Brendan O'Connor (Gorton, Australian Labor Party) Share this | Link to this | Hansard source

I rise to comment upon the report that was tabled in the parliament this week entitled Shifting gears: employment in the automotive components manufacturing industry. It is a unanimous report authored by the House of Representatives Standing Committee on Employment, Workplace Relations and Workforce Participation and provides a series of recommendations to the automotive parts industry in order for that industry to have a viable future.

This has been a very important inquiry because, as we know, this industry is certainly, to say the very least, in a state of transition. Some would say it is at a critical point in its history because, during the course of our inquiry, whilst we listened to some of the dry commentary from industry players, we were witness to the many closures of small- to medium-sized companies that were feeling the effects of competition from our external competitors. It is true to say that a lot will have to be done to ensure that this industry survives. Without the automotive parts industry there will be no automotive industry in this country—so it was a very important inquiry. The federal government and, indeed, the state governments have an essential role to play in providing a level of assistance to ensure that the industry is competitive.

I think the reason this report is unanimous is, firstly, that we did not engage in an ideological debate over the industrial relations policies of this land. You can be assured that there would have been a comprehensive dissenting report if the government members had asserted that the Work Choices legislation is the answer to the problems that have beset this industry and others in our country. The reason I think the government members of the committee chose not to engage in the industrial relations battles that we have in this place is that most, if not all, of the employer bodies, and indeed the major union, said that was not the significant threat to this industry—that is, the failure to reform the industrial relations laws. If you look at the submissions that were made by the peak employer bodies, you will find it is a very low-order issue—that is, the changes required to our industrial relations laws. There was very little mention of Work Choices by any of the employer representatives before the committee. The major issues that they raised about the way in which the Commonwealth of Australia could assist the industry were in areas of attending to skill shortages and attending to our failure—to date—in research and development, which I think has been one of the wanton failures of this government. If you were going to point to an area which has been ignored and wilfully neglected, it is clearly the failure to invest in research and development. If you measure the investment in this country in that particular field and compare it with countries in the OECD set of nations, you will find that we are falling behind at a rapid rate. Therefore, it is not entirely surprising that some of our markets are having difficulty competing with other nations’ markets.

I would like to commend the chair of the committee, the member for Deakin, and other government members and, indeed, the opposition members—but I think it is always harder for government members to effectively draw to the attention of the executive that there has been a failure of government in assisting the industry in the areas of skill shortages and research and development. Many of the recommendations in this report go precisely to those particular areas. I know it is not fair to suggest that the government members on the committee were brave, because that might damn them, but I do think they looked at the issues clearly, they listened to the witnesses before us and they did indeed indicate, as did all members, that there were failures by government. I have to say that would of course include, to a degree, some of the state governments.

As we know, this industry is primarily based in Victoria and South Australia. There are some companies located elsewhere, but over 85 per cent of the industry is located in those two states, primarily in my state of Victoria. There have been some efforts by the state government there to assist in recent times. It is playing catch-up to a degree, but certainly there are positive signs that the state government is now assisting the industry. However, if you look at the 18 recommendations, Mr Deputy Speaker, you will find that there is a clear message being sent by this parliamentary committee to the ministers responsible to start assisting. I would like to refer in particular to a number of those recommendations. In recommendation 8, the committee recommended:

... the Australian Government investigate options to encourage the retention of local and foreign-born engineering graduates within Australia, including measures to facilitate entry into the workplace in areas of skills shortages.

We found that in the area of engineering there are clear shortages which are causing problems in many of our small to medium companies. I think we have provided a practical recommendation that the government can embrace in order to ensure that those companies are not wanting when it comes to having decent engineers in this industry. In recommendation 9, the committee recommended:

... the Australian Government support the establishment of an automotive component manufacturing leaders forum to develop strategies aimed at improving recruitment and overcoming stereotypes surrounding the image of the industry.

There is no doubt, and it is mentioned in the chair’s introduction to the report, that there is an image issue for this particular industry. There are new and exciting jobs on offer, but they do not seem to have attracted the attention of many of our best and brightest. I think there needs to be some effort by the industry, with the assistance of the Commonwealth, to try to lift its image in the eyes of prospective employees who want to have a long and fulfilling career, because what is now going on as a result of the significant technological change happening in the automotive parts industry is not necessarily reflected in people’s perceptions of it. So I think there is a need to do something there. Again, that recommendation is a practical one that I think the Commonwealth can consider.

I would also like to refer specifically to some of the recommendations under the heading ‘Driving the industry’s future’ that go to the need to review research and development assistance. The committee recommended:

... the Australian Government review R&D assistance available to the automotive component manufacturers to assess whether it is commensurate with incentives offered internationally.

There is a view, as I indicated earlier, that this government has failed in terms of investing in research and development across all industries. Indeed, there has been a decline in investment since 1996. And not only has there been a decline in real terms in investment in research and investment since 1996; we have fallen even further behind because there has been a net increase in most of the nations that we are competing against in this industry. Because of the ideology or the particular view of the government, there has been a real failure to assist the automotive parts industry in the research and development field.

The committee unanimously recommends that there be a review. It also recommends that the government extend R&D assistance to work undertaken by the Australian based automotive component manufacturing subsidiaries of multinational companies where it can be demonstrated that the work is to be undertaken in Australia to benefit Australian products. Again, I think that is a particularly practical suggestion, and the government should take heed of that concern of the parliamentary committee.

I want to just expand upon earlier comments in relation to why the report did not focus on the Work Choices legislation. Again I do not think it was necessarily the committee ignoring evidence that was provided to it, nor was there any sort of informal view by committee members that it should not be touched, but when we looked at the evidence from the Australian metal workers union, and indeed the peak employer bodies, there was little mention of the need to have Work Choices imposed upon employees in this country.

It seems to me, if anyone understands the automotive parts industry or indeed the automotive industry in this country, there has been a significant amount of collaboration by organised labour and employers to get things done for the mutual benefit of everybody. One has only to look at the way in which the unions cooperated with the employers when the Button plan was introduced in the late 1980s to see that there has been a longstanding collaboration on the major issues confronting this industry.

There is no doubt that it was not of concern to the employers. Indeed, a number of employers raised a concern that, because the government had sought to remove award classifications in their industry—award classifications that are skills based classifications—there would be less of an incentive for people to be properly trained. They need to feel that there is some worth in their acquiring more skills, new skills and knowledge. So it was refreshing to hear an employer representing the industry at our hearing in Melbourne—and I will find the particular employer’s name if I can—indicating to us that there was a real concern that, in terms of the award-restructuring process that was going on, they were concerned that the skill based classification structure was going to be stripped away. They were concerned that just bottom rates would be left, which would send a message that either money should be provided above and beyond the minimum rates based on things other than skills, knowledge and responsibility or indeed that it would be a real turn-off for employees who are concerned with the challenges that the industry confronts. I think the government should take note of that.

We sought, as opposition members, not to dissent. There is no doubt we could have dissented—that is, by adding things that were not recommended by the committee members. It is not a particularly new idea by employers. I would like to quote Roger Boland, who was then the Ai Group spokesperson. Not that long ago he indicated his concerns about taking a rash and unfair approach in the workplace, when he said:

Where employers have adopted a bargaining strategy, in many instances it is driven by an exclusive desire to cut costs rather than pursue innovation. Now that is completely understandable in today’s competitive environment. But is a blinkered approach to achieving competitiveness through workplace change and is creating a backlash amongst workers manifested in intense feelings of job insecurity, disillusionment, lack of trust, “reform fatigue” and a shift to greater militancy.

They were the words of the AiG spokesperson not that long ago, and I think it is true to say that many employers share that view. That is why you do not see all employers, certainly from some particular industries, coming out embracing Work Choices.

That is why Work Choices is not mentioned in this report. If we want to fix the problems in this country in our work places, we have to attend to skills shortages, as was noted in this particular inquiry and in this report—indeed, we have to attend to the failure in research and development. We ask the government to seriously consider those recommendations and hopefully adopt some of them in the very near future.

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

I join my colleague the member for Gorton in speaking to this important report from the Standing Committee on Employment, Workplace Relations and Workforce Participation entitled Shifting gears: employment in the automotive components manufacturing industry. It is important because the report was brought down without dissent. Clearly a lot of time and effort was put into addressing the present position of the industry—the industry collectively as well as various enterprises within it.

The picture that is painted in the report Shifting gears is one of significant global developments affecting our automotive industry and developments occurring which are having a profound effect on the domestic supply chain. The global automotive industry at the moment is going through a huge and profound change. It is moving to restructure significantly to respond to competition; to address the rise of new markets, principally markets based around India and China; and to address production costs by moving closer to markets. Globally we have a position of overproduction—certainly overproduction of certain classes of automotive vehicles; hence the move to restructure into smaller, more efficient vehicles and vehicles which are more in demand in the rising markets of developing countries.

It is far too easy to say this is simply a global problem that the industry finds itself in and it is one that the government has got to dig it out of. I, for one, do not accept that rationale. We have seen over the last number of years a number of significant closures in the supply chain of our domestic automotive industry—one only two weeks ago. Clearly our motor vehicle manufacturers are changing how they access components. They are certainly going more and more offshore. The proportion of Australian components in Australian manufactured vehicles has dropped considerably over the last five years and it is a trend that does not appear to be changing.

When we look at this industry a couple of features stand out. It really now can be categorised as a just-in-time industry. Whether it is the fasteners, the transmissions or the power steering, when they are outsourced it is within the domestic context a just-in-time industry. The motor vehicle manufacturers do not carry inordinate stocks. They run their manufacturing schedules around the provision of parts. They are so carefully choreographed that component manufacturers effectively have to meet the just-in-time demands that apply in this industry.

Another thing that is clearly the case in this industry—and not just in automotive parts manufacturing; it could probably be seen almost as a microcosm of manufacturing generally at the moment—is the rise in competition from imports, particularly imports as a consequence of cheap labour in developing countries. Quite frankly, that is having a dramatic impact on the Australian automotive industry, having regard to the way it seeks to outsource the supply of various areas of componentry.

It is a little easy, I suppose, to have regard to this, despite the fact that the Australian government over many years has, through the Automotive Competitiveness and Investment Scheme, contributed to the adjustment costs of industry, particularly with the withdrawal of tariffs. That assistance does not seem to have percolated right through the supply chain and, as a consequence, many within that supply chain still suffer in terms of adjustment costs in meeting the demands of Australian motor vehicle manufacturers.

One of the matters that really stands out in this industry is that despite the fact that we see a contraction, we are still seeing skills shortages. Numerous organisations appeared before us and expressed concern about how difficult it was to fill vacancies, particularly in relation to the skilled ranks. For people who have not studied this review closely, that would seem to be a contradiction in terms. On one hand the industry is suffering because of overseas competition and because local manufacturers are going offshore for parts and componentry, yet on the other, within the component sector itself, they are still struggling to fill vacancies. This is occurring while we are seeing much-publicised redundancies. We saw the Ajax Fasteners case during the week before last and the downturn in the motor vehicle industry in South Australia—a lot of people, unfortunately, have been retrenched there—yet we are still struggling to fill vacancies in various sectors of the industry.

That gave rise to one of our recommendations, recommendation 10, which, among other things, calls on the government to commission a national study on the post-redundancy outcomes for workers in the automotive industry which takes into account employment, educational and social outcomes for those individuals accessing a formal labour market adjustment program. It is a little trite to think that just because there are workers who are displaced in one location they can easily fill the needs of another location. Realistically, we must start to plan, or at least look at and identify where these issues are emerging so that we can do something about it.

I would also like briefly to draw attention to recommendation 11, which recommends that the Australian government develop a general labour adjustment program for the automotive components industry that focuses on the provision of training and employment support strategies to assist employees while they are still employed, on targeted training to upskill displaced workers and on addressing the concerns of the wider community about the impact on regions where the automotive components industry is a major employer. That is something that we consider to be overdue. As I said earlier, we are concerned that the assistance that has been provided by way of an adjustment program to automobile manufacturers has not necessarily made its way down to all the various support industries within the automotive componentry manufacturing area. That is something that we should be taking on board. It is difficult when we have this contradiction of, on the one hand, a skills shortage and, on the other hand, redundancies throughout the automotive industry on the scale that we saw during the period that we participated in this inquiry.

One of the things that we have addressed is research and development. The reason I want to draw attention to this is recommendation 12, which says:

The Committee recommends that the Australian Government review R&D assistance available to automotive component manufacturers to assess whether it is commensurate with incentives offered internationally.

During the recent House of Representatives Standing Committee on Science and Innovation inquiry into commercialising innovation, one of the things that we found when we looked at the level of research and development that has taken place in this country was that, whilst we may provide financial incentives or tax incentives for Australian based companies to undertake R&D within this country, we do not make the same provision for overseas based companies.

As was the case with the science and technology committee, I think it is fair to say all members of the employment, workplace relations and workforce participation committee came to the view that undertaking R&D is a little bit like education. Certainly we should look at attracting R&D into this country, because if we can do that there is probably a greater likelihood that we will get the downstream benefits of manufacturing itself. We are supportive of what the science and technology committee recommended and we are strongly of the view that the government should consider reviewing the tax incentives that are available for companies that undertake R&D in this country. We also feel that the government should make those tax incentives available for overseas based companies, provided the R&D work is actually conducted in Australia. We think that that would further stimulate skills in this industry. It would certainly provide a much-needed skill base of available personnel and would build a very substantial link between R&D and manufacture generally.

In closing, my own personal observation is that many people in the industry will have to face up to the reality that there does have to be diversification. I would raise just as an example of that—only because this occurs in my own electorate—Broens Industries. This organisation started 25 years ago, ostensibly as a toolmaking shop, but has now targeted the higher end of the manufacturing industry in precision engineering, special purpose manufacture of machinery parts and automotive application. Currently, this shop, which is in Ingleburn, exports to 17 countries. It includes among its customers companies such as Mercedes-Benz, Ford, General Motors, Boeing and Airbus. The company employs 150 people. It put on 27 apprentices. This company invests 30 per cent of its annual turnover each year in process development in new products. When I look at it, this company is actually doing it right. It is committing to it. It is backing itself for the future and, as a consequence, it is now supplying a substantial proportion of the Australian domestic market with power steering. This is a company, as I say, that started off 25 years ago as a toolmaking shop.

I think that this is the way that people in the manufacturing industry are going to have to go. I was very heartened when I heard the first contribution of the new Leader of the Opposition the other day in the MPI, when he outlined his view about Australia not being the quarry of Asia and certainly not being the beach for Japan, but being able to not only meet and compete but actually attack the manufacturing market, particularly at the high-tech level. We do support the retention of higher skills within this industry, and that should be Australia’s niche. The higher end of this market is something that I think we can work to attract. I commend the report. (Time expired)

Jill Hall (Shortland, Australian Labor Party) Share this | Link to this | Hansard source

As has been noted by previous speakers, this report from the Standing Committee on Employment, Workplace Relations and Workforce Participation, entitled Shifting gears: employment in the automotive components manufacturing industry, was unanimous—which, I must say, has been a unique experience on that committee. The committee tends to divide very much along philosophical lines, but this was one report that we all came together on and delivered a unanimous report.

My impression of the automotive component manufacturing industry is that it is an industry under extreme threat. Every time I attended a public hearing and I heard evidence from the witnesses, I got the overwhelming impression that this is an industry that is struggling for survival. It is dependent on the car industry for its survival, and problems that are confronting that industry are impacting very much upon the components industry. I think one example of how the component industry is being affected is the new Holden. In the previous Holden, more than 70 per cent of the components were Australian made. In the new Holden, that has gone down to around 55 per cent. That shows that more and more components for our Australian cars are being manufactured overseas. This, in turn, impacts very much upon employment within those industries and the future of our component industry within Australia.

It was fairly hard to get a clear picture of the industry and the people who work in the industry. That is why I think the committee’s first recommendation—that the Australian Bureau of Statistics publish disaggregated data on the automotive industry to the level of the automotive component manufacturing sector—is a good one. I found that invariably information was not set out in a way where we could readily obtain information. DEWR did not have the information; nor did the industry bodies.

Overwhelmingly, the issue that hit me is the fact that the government has failed to invest in Australia’s future. I feel that our manufacturing industry within Australia is declining at an ever-increasing rate and that we as a nation are failing to invest in manufacturing, failing to ensure that we have an ongoing strong manufacturing industry and, as a consequence of that, we have a declining skills base for industry to draw upon. A country without a manufacturing industry is very vulnerable, a country without a car industry is very vulnerable and a country that does not have the skills and expertise to manufacture components for its car industry is a country that is very, very short-sighted.

Overwhelmingly, this report acknowledged that there are enormous skills shortages and that there are issues around training. Part 4.4 of the report says:

… there are widespread skills shortages within the automotive industry, particularly for engineering and trade skills.

It is important to note that the shortages also go to unskilled workers. Witnesses told us that, when skilled workers within the industry are made redundant, they seek to leave the industry and develop new skills rather than upgrading their skills and utilising them within the manufacturing industry. I see this as a long-term exacerbation of the skills shortage that exists.

DEWR has identified trade skills shortages for welders, metal fabricators, toolmakers, fitters, machinists, motor mechanics, electricians and vehicle body builders. The report includes a table which shows that there is an across-the-board shortage in all states in those trades, except metal fabrication, for which there is a regional skills shortage. And there is not a shortage of toolmakers in the Northern Territory, which I think says more about the composition of the manufacturing industry within the Northern Territory. I do not believe that that is a skill in such demand in the Territory.

There is fierce competition within the manufacturing industry for skilled workers. The mining industry, the resource sector, can afford to pay more for their workers. As a consequence of that, industries such as the automotive parts industry have great difficulty in attracting workers. It is a unique situation. We have an industry that has had significant redundancies over a period of time yet simultaneously has a skills shortage, which goes to reinforce the fact that it is an industry under threat. It is an industry that has suffered from government neglect and a lack of planning. It is an industry that really needs the support of government.

The committee made some substantive recommendations relating to skills shortages: recognition of on-the-job training; recognition of prior learning; looking at arrangements for displaced workers in the future; looking at current skill needs and strategies to address those and trying to predict future skills shortages; and integrating training across the supply chain to facilitate the transferability of skills across the industry sector. If the government is really serious about addressing Australia’s skills shortage, if they look at what is happening in the automobile component industry it will give them a good idea of how this skills shortage has been allowed to develop and how the government’s failure to address that skills shortage is impacting on the industry.

It is very sad that we are faced with an enormous skills shortage across Australia in all the trades. It reflects the fact that the government has failed to invest in training young Australians over a long period of time. Bringing people in from overseas is a very short-sighted, stopgap approach to addressing the skills shortage. Allowing our industries to go offshore is even more short-sighted. We should be getting in there, assessing, planning, looking to the future, working out what Australia’s skills needs will be in the future and training young Australians so they can fill the predicted shortages in the future.

I think it is time, with the tabling of this report, to note the importance of the manufacturing industry to Australia and the importance of the government getting behind the manufacturing industry, acknowledging the fact that Australia does need a manufacturing industry and then putting in place proper strategies to address the skills shortage to ensure that we have Australians with the skills needed to work in our manufacturing industry. There are a number of very good recommendations in this report, looking at redundancy, skills and training, and the future of the industry. I support the recommendations of this report and I encourage the government to adopt those recommendations.

Debate (on motion by Mr Randall) adjourned.