Andrew Laming (Bowman, Liberal Party) Share this | Link to this | Hansard source

Let my haste in rising to my feet reflect only my unreserved enthusiasm for the Export Market Development Grants program, which has been a long-existing program set up by a previous administration. I rise not only to speak in strong, favourable terms about export market development grants but also to reflect upon our export performance. There has been from the other side of the chamber some confected cardiac arrhythmia about the fact that our current account deficit has increased by about a quarter of a per cent. So today I respond to the member for Batman and the member for Griffith as much as I speak favourably about these great export market development grants.

Let us go back to the take-home messages from the last time we were sitting in this chamber talking about the Export Market Development Grants program: 77 per cent of all money goes to small business, which I think needs to be remembered. I am reminded that $123.9 million of total grants has gone out to I think 3,277 very worthy recipients. The figures speak for themselves. But, of course, making these grants simpler and more accessible has also been the mission of government. It is not just about volume; it is sometimes about how well you can ensure that. Government responds to the needs of business: they are busy people and their area of expertise is not engaging government. It is our job. It is our prerogative to make our grants as accessible and easy to apply for as possible.

That has been done through public submissions. They have been received and, clearly with these amendments, they have been responded to. The grant system is extended for five years, as will be recalled from last time we debated this. Also the rules for Australian origin have been reviewed. Issues around disposal of intellectual property and, of course, principal status will make the scheme more accessible for emerging exporters. That is the objective of this grants scheme. All of these amendments will streamline administration and will make a great difference for the very small and medium sized exporters, which in my electorate of Bowman are applying at this very moment for upcoming rounds.

Bruce Goodrick, from Seafood Innovations in my electorate, is developing a remarkable trout-stunning system—a humane way of ending the life of the noble trout so that it can be processed in the food industry. He said, ‘The grant has allowed us to do research that we could otherwise never have done.’ He said the first trial of his automated fish-bleeding machine had a 93 per cent success rate and that the machine is comparable with machines produced in Denmark but significantly cheaper. This gives us a strategic advantage and an ability to provide to our part of the world some fantastic new Australian technology. Edward Bunker of Redlands Nursery said of the EMD grant: ‘The grant was necessary for our growth. It has assisted us to develop markets in other countries, including Canada, the United States and a total of 13 countries in Europe.’ They have even made inroads into the Japanese and South African markets. I think there is general agreement on both sides of the chamber that anything we can do for emerging exporters is a good thing.

I would like to move now to the more contentious area of how our exporters are performing. One of the touchstone issues on the other side of the chamber is the claim that Australia’s manufacturing is dissolving away to nothing. It is rarely articulated that profits in manufacturing are as high as they have ever been. Australia is holding up very well, albeit that parts of our manufacturing sector are changing and responding to international demand—and that is, of course, what you would expect in a developed economy. But let us go to the figures. When I look at export performance, I find a fundamental difference in how the two sides of the chamber approach the issue of investment in infrastructure. This government strongly encourages private investment in infrastructure. There is $31 billion worth of private investment in infrastructure. I do not think it is unreasonable to hold the position that the private sector investing in infrastructure allows the government to focus its resources on more needy areas that are not met by the private sector.

What has been the outcome of that? The $31 billion provided by the private sector is $31 billion that is not taken out of taxpayers’ pockets. The problem of the bottleneck at Dalrymple Bay is being addressed. By addressing the bottlenecks, we have had massive improvements. The commodity prices at the moment are a lucky turn of events for Australia’s terms of trade and we are in a position to maximise those changes in our terms of trade. Many countries cannot respond quickly, update their contracts and see the flow-through into their economies. Australia is doing as well as any nation. Our giant coal industry is worth $21 billion and our iron ore industry is worth $11 billion. That is a 78 per cent increase, which is an extraordinary difference.

I often look at the debate over petrol prices, and not for one moment do I say it is not going to be difficult this year, compared to last year, to fill the fuel tank of the family car. We ride the commodity boom and accept all the profits from iron ore and coal, but we somehow carve that away and make an issue out of the rise in the price of another commodity—petroleum. You cannot have one and not the other. We are riding a commodity boom, and Australia is well placed to do that; but, as part of that, we have international parity pricing on gasoline. We are benefiting enormously, but indirectly, from a range of commodities. In the last year, iron ore was worth $11 billion, aluminium was worth $4.7 billion and natural gas was worth $3.7 billion. The size of the natural gas market is up by an extraordinary 41 per cent. Motor vehicles exports are up by 12 per cent. The medications industry is worth $3 billion, as is our alcohol industry—primarily, our wine industry.

Our export performance is excellent, but, more importantly, we are capitalising upon terms of trade that favour us. Australia does not determine its own terms of trade. As a medium sized economy, we float on the rough waters of international finance and trade. So, while the terms of trade are good, the question should be: are we optimising what we do for our exports to neighbouring economies? I put it to you that, if we look at the performance of other economies, we are, in the main, doing that extraordinarily well.

Australia is also doing incredibly well on export of services. We know that the export of education related services is high, at $7.3 billion—and that is up by 10 per cent. I do not believe we would have that impressive export performance had there not been substantial private sector investment in education. Without ever giving a figure for overall investment in education, the shadow spokesperson on education will often repeat the claim that public investment in education is down. We need to look at the whole picture. It is obviously up, thanks to a mix of private and public provision.

If we have to drag the other side of the chamber with us into generational change to accept that, we will do it because right now private sector investment in education is up enormously, and far more than any change in public investment, and because we are reaping the rewards directly in tradable goods. It is one thing to be providing educational services at home but quite another to be maximising our opportunities with education related services that can be exported. Also on that list of service exports are business related services and transportation services, both exceeding $3 billion, and of financial services.

Given that profile of our exports, I want to turn to the analysis of the current account deficit. I know at this moment there is often an element of shifting dullness, where the opposition moves from one side to the other of a fairly impressive economic performance looking for isolated figures and then trying to form some sort of picture that there is poor economic performance. The latest one was the increase in the budget deficit. It needs to be pointed out that, when one sector of Australia’s economy booms—and it might well be resources—and those that dig the resources out of the ground and send them overseas are not wholly Australian owned companies, of course some of these profits are repatriated overseas. It is my understanding that, over the last three decades, we have moved towards a more liberalised financial economy. That means that, if a company selling iron ore overseas from Australia is 55 per cent foreign owned, 55 per cent of those profits are repatriated overseas. The only alternative that I can recall from lessons in economics is to send that company packing and find an Australian company that can do it. That cannot always be the case. That is why you have a very dominant two or three players doing most of the mining. Australians are welcome to be shareholders in any one of those companies, but it is worth knowing that, when their profits boom, we do not keep all of them because it is not an Australian company.

It is a fundamental lesson of economics that, if we have a coal led or an iron ore led boom, our current account deficit can widen but our net position is enormously enhanced. I think that point is never clearly made by the opposition. We have had a series of enormous price gains: in hard coking coal, up 120 per cent; in thermal coal, up 20 per cent; and, in iron ore, up 70 per cent. We are not talking about seven per cent here: these are enormous jumps in contract prices. They take time to flow through. That does not happen in three months, because we have pre-existing suppliers with whom we are replacing contracts. China is holding out, trying to avoid paying a 19 per cent increase for iron ore. Every other domino has fallen, and I predict China will do the same shortly.

So, while we ride the wave, the question is not: has our current account deficit increased by a quarter of a per cent? I have given a good reason for that having occurred. The question is: is Australia doing everything it can to capitalise upon our endowments and look after Australian people as a result? I would argue that every dollar of profit that is repatriated back to the Australian economy is, logically, a dollar that we do not take out of the pocket of a hardworking householder. That is what we have seen in the last two budgets.

Moving from issues of export to infrastructure, there have been debates about state and federal responsibility in areas like Dalrymple Bay and the Port of Newcastle. Those two very important bottlenecks are now being addressed. It is an important challenge for every economy: as a sector of the economy and its export performance expands, government and the private sector are together mandated to find solutions to bottlenecks. That is occurring, but it does not occur overnight. The other issue affecting our export performance has been the drought. It was welcoming to hear that there have been really impressive rainfalls that have made 2005-06 the second biggest year on record for our farm sector.

Ongoing global demand for what Australia can produce insulates us against future shocks. Australia has already shown—through, in no small measure, the efforts of this government—that we have negotiated a number of crises over the last 10 years within our own region. Where most observers would have expected that Australia would have fallen foul of international crises, we did not. No government can guarantee a crisis will never happen. I think it is incumbent upon the opposition to always point out that there may be trouble over the horizon, but it does wear a little thin when the member for Batman and the member for Griffith are continually talking about the bubble bursting. All I would say to those two members from the other side—and I would expect better from two who pride themselves on their economic credentials—is to have a look at what the financial markets are saying. They say:

... strong world demand and expansions in production capacity make for a positive growth outlook for resource export volumes over the remainder of 2006.

You cannot have a bubble burst, typically, without someone starting to say that that forecast is wrong and, until that occurs, I suggest that the opposition might like to move to another frontier of attack because criticising our export industry, I would put to them, is wasted effort. What we also have in Australia is a very high exchange rate, so our terms of trade are good, our dollar is quite high and our trade weighted index sits at around 63, so predictions can only be made around those inputs which we know and control. But one thing is fairly certain and that is over the last decade or so Australia has fairly closely followed US monetary policy. As a result, we have seen a move away from the 1980s and the enormous fluctuations in economic performance, and we have seen more stability. I think that has been good—that a medium sized power like Australia, which is a major exporter, has found a way to stabilise some of the toing-and-froing of economic performance. And, if you look at what has happened in cyclical moves in exports and imports, that is exactly what we have witnessed.

Of course the income deficit is still tipped to widen in 2006 and 2007. There were some high estimates by Treasury that exports would grow by between zero and six per cent, and that did not materialise. This was focused on very closely by the member for Griffith, who was quite critical of the high estimates for export growth. My only response there is that, again, one makes the best estimates one can from information available. But I am not terribly worried about whether an estimate from Treasury is a few per cent out. What Australians care about is that the platform is being laid for strong export performance in this country, and from the dividends of that strong export performance I am sure Australians can make their own decisions about what they choose to buy—and they may well choose to import. We have seen, in the last quarter, imports increase by $3 billion and exports increase by $1.1 billion. Therein lies the current account deficit that we are discussing today. In the end, individuals are making private purchase choices and that is a whole lot better than the government making purchasing decisions on their behalf, going into debt on their behalf and ultimately servicing debt on their behalf.

The factors contributing to the widening current account deficit are primarily those of a stronger export sector and, as I have said, companies involved in the export sector are not always Australian owned. It is also worth noting that as long as the petroleum price remains at over $70 a barrel that will be a major driver pushing inflation up towards the three per cent mark. As long as it sits somewhere between two and three per cent we are within the Treasury benchmark and the preferred channel in which we would like to see inflation sit. But the great fear, of course, is that secondary effects of rising fuel prices can cause the price of other commodities and other local products to rise for Australians. That will be something, I know, that the government will watch very closely.

Australia is a strong exporter. Over the last 12 years, the size of our economy has moved from 16th to 12th on OECD rankings. It is incumbent on us to look at our performance relative to other OECD economies to see where we are moving and whether we are actually capitalising upon the endowments we have. Australia was very active in Doha—one of just six nations that led negotiations in that round. We are a leader in freeing up trade, which we know is probably just as important as foreign aid for the developing economies that seek to capitalise upon the opportunities that liberalised financial markets give them. This government has negotiated a number of free trade agreements: with Singapore and Thailand already; with China, ASEAN, Malaysia and the UAE shortly; and we are already moving ahead with Japan, hopefully, towards the end of 2006.

Mr Deputy Speaker, in closing, this is a government absolutely committed to our export sector and particularly focused on the needs of small to medium exporters. Those in Bowman that have been recipients of this important grant round cannot speak highly enough of it. I support these changes which indicate that this government is listening and responding. I would like to see it continue on and that my exporters in Bowman remain able to access it, and that we continue to insulate Australia’s future with a particularly strong export performance.

Sharon Bird (Cunningham, Australian Labor Party) Share this | Link to this | Hansard source

I say to the member for Bowman that it is quite wrong to characterise Labor’s discussion of the current minerals boom as critical of the minerals boom. Our concern is how that boom can be utilised in order to safeguard the longer term future. I come from a major coal-producing area that saw massive redundancies and the heartache that they caused, and I think it is quite legitimate for us to have a view of how the investment following that boom time should be made to safeguard our future. So I correct the representation that the member for Bowman made that our concern is to be critical of the boom itself. Our criticism revolves around our view about the investment of that boom for the future.

I welcome the opportunity to contribute to the debate on the Export Market Development Grants Legislation Amendment Bill 2006 and, like the member for Bowman, acknowledge some of the businesses in my area that have utilised this very important program and its initiatives. I agree that it contributes to assisting Australian businesses in the challenges and opportunities in export. The bill amends the Export Market Development Grants Act 1997 by extending the life of the EMDG scheme until the end of the 2010-11 grant year. It provides for a review of the EMDG by 20 June 2010 and makes 14 amendments to the current act.

The EMDG scheme is perhaps one of the most outstanding continuing government programs in Australia. It has had a long life, as the previous speaker acknowledged, and so it should. In fact, as with most policies of such enduring value, the EMDG was introduced by, as the previous speaker described it, a ‘former administration’. I will not be so shy; I will say that it was introduced by the Labor government in 1974. It has been maintained, although in various forms, by governments of all political persuasions that have come and gone. The EMDG is a crucial element of the export strategy of Australian companies seeking to commence and/or sustain their exports. The EMDG directly assists small and medium businesses, most of them in regional areas of Australia. The costs of export and sustaining the export market are prohibitive to these small and medium businesses. The EMDG helps provide them targeted financial assistance. I will also use the opportunity of this debate, as have previous speakers, to comment on Australia’s general export performance over the last 10 years.

The opposition is supporting the bill but has moved a second reading amendment which we believe would improve it. The EMDG was reviewed by Austrade, which considered nearly 400 submissions. It concluded that the EMDG was popular among the Australian business community and that this support was not limited to any particular industry sector. It also concluded that the EMDG was an effective program to assist small and medium businesses to commence and continue export activity. The Minister for Trade announced a series of measures on the EMDG in late January this year, which are encompassed in this bill.

As the opposition amendment suggests, we are concerned by the removal of the Australian content rules. Currently, goods are eligible if they are manufactured in Australia and have at least 50 per cent local content. If goods are manufactured offshore, eligibility requires that at least 75 per cent of the components’ value must meet the 50 per cent Australian content requirements. The bill also gives the minister discretion in determining whether goods are made in Australia. Given the minister’s recent appearance before the Cole inquiry, I no longer have much confidence in the discretion provided to ministers. All too frequently we have seen examples of how such discretion has been abused or incompetently administered. Ministers and parliamentary secretaries are responsible for discretionary powers—for example, under the Regional Partnerships program. These discretionary responsibilities were abused on occasion and incompetently administered, as revealed during the Senate committee inquiry into the program last year. I urge the government to adopt the reasonable proposals contained in the opposition’s second reading amendment, including having the Auditor-General audit the EMDG two years from the date on which this bill is enacted.

The EMDG is far too important to small and medium businesses, especially in regional areas of Australia such as mine, to be the victim of any abuse or incompetence. I note that the bill does not address one area of business concern: certainty of payment. Eight years ago the government capped the EMDG. The Australian Chamber of Commerce and Industry has been most critical of the way payment is made. The more reasonable Australian Industry Group, which has a more realistic world view, devoted some thought to the EMDG in its report released last week, entitled Manufacturing futures: achieving global fitness, a briefing on which I attended in Wollongong. Page 63 of the report states:

Since 1996 there has been a gradual erosion in the real value of the Scheme’s budget ... A yearly allocation of $300 million would be more appropriate for what is the keystone of Australia’s efforts to foster and develop a diverse and sustainable export sector.

It goes on to say:

The uncertainty surrounding full payment of eligible claims and the long lags in receiving the rebate further undermine the efficacy of the Scheme.

The bill, unfortunately, does not address these key issues despite the calls from the Australian business community. As fate would have it, given it is so important in my area, I had asked the Minister for Trade a question on notice about the EMDG in early February 2005. He provided some interesting information relating to the EMDG and the program’s use by businesses in the Illawarra in May 2005. In my electorate the EMDG total value of grants in the period 1993-94 to 2004-05 was $3.3 million. In Throsby, my neighbouring electorate, for the same period the amount was $1.6 million. In Gilmore, again over the same period, the amount was $4.6 million. The number of applicants and recipients in each electorate has been relatively constant over the decade. This indicates to me the popularity of the EMDG for small and medium businesses in regional areas. It also confirms that the Illawarra continues the export task.

In my electorate the businesses having received EMDG grants between 1993 and 2004 are wide and diverse, as they are across Australia under the program. They include: photographic and optical goods, inbound tourism, computer consultancy services, fabricated metal product manufacturing, toy and sporting good manufacturing, electrical and equipment manufacturing, mining and construction machinery manufacturing, plant nurseries, data processing services, telecommunications services, fruit and vegetable wholesaling, boatbuilding, black coal mining, domestic appliance retailing, glass and glass product manufacturing, education, and wine manufacturing—none of which is quite as amazing as the fish-stunning piece of equipment that the former speaker referred to.

This is an extraordinary list of businesses by industry groups exporting goods and services to the world. And they are based in the Wollongong and Illawarra region, once so famous for its steel and coal but now expanding its export base. These are just another indication that the region I represent in this place has vastly diversified its economic base over the last two decades directly as a result of the fact that the coal industry did experience a significant downturn and that economies did have to diversify and, whilst we appreciate and value the current boom in export commodities, we do realise that it is important to continue to build on our diversified base for the future.

When I was first elected I discovered an EMDG recipient based in Bellambi in my electorate. I have mentioned Seawind Catamarans before in this place. Usually, unfortunately, it has been in the context of the skills shortage because they have had a problem in that area. Seawind build boats and catamarans at the luxury end of the multimillion dollar industry. The Seawind site at Bellambi—the giant shed—at any one time is full of boats and catamarans, some just skeletons, others nearly finished, others complete, polished and ready for launch at the Wollongong boat harbour on a very early morning run. Most are placed in the water for their sail to Sydney and then for export to Asia, the United States, and other countries.

Just a few weeks ago I met with the new management team at David Brown Gear Industries based at Bulli. David Brown Gears has also been a recipient under the EMDG scheme. This company is part of Textron, a $10-billion multi-industry company with 45,000 employees across 40 countries. Forty-five per cent of their activity is involved in aircraft, 15 per cent in fastening systems, 15 per cent in industrial products, 18 per cent in industrial components and seven per cent in finance. I recently invited the University of Wollongong and its Innovation Campus initiative to make contact with David Brown Gears to talk about establishing a research partnership, and AusIndustry representatives have also been to the site for discussions. I will be asking my colleague the honourable member for Gilmore to meet with me shortly to discuss the potential of the company to be involved in defence related industry, which is such a strong part of her area and which I know she strongly supports.

These two examples of successful businesses based in my electorate confirm a rather insightful comment contained in the AiG report I referred to earlier. On page 20, a quote appears from a Wollongong metal manufacturer stating, ‘We are no longer an Australian company, but a global company based in Australia.’ Australia’s export performance over the last decade has, sadly, been poor. The balance of payments figures confirm a structural weakness in our trade performance. The Prime Minister, in March last year, said: ‘The current weakness on our trade account will only be temporary.’ At that stage Australia had recorded 38 monthly trade deficits in a row. Now, we are on the verge of 50 consecutive trade deficits. Just how disastrous does it have to be to be taken seriously by the government?

The government has been cautioned, warned and advised by international organisations—including the IMF and the OECD—of the consequences of running unsustainable current account deficits. It has similarly been cautioned, warned and advised by the Reserve Bank of Australia, Treasury and even respected private economic consultancies such as Access Economics. The government should not simply ignore this giant problem and wish that it would go away.

Like its last Liberal predecessor, the Fraser government, in which the Prime Minister served as Treasurer, it is relying on the engine of China and India to power a resources boom. The government has been warned, and Australian history confirms, that these resource booms do drop off and the consequences for Australia, as have occurred in the past, will be massive. Last week’s budget confirms just how precarious Australia’s trade position actually is. The budget strategy announced is based on a false floor: a commodities boom that cannot and, history foretells, will not last forever. The current account balance in the budget’s macroeconomic forecast shows a deficit for 2004-05 of $58 billion. We still have a further two months of the financial year to go. The forecast for 2006-07 is a massive almost $63 billion, over six per cent of Australia’s domestic economy. The government is forecasting export growth of two per cent in 2005-06. That is down from the 2½ per cent export growth outcome for 2004-05.

In a real dose of illusion, the government is now estimating seven per cent export growth in 2006-07. It publishes this estimate every year and it never reaches its target. The Treasurer boasted in the budget about the government debt. When you are the highest taxing government in history, is it really difficult to reduce government debt? When you have shifted debt to households, is it really difficult to reduce government debt? The budget forecasts show that, despite the tax relief offered in the budget, this government will continue to snatch and grab revenue of $222 billion next year, $230 billion the following year and a further $9 billion the following year.

By 2009-10 it is projected that the government will have its hand in the pocket of Australians to the tune of $263 billion. It is soon to be a trillion dollar economy, with the Treasurer’s hand still deep in everybody’s pocket. When talking of debt, however, the Treasurer never talks about the current account deficit or Australian foreign debt, and the former speaker tried to minimise the importance of those issues by suggesting they are only one component. It certainly did not stop the government, when in opposition, running debt trucks around the country on exactly that issue. The infamous 1996 debt truck, unfortunately, broke down along the Hume Highway. Since then, it has been hidden in a shed under a tarpaulin.

But the bill for the blow-out in the foreign debt of nearly half a trillion dollars means that every Australian man, woman and child owes nearly $26,000. Australians need to know that the Howard government’s neglect of debt during the last 10 years directly threatens the prosperity enjoyed as a result of the massive and, at times, very painful reforms undertaken by the Hawke-Keating Labor governments. To service the Australian foreign debt we have a contract with foreign lenders. That contract needs to be serviced by exports. At some stage foreign lenders will make a drastic call that Australia cannot service its borrowing. They will, at some stage, call in that debt. The results will be catastrophic for each and every household.

The government, of course, blame everyone else and everything else for the poor export performance. Invariably they blame the international terrorism situation, drought, the high dollar, the low dollar, rising oil prices and the Asian financial meltdown. There is a ready excuse constantly on hand for refusing to take responsibility. The government believe that the best way to compete with the Chinese, Indian and other emerging economies is to mirror how those countries pay their workers. It is the low-paying road; hence, the Work Choices legislation. Never mind the evidence of the last decade, prior to 2000, when manufactured goods and supporting services grew by 15 per cent, simply transformed manufactures by 13 per cent and elaborately transformed manufactures by 16 per cent. What did this export activity contribute? Linked industry and businesses, leading technology, skills, system organisation and management techniques—in other words, innovation. It led to a productivity burst, which is now evaporating.

The budget included funding of $750 million for the EMDG over the next five years. It is no more funding than already allocated. The EMDG is a good program that was, as I mentioned earlier, introduced by a Labor government in 1974. It has been continued and supported by governments since. It has continued to exist because of its useful assistance to small and medium businesses seeking to export and sustain a new market overseas. The EMDG has certainly been a source of assistance to exporting businesses in my electorate and the region I represent. But Australia needs to do much more to improve our export performance. There are significant threats to the continued prosperity of the nation unless we act, and act soon. This government does not seem to have the stomach for it.

Stuart Henry (Hasluck, Liberal Party) Share this | Link to this | Hansard source

It certainly gives me a great deal of pleasure to be able to speak on the Export Market Development Grants Legislation Amendment Bill 2006, as there is no doubt that exports are critical to our economic wellbeing and the prospects of Australia and Australians. It is interesting to note the concluding comments of the previous speaker with respect to illusions, to cheap labour from places like China, India and those other places and to suggestions that the Howard government wishes to emulate that. That is the greatest illusion of all—the illusion of the opposition—with respect to these changes. Let us look at their record. Let us look at the history and the track record of the previous Labor administration: one million people unemployed, 345,000 of those long-term unemployed, and the highest level of unemployment in teenage ranks, at something like 34.5 per cent. Then there were mortgage rates of over 17 per cent. Talk about family friendly! With those sorts of statistics, everyone shudders. Then on top of that there was a debt of $96 billion left to the Australian government and the Australian community to recover. Very fortunately, we have had the Howard government for the last 10 years, which has ensured that Australia is debt free. So no more about illusions; let us get to the reality.

The realities are that the Howard government well understands the importance of this and works tirelessly to better support and enable Australian enterprise to flourish in the dynamic world of international trade. The Export Market Development Grants Scheme is a highly successful initiative, and this amending bill is designed to make it even more so. Exporting is of incredible importance to Australia—indeed to any modern economy. The most obvious area of importance, of course, is the issue we know as the balance of trade. This is something that the government will continue to work tirelessly to address. Exports, in effect, allow nations to pay for their imports. This benefit from exporting is well known and is discussed in public debate often by our leading economic thinkers and policy makers. But there are many other benefits which get comparatively little coverage and yet, as people like me who have seen them in action can attest, they are of far-reaching significance.

Businesses involved in export are typically economically stronger and make a greater economic contribution to Australia than businesses not involved in exporting. If we take a macroeconomic view we see some significant indicators, such as exports in 2005 accounting for over 20 per cent of the total value of Australian produced goods and services. Austrade has estimated that one in four jobs in regional Australia and one in five jobs across the whole country depend on exports. Over the past 20 years industries with strong export performance had much greater gains in productivity. We have enjoyed a very strong and sustained period of export performance with clear trends towards greater diversity in our exporters. There is now much higher diversity among Australian exporters, not only in terms of what they export but also in terms of where they are located. This pattern, combined with results like the 2005 record achievement of export value of $176.7 billion, which was an increase of 15 per cent on the previous year, is not bad. It is positive news indeed for the nation as a whole, as well as for our 30,000 exporters.

We also see clearly how exporting drives innovation and productivity, not just in the exporting business itself but also in their non-exporting competitors here in Australia, their suppliers and even their domestic customers. The analogy of a sporting competition illustrates this well. No sportsman or team would expect to improve their performance with home training or competition alone: high-level away competition provides a whole different sort of training and opportunity that you cannot get otherwise. Indeed, in many sports, the mark of a truly great team or competitor is one which consistently outperforms the competition no matter where the location. Domestic competition also benefits from the knock-on effect of being exposed to a high standard of competitor. This in turn creates a culture of generally higher productivity, which contributes to higher living standards across the community.

This competition is healthy, not destructive. It will create opportunities, not limit them, since no nation can excel at everything. The global marketplace allows each the scope to become very good at what they are best at. It also allows scope for this, like sporting achievement, to change over time. This is not just a particular point of view. The research clearly shows that Australian exporters are more efficient, more productive and more innovative than nonexporters. They spend more on research and training, they uptake and apply technology quicker and they develop and market new ideas sooner.

It is important for Australia to be competitive in the global marketplace. Globalisation has exposed Australia to more technology, more change and more opportunities. Australian business has taken up the opportunity presented by globalisation to increase our export markets, particularly in the areas of design and manufacture. We have expanded beyond trade in our traditional commodities such as wheat, wool and ore.

The Howard government encourages Australian businesses to take advantage of these export opportunities and to make smart use of the new technology brought to our shores by globalisation in order to compete at the same level with countries with bigger populations and bigger economies. In my own experience I have had the privilege of working closely with a great many exporters, including small businesses, in the water industry over a number of years. Their ingenuity, entrepreneurship and work ethic is something to be celebrated and encouraged wherever possible.

This includes businesses like Caroma Dorf, which produce outstanding quality water fittings for the Australian and international market, including being a world leader in the development of dual-flush toilet systems to save on water use. And now as the representative in this House I am glad to support exporting businesses in my own electorate of Hasluck, including Freedom Pools and Pioneer Water Tanks, which are currently working in markets world wide and have been the beneficiaries of the export market development grant.

Freedom Pools, located in Kenwick, received an export market development grant of $50,000 last year to develop the export aspect of their successful fibreglass swimming pool manufacture and retail business. Freedom Pools is now the largest exporter of fibreglass pools in Australia, exporting over 600 pools per year to Europe, the United States, Asia, southern Africa, the Asia-Pacific and the Middle East. Pioneer Water Tanks, another very dynamic and effective business in Midland in Hasluck, has received two export market development grants since 2004, totalling almost $116,000. Pioneer Water Tanks has provided tanks to a brewery in Papua New Guinea, a desalination plant in the Persian Gulf and to countries throughout the Asia-Pacific and the Middle East. I congratulate of these two companies in particular on the endeavours and on the significant contribution they make to employment opportunities in the electorate of Hasluck.

But they are just two of those dynamic businesses that exist in Hasluck. This includes lots of small businesses operating in horticultural areas—stone fruit growers, orchardists, vineyards, wineries—which are also involved in export markets and the development of those markets overseas and are doing a fantastic job. The innovation I have consistently seen among these exporters for many years is undoubtedly inspired and driven by their exposure to international trade and the competition provided in those markets. This first-hand lesson is something I would wish for anyone interested in what export really means for Australian small business. In fact by 2003 this government had already moved to enhance the Export Market Development Grants Scheme by targeting its support more towards small businesses. Now Austrade estimates that 77 per cent of all grant recipients are small businesses.

So what does this mean for Australia’s workforce? The research on this is both impressive and unambiguous: exporting businesses outperform non-exporting businesses in many key employment indicators, including both measure of employment quantity and employment quality. The most recent ABS business longitudinal survey, published in 2000, tells a compelling story. Although exporters account for only four per cent of Australian businesses, they account for 16 per cent of Australian employment. That is a fourfold difference.

And what of the quality of these jobs? It is worth bearing in mind some other employment statistics about exporters. Exporters outperform non-exporters on standards of pay, training, health and safety practices and job security. For example, 34 per cent of exporters pay above average weekly earnings while only 12 per cent of non-exporters do. On average, exporters have 91 per cent of their staff as full-time employees and 90 per cent of their employees enjoy permanent employment status. The figures for non-exporters are only 69 per cent and 72 per cent respectively. This pattern holds remarkably consistent across other indicators such as health and safety practices and investment in training. Notably, the pattern also holds regardless of business size—in other words, even the smallest exporting businesses tend to offer Australians better quality jobs than their non-exporting counterparts.

The Export Market Development Grants Scheme is one of the government initiatives through Austrade to play a strong facilitative role in the development of Australia’s export capacity and performance both now and in the long term. The scheme was introduced by the original act in 1997 and has already been enhanced in 2003. In 2004-05 alone the scheme made 3,277 grants totalling $123.9 million to small to medium sized business that were actively working to improve their export performance. These businesses generated around $3.1 billion worth of exports and 23 per cent of these exporters are based in regional or rural areas.

A comprehensive review, including independent economic research, was undertaken in 2004 to evaluate the scheme and make recommendations about its future. The review concluded that this is a particularly effective and popular scheme which delivers excellent value for money to the Australian community. I think it is notable that the review observed a clear pattern in which the greatest benefits from grants were seen in the smallest businesses, especially businesses which otherwise had financial constraints. This indicates clearly that the scheme is being applied as intended by both administrators and recipients. Specifically, it concluded that the scheme: induces export promotion; increases exports; helps small to medium enterprises become sustainable in their exporting; positively impacts on export culture; and delivers net positive social benefits. It concluded that the scheme clearly outperforms any feasible alternative approach and deserves to continue. This bill ensures that by extending the program to 2011.

The review also gained important insights learnt by the scheme’s stakeholders during its operation to date and found that there were a number of ways in which the operation and effectiveness of the scheme could be improved. Overall these focus on four strategies: increasing incentives to visit overseas markets and gain an international perspective; focusing on new and emerging forms of exporting; reducing risk and administration; and improving certainty of payment for businesses. In particular I wish to draw the attention of the House to several aspects of this amendment bill which address important findings of the review.

This bill allows for the scheme to continue until 2010-11 with a review to be conducted in 2010. This continuity provides security and a reliable context within which businesses wishing to improve their export performance can plan. And greater business certainty allows for better allocation of resources and more employment certainty. Increasing the daily overseas visit allowance will be very encouraging for those businesses, typically small or start-up enterprises, which are only just beginning to develop their export program and need first-hand on-the-ground knowledge and contacts that can often only be achieved by getting there yourself.

The bill includes a number of measures designed to eliminate anomalies around the question of which businesses are and are not eligible for the grant. With this legislation Austrade will be able to allow eligibility where the case is clearly genuine but a business may not fit an expected category. It also prevents the unfortunate situation where eligibility is prevented because of financial timing: a business being denied a grant in one financial year because their export earnings occurred in another financial year.

As knowledge becomes ever more important in the global economy I am also happy to draw the attention of the House to measures in this bill that allow for greater eligibility for businesses involved in the export of knowledge and intellectual capital. This is an area of Australia’s performance that we must encourage wherever possible, such as with this legislation. This greater flexibility and responsiveness to the needs of modern business is also achieved by amendments to the rules governing principal status and country of origin for the eligible products.

Complementing these measures to open up and simplify deserving eligibility are important measures to prevent unwarranted or manipulative use of this scheme. The new limit on eligible cash payments and conditions on transfer of business ownership are important to ensure that the funds available go only to deserving exporters and that the Australian community gains maximum benefit from its investment. Clarification of the rules precluding commission payments to prevent loopholing and clarification of Austrade’s authority to disallow claims it views as not in keeping with the legislation’s intention are also important amendments. Overall, these amendments ensure: more clarity, simpler processes, greater responsiveness, improved flexibility, more fairness, less risk of manipulation, enhanced incentives for new exporters and overall increased effectiveness from a program of which we should be very proud already. This amendment bill ensures even better support for Australian exporters and even better outcomes for the Australian community, including those businesses in Hasluck currently exporting or considering moving into the export market areas. I commend the bill to the House.

Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

I support Labor’s second reading amendment to the Export Market Development Grants Legislation Amendment Bill 2006. While I welcome the continuation of the scheme and acknowledge the importance of a number of the changes that the government is implementing in this bill, at the same time I am concerned about the impacts of those provisions which seek to increase the level of discretion available to the minister. I cannot help thinking that the government might be getting a little desperate to deliver on its promise of doubling the number of exporters and seeing this as a means by which it might be able to redefine its measures of success in relation to that promise.

There is no doubt that the export market development grants have benefited a great number of companies throughout this country. For an island nation like our own, a strong culture of exporting and a strong export sector are critical to the long-term success of our economy. The export market development grants have helped companies that might not have considered themselves necessarily as exporters, but they have certainly been able to develop their businesses to the point of entering and competing in an export market to our benefit. The grants have played an important role in allowing small business owners throughout the country to seek out and expand their businesses through export. In my own electorate of Werriwa since 1993-94 there have been more than a hundred grant recipients with a total of $5.2 million paid out in grants to companies like Broens Industries which received grants of more than $180,000 over a number of years.

I have mentioned Broens in this place on a number on occasions as it is a great example of the type of innovative and growing business that is based in my electorate. Broens has operated for more than 25 years. It started with a single toolmaker. The business is now designing and manufacturing high-tech solutions for precision engineering, tooling, special purpose machinery and automotive applications. Last year Broens was one of the winners in the Western Sydney Industry Awards. As a matter of fact it took out the most coveted, most outstanding large business award. Broens exports to 17 countries and among its customers are Mercedes Benz, Ford, GM, Boeing and Airbus. The company currently employs about 140 people and in Werriwa is one of our largest employers of apprentices. Only recently the company took on another 17 apprentices in the metal trades area. I have not spoken with Carlos Broens in detail about the impact of these grants on his business but I have no doubt that they have played a significant role in his business expansion into overseas markets.

Another company that has benefited from a grant under the EMDG is Lipa Pharmaceuticals of Minto. Recently I had the opportunity to tour the Lipa plant with its owners Gorge and Stanika Jovanova. Lipa is a contract pharmaceutical manufacturer. They started the company in 1995. It started from very humble beginnings as both Gorge and Stanika migrated to this country with nothing in 1988. So theirs is a very good story. They have opened this new plant in Minto. They currently employ in my area over 300 employees and they are a major contributor to the local economy of Campbelltown. Lipa has used their EMDG to target international markets. It has certainly opened up new areas for business which can be supplied by our local manufacture and it has created new jobs. They have identified specifically a market for quality pharmaceuticals for export into the international market. They constantly remind me that the threat to the local pharmaceutical industry is from overseas manufactured products that are not currently required to display or advertise their country of origin, so when those products appear on our shelves we do not see that. I will say more about that later.

These are just a couple of examples of companies that have expanded through the growth in exports, assisted by export market development grants, and are reaping the benefits of exporting. That said, Australia’s export performance remains poor. It was only two weeks ago that we heard those fabled words from the Treasurer once again as he delivered his 11th budget. Towards the end of the budget speech he said:

GDP is expected to grow by 3¼ per cent in 2006-07, following more modest growth in 2005-06. Economic growth will continue to be supported by strong global demand for Australia’s commodities. This is generating robust growth in business investment and should lead to—

and I stress—

an increase in export growth.

Once again this is a case of another budget speech and another prediction from the Treasurer that an increase in our exports is just around the corner. This is another prediction of strong export growth from a government that has consistently got it wrong when it comes to forecasting export performance. It is another prediction of improvement in Australia’s export performance from a government that has overforecast growth in exports by an average of 5.5 per cent each year since 2001.

I would like to quote some figures. In 2001 the government forecast export growth of five per cent. In reality, it fell by 0.8 per cent. In 2002 the government forecast a six per cent growth. The reality was a fall of 0.8 per cent. In 2003 the government forecast export growth of six per cent. Exports came in that year at around one per cent. In 2004 the government forecast export growth of eight per cent, and the result was a mere 2.5 per cent growth. This is the government’s actual record when it comes to export growth, and I have to say that, if as with other things the government’s record is its guarantee, when it comes to predicting more export growth being just around the corner I for one have to be just a little sceptical.

A closer inspection of the budget papers reveals that, during a period of record terms of trade and with an export expansion just around the corner, the current account deficit is expected to hit a new record high. In 2006-07 it is expected to hit a new record high of $6.2 billion or some 6¼ per cent of GDP. A couple of weeks ago I was shocked to see that our monthly trade deficit had increased to $1.5 billion. That is $1.5 billion for the month, with an expected $6 billion increase in the current account deficit expected over the next 12 months. That is hardly a record that sits well with this government.

Digging a little further into the budget papers reveals that Australia’s poor export performance is impacting on growth. The budget papers reveal that net exports are expected to knock off about half a per cent of GDP growth in 2006-07, which follows on the back of a one per cent reduction in GDP as a result of export growth in 2005-06. This is simply not good enough. Today we are tinkering with the Export Market Development Grants Scheme, waiting—ever waiting—for the predicted but never realised export boom to come along, while what Australia really needs is a new export strategy.

In the budget the government had the opportunity to take business by the horns and lead it to overseas markets but instead the budget did not contain one single new export initiative. It contained yet another promise—the promise of the export growth that always seems to be just over the horizon, no matter how close we are—but it did not contain any new initiatives to lift the number of exporting firms that we have in this country. The Treasurer is starting to sound a little like Paul Revere, running around telling us, ‘The exports are coming,’ but for the Treasurer the export improvement never seems to occur. The government talks big on exports but very little seems to be happening.

In 2001 the government set a target of doubling the number of exporters by 2006. In response to a question I put on the Notice Paper not long after I got to this place, the Minister for Trade said that the Australian Bureau of Statistics recorded that in 2000-01—the base year on which they are going to calculate success or failure of the strategy of doubling the number of exporters—the number of exporters stood at 25,000. In 2001-02 it had grown to 31,450, in 2002-03 it dropped back a little to 31,174 and by the end of 2003-04 the number of Australian exporters stood at 30,788. In all, since 2000-01 the number of exporters has increased by fewer than 6,000. Growth of fewer than 6,000 in three years, while the government’s goal was to double the number of exporters! This leaves the government nearly 20,000 exporters short of reaching that target. That is a long way short. It is so far short that it is almost at the point where the government could start all over again.

This government is asleep at the wheel when it comes to promoting exports. It is keen to sign up to bilateral trade agreements—the benefits of which are largely yet to be seen—but, in terms of a real commitment to an export strategy, we have seen nothing from this government. I mentioned at the outset that I had concerns about some of the provisions of this bill. I am particularly concerned about the removal of the Australian content rules and their replacement by a provision that allows ministerial guidelines to determine eligibility criteria in the future.

Yet again it is a case of the devil being in the detail, although, unlike other pieces of legislation that come before this place, I strongly suspect that on this occasion the detail will allow a less stringent approach to assessing the performance of the minister. If the decision of the government was that the rules of origin requirements should be replaced by ministerial guidelines, then why are those guidelines not available? In effect, this piece of legislation is the government asking the parliament to write it a blank cheque.

It is asking us to agree to a set of guidelines that, for all we know, have not been written or, at the very least, have not been made available. The government’s track record on such matters hardly instils me with confidence. While the majority of changes in this bill are improvements to the Export Market Development Grants Scheme, this should not be seen as the most comprehensive approach to export promotion that the government could come up with. The scheme does help small and medium sized firms test and explore possibilities in overseas markets but it is certainly not the complete strategy that is needed by a country facing an increasing current account deficit and an export performance that is starting to shave percentage points off economic growth.

I support Labor’s amendment to this bill to improve some aspects of the grant’s operation and ultimately I will support the bill because Australian businesses need all the help they can get to get their products to international markets. Australian businesses need to know that the next expansion for their business can and should be to export. But more importantly Australian businesses need to know that they have a government that is backing them and that will support their bid to expand their businesses and markets. From all the evidence that I have seen, the current government is not willing to provide that support and is not ready to get behind potential exporters by putting in place the infrastructure and policies that potential exporters need to help them on their way.

The fact that the review of the Export Market Development Grants Scheme found a need for the scheme to continue and the fact that this bill is before us today is a good start—I do not doubt that—but I have to say that it is not enough. At a time when a new export strategy is needed, at a time when the Treasurer concedes that our export performance is constraining economic growth and at a time when independent assessments of Australia’s export performance report it to be severely lacking, having a government that is willing to sit idly by while the current account deficit gets out of hand is simply not good enough.

It is not good enough for this government to continue to resist the need to improve infrastructure. We need the building blocks so that domestic businesses can cheaply and efficiently get their products into overseas markets. While I strongly support the continuation of the Export Market Development Grants Scheme, I do believe this government needs to do more. In my electorate there are many fine businesses—world class businesses—that should be able to get their product into overseas markets and use exporting as a means to grow their businesses and create jobs.

Instead of trying to stave off international competition by cutting wages and threatening workers’ job security through the Work Choices legislation, we should be putting Australian businesses on a more competitive footing with overseas businesses so that they can compete with those markets. That is what we should be doing. Our policy should be driving that because, at the end of the day, that is what is going to create jobs and economic wealth for this country.

Luke Hartsuyker (Cowper, National Party) Share this | Link to this | Hansard source

I welcome the opportunity to support the Export Market Development Grants Legislation Amendment Bill 2006. The legislation before the House today reminds us of the importance of overseas trade and export industries to Australia. I would like to focus on three vital areas which relate to export market development grants and the Australian government’s positive trade policy initiatives. Firstly, I intend to look at the merits of this legislation and its importance to the development of overseas trade opportunities. Secondly, I would like to highlight some examples of how export market development grants have assisted some businesses in my own electorate. And, thirdly, I will focus on the opportunities being created for our emerging exporters by the government’s free trade agreements.

However, before I address those points, I must challenge the comments made by the honourable member for Griffith in this chamber when he rose to speak on this bill. It is clear that the good member’s glass is half empty rather than half full. He attempts to paint a gloomy picture of our export performance. In his contribution he conveniently neglected to mention the substantial growth in the export of goods such as medicines and passenger vehicles. It has also slipped his mind that this country has achieved record exports across a range of sectors. The member for Griffith also paints a gloomy picture of the impact of our free trade agreements on a wide range of industries. Does he seriously believe that greater restriction on international trade can enhance trade performance? That is clearly a nonsense. A less restrictive trade regime builds greater national wealth for trading partners; but I will comment on FTAs later.

We can see where trade sits in Labor’s list of priorities, with the opposition having handballed the trade portfolio to no less than six different shadow ministers over the last six years. I say that the Minister for Trade hard work and vision has led this country into a new era of prosperity. There has never been more incentive to get emerging exporters ready for international business. In contrast, we have an opposition with no plans, with no ideas and with no meaningful policies in the area of trade. Perhaps the honourable member for Griffith should have taken some time to join me and the Deputy Prime Minister at the mid-North Coast innovation showcase held at South West Rocks. There were examples of regional businesses delivering world-class products and exporting to world markets. In most cases, they were not just following world’s best practice but were creating it by innovation—innovation being carried out in regional Australia.

In the 10 years this government has been in office, the value of Australia’s annual exports has increased by $53.5 billion. In that time, some 1.7 million jobs have been created under the coalition government, jobs that were just not there under Labor. Of those 1.7 million jobs, 320,000 had been generated through export performance. Currently, only five per cent of Australian businesses export, but that five per cent of businesses creates almost 20 per cent of Australia’s jobs. It is even higher in regional Australia, at 25 per cent. That is one of the reasons we are enjoying 30-year-low levels of unemployment. Imagine the possibilities if we can open up the world markets to another five per cent of Australian businesses. What jobs would we create? What wealth would we create? That is what export market development grants are doing: creating prosperity for businesses and jobs for Australians through making businesses export ready and through putting them in contact with potential trading partners.

I will now turn to the legislation itself and its relationship to future export trade. The legislation before us today will build on the success of the Export Market Development Grants Scheme and refine the program to make it more efficient and more effective. Under the sunset clause in the current legislation, the final grants to exporters will be paid in 2006-07. Owing to the immense success and popularity of the scheme, the government proposes to extend the scheme by five years, providing emerging exporters with further opportunities to market their products world wide.

One in five jobs nationally and one in four jobs in regional Australia are directly dependent on exports, and history shows that businesses which have been given access to global markets have experienced significant growth. The benefit of this growth is felt in the back pockets of the nation’s workers, with the 30,000 Australian businesses that export currently paying their employees on average $17,000 more per year than those businesses that do not export. This bill aims to keep this trade growth continuing and to give businesses with export potential the tools they need to get into the global marketplace.

Last year, 2005, was a record year for Australian trade, with exports reaching over $176 billion. Last year, 12 of Australia’s top 20 goods and services exports recorded record trade figures. We have copper ores up 76 per cent; coal up 63 per cent; iron ore up 78 per cent; natural gas up 41 per cent; medicines up 27 per cent and passenger motor vehicles up 12 per cent. There were also increases for wine, beef, education and business services.

In the 10 years it has been in government, the coalition has focused on providing the conditions whereby Australian firms can access world markets effectively and competitively. The government has facilitated exports through a range of measures—firstly, by pursuing trade opportunities on a multilateral and bilateral basis. The second way this government has helped exporters is by freeing them from the nightmare that was the sales tax system, a tax on exports—a tax acting against those companies that wanted to build wealth for Australia in the world marketplace. The third way the government will be helping exporters is through workplace relations reform. This reform is essential to making our labour markets internationally competitive.

This bill not only proposes an extension of the EMDG scheme but also specifies a number of improvements to the scheme which will make it more streamlined and provide further opportunities for emerging exporters not currently utilising the scheme. In 2005 Austrade conducted a full evaluation of the scheme and recommended its continuation. This recommendation was based on extensive consultation with some 394 submissions being received and no fewer than 70 meetings with business representatives, industry associations and government. In the bill currently before the parliament, several modifications stemming from the Austrade review are proposed. The bill proposes an increase in the claimable overseas visit allowance from $200 to $300 a day. It simplifies the rules on Australian content. Emerging exporters will be offered more flexibility with applications for funding that currently do not met the criteria.

The bill will ensure that expense categories for overseas representatives and marketing consultants are separated and capped to $200,000 and $50,000 per annum respectively. It will extend from three to five years the period for which Austrade can grant approval status to special applicant categories, the approved bodies, joint ventures and trading houses. This new piece of legislation will empower Austrade to reject unsubstantiated, unreasonable, uncommercial or non bona fide expense claims. The eligibility for cash payments made by applicants will be limited to $10,000 per annum. The bill also removes the export performance test, which has in the past made it difficult for some small businesses to access the scheme.

Last year, the EMDG scheme paid out some 3,200 grants totalling $124 million to small and medium export businesses. For that $124 million investment, those businesses generated over $3 billion in export revenue. I will repeat that figure because it is quite staggering: $124 million investment generated over $3 billion in export revenue. For Australia to prosper, it must have an effective trade system. A means by which manufacturers who produce high-quality products and international buyers can meet at the same table is through world trade—and the EMDG scheme facilitates that.

The good news for Australia is that exporters need look no further than the Pacific rim to access huge markets, such as Japan, the United States or China. The EMDG scheme is about helping Australian exporters contact international buyers. That brings me to my second point—the importance of EMDGs to regional and rural Australia.

In my electorate, exposure of business to external markets has proven crucial to business success and employment growth. I am pleased to say that local businesses have benefited directly from the EMDG scheme. A good example of that is a very small firm—which you would probably know of, Mr Deputy Speaker Causley—Dahlberg Surfboards in Yamba. In the highly competitive world of surfing, Rodney Dahlberg has managed to carve out for himself a niche market in Japan, using magazine print advertising and by sponsoring riders in Japanese surf tournaments. Mr Dahlberg says that EMDGs have been—and I will quote his very extensive words—‘a great help to him’, giving him the chance to put his product on the Japanese market. As a result, this small firm sells on average two surfboards a day into the Japanese market—quite a result for a small business operating out of a small country town in regional Australia.

Another example is the dental supply manufacturer, Erskine Products, in Macksville. General Manager Tim Erskine-Smith says that, without the EMDG scheme, he could not have ‘tested international waters’. With the financial support of the EMDG scheme, Erskine Products invested almost a quarter of a million dollars in attending trade shows, taking out commercials in trade magazines and doing test mail-outs. Similar testimonies can be given by a range of firms around the country. The extension of the scheme will see more success stories and more prosperity for local firms and their employees.

In my contribution to the House today, I would like to recognise the efforts of 30 young people who have just attended the Export Market Development Training Course, part of the Australian government’s Industry Partnership program. This program is designed to boost the understanding of young Australians in the areas of international trade and the export sector. The five-day intensive course held earlier this month in Sydney taught participants about how export markets work. It provided them with the skills to develop their own ideas and the motivation to develop an export business of their own.

The 30 participants were from a range of sectors, such as sheep and wool producers, brewers and winemakers, oyster farmers, beef producers and cheese producers. One of the participants was from my electorate. Timothy Zirkler, from Macksville, wishes to make a career for himself in the production of blueberries. The North Coast of New South Wales is home to some of the biggest producers of blueberries in Australia and provides work for a range of people—locals and backpackers. These blueberry farms have secured opportunities in the lucrative export Japanese market. Timothy knew about growing blueberries but not about how to sell his product on the global market—but that is changing, thanks to the Export Market Development Training Course. Young people like Timothy, who make up over 30 per cent of the workforce in agriculture, fishery and forestry, are being made ‘export aware’ through programs such as this.

I commend the Export Market Development Grants Legislation Amendment Bill 2006 to the House so that emerging exporters can have increased opportunities to take their products to international buyers, safely and effectively. Demand for the grants is increasing each year, showing the health of Australian business and the success of the scheme. Three-quarters of the grants awarded last year went to businesses with a turnover of $5 million or less and, of those, 23 per cent went to regional Australia.

At this point, I would like to return to the issue of trade negotiations. Free trade agreements have provided Australian exporters, especially those in regional Australia, with increased market access to the US, Singapore, Thailand and New Zealand—the first country to sign a free trade agreement. Since the Australia-US Free Trade Agreement was signed at the beginning of the year, cheese exports have risen by 103 per cent, two-thirds of US agricultural tariff lines have been reduced to zero and the majority of tariffs on lamb and mutton have been eliminated. In the first 12 months of the Australia-Thailand FTA, over 450 companies registered as active exporters. In last year alone, two-way merchandise trade grew by 30 per cent, helping to make Thailand Australia’s 10th largest merchandise trading partner.

In 2005, exports of services and merchandise to Singapore grew by 10 per cent and 23 per cent respectively. That is a very significant figure. The Singapore government revealed that it had chosen the University of New South Wales to establish the country’s first foreign university—the first wholly-owned research and teaching institution to be established overseas by an Australian university. Trade with New Zealand has grown by over 500 per cent since the signing of the FTA. Australian exporters are now anticipating the possibility of an FTA with China.

The Australian and Chinese governments began negotiations on an FTA after a joint study showed enormous potential benefits for both countries. China is already Australia’s second largest merchandise trading partner, our second largest imports source and our second largest export market. As a country of only 20 million people who consume only 30 per cent of the food and fibre we produce, we must export. There has never been a better time to develop Australian export business. If this government can educate and kick-start emerging businesses into the export sector, it will produce huge benefits for regional and rural Australia and for many small firms, stimulating considerable employment growth, all through the development of export opportunities.

There has been overwhelmingly positive feedback from exporters for this scheme and independent research has shown that the scheme has encouraged export promotion, which is a key factor in successful small business expansion. In the light of the reviews of the scheme and its track record of boosting Australia’s export industries, it is the government’s decision to extend the scheme, as I said, by another five years. I commend these changes. I commend the Export Market Development Grants Legislation Amendment Bill 2006 to the House and look forward to its passage so that we can continue to encourage our small exporters, continue to encourage export opportunities and all of the benefits that they bring to Australian companies.

Chris Bowen (Prospect, Australian Labor Party) Share this | Link to this | Hansard source

Assisting private enterprise and promoting exports are core responsibilities of government and core responsibilities with regard to which this government has failed abysmally. A good export performance is vital to our economy. There are, of course, significant spillover effects for wider society and the economy, which means that it is appropriate for the government to promote exports. In fact, it is more than appropriate; it is vital. I will come back to those spillover effects a little later.

In a nation like Australia it is important that our exports come from a diversified range of sources. Personally, I regard this government’s worst economic failure, among many, as being its complete failure with regard to exports, and manufactured exports in particular. Two weeks ago we saw the release of the March trade figures, which my honourable friend the member for Werriwa referred to, and we saw our monthly trade deficit increase from $1 billion to $1.5 billion. This is not what concerns me most. We do see from time to time monthly fluctuations. We see occasional blips as the deficit figures go up and down as particularly expensive imports come in from time to time. But what worries me and the Labor Party more is that this was the 48th trade deficit in a row. Not in 20 years have we seen a run of trade deficits which has lasted this long.

Twenty years ago Paul Keating warned Australia that we were in danger of becoming a banana republic unless we turned things around. But there is one very big difference between that trade crisis and this one. In 1986 the world economy took a turn which was not in Australia’s best interests. Demand for commodities, the staple of the Australian economy, was low. Of course, that is not the case today. We see the massive growth of China, we see Australia riding the Chinese wave and the massive increase in demand for our commodity exports, led primarily by the 10 per cent per annum growth in the Chinese economy. If we had the terms of trade now that we had in 1986, our current account deficit would now be 13 per cent of gross domestic product. Even with the best terms of trade in 50 years, this government delivers a trade performance which sees us with a current account deficit which fluctuates between six per cent and seven per cent of gross domestic product.

Even with the best international world conditions since the end of World War II, this government delivers the biggest trade deficit in our history, and of course this translates into Australia’s record foreign debt. This government has effectively transferred public debt to private sector debt and seen it balloon out in the process. When the Howard government came to power, promising to reduce foreign debt and driving debt trucks around Parliament House, foreign debt then stood at $180 billion. It is now $450 billion or half a trillion—that is, more than 50 per cent of gross domestic product.

The government have had a lazy approach to trade. They have been riding the coalminer’s back, they have been riding the wave of Chinese growth and they have done nothing to encourage manufactured exports. The results are there for all to see. In 1983 Australia’s elaborately transformed manufactured exports stood at $2.6 billion. By 1996 they had increased to $18 billion. By 2005 the growth rate had dropped off dramatically and it had reached only $26 billion. Indeed, in 2001 and 2002 we saw the only decline in elaborately transformed manufactured exports in the last 23 years. It actually went down over a 12-month period.

Of course, there is no doubt that global economic conditions play a role in this and that Australia, from time to time, gets bounced around as the world economy grows and then falls off. But this government has dropped the ball. It has failed to encourage research and development and has let other countries get past us—other countries with comparable bases when it comes to their economy. They have overtaken us in the field of elaborately transformed manufactured exports and high-tech exports. These are countries like Ireland and Finland, for example. In fact, Australia is one of the very few countries in the world that have a traditional commodity base that are still running a trade deficit. As world demand for commodities has increased, most economies that are similar to Australia’s have gone into trade surplus. Countries like Finland and Canada have gone into trade surplus. I think South Africa is in fact the only other country with a similar economic profile to ours which is running a trade deficit.

The honourable member for Cowper talked about the workplace relations changes and how they helped exports. What this government is doing is going down the low road. It is competing with countries like China and India by reducing our wages. What it should be doing is going down the high road and competing with countries like Ireland, Finland and Canada by encouraging manufactured exports, by encouraging the high-tech sector and by encouraging research and development. But it has gone down the low road. It is driving down wages instead of driving up innovation. They are driving down conditions instead of driving up our ability to compete in the international field.

This is a remarkable story of neglect which makes this bill, the Export Market Development Grants Legislation Amendment Bill 2006, even more important. I mentioned before that there are spill-over effects from exports. When a business begins exporting, it benefits the wider economy as well as that particular business. When a business begins exporting, there is evidence that it improves its productivity. This government’s record on productivity has been appalling, and that is what makes this bill even more important. Businesses which decide to export are no longer just competing with businesses within their own catchment but competing with every other business in the world in that field. Research by the Centre for International Economics indicates that 70 per cent of respondents believe that exporting has made their operations more efficient. A bigger market means more economies of scale and, by definition, a more efficient operation. An exposure to export markets encourages businesses to be more innovative. The Australian Bureau of Statistics longitudinal study in 1997 and 1998 found that nearly half of all exporters planned to introduce a new good or service, compared to just 15 per cent of non-exporters.

The honourable member for Cowper referred to the fact that only five per cent of Australian businesses export. I was surprised to hear a member from that side of the House making that point. I would have thought that point would come from a member of this side of the House. Just five per cent of Australian businesses are exporting, and this government and the honourable members opposite come in here and crow that their export performance has been excellent.

As I alluded to earlier, anything which encourages more innovation in the Australian economy is something which will improve our economic performance and help us compete with those economies which have embarked on deliberate national strategies to improve their levels of elaborately transformed manufactures. It is something that this government has not done but it is something that governments in Ireland, Finland, Canada and Switzerland have done. This government has dropped the ball and has been riding the coalminer’s back. Governments in the past rode the sheep’s back; this government has been riding the coalminer’s back. Again I find myself in agreement on at least one point with the honourable member for Cowper. Exporting is good for employees. This makes sense. A successful, innovative exporting company is very likely to be in a position to pay more to attract good employees. Again, the Australian Bureau of Statistics found that exporters paid each full-time employee an average of $46,000 in 1997, while non-exporters paid an average of just $28,600.

All of these points go to the importance of the export market development grants bill. Of course, the Export Market Development Grants Scheme was introduced by the Whitlam government in 1974 and it has been retained by each successive government. I note, however, that this government when they came to office promised to abolish this scheme—but the furore from the exporting community was so great that they had to renege on that promise and they kept the export market development scheme in place, despite the fact that they had gone to the election with it as a potential saving and that, in their projected budget papers, they had indicated it would be abolished.

I was saying before the Main Committee suspended that the government have a shameful record when it comes to exports. They had the highest terms of trade in 50 years and yet they delivered the highest deficit in 50 years. They have been lazily riding the wave of Chinese growth and leaving this country exposed. If the world demand for commodities starts to fall off, we will be shamefully exposed to that downturn and we will leave ourselves open to an economic downturn in our own nation because the world will turn away from our commodities.

This development grants scheme, as I said before the break, was introduced by the Whitlam government in 1974 and has been retained by each successive government. This government was going to abolish it but, under pressure, decided not to. This bill extends the scheme to 2010, with a mandatory report to the Minister for Trade on the efficacy of the scheme due in 2010. This is a sensible outcome. There is no evidence at this stage that replacing this scheme with any possible alternative would produce better results than we have seen thus far. However, I for one remain open-minded about the possibility of converting to a tax deduction scheme or something similar, providing that the safeguards are there to assist small start-up businesses that are not yet paying taxes because they do not yet make a profit.

I do have some reservations about a couple of the changes proposed in this bill, most significantly the proposed amendment to say that recipients of export market development grants no longer need to show success in promoting exports to receive future grants. I think that is a retrograde step. There needs to be some form of accountability, and I think the taxpayers would expect that a company which has been receiving export market development grants but which has not generated further exports should therefore not continue to receive further grants. There is no reflection on them that they have not been able to achieve that—I am sure we would all agree that they have tried their best—but it has not worked out and therefore the taxpayers’ money should be diverted to somebody else.

The scheme, by its nature, supports small and medium sized enterprises to develop export markets, and this is appropriate. Small businesses do not necessarily have the skills or the capacity to identify and pursue export markets, although their products may be of very high quality and can, without question, compete on their own merits overseas. Shaw and Hughes found that 35 per cent of Australian businesses regard themselves as feasible exporters but have no plans to export, and we need to get that figure down. The size of that figure informs the argument that we need to be reviewing our export assistance to small businesses and assessing whether there are better ways of assisting them. The Centre for International Economics notes that procuring of finance for small business to develop export markets is difficult, and this is unsurprising, as lenders often take a very cautious approach. This was the finding of the government’s 2001 report on the review of export credit and insurance services.

The evidence indicates that the EMDG Scheme plays a positive role in overcoming these hurdles for small businesses to export. In a survey conducted to inform the efficacy of the scheme, indications were that the EMDG funds represented nearly 20 per cent of export promotion funding for recipients and that they were the second most important source of external funding. So there is no doubt that this scheme plays an important role, but I stress that I think it is sensible that the scheme be reviewed in 2010 to see whether there is a better way of doing things.

The receipt of EMDG funding assists small firms to fund their export-chasing activities. For each dollar of the EMDG funding received, the Centre for International Economics found that recipients facing tight financing constraints are likely to spend an extra dollar on export promotion, so the bang for the buck from this scheme is quite high. Even for those firms facing extreme financing constraints, the additional expenditure would be in the order of $1.30 to $1.90 for each dollar from the grant.

In conclusion, this scheme does good work. I look forward to seeing the results of the 2010 review of the scheme, which will assess whether there are better and more efficient ways of encouraging export activities. Hopefully those results will be reported to a Labor minister for trade—perhaps a minister for trade of the ilk and the achievement of the honourable member for Fraser, who has joined us in the chamber. He is one of the better ministers for trade that this nation has had in the past. Hopefully that minister for trade will be somebody who has a real interest in making a contribution to diversifying Australia’s trade exports, not someone who simply wants to ride the coalminer’s back and the Chinese wave, as the current minister and this lazy coalition government have done.

Kay Hull (Riverina, National Party) Share this | Link to this | Hansard source

It is a pleasure to rise in the chamber today to speak about the benefits that the Export Market Development Grants Scheme has brought to my electorate. In doing so, I will also speak about the Export Market Development Grants Legislation Amendment Bill 2006. The EMDG Scheme, which is administered by Austrade, assists small and medium Australian businesses to enter the export market and to grow export sustainability by partially reimbursing their eligible export promotion expenses. Many of the businesses that have been enabled to grow are in the electorate of Riverina.

With this legislation, the government is delivering on its commitment to extend the EMDG Scheme for another five years and to provide a number of enhancements to the scheme. I congratulate the Minister for Trade, the Hon. Mark Vaile, who has been diligent in his efforts to continually open markets and access trade for the producers in my electorate. Not only that, but he is also an approachable person who is absolutely committed to his role.

The EMDG Scheme supports a wide range of industries. In my electorate, businesses in the fruit growing and wine manufacturing sectors are just some of the businesses which have benefited from the provision of the 3,000 grants which are provided each year. In 2004-05, 11 businesses received almost $400,000 in EMDG. They include the Beelgara Estate at Carrathool, which is an emerging business with an excellent product; Skyron Pty Ltd in Leeton, which is also a great business; Sunfresh Citrus in Leeton and Sumar Produce in Griffith. The magnificent citrus industry is finally able to get some assistance in their very difficult plight as they battle the enormous odds stacked against them.

Last year, the EMDG Scheme delivered more than 3,200 grants and paid out around $124 million to small and medium exporters. These businesses generated approximately $3.1 billion in exports. Many of those billions of dollars in exports also came from my electorate of Riverina. Of the grants delivered last year, 77 per cent went to small businesses with annual incomes of just $5 million or less. You could not ask for a program which is more targeted, more readily accessible and more readily appreciated than the EMDG Scheme. Twenty-three per cent of grants were paid to businesses in rural and regional Australia.

The proposed amendment to increase the claimable overseas visit allowance from $200 to $300 per day will be of particular benefit to new and emerging exporters. One of the issues that businesses confront occurs when they take their product overseas. Sometimes when they make appointments, the appointments fall over and they are required to extend their stay. That expense can preclude the smaller player from entering into lucrative export niche markets.

The amendment will increase the incentive for the businesses to take the crucial step of visiting overseas markets and meeting new customers and to learn how export business is done. It is a great experience that can yield enormous results. Removal of the export earnings test will also address the anomalies that have resulted in some of the small to medium enterprises in my electorate, and those emerging exporters, being denied grants or having their grant entitlements reduced.

Organisations from the Riverina are continuing to grow within the export market, and they are generating more jobs. We have manufacturing companies that include Celair-Malmet and Precision Parts—both domiciling in the Riverina. Celair-Malmet commenced in a backyard shed in Leeton, actually inventing one refrigeration unit. Then Ted Celi and his family have taken this magnificent company of Celair-Malmet to international pride, being one of the most significant suppliers to Wal-Mart in the US market. As I said, they have come from just a small backyard shed in Leeton. They invented a refrigerating unit and have now gone on to own the bulk of airconditioning units right across Australia. They have now branched out into the climate control business. They are an unassuming family, and I am proud to call them friends not only of mine but of the entire Riverina electorate.

We also have Precision Parts, another business started from a backyard shed. Many years ago the owners of Precision Parts were involved in the Air Force and decided to stay in Wagga Wagga. They decided to start up a business with harmonic balancers, would you believe. They now find themselves world leaders in harmonic balancing manufacturing, with both a rebuilt exchange unit utilising used units returned from distributors and a brand-new replacement unit using locally sourced components. Precision’s rebuilt and new product programs are purchased by almost all automotive wholesalers in Australia. The unique combination of unbeatable range, competitive prices against imports, stock service and consistent quality has underpinned this product support. The bulk of Precision Parts’ product range is targeted at the standard replacement market, but there is also a much smaller but highly profitable market for high-performance balancers, both in Australia and overseas.

So from just a simple EMDG, back in 1998, we have a very skilled entry into the US market and we have since seen Precision launching the Powerbond performance balancer range, utilising advanced bonded dampening technology, with instant market success both here and in the US. Who would have thought that a small business would now extend to over 120 employees in a very short time—around six years—simply by taking advantage of an EMDG, going into the US market and providing a product, a harmonic balancer, that is well regarded and a top seller?

This government has been focusing on opening up these opportunities. I recall that at the time I was running for the seat of Riverina Mark Vaile—the current Minister for Trade and Leader of the National Party—was the Minister for Transport and Regional Development. He was only too keen to come in to Wagga Wagga, talk to Precision Parts and others and encourage them into that export market. He has been very keen on this export market for such a long time and has continued to focus on opening up these opportunities right across the world with bilateral, regional, multilateral and global negotiations.

To take advantage of the outcomes achieved, the government has put in place a number of programs to assist and enable those businesses to take advantage of, or to capitalise on, the market opportunities that have been opened up. Programs like the New Exporter Development Program take aspiring exporters from the initial inquiry stage right in to the doors of the marketplace. There are programs like TradeStart, where the government has set up a national network of 50 offices providing resources, advice and guidance for new exporters getting into these markets right across the world. They can go in, discuss their product and get really good advice about the potential appointments that they might need to make in order to break into the market—whether that be with a niche or a high-volume product.

The government has kept the economy strong by doing this. I know the economy is strong because, just recently, the Business Review Weekly published the top 200 millionaires in Australia and four of them were in Griffith alone—McWilliams, De Bortoli, Casella and Barters. They are all operating in the export market. You see just how valuable many of these programs have been in creating resilience and also providing a strong economy, particularly in my electorate of Riverina, which has endured the most significant drought over the last five years and seen our broadacre farmers being particularly stricken. This part of the electorate has maintained the viability and the strength of the employment opportunities through this very difficult time so that our people did not have to leave the region. I sincerely appreciate the efforts that these businesses go to to ensure that takes place. I encourage anything that can keep our economy strong.

I note that just days ago, through the Riverina Industry Partnerships Program, two of our young Riverina people were selected from amongst 30 Australia wide for the export market development training course. These two people, Vito Mancini and Joanna Brighenti, will do a five-day intensive course that will give them an insight into how international markets operate and provide them with the skills to develop their own export strategies and run a successful export business. Both of these participants are involved in the citrus industry in Griffith. I applaud and congratulate the selection of these two people to do the course, because if anyone needs a leg up or a hand it is this industry. I have to say that I believe that both the previous government and the current government have sincerely failed the citrus industry in my electorate. I will do anything to ensure that these people get an opportunity to encourage, to promote and to ensure the growth and sustainability of that mighty citrus industry, which has really copped a bucketing since 1990.

We also have successful companies like Ricegrowers Co-operative Ltd, or SunRice. It is one of Australia’s most successfully vertically integrated agribusinesses and it produces and markets great products under outstanding brands of SunRice. This company is particularly sensational in that we saw it get the regional exporter of the year not just last year but also the year before. It was an amazing coup for SunRice, because it has had to battle an enormous amount of misinformation and malice out there about its product, which is the finest product in the world. SunRice is one of the best vertically integrated businesses and one many could emulate. I am very supportive of what it has achieved. It has an annual export sale of well over $500 million.

Since 2001, Ricegrowers has been Australia’s largest exporter of branded food products with its SunRice brand. It is always well positioned to achieve its vision—that is, to be the world’s favourite rice food company. It has gone a long way toward that. The one thing about SunRice and Ricegrowers is that all of the jobs are in Australia. We do not export in bins; we export a branded product. We are the largest branded product exporter from any port in Australia.

It is a significant product. You can go to Japan, Papua New Guinea and a whole host of places and see that Trukai or that SunRice brand. I never feel as proud as when I am visiting overseas and I can see a product that has been made by the hands of the Leeton people in the Riverina district being put on shelves as a branded product. That gives me a lot of pride as the member for Riverina. I recall going to Papua New Guinea for the ministerial forum with the Minister for Foreign Affairs, Alexander Downer, and other ministers, such as Senator Vanstone and Mr Ruddock. We visited our Trukai factory in Lae in Papua New Guinea. To see the value that Trukai, SunRice and Ricegrowers have given to Papua New Guinea is an extraordinarily humbling experience. I congratulate them on that. They are a wonderful organisation that is wholly owned by Australia’s rice farmers, and they export 85 per cent of their production. They also represent four per cent of world trade, and 39 per cent of the trade is in japonica varieties. So you have branded consumer packs that, as I said, make up 70 per cent of their entire exports. We export to 72 countries in the Pacific, Asia, the Middle East and Europe. It is truly a global product and one that embraces globalisation and also one that has benefited from the EMDG. For that, I am always thankful.

The EMDG Scheme is a great principle and one that many companies in the Riverina have benefited from, as I have said. Those include Celair-Malmet, Filmont Australia, Louver Shield, Riverina Wines in Griffith, Miranda Wines in Griffith, Finemores Holdings in Wagga Wagga, Westend Wines in Griffith and Casella Wines in Griffith.

Casella Wine’s sales just recently reached $344 million in their enormously successful branded Yellow Tail product in the US market. They have been enormously successful in their export specific brand. They have not only exceeded most other exports but were also the exporter of the year not last year but the year before.

Something that they are really proud of is that they are a local family business—a simple family business started in Australia in 1965 by Filippo and Maria Casella, who emigrated to Australia from Italy. They brought with them their hopes and dreams. And the most refreshing part about the whole story of Casella is that they are very significantly high up the ladder of millionaires in Australia but live the simple life of the simple Italian family. Nothing has gone to their heads. In fact, John’s parents live right in the centre of the forest of stainless steel vats in their original little home cottage. It is another humbling experience to see that people do not let success go to their heads and become more important than the past, the present and the community and family members that have supported them. They have stayed very focused and close to that community.

We also have the De Bortoli Winery in the EMDG process. De Bortoli’s commenced in 1928. It is a fabulous winery. They are great friends of mine. It was established by Vittorio and Giuseppina De Bortoli, and they rapidly expanded their operations under their dynamic son, the late Dean De Bortoli. Today, under the equally dynamic leadership of Darren De Bortoli, son of Dean, the company has increased its value tenfold. It provides to the community and, as all of these companies are, is ready to help every community project and all community charity organisations. They are the first ones to put their hands up to put endless dollars into ensuring their community remains one of those great places to live and work.

Paul Neville (Hinkler, National Party) Share this | Link to this | Hansard source

And not a bad drop too.

Kay Hull (Riverina, National Party) Share this | Link to this | Hansard source

That is right. Moving on to others that have been recipients, there is Keenan Produce in Griffith, Flavourtech Pty Ltd—a great company, which is determining how we can make synthetic coffee actually taste real and doing a great job at it. There is Westend Estate and the great Three Bridges label under the ownership of Bill Calabria and his wonderful wife, Lena, and family. They do an enormous job for the region as well. There is Keenan Produce, Terra Nova Estate and Riverina Wines—another brilliant business that offers extraordinary employment and opportunities. There is Pacific Fresh Produce—Tony and the guys in the citrus industry have been doing battle so hard and were able to secure an EMDG. That grant has been able to give them some processing in and entry to other markets and they have taken every advantage of that. With a cold storage process for citrus they have been the leaders in the industry. They are another citrus organisation taking advantage of these grants. There is Flavourtech; Finmara and Sons, Leeton; and Beelgara Estate from Carrathool, which is an emerging business but will be one to watch, believe you me. There is Gary and Robert Pandolfo in Griffith, Skyron Pty Ltd in Leeton, Westend Wines in Griffith, Toorak Winery in Leeton, Sunfresh Citrus in Leeton and Sumar Produce in Griffith.

You can see the value that water and access to water have in our communities and what they have provided in economic benefits—not only to my region, my electorate, but to the nation and internationally as well. I hasten to add that I am worried as to just what is the pathway and the future for our electorate when we look at all of the activities taking place at both the state level and now the Commonwealth level with respect to water. I commend this bill to the House and take great pleasure in outlining some of the many excellent businesses within my electorate of Riverina.

Bob McMullan (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

I rise to support the Export Market Development Grants Legislation Amendment Bill 2006 and the second reading amendment. It was interesting to hear the remarks by the member for Riverina. They would have led one to believe that the Export Market Development Grants Scheme was a great coalition initiative rather than one which the coalition butchered when it came to office. It slashed it and abolished all the accompanying programs in the biggest cut to assistance to exporters in Australian history.

However, I strongly support the things which the member for Riverina had to say about the merits of the Export Market Development Grants Scheme over the years and the assistance it has given, including to many of the companies which she mentioned with which I had the pleasure of working when I was trade minister—particularly Ricegrowers, which is a truly great exporter. I had the privilege of leading Ricegrowers into the Japanese and Korean markets, which had been closed to them forever until they were opened by the negotiations by my colleague and predecessor as trade minister, the former senator Peter Cook. That was a great initiative. I was pleased to be a part of it; it has enhanced their market and I hope the current round of multilateral negotiations might further enhance access to that market. It would be in the interests of Australia, Japan and Korea.

Having been a great supporter of the Export Market Development Grants Scheme and the associated programs that existed prior to their abolition in 1996, I want to say that I think it is about time we rethought the whole thing. I am not referring to the idea of assistance to exporters; I am sure we should continue to do that. In a moment I will come to what I think the rationale for that is. I do not think it is contested here, but nevertheless, when you are talking about root and branch review, you should go back to first principles—why we support exporters.

Let me start by saying that I do support continuing public support for the activities of people wishing to initiate or expand their exports. But I wonder whether the way we are doing it has perhaps got a bit tired and whether we might need to rethink the whole thing. That is why I am happy with the proposition in the legislation for a review. If it were up to me, I might wish that the review was a bit quicker, but I understand that you have to give companies time to plan and therefore we need fairly long lead times for reviews. When we are putting forward a program to extend assistance to companies that are making commitments for their expenditure based on what the government says, we cannot precipitately change it. That is why I was so worried about what happened in 1996. I would not wish to see an incoming Labor government repeat that mistake. Let me say quickly that I do not recommend going back to the situation that we had in 1996. I will only draw on that as an example of alternative ways in which assistance can be given to exporters and say that we should look at some of those principles and apply them in the modern circumstance, because international trade is changing its character very rapidly.

Prior to the slashing of these programs in 1996, there were more options than just EMDG. There was what was called ITES, the International Trade Enhancement Scheme, which enhanced international business prospects for individual firms, joint ventures, consortia and industry associations, developing programs which had the potential to generate substantial foreign exchange earnings for Australia. The scheme financed market entry and expansion activities. I want to emphasise that: entry and expansion activities. It was not funding what you were already doing, but if you wanted to break into a new market or expand in a new market, you could get assistance, facilitating new investment.

The scheme funded up to 50 per cent of the project expenditure up to a maximum of $2.25 million. And this is the other point that I want to make: funds for that scheme were what I called the ‘revolving fund’—it was expressed differently by others. Funds were provided either as a concessional loan repayable with interest or—and what I preferred and most companies preferred but some wanted the loan—an advance involving a success fee in the form of a percentage of the revenue generated from the project. That is, people got assistance but, if they succeeded, some of the benefit flowed back to the taxpayer. It was a very good scheme and when the government abolished it, it was anticipated that over the forward estimates period it would have provided $118 million support over four years to exporters in an innovative way. I supported that scheme and I regretted its abolition.

There was a smaller but also a very valuable scheme called the Innovative Agricultural Marketing Program, or IAMP—I hate these acronyms, but that is what people knew it as—which provided financial assistance to producers, manufacturers and marketers in Australian agriculture, forestry and fishing industries that had potentially commercially viable projects to broaden the export base of those important industries. Consistent with the principle, the member for Riverina correctly pointed out the situation with regard to rice growers where they do not just export the rice; they do it in a value added way. We saw meat exporters exporting meat pre-cut and ready for specialised catering to the Japanese market. That specialised work was done in Australia and funded by the company with assistance from the Innovative Agricultural Marketing Program. The value added jobs, the quality jobs, were in Australia. That was a smaller program, at its peak estimated to be about $3 million a year. It had a lot of potential and it was about broadening our export base, and that is why I thought it was valuable.

There was also the Asia Pacific Fellowship Scheme, which was abolished, which enabled managers and graduate employees of Australian organisations to work and study Asian markets for six to 12 months. Half the time was spent gaining business experience and half on language training. This was about integrating our economy into Asia. I do not advocate going back to those schemes; the past has gone and we need to move on. But I think we should draw some lessons from the potential which those programs had.

We had the Productivity Commission looking at our export enhancement programs—that was a good thing to do—and I welcome the fact that the Centre for International Economics looked at EMDG and recommended its continuation. That was essentially the catalyst for this legislation to extend the scheme. I welcome the fact that the Senate committee recommended a performance audit and that the second reading amendment by the shadow minister emphasises that, and I regret the fact that performance audit concept has not been taken up.

I think that we need a very fundamental review of how we go about export assistance, a root and branch review. In my view we could provide more support if the support were provided contingent on more return to the taxpayers when the exports are successful, the principle that underpinned the ITES but on a bigger scale. I do not think that we need fragmentation of a number of different small programs; I would like to see a bigger, enhanced Export Market Development Grants Scheme where people who took initiative and went into new markets or sought to expand their operation within existing markets in new ways received assistance from the government.

But there is always a risk, and the export market development grant has always been subject to risk. This is not something new under this government. I am not criticising the current administration; it is inherent in the nature of such schemes. Almost the worst public policy thing you could do is to pay people with taxpayers’ money for doing what they were going to do anyway, and that is a big risk. It is inherent in the nature of this and not totally avoidable if you are going to provide assistance to exporters. Clearly, they are people who have some idea of exporting and when you provide assistance you cannot possibly tell how much of that they would have done if you had not given them any money. But we need to minimise that. It is an example of private capture of publicly funded benefit, which is the principle that underpins HECS, for example. We publicly fund you to go to university but, since there is a substantial benefit that flows to you as an individual from it, some part of that benefit should flow back to the taxpayer if you take advantage of that benefit.

I suggest that we look at a new model for export assistance. I do not want to cut it and I am not looking for savings or to say we do too much. I suspect we do too little. I am also not looking to say, ‘Let’s just throw more taxpayers’ money at it.’ Let us be a bit innovative and try and take apart the underlying principles of why we provide export assistance and look at new ways to do it. Let us look at the idea of some sort of revolving fund—some sort of return to the taxpayers on success.

Let us go back to those first principles. What are the public policy purposes for which we provide export assistance? We are not just trying to buy exports. That would be a totally inefficient proposal. If you did that, you could just subsidise people’s prices and they could go and do it more cheaply. I know it would be a breach of the World Trade Organisation rules but that is not my point; it is just a stupid thing to do. Nobody would wish to do it, and if you start down that road you wind up with a common agricultural policy. Who wants to go there? You have billions of taxpayers’ dollars achieving the purpose of having Europeans pay higher prices for food than they would otherwise pay. No-one wants to go down that road in Australia. So why do we fund exports? It seems to me that there are significant public policy objectives that we achieve. We want a higher proportion of our firms exporting. We want to diversify our export base and broaden the geographical base of our exports.

How can we go about doing that? There is one basic way, which is uncontroversial and cheap and which we do a lot—providing information. That is essentially what Austrade does; it provides information and advice about how you get into markets. That is a terrific role and, while I think we always need to look at the most efficient way to do it, I do not propose any change to that. But we provide financial assistance to companies. I am not a great fan of taxpayers’ money going to companies, unless there is a reason. You have to ask, ‘What is the purpose, beyond the profit for that company, of us doing this?’ I think in exports it is clearly possible to establish the case that there are what in economist jargon we call ‘externalities’—profit beyond that which can be captured by the individual company. When an economy gets an export focus, it drives productivity, openness, efficiency, competitiveness and quality, and all of us benefit from that. Every company in Australia benefits from that. The quality of products in Australia is enhanced. We get better rice in Australia from SunRice because they are an active international competitor. They have to produce the best quality to win in the international market; we get the benefit. That is true in a number of other industries, but I use that example because of the comments of the member for Riverina. She is correct, and it is one of the reasons we should be providing assistance to new companies or to companies wishing to go into new markets.

Why don’t I ask why we don’t go back to 1996? I was, to some extent, the architect of some of those programs and the administrator of others, and I thought they were pretty good, but the world has changed. I do not think we should go back. The whole nature of international trade has changed. Many Australian firms sell without leaving the country. They sell around the world on the internet. The old forms of assistance—even what is in EMDG—are almost pointless to people who sell over the internet. Once again, that is not a particular criticism of EMDG; that is inherent in the nature of it. We fund people to go overseas. That is great, but sometimes we do not want them to leave; they can sell just as well staying here and selling on the net. There has been a communications revolution. The nature of travel has changed. There has been extraordinary change in the international economic make-up of the globe where the traditionally dominant economies are being transformed by those which were dominant a millennium ago. We are going back to the days when China and India were the dominant economies, as they were prior to the industrial revolution. They are surpassing Europe and North America.

We need to see how we can accommodate our export promotion to this wonderful new opportunity. Australia has always had a great barrier to its exports in that we were so far from our export markets. Well, we have not moved, but the export markets have moved closer to us. That is a great benefit, but we are not taking advantage of it. When I looked a couple of years ago at the rapidly growing Indian market—and I apologise to Austrade if these figures are no longer correct, but they are the most recent I could find—the figures showed that Canada was a bigger supplier, a bigger exporter to India than us. The Canadians have to fly over Australia to get to India. Why are they beating us in that market? You as a Western Australian, Mr Deputy Speaker Wilkie, and I as a former Western Australian should have a particular focus on that, because we know that there is no Indian Ocean country better placed to service the growing demands of the Indian market than us. By that I do not mean just selling them natural gas and unprocessed products. I am not against that, of course. They want to buy it; we have got a product: let’s sell it to them. But there is now an enormous Indian middle class with sophisticated consumer requirements—and we should be part of the process of supplying that. Yet, when you look at the allocation of Austrade offices, there are more than twice as many in China as there are in India. There used to be more Austrade activity in India when the ANZ bank owned a big operation there and we were able to piggyback on that. That is no longer possible. Nobody in the government is to blame for that, nor is ANZ; it was a commercial decision. But we need to look at how we enhance our access to that market. So it is about the internet revolution, the general communications revolution and the change in the way the international economy is growing.

The review is to be undertaken in 2010. I hope it might be undertaken a bit earlier than 2010, because it might take longer, but it will be concluded in 2010. This scheme will continue until then. As I said in my opening remarks, while I would like to see it enhanced I think you do need to give people a long time to change. Companies make commitments on expenditure and they need to know what they are going to get back from the government when they do that, so we should not change the scheme precipitately. But I am looking for a new scheme that has the best features of the existing scheme—and the EMDG has many virtues—but which responds to the new public policy challenges, the new circumstance in which we find ourselves, and which takes up some of the principles under which I think we should provide taxpayers’ funds to firms. So if the government assists a taxpayer to gain a private benefit then, to the extent we can, some part of that benefit should flow back to companies.

The most straightforward way to do that is to change some of the grants to loans. I am a bit dubious about that. I was not that happy about that in earlier time because loans have to be paid back by unsuccessful people as well as successful people, so you may wind up penalising people for trying and failing when we want them to try. Not everybody who goes overseas will succeed, but we want them to try. So I am not keen on the simple solution, which is change the grants scheme to a loans scheme. I am much more positive about the idea of some sort of success fee, a contingent grant model that creates a revolving fund so that successful exporters put the money back into the fund and more funds can then be provided in future years to more exporters.

It is very important that we focus on this, because Australia’s export performance in recent times has been a disaster. The true nature of the disaster is hidden by the resources boom, but the size and shape of our exports are quite worrying. Our export volumes in areas other than resources are falling, and in manufactures and exports we are losing market share at a time when the terms of trade are at a record high. So it is shrinking and the shape is changing. We were growing more rapidly in manufactures and services, where the good jobs are in Australia, and now they are dwindling and we are back to a quarry and a farm.

I support public policy to assist efficient sales of our great agricultural and mining industries. I have been proud to be associated with that in the past; I would be proud to assist in any way in the future. But we cannot succeed as a 21st century nation without doing better in the exports of services and manufactures and in added value to our mining and agriculture. That is what the new schemes need to look at. I think we should really have a root and branch review, go back to first principles and have export promotion as a small but necessary part of the response to our current trade crisis.

De-Anne Kelly (Dawson, National Party, Parliamentary Secretary Trade) Share this | Link to this | Hansard source

In closing this debate, I would like to thank all of those who have spoken. I will refer to them in more detail later, but I think that all those who have spoken have made a significant contribution to the debate. I would like to acknowledge the members for Bowman, Cunningham, Hasluck, Werriwa, Cowper, Prospect, Riverina and Fraser. Later in my address I will respond in more depth to the points that they have made.

Before I talk in detail about the Export Market Development Grants Scheme, I would like to put the record straight for those who perhaps have overlooked the facts on Australia’s export performance. In 1996, Australia’s exports were worth $99 billion. In 2005, they were valued at $176.7 billion. That is an increase of 78 per cent over that 10-year period. Of Australia’s top 10 merchandise exports, six reached record levels in 2005. Those figures speak for themselves.

I would like to specifically address the scheme that we are looking at: the EMDG Scheme. It certainly is a proven success. I appreciate the comments of the member for Fraser and the suggestions he has made. It is a proven success in assisting small and medium businesses to become exporters. It also supports the government’s wider strategy for a robust, internationally competitive economy. We need to build a diverse community of successful exporters. That is absolutely vital to underpin Australia’s future economic prosperity and it is a key objective of the EMDG Scheme.

Over the last decade the government has successfully retargeted the scheme to small and emerging exporters—those businesses that most need assistance to build their export markets and grow to be sustainable. Last year, of the more than 3,200 businesses that received export market development grants, over three-quarters of them reported an annual income of $5 million or less. So it certainly is achieving the aim of targeting those emerging exporting companies. Through the EMDG Scheme, the government is encouraging businesses Australia wide to think globally and to reach out to potential customers around the world, to win export sales and to create jobs.

Other speakers—and I will deal with many of those in more detail—have highlighted the value of the EMDG Scheme to small and medium enterprises in their own electorates. There is no doubt that the review of the scheme recently showed that it enjoys very strong support from Australian businesses across a wide range of industry sectors. Independent research has confirmed that the scheme works and that it is an effective means of encouraging small and medium businesses.

I note that one of the previous speakers, the member for Cunningham, wanted the scheme to grow to $300 million a year. However, it is not meant to accommodate larger and more experienced exporters. In fact, the independent economic analysis that has been undertaken shows that the export behaviour of firms with annual incomes of $30 million or less is more likely to be responsive to the EMDG Scheme than that of larger firms. So we believe the targeting is right. It is the small and emerging exporters that most need our help at the embryonic stage of their venturing into export markets, and we will continue to focus on that group. The member for Cunningham also mentioned a lag in payments. The reality is that if applications are put in in a timely fashion then payments will be made in a timely fashion. But if any members are finding that there is an anomaly in the scheme that is delaying payments into their electorates, I would be very glad to hear about that and assist them in ensuring that that is overcome.

I would like to move to what individual members have contributed. I notice the member for Bowman was very energetic in his support for export and resource industries. I mentioned the member for Cunningham. Again, every speaker was in support of our Australian export industries and generally very supportive of the EMDG Scheme. I am pleased to see that members on both sides of the House are such champions of our Australian export industries. The member for Hasluck mentioned the $176.7 billion in record export achievements last year—an increase of 15 per cent—and the need for innovation and productivity. The member for Werriwa gave a very comprehensive address, mentioning the monthly trade deficit, but perhaps I will go into more detail in addressing his points later in my address. The member for Cowper looked at areas of growth for exports of minerals, coal and medicines in the context of an overall growth strategy that includes tax reform, the Work Choices legislation and a range of other initiatives. He also noted that $124 million in the EMDG Scheme leverages out $3 billion in exports. I also note that surfboards into Japan are part of the process in Cowper for achieving exports, and I congratulate the Dahlberg firm that does that.

The member for Prospect claims that the government is riding on the Chinese wave and the coalminers’ backs. There is no doubt that we are experiencing record export growth from our resource industries, but it is not right to merely focus on resources. I would like to comment on the Committee for Economic Development of Australia’s World Competitiveness Yearbook. Significantly, that shows that for exports of goods as a percentage of GDP Australia ranks 54th out of 61 countries. On the face of that, you would say that perhaps it is not a result that we would be pleased with, but when you look at which country ranks 57th you see it is Japan, and 61st is the United States. It is quite plain that countries that have very strong domestic demand have that offsetting their export success. There is no doubt that the growth in Australia’s resource industries—the rapid investment in Australia—is creating a great deal of domestic demand and diverting resources to domestic needs. Australia’s rankings in 2006 from the World Competitiveness Yearbook show that we have risen overall from ninth position to sixth. Our economic performance is 14th, as opposed to 22nd last year. For infrastructure we are 19th out of 61. The results speak for themselves: in terms of the value of direct inward investment flows, Australia is fifth out of 61 nations.

The member for Riverina spoke glowingly, and it is wonderful to see a local member so proud of the export achievements of their electorate. She is justifiably proud of the rice industry in her electorate. She very graciously thanked the member for Fraser for his contribution when he was the Minister for Trade—

Paul Neville (Hinkler, National Party) Share this | Link to this | Hansard source

A good contribution it was, too.

De-Anne Kelly (Dawson, National Party, Parliamentary Secretary Trade) Share this | Link to this | Hansard source

Yes, it was a good contribution. The address was a good contribution also, and she acknowledged the achievements of the previous minister in the last government.

I listened very carefully to the member for Fraser, and I thought there was much that was very worthy in his address. He is right that the world has changed. We cannot go back a decade to revisit the schemes and approaches that were there then. He is right: the aim of a successful program for driving exports should look at a higher number of firms seeking to export successfully, at diversifying the base of our exporters—

Paul Neville (Hinkler, National Party) Share this | Link to this | Hansard source

Continuing renewal.

De-Anne Kelly (Dawson, National Party, Parliamentary Secretary Trade) Share this | Link to this | Hansard source

indeed—and at growing the geographical base of our exporters. I think they are very pertinent points to keep in mind. As for revolving funds, that is one to think about. Can I say that I thought everybody came to this debate with a very constructive and positive approach. In the time I have left I would like to speak about the amendment proposed by the opposition. The government does not support the second reading amendment proposed by the member for Griffith. Firstly, the opposition has stated that it is concerned about the definition of ‘made in Australia’ and what will be applied under the amended scheme. The explanatory memorandum to this bill makes it clear that the definition to be used will be similar in concept to that of the certificate of origin criteria used by Australian chambers of commerce. These criteria take into account such matters as whether a product is mined, grown, raised or substantially transformed in Australia. This will bring the EMDG rules into line with standard industry definitions of Australian origin.

In June 2006 Minister Vaile expects to table the final criteria as a disallowable instrument. Those criteria will be consistent with the definition foreshadowed in the explanatory memorandum. It is not right to say that we are asking members to vote on criteria that are unknown. These criteria will be administered by Austrade, without ministerial discretion or involvement.

Secondly, the opposition called on the government not to proceed with the provision to remove the export performance test. As noted in the explanatory memorandum, the removal of the export performance test will overcome a number of anomalies that have resulted in genuine exporters being denied grants, including for instance businesses that spend on export promotion in one year but do not receive export earnings until the following year. I am sure that the member for Fraser would be aware that in many of our dealings now with countries in the region, particularly Asian nations, there is quite a long period of developing a business relationship with those to whom you seek to export. Sometimes that development can take a considerable period of time, particularly if you are dealing with complex equipment, as many of our exporters from the engineering resources area in my electorate are finding. In the end many of them are successful, but there is a period of time required to develop the relationship, to provide the engineering advice needed to the prospective customer and, finally, to achieve that export outcome.

There are many small firms as well that are unable to generate high volumes of exports. Also, there are firms that are impacted by circumstances beyond their control. They may well have genuinely spent export dollars on trying to open a market but then find that, for reasons they have no control over, they are unsuccessful in securing exports until a later time. The tourism industry, for example, with issues like terrorism or SARS, can find that their best efforts are thwarted. So this measure will overcome those anomalies.

There are other rules that will ensure the integrity of the scheme. Quite rightly, all members want to see the grants go to Australian businesses that are investing their own funds in genuine exporting activities. But there are other safeguards within the legislation to ensure that that occurs. Austrade will continue to audit claims carefully to ensure that grants are paid only where the requirements of the scheme are met. Firms will still be required to spend their own money on eligible export promotion before applying for a grant.

The opposition has also called on the government to request the Auditor-General to conduct a performance audit of the EMDG Scheme two years after the proposed legislation comes into effect. It is not correct to state that the EMDG Scheme is not subject to independent scrutiny, because it is. It has been reviewed or evaluated some 17 times since its inception in 1974.

The amendment bill before the House includes provisions for an independent review of the EMDG Scheme by June 2010. That is a review by a body other than Austrade. In addition, the EMDG Scheme is subject to ongoing scrutiny through regular audits by the Australian National Audit Office and KPMG, Austrade’s internal auditors. Of course, like many other government bodies with decision making, it can be subject to the Administrative Appeals Tribunal. The Auditor-General can, if he chooses, schedule an audit of the EMDG Scheme at any time. The government sees no need to request him to do so now, given that the scheme is going to be independently reviewed in 2010.

Members on both sides have supported the bill before the House today, which continues the EMDG Scheme for another five years and provides a number of enhancements to the scheme. These amendments will ensure that the EMDG Scheme continues to assist Australian businesses, particularly small and emerging exporters, to develop sustainable and growing export markets as part of a dynamic international community. I commend the bill to the House.

Question agreed to.

Original question agreed to.

Bill read a second time.

Ordered that the bill be reported to the House without amendment.