Greg Combet (Charlton, Australian Labor Party, Parliamentary Secretary for Defence Procurement) Share this | Hansard source

The Export Market Development Grants Amendment Bill 2008 satisfies an election commitment to improve Australia’s trade performance. Of course, that is central to securing the long-term economic future of the country. In the first six months of government, Labor have put a lot of work into recalibrating our approach to trade negotiations to give renewed emphasis to the Doha Round and have commissioned a major review of trade policies and programs by Mr David Mortimer. The Export Market Development Grants Scheme assists small and medium-sized Australian businesses to develop export markets, reimbursing up to 50 per cent of expenses incurred on eligible export promotion activities. The changes contained in this bill will revitalise the EMDG Scheme and increase funding by $50 million. The most significant measures in the bill will increase the maximum grant available by $50,000 to $200,000, lift the maximum turnover limit from $30 million to $50 million and reimburse the expenses related to patent protection in international markets—all extremely important initiatives to strengthen the scheme.

Exports are vital to the long-term prosperity of the nation, and over the past five years world trade has grown at twice the rate of world output. If we want to secure Australia’s economic future beyond the resources boom, we must engage in the fastest-growing areas of international trade opportunity. Austrade research shows that firms that export pay higher wages, provide stronger growth in employment and are more profitable. By diversifying the sources of demand, we reduce our economic risk to downturns in the domestic economy or individual parts of the global economy.

It is relevant to note that we have recently been hearing condolence speeches concerning the passing of Australia’s greatest industry minister, John Button, and I think on the speakers list for this evening there are further speakers in that regard. By far the most common triumph attributed to Senator Button was transforming the manufacturing sector into an outward focused and export oriented sector. This secured the long-term future of manufacturing in Australia in many areas, and we are seeking to build on that reform process and that tradition with these amendments to the EMDG Scheme and our wider economic reform agenda—that is, the reform agenda of the Rudd Labor government.

The Export Market Development Grants Scheme has been cut in half in real terms since 1995-96 and that is the fact of the matter. This was at the same time the Howard government promised to double the number of exporters, but they failed woefully at delivering on this promise—and it is no surprise, given the attitude to the EMDG Scheme during the period of the Howard government. The coalition’s attitude to trade policy was not isolated to the Export Market Development Grants Scheme; they also abolished the successful International Trade Enhancement Scheme. One study of the effectiveness of the EMDG Scheme found that it returns an additional $12 of exports for every $1 of outlay. In 1997-98 and 2004-05 the Howard government changed both the eligibility criteria and the thresholds, which made it harder to access the scheme. As a result, in six of the 10 years following 1997-98 the scheme was in fact underspent, notwithstanding the return that is available in aggregate economic terms.

The attitude of the Howard government during that period pervaded all of the Howard government’s trade policies. Unfortunately, it is the economy and, of course, the Australian population who depend upon the economy who paid the price for that approach. In the last six years of the Howard government, despite the resources boom, total export revenues grew at an average annual rate of only 5.8 per cent, compared to the 10.7 per cent in the previous 18 years following the 1983 float of the dollar. As a result, the Howard government’s legacy is 70 consecutive months of goods and services trade deficits. No government in our history has presided over such a run. In fact, the trade deficit for the December quarter of 2007, the last quarter during which the Howard government presided, was almost $7 billion, the worst on record. That is the export trade performance that the Rudd Labor government inherited after 12 years of the Howard government.

Net exports made a positive contribution to economic growth in only two of the 12 years that the Howard government was in office. This compares to Labor’s record between 1983 and 1996, when net exports made a positive contribution to growth in 10 of the 13 years. The lesson from all of this is that a government determined to focus on export growth in international trade can have an effect on the country’s performance. As a consequence of the neglect in the Howard period, we now have a current account deficit at a record level of around six per cent of GDP and soaring foreign debt of $554 billion, measured in the 2006-07 financial year.

Even more concerning is the performance of elaborately transformed manufactured exports. In the decade to the mid-1990s, the Labor government focused on diversifying Australia’s export mix from an overreliance on the quarry and farm to a more modern and open economy, with a stronger presence of value-added services and ETMs. We lost this focus under the previous government, which lazily relied on the resources boom. This has exposed the country to serious risks, the greatest of which is our diminished capacity to reap the gains from participating in the high-growth global trade in knowledge and technology intensive goods and services. That is where the growth is and that is where we must focus as well. In the last six years of the last Labor government, elaborately transformed manufactures export growth averaged 17½ per cent per annum. This compares with the last six years of the Howard government, where the average ETM export growth rate was only 4.1 per cent. Unless we reverse this trend the Australian economy will not be on a sustainable footing when the resources boom eventually runs out.

The disastrous trade performance under the last government occurred because they failed to invest in the drivers of economic growth and international competitiveness—skills, education, innovation and effective infrastructure. Investment in R&D and other forms of innovation is a key success factor in our international competitiveness. Unfortunately, that investment also stalled under the previous government. In the nine years to 1995-96—Labor years—business investment in R&D grew in real terms by 11.4 per cent per year. In the nine years to 2004-05—the Howard years—business investment in R&D grew by only 5.1 per cent per annum. That is 11½ per cent versus 5.1 per cent. What is even more appalling is that, over the two periods, the annual real growth rate in manufacturing research and development—which is crucial to being able to participate in the growth of trade and elaborately transformed manufacturing—fell from 10.6 per cent to 1.9 per cent. As a result, again, Australia’s business investment in R&D as a share of GDP is only 62 per cent of the OECD average. That is a very important means of measuring the seriousness with which we in Australia are approaching the challenge of R&D.

A strong education skills formation and training system is vital to our international competitiveness. Over the last 150 years the measure of a nation’s economic development was the number of tonnes of iron and steel it produced. In this century, it will be the number of graduates, especially in science and engineering, that our nation generates. Investment in education is the linchpin of our future economic potential and trading performance. And what did we see in the last 11 years of the Howard government? We saw the proportion of Australian adults with at least upper-secondary education sitting below the OECD average. We saw Australia ranked near the bottom of the OECD in terms of the annual growth rate of graduates with science and engineering degrees. Our national investment in early childhood education was well below the OECD average. Since 1998 more than 300,000 people have been turned away from TAFE. Since 2001 almost 150,000 eligible applicants were turned away from our universities. That is an appalling record when we are confronting the economic challenges we have.

It is not surprising, therefore, that in the decade since 1995 Australia was the only OECD country to effectively cut public investment in tertiary education at precisely the time we needed to be significantly increasing it. The average increase in public investment by other OECD countries and aggregates since 1995 was 48 per cent, whereas our investment fell by seven per cent. The situation was so bad that in 2005, amidst a skills shortage, there was actually a drop in TAFE students overall. There was no growth—in fact, it was negative. In four of the five years between 2000 and 2005, the fact is that TAFE student enrolments actually declined.

How can we be expected to compete in global markets for knowledge intensive goods and services when we are training fewer TAFE students and underinvesting in tertiary education generally? This is one of the challenges that the Rudd Labor government faces, and it is great to see that the budget is tackling this problem. Look at some of the key elements—investing $11 billion in the Education Investment Fund, spending $1.2 billion on the digital education revolution, outlaying $2.5 billion on trades training in schools and committing $1.9 billion to deliver up to 630,000 training places. It is important to note that, in contrast to the former government’s Higher Education Endowment Fund, not only is Labor’s Education Investment Fund $6 billion larger but it can also be spent on vocational education and training facilities, not just on university infrastructure. Improving our international competitiveness will be equally dependent upon having a modern, well-resourced vocational education and training sector and a modern university system.

Developing additional economic, social and innovation infrastructure is essential to relieving the capacity constraints experienced in the economy. It is also critical to increasing productivity and driving export growth. We are seeing the impact of infrastructure bottlenecks such as clogged ports preventing resource exports. Living in Newcastle, I know this just as well as anyone, with the queue of ships off the coast. This is a direct result of the decade of neglect under the former government and it is great to see that this neglect is beginning to be addressed in the budget.

The establishment of Infrastructure Australia and the $20 billion Building Australia Fund will in time help to remove capacity constraints, improve our competitiveness and boost our exports. The government recognises its economic reform agenda must do all it can to restore Australia’s trade performance. This will help ensure that our trading sector once again becomes a positive contributor to economic growth in this country and places the economy on a sustainable basis beyond the resources boom. This will complement trade-specific policies such as the subject of this bill, the improvements to the Export Market Development Grants Scheme. These improvements will assist small and medium-sized Australian businesses to develop export markets and help reverse the awful trade performance under the previous government. This is going to be one of the key challenges for the Rudd Labor government—a challenge that has been grasped in the recent budget, in the policy position that has been adopted and in the activities of the Minister for Trade, Mr Simon Crean. It is a position that I am very proud to support through this bill.

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