Kate Chaney (Curtin, Independent) Share this | Hansard source

I rise to provide qualified support for the National Reconstruction Fund Corporation Bill 2022. A version of this bill is an essential step forward if we want to reduce supply chain risk, shape our future economy and achieve our potential to become a renewable energy superpower. There is so much opportunity in Australia, and in some areas, where markets fail or enabling investment is required, government support is justified to kickstart new industries. For example, in my electorate there's huge potential under the $1.5 billion committed to medical manufacturing under the medical science priority area. In Curtin, we have six medical research institutes, four hospitals, a university and a number of med-tech startups.

But Australia's wealth hides a serious failure of national strategy. The wealth generated from our abundance of resources should have led to an investment in the industries and skills that Australia doesn't currently have. Due to our geography, we'll always be a country that digs stuff up and ships it overseas, but we have so much potential, including for value-adding to our commodities. As an alternative to exporting green energy directly, we can move further down the supply chain, using our abundant sun and wind and embedding green energy in our commodities and adding to our economic complexity.

Australia's main exports are in low-complexity categories such as mining and agriculture. According to the Atlas of Economic Complexity, in 2020 Australia ranked 91st of 133 countries, just above Namibia and just below Kenya. Economic complexity is important because it not only allows countries to produce unique, sophisticated and high-value products with diverse export destinations but also guards against major economic shifts that could dramatically affect a country's reliance on a small number of industries, as we do. We need to add to our economic complexity as we can foresee significant changes in demand for our second and third largest exports, coal and gas. There are huge opportunities to add value to our largest export, iron ore, by processing it using green energy, but this will require some government support to ensure we don't miss the boat. Many of these industries will only become competitive with some foresighted government support, especially as we see other countries, like the US, positioning themselves to lead in the opportunities presented by decarbonisation. So the priority area for focus on renewable and low-emissions technologies in the fund is essential, as well as value-add in resources.

I would like to be a hundred per cent supportive of this bill, but, like many of my crossbench colleagues, I'm concerned about the potential of this government or future governments to abuse the intention of this legislation and this fund. Government support is only needed if market forces do not provide adequate incentives for investment. This mainly occurs in emerging or immature industries. There is a risk that the fund could be used to grow economic activity that's contrary to the sustainable long-term robustness of our economy. For example, value-adding to resources will need to leverage our natural advantage in renewable energy, not embed or grow the use of fossil fuel energy sources.

While I understand that fossil fuel investment is not the intention of the bill, it's important that we guard against the fund being used to satisfy powerful interests, such as the fossil fuel companies, with strong connections to political parties. Before I can support this bill, I would like to see an explicit carve-out for fossil fuel industries to ensure that this or future governments cannot use the fund to support fossil fuel based industries that have a declining role in our future economy.

There are some broad challenges with the legislation which I expect will surface in the report to be tabled on Friday from the Senate Economics Legislation Committee. I understand the rationale for securing the full $15 billion to provide certainty for private sector co-investors, but the discretionary nature of the $10 billion component to be provided in due course raises some concerns. There is very little transparency or guidance on how the fund will be used. There are seven broad priority areas based on analysis from 2020. It's not clear whether there is actually market failure in all of these areas, whether government intervention is justifiable. We don't want to see government investment that takes the place of private investment. I would like to see more recent or ongoing analysis—say, by the Productivity Commission—into whether these areas are and continue to be fields that require government intervention to promote future healthy industries.

I have a similar concern about the transparency of the investment mandate. With such a large amount of money, there should be an opportunity for parliament to scrutinise the investment mandate. This could be done, for example, through a disallowable instrument. Taxpayers have the right to know how this money will be invested.

Another concern relates to timing. Having just seen the 10th consecutive interest rate rise, I believe it's clear that the economy remains overheated. It will take some time to get the fund up and running and it's expected that inflation will peak in the next 12 months. It would be preferable for the first investments from the fund to occur after inflation is more under control. The timing may work naturally, but the government could consider linking the two to avoid fiscal policy working counter to monetary policy.

The government has stated that the board will be independent, but the ministers' power to appoint the board means the ministers potentially have significant power in relation to a significant discretionary sum of money. I will support the member for Mackellar's amendment, which aims to improve the transparency and accountability of the board. I hope that the board will have the skills and experience to make appropriate trade-offs between the seven priority areas and take a long-term view of the industries in which Australia is most likely to have a long-term competitive advantage.

Our economy depends on diversification into growing sectors and our world depends on meeting our emission reduction targets. I think there is potential to achieve both of these aims through this bill, and I encourage the government to consider the concerns I've raised, along with the outcome of the Senate inquiry, to ensure that the fund doesn't replace private investment, extend dying industries or industries where we have no competitive advantage, or exacerbate inflation.

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