Alannah Mactiernan (Perth, Australian Labor Party) Share this | Hansard source

This bill is further evidence that the Abbott government's fundamental solution to our economic woes is cutting baristas' wages so that we can get a cheaper cup of coffee and save a few bucks going out on New Year's Eve. That seems to be their vision—cheaper coffee is what is going to drive our economy.

We know that is complete nonsense but, when we look at their action here today, the introduction of this Automotive Transformation Scheme Amendment Bill, we know it is really the limit of their perspective. It displays a massive misunderstanding of modern economies and what modern economies need to drive themselves forward. This piece of legislation demolishes the assistance to automotive manufacturers. I note in passing that it will have a direct impact in WA. There are about 2,000 Western Australians who are directly involved in supplying the automotive industry. Our state is not a major player, but it will have that impact. The real issue is not the loss of jobs but the loss of advanced manufacturing capacity and skills and the impact this will have on playing a role in the development of emerging industries.

We should be very clear that the automotive sector involves advanced manufacturing with highly developed robotics technology, which will be a massive growth area in manufacturing. If we look at the various reports, the number of data systems driven out of the automotive sector is huge. We are not talking about propping up an industry that belongs to an industrial museum, we are talking about cutting out an involvement with an industry that is driving forward much of the R&D.

My friend the member for Bendigo made comment about this too, that the auto sector is the largest R&D contributor to the Australian manufacturing sector. It delivers over $700 million worth of R&D annually. That is massive, if you think about the skill sets involved in this. The importance of the automotive industry is not simply in having the capacity to produce motor vehicles per se. It is about the production of these motor skills, of doing the R&D that is embedded in that manufacturing process. It creates a skill and research base that can be leveraged off to generate new technologies and products. We need those skill sets to be here, in a sufficient volume, in order to allow us to participate more fully in future industries.

As has been pointed out by many of my colleagues, it is precisely for that reason other developed countries financially support their car industries. As has also been pointed out, our contribution is relatively modest. Per capita, Australia gives $17.40, Germany gives $90, the US gives $264 and Sweden gives $334. These are economies that are not frightened by investing in this sector, because they understand that that advanced manufacturing capacity and research base that is constantly being driven in the automotive industry is critical for other industries.

Putting aside even that long-term impact, it is interesting to note that the direct loss for the industry will be a significant depressor. We have had University of Adelaide modelling showing that the impact of cuts contained in this legislation will produce a negative annual impact of around 29 per cent, or around two per cent of Australian GDP. They are pretty big figures. Already we have seen Australian manufacturing losing ground, despite the falling exchange rate. I think it is interesting to note that just today the Australian Industry Group performance of manufacturing index for September slipped to 46.5. That is edging further below the 50.0 level which separates expansion from a contraction. So we are very much into the contraction phase. This is notwithstanding the steep falls we have had in the Australian dollar. Particularly alarming—again, notwithstanding those steep falls in the Australian dollar—in the index that was released today was that manufacturing exports experienced a large deterioration, dropping a whole 11 points to 42.4, which is the lowest reading in 18 months. It is interesting to note that it is the Australian Industry Group that has made the assessment that it is the winding back of Australia's automotive assembly that has been one of the principal reasons for that. We have to be concerned. This is not some fanciful projection about the role of this industry; the role of this industry has been widely understood in the Australian economy and we are already seeing the decisions made by the government at the end of last year already feeding through, in the view of the Australian Industry Group.

If I can pick up some other comments made by the member for Bendigo previously, she was talking about the Abbott government's view that instead they can go and build a tunnel, do all this infrastructure work—'We'll go out and borrow and build.' That is really to misunderstand the significance of manufacturing. At the end of 2012 the McKinsey Global Institute produced a paper on the role of manufacturing in modern economies. I just want to quote some of this to help us understand the importance of manufacturing and the reason we should not be scrapping manufacturing and saying that everyone can just go and make cups of coffee or go and lay a bit of bitumen. Their conclusion was:

Manufacturing makes outsized contributions to trade, research and development (R&D), and productivity … . The sector generates 70 percent of exports in major manufacturing economies—both advanced and emerging—and up to 90 percent of business R&D spending. Driven by global competition in many subsectors, manufacturing's share of productivity growth is twice its share of employment in the EU-15 nations and three times its share of US employment.

So if we want real productivity, we are not going to get real productivity by cutting the price of a cup of coffee; real productivity is going to come from investment in the manufacturing sector. They go on to comment:

The role of manufacturing in the economy changes over time.

…   …   …   

As economies mature—

as in Australia—

manufacturing becomes more important for other attributes, such as its ability to drive productivity growth, innovation, and trade. Manufacturing also plays a critical role in tackling societal challenges, such as reducing energy and resource consumption and limiting greenhouse gas emissions.

So here we have got, again, a demonstration of the complete lack of a sophisticated understanding of how an economy works and the need for innovation. Unfortunately in Australia we are not performing well in terms of innovation. On the surface we may feel we can be a bit complacent, because we are ranked 17th on the global innovation index and 15th on OECD research collaboration. But as Dr Paul Jackson from Edith Cowan University points out, these measures can be very misleading. At an aggregate level we look quite good but when we break it down into innovation efficiency—that is, the translation of innovation inputs to outputs—we actually do very badly. So, while we might be providing the precursors, we are showing a very poor capacity to translate those innovation inputs into outputs. Dr Jackson goes on to comment that one of the major problems is the level of direct funding for Australian business, which is one of the lowest in the OECD.

There have been cases where we have seen Australian companies driven overseas because we have failed to support those companies. We had a very interesting case where an Australian company had, using the innovation fund, developed a technology for the treatment of the symptoms of Parkinson's. It was a small Australian company which took on a research project and developed a product which is being marketed in 12 countries, which is a great measure of success. The company is called Global Kinetics Corporation. They say it would not have happened without the $1.3 million of federal government funding from Commercialisation Australia, a fund which has now been scrapped.

Likewise, on Friday I was speaking at a rally supporting the architecture around renewable energy and carbon abatement. I was approached by a Western Australian entrepreneur who had developed a very innovative energy-assessment tool that gives a very fine-grained assessment of energy outputs, down to the individual valve level, at a very cost-effective price. They had developed this technology in Australia. They were wanting to sell it in Australia. They have now been advised that, since we have dismantled all the infrastructure to do with carbon abatement, there is no longer going to be a significant market in Australia for this fine-grained, powerful assessment tool for energy-use assessment. Their financiers have said they should now move their company over to the United Kingdom, where companies are required to do these energy assessments, and produce for those companies great cost savings because they can more readily identify their energy outcomes.

The point here is: we need an advanced manufacturing industry. We need it because it brings with it inherently strong R&D facilities. That R&D capacity, and the advanced manufacturing skills that go with it, is what we require as a mature economy to drive our industry forward and create the jobs of the future. That is not all going to come out of cheaper cups of coffee generated by lowering the overtime rates of baristas.

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