-05, Australia’s manufacturing trade deficit was $87.5 billion. This is unsustainable in the long term. Of course, there are external factors which have impacted on the manufacturing sector. The average OECD country has lost six percentage points of global market share over the past five years, but over the same period Australia’s share has declined by three times this amount. The question is: with all our eggs in the resource basket, who will be our exporters once the boom is over and what should we do in the meantime to ensure that these industries do not collapse? This is the question the government should be asking itself. Once the resources boom is over, what will be left of our manufacturing industry, an industry we are going to rely on to fill a gap created by a slowing resources sector?

While it is clear that across-the-board tariffs are not the solution, there is a role that government can play in smoothing out the economic cycle. In an editorial last year, the Australian Financial Review argued that there was a role for government in ensuring a balance between industry sectors in the economy. It said:

Industry policy has moved a long way since manufacturing was equated with high levels of industry protection. But now there is a need to do more than simply leave manufacturing to its own devices—as long as we follow the incentive route and do not revert to protection.

Labor is not talking about tariffs or massive industry subsidies and nor is industry. We are, however, about listening to what industry needs to survive—and what does the manufacturing industry say it needs? The Australian Industry Group quotes one Victorian manufacturer as saying:

At a national level we need a business plan. We need a clear set of objectives so we know where we’re going, where infrastructure is taken into account and the issues of developing people, getting good leadership, looking at ways we can be smarter and finding niche markets are taken into account.

This is the sort of thing government ought to be listening to to address the trade deficit. Unfortunately, the Howard government is not listening. The fact is that we cannot simply abandon the manufacturing sector. We cannot haul up the white flag on the largest employer in the country. We cannot just wait for the resources boom to end and leave a devastated manufacturing sector to try to fill the gap. Labor believes that the manufacturing sector needs to be viable beyond the end of the resources boom. We have a plan to increase skills by abolishing TAFE fees for traditional trades, a plan to increase labour force participation through the provision of more child-care workers and a plan to facilitate exports through a coordinated approach to infrastructure through Infrastructure Australia.

We believe that a new approach is needed to boost Australian exports, an approach which focuses on all industries, not just resources. A new national export strategy should tackle the productivity challenge head-on across the infrastructure skills and R&D sectors, maximise Australia’s efforts to secure greater global market access through the current WTO round, reform Australia’s approach to export promotion through Austrade and implement concrete messages to create a better export culture across the economy through practical assistance to exporters.

This bill will not address Australia’s systemic export and current account problems. We will support it. However, what it does is to provide for the transition of the Australian Trade Commission from a statutory authority under the Commonwealth Authorities and Companies Act 1997 to a statutory agency which will be part of the Commonwealth subject to the Public Service Act 1999 and a prescribed agency under the Financial Management and Accountability Act 1997.

The member for Griffith has raised concerns over one of the consequences of this bill—that is, upon its proclamation the role of the CEO will be established to replace the Austrade board. As he points out, the Austrade board was established by the Hawke Labor government in 1985 for the very reason that it would bring the commercial acumen of the private sector into facilitating Australia’s trade performance. The Labor Party recognises the valuable input that business and industry can provide to policy, which is particularly important at a time when Australia’s trade position is in such a parlous state. It is somewhat ironic that the party that holds itself as the champion of free enterprise has taken it upon itself to reduce the level of private sector involvement in facilitating Australia’s trade performance.

The legislation does allow for the continued involvement of industry through the existing Free Trade Agreement Export Advisory Panel and Trade Promotion Advisory Committee. However, there will be no high-level input from business and industry leaders that the current board structure provides. The bill implements the executive management corporate governance model, as per Mr John Uhrig’s Review of Corporate Governance of Statutory Authorities and Office Holders. The Australian Trade Commission Act 1985 established the Australian Trade Commission and defined the organisation’s structure and operational framework. This bill is intended to enact revised governance arrangements in the enabling legislation. The changes, according to the explanatory memorandum, will improve governance and accountability in the Australian Trade Commission—and I certainly hope it will.

The recent AWB scandal has raised several serious governance and accountability questions for the Australian Trade Commission and, so far, we are yet to hear answers to these questions. Austrade has been peculiarly silent about AWB providing hundreds of millions of dollars in kickbacks to Saddam Hussein. The fact is that Austrade, the Australian Trade Commission, was one of many government agencies that were aware of substantive information about the link between Alia, AWB, Saddam Hussein and the coordinated subversion of the UN’s oil for food program.

Austrade continues to be responsible for assisting Australian firms to develop export markets and international business. But, in light of its silence about information concerning Australian traders breaking laws and subverting international conventions, its understanding of its responsibilities appears to be limited. It kept quiet—or at least its concerns and the information it was privy to was kept quiet.

This bill was an opportunity for the Trade Commission to have been given an explicit directive to uphold Australian law in matters concerning international trade. The bill was an opportunity for the Trade Commission to be given an explicit directive to uphold Australia’s reputation in matters concerning international trade. Had the Trade Commission done so in recent years, perhaps the trade sanctions put in place by the United Nations would have worked more effectively. Perhaps—instead of propping Saddam Hussein up—enforcing trade sanctions would have weakened him, lessened the threat that he posed and negated the need felt by the coalition of the willing to invade Iraq. Perhaps tens of thousands of men, women and children would still be alive today. Perhaps tens of thousands more would not be suffering as they are today.

What could Austrade have done? It could have made inquiries. It could have taken some responsibility. It could have reported to the government upon the results of its inquiries. I will give the House a couple of examples of what I am thinking of and two incidents where Austrade had the opportunity to do the right thing spring to mind. First, there was Alistair Nicholas, Austrade’s commissioner in Washington in 2000, who said in his statement to the Cole inquiry that he was approached by Ms Felicity Johnston of the UN oil for food program in early 2000. She told him that the UN oil for food program had raised concerns about AWB’s kickbacks with Australia’s mission to the UN but that they still did not have an answer from that mission. This was an appeal by the UN oil for food program, as far back as 2000, to another arm of the Howard government, at a time when few kickbacks had been paid, and much of the scandal could have been averted. Alistair Nicholas then raised the issue with AWB executive Tim Snowball, who assured him that there were no irregularities. Let me quote what Tim Snowball wrote back to Mark Emons, the AWB Middle East section chief, about the matter:

Alistair mentioned that someone at the UN was asking him quietly/informally about payments AWB was making to Iraq for discharge/trucking ...

We played down the issue and said we would look at the UN request.

We do not want Alistair sticking his nose into our Iraq business and causing us problems ...

What a disgraceful response from AWB. Commissioner Alistair Nicholas was apparently not entirely convinced by Tim Snowball’s assurances, because in late 2000 he sent a cable back to Canberra saying:

... AWB do not understand the seriousness nor the urgency of this matter. It may be necessary to advise the Minister of the situation.

But it would seem that Alistair Nicholas did not ultimately ‘stick his nose in’ and Austrade elected not to cause any problems—which is a shame. Austrade could have done more to avert this scandal. Austrade had further information about these kickbacks that, had it been operating under more explicit legislation, represented at least one other opportunity to do the right thing. In 2003, Ayman Ayyash was Austrade’s manager in Jordan, where he helped secure, among other deals, wheat deals for AWB. General Manager of Alia, Othman Al Absi, told the ABC’s 7.30 Report in April this year that he knew Ayman Ayyash and that he had known him since at least 2000. They had all been to parties at the Australian ambassador’s residence in Amman, Jordan. He went on to say that Austrade’s Ayman Ayyash also knew the Chairman of Alia, Sheikh Hussein al-Khawam.

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