Craig Emerson (Rankin, Australian Labor Party, Minister Assisting the Finance Minister on Deregulation) Share this | Hansard source

I move:

That this bill be now read a second time.

This bill establishes the legislative framework for the new Automotive Transformation Scheme.

This bill, together with the ACIS Administration Amendment Bill, demonstrates once again the government’s commitment to securing the long-term viability of the automotive industry. Car making is a cornerstone of Australian manufacturing. It makes a critical contribution to Australian employment, skills, innovation and exports. The automotive industry directly employs more than 52,000 people. This scheme will help to secure these vital jobs as the industry faces intense pressure in the short term as a result of the global economic downturn, as well as the long-term challenge of modernisation and renewal. The automotive industry is also one of Australia’s top export earners—despite the recent effects of the global economic downturn—with exports of $5.8 billion in 2008.

These are just some of the reasons why, on 10 November 2008, the government launched the $6.2 billion initiative A New Car Plan for a Greener Future, the most comprehensive package ever devised for the Australian automotive industry. The Automotive Transformation Scheme, established by this bill, is a centrepiece of the new car plan and a vital complement to other elements of the plan, such as the $1.3 billion Green Car Innovation Fund.

Assistance under the Automotive Transformation Scheme will commence on 1 January 2011. The scheme will support the competitive investment and innovation needed to make the Australian automotive industry economically and environmentally sustainable. It will achieve this by increasing support for strategic investment in research and development, plant and equipment, and the production of motor vehicles.

The Automotive Transformation Scheme replaces the previous government’s Automotive Competitiveness and Investment Scheme—or ACIS for short—which was due to run until 2015. Assistance under the new scheme will continue until 31 December 2020.

The new scheme improves on the existing ACIS by placing a renewed focus on innovation, with increased support for eligible investment in R&D. Stimulating additional R&D—a major contributor to innovation—will improve productivity and build competitive advantage. The new scheme also requires participants to demonstrate a commitment to improving environmental outcomes. This will lead to the development of vehicles with lower fuel consumption and lower greenhouse gas emissions.

Innovation is the key to making the automotive industry greener and more internationally competitive. It will enable the industry to adapt to the challenges presented by changing consumer preferences and climate change. Above all, innovation is the key to creating long-term, full-time, high-skill, high-wage jobs.

A companion to this bill, the ACIS Administration Amendment Bill, makes amendments to the final year of ACIS. The amendments repeal ACIS stage 3 and provide additional assistance to motor vehicle producers in 2010. The amendments guarantee continuity in support for the industry and will ensure a smooth transition from ACIS to the new Automotive Transformation Scheme.

Passage of this bill will give the automotive industry 10 years of policy certainty at a time when it is under acute pressure both in Australia and overseas. In the short term, the bill, in addition to proposed amendments to ACIS, will restore much needed confidence to deal with the global economic downturn. At the same time, the bill looks to the future by encouraging the industry to develop new technologies and take advantage of new opportunities.

In designing the scheme, the government recognised that a successful, innovative automotive industry needs a highly skilled workforce. This is why we will also require participants to demonstrate their commitment to boosting workforce skills and capabilities. Ensuring that scheme participants meet these obligations will provide significant benefits to the entire Australian economy.

This bill coincides with the legislated reduction of automotive tariffs from 10 per cent to five per cent on 1 January 2010. This will make Australia’s tariffs on passenger motor vehicles among the lowest in the world. This is consistent with the government’s belief that the long-term viability of the automotive sector depends on action to increase its innovation capacity, competitiveness and globally integration—not on tariff protection.

Replacing ACIS with the Automotive Transformation Scheme is consistent with the recommendation of the Review of Australia’s Automotive Industry by the Hon. Steve Bracks, which reported on 22 July 2008.

The bill establishes the framework for the scheme, with the administrative details to be included in regulations. This reduces the administrative complexity of the legislation and provides the flexibility required to deal with changing circumstances in the Australian automotive industry. The regulations are currently being drafted and will be subject to industry consultation later in the year.

The new scheme provides assistance to participants in the form of grants, instead of the duty credits paid under ACIS. The move to grants will assist in the administration of the scheme and remove some of the complexity in the current legislation. The automotive industry has endorsed this change.

Despite the move to grants, the payment timetable for the new scheme will be similar to the one for ACIS. This will provide continuity for participants, which is especially important during these difficult times.

The scheme provides $3.4 billion of capped and uncapped transitional assistance to registered participants.

The bill guarantees up to $2.5 billion over 10 years in capped assistance—available to both vehicle producers and supply chain participants—through a standing appropriation. Participants will be eligible to receive up to:

• $1.5 billion in capped assistance over stage 1, running from 2011 to 2015; and
• $1 billion in capped assistance over stage 2, running from 2016 to 2020.

The standing appropriation will give the industry the certainty it needs to plan long-term investment.

The move from duty credits to grants also requires further changes from the approach set out in ACIS to ensure the effective administration and accountability of the scheme. The bill allows the Commonwealth to recover assistance that is overpaid to participants. The standing appropriation will allow debts recovered from participants to be returned to the scheme for redistribution.

The bill also includes a strong monitoring regime, including provision for authorised officers to obtain a monitoring warrant to check compliance and substantiate information. The scheme imposes obligations on participants to ensure authorised officers appointed by the Commonwealth can verify information efficiently and effectively. Contravening these requirements will be an offence. These provisions are necessary to protect the Commonwealth, since assistance is paid almost immediately based on a participant’s claim.

The scheme can adapt to industry investment cycles by allowing unspent money in a calendar year to be rolled over to other years within that stage.

The new scheme puts a renewed emphasis on stimulating R&D. It increases the rate of claims for investment in eligible R&D from 45 per cent to 50 per cent. The aim is to support R&D activities that would not have taken place without assistance. The rate of assistance for investment in approved plant and equipment will be reduced from 25 per cent for the supply chain to 15 per cent to make investment in R&D even more attractive.

The bill will commence on 1 July 2010 to allow for preregistration of existing ACIS participants. This will guarantee continuity of assistance when payments under the new scheme commence from 1 January 2011. The transition to the new scheme will also be smoothed by provisions that allow for the recognition of existing eligible investments made under ACIS.

While the scheme provides significant funding for the industry over the next decade, the ultimate aim is to make it economically and environmentally sustainable. That is why the funding is front-loaded in the early years and will be reduced to zero by 2020.

This bill is the result of extensive policy design and industry consultation, and it has strong stakeholder support.

Its ultimate goal is to reinvigorate the automotive industry so that it can go on contributing to Australia’s prosperity for decades to come.

I commend this bill to the House.

Debate (on motion by Mr Pearce) adjourned.

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