Anthony Albanese (Grayndler, Australian Labor Party, Manager of Opposition Business in the House) Share this | Link to this | Hansard source

I rise to speak on the ACIS Administration Amendment (Unearned Credit Liability) Bill 2007. The Labor Party supports this bill, which seeks to confirm the Australian government’s continued ability to issue participants in the Automotive Competitiveness and Investment Scheme with unearned credit liabilities that are offset against their future ACIS credits in the case that items of ineligible expenditure or other errors are identified. It is important that the Australian automotive industry is able to participate in ACIS and not be disadvantaged by administrative delays. The significance of the Australian automotive industry, and indeed all Australian manufacturing, cannot be overstated. The Australian Labor Party has a strong history of supporting Australian industry and keeping pace with changing industry needs over time. Labor’s approach has included the introduction of a generous 150 per cent research and development tax concession, the development of specific industry policies in areas such as automotive and pharmaceuticals, and a proactive approach by government in attracting foreign capital. If it were not for the assistance provided by previous Labor governments, some industries would never have passed the embryonic stage. Under the leadership of Labor’s former Minister for Industry and Commerce, Senator John Button, industry was assisted to modernise, innovate and face foreign competition. Labor Party reforms have enhanced the competitiveness of Australian firms by removing tariff walls and other barriers that had sheltered Australian industry from international competition and engagement.

Today the automotive industry directly employs around 80,000 Australians. With turnover of approximately $27 billion per annum, the industry accounts for six per cent of employment in the manufacturing sector and around one per cent of Australia’s GDP. Reforms initiated under John Button have allowed the industry’s productivity and quality performance to become a significant asset and allowed some Australian firms to supply products to particular export markets.

But, upon coming into government, the Howard government wasted no time in undoing many of these positive reforms. The first Howard-Costello budget slashed the R&D tax concession, from 150 to 125 per cent, and cut back funding for export and trade enhancement programs. Two years later they announced a pause in the tariff at 15 per cent, from 2000 to 2004, followed by a reduction to 10 per cent in 2005, and the introduction of ACIS, designed to provide the automotive industry with import credits to be offset against customs duty on eligible imports. But, in truth, ACIS has been little more than a rebadging of the Export Facilitation Program, a similar assistance program introduced under the previous Labor government.

In December 2002 the government announced that its automotive policy commitment beyond 2005 would revolve around a 10-year, $4.2 billion extension of ACIS until 2015 and, following a 2008 Productivity Commission review, a reduction in the tariff on passenger vehicles and automotive components to five per cent from the beginning of 2010. What is clear in 2007 is that the Howard-Costello government thinks it has done everything it needs to do as far as the Australian automotive industry is concerned: it has extended the ACIS program, called for a review or two and reduced vehicle tariffs. What the government has failed to do is to keep step with the rest of the world and the changing face of the global and local automotive industry. This is an industry that must now take into account globalised supply chains and the emergence of new automotive economies such as those of China and India.

There are unaddressed industry concerns that ACIS is failing to deliver benefits to local industry, in terms of both R&D value and in facilitating the involvement of Australian manufacturers in the global supply chain, and that car makers are using import credits in a way that reduces the local content of domestically manufactured vehicles. The Howard government approach to policy leaves industry unprepared—and this is not confined just to the automotive industry. The Howard government has washed its hands of the plight of the Australian manufacturing industry as a whole. We on this side of the House know that good industry policy translates into vibrant and growing manufacturing industries of all varieties. However, on the Prime Minister’s watch manufacturing has plummeted to under 12 per cent of GDP, amongst the lowest levels in the OECD. Just over a decade ago, manufacturing accounted for over 14 per cent of GDP. That is over $24 billion in today’s value lost to the economy. Between 2002-03 and 2005-06 alone, manufacturing output fell by $860 million.

Despite the fact that the manufacturing industry employs over one million Australians, the Howard government does not have a plan for the future of critical manufacturing industries, such as the automotive and textiles industries. Without policy reform, the numbers will continue to decline. The downward trends are astounding. Since the election of the Howard government in 1996, we have lost over 110,000 manufacturing jobs. This is equivalent to approximately 204 manufacturing jobs disappearing each and every week that the Howard government has been in office. Since 2004 alone we have lost 36,700 manufacturing jobs. That is equivalent to 352 every week.

The impact of these job losses on local communities and workers is severe. At the beginning of 2006, the Australian Manufacturing Workers Union conducted a survey of workers made redundant at Ion in Albury around September-October 2005 and at Tristar in Sydney in August 2005. The findings of the survey are astounding and should be of concern to anyone interested in the long-term future of manufacturing and communities which are dependent on manufacturing employment. The main findings were:

• The percentage of redundant workers who have found employment is 37.2% with the average length of unemployment for the lucky ones who found jobs being 5 weeks.
• The unemployment rate amongst these people up to 6 months after they were made redundant is 48.2%.
• 5.1% of those surveyed were forced to retire prematurely because of the redundancy.
• Only 41.4% of the workers who had managed to find jobs were able to secure employment in the manufacturing sector.
• Only 48.4% of those workers employed found full time employment.
• 31% of the workers had to accept casual jobs.
• The average hours for the redundant workers who found full time jobs was 44.4 hours per week representing 10% more hours than they worked in their previous job.
• Of those lucky enough to find employment, 89.7% suffered a reduction in wages with the average reduction being 28.3%—

or more than one dollar in every four—

• Exactly half of those who were made redundant believe that their long term financial security has suffered significantly from this redundancy.

In other words, high-skill, high-wage manufacturing jobs, once lost, are extremely hard to replace. This is the ultimate price that Australia will pay if we allow the automotive component industry to disappear.

Another big concern for manufacturing is the significant downturn in export growth and the impact this is having on the trade deficit. The data is telling. Between 2001 and 2005 manufacturing exports fell by $1.3 billion, while manufacturing imports grew by $28.4 billion. In 2004-05 the manufacturing trade deficit blew out from $29.7 billion to more than $89 billion. This government has reached new records and filled industry data with superlatives. Australia’s share of world exports has now fallen to its lowest level since records began in 1946. The Howard government has presided over 57 monthly trade deficits in a row—the longest run of any Australian government.

This government’s declining support of industry is damaging and does not bode well for future economic prosperity. There is a dire need for this government to develop sound industry policy that will see to industry growth, not decline. How can we revive a globally competitive manufacturing industry in Australia? One of the strengths of the manufacturing industry here in Australia is its innovative nature. We must build on this strength. Australian businesses and industry have imagination and a desire to grow. We must catapult emerging industries so that they become Australian success stories of tomorrow and not foreign success stories built on Australian innovation.

In the last decade, it was a tragedy that some of our best technology and brightest and, indeed, most innovative people went overseas. Take, for example, the solar hot water systems developed at the University of Sydney. The Chinese saw its commercial potential and grabbed it. It is now a huge part of China’s solar market—invented in Australia, but made in China. Some of you may recall Dr Zhengrong Shi, a dual Chinese-Australian citizen. Dr Shi completed his PhD in solar energy at the University of New South Wales, but his wealth, which is estimated at $3 billion, comes from commercialising solar energy technology in China. Dr Shi told the Sunday Telegraph on 27 August 2006:

... if Australia had a similar type of incentive program (to China’s), we definitely would have set up a manufacturing facility in Sydney or Australia.

I have met Dr Shi and spoken with him on a platform at the Australian National University. He is indeed someone we should all be proud of. We should be encouraging innovators such as Dr Shi to develop industry here in Australia so that the profits and the jobs stay here. Australia needs the right mechanisms and incentives to encourage innovation and investment. We simply cannot afford to lose these sorts of opportunities.

Labor believes that innovation and research and development are the keys to a competitive manufacturing industry, but a complacent Howard government is unable to create an environment that fosters innovation. Under its watch, business expenditure in R&D in Australia has been declining in comparison with our competitors. In Australia, business expenditure in R&D, or BERD, is 0.89 per cent of GDP. This ranks Australia 15th in the OECD. The OECD average is 1.5 per cent. By comparison, Chinese firms have been increasing their R&D expenditure by over 20 per cent per year. Though the government will argue that since 1996 BERD has been growing on average at 2.6 per cent per annum, it will not tell you that in the previous decade R&D investment grew by 11.4 per cent per annum—11.4 per cent under Labor and 2.6 per cent under the Howard government. Manufacturing has taken a more severe hit, with BERD down from 10.5 per cent to 0.8 per cent. This is a devastating decline given that manufacturing is generally seen as the major driver of BERD. Within manufacturing, the automotive industry contributes the majority of research and development.

The future of Australian industry must be underpinned by innovation—a critical factor to drive productivity and therefore to drive growth. It is not just Labor that says so. In its paper New concepts in innovation: the keys to a growing Australia, released in March 2006, the Business Council of Australia stated:

… there is a lack of understanding … about how innovation occurs within businesses and the policy environment required to allow it to thrive.

We need to meet the challenge and kick-start the next generation of innovation. Under a Rudd Labor government, industry will be driven by investment in research and development, a highly skilled workforce, sound intellectual property arrangements and venture capital finance initiatives that facilitate commercialisation.

The Howard government strategy for making us competitive is very simple: cut wages and conditions so that Australia can compete with its neighbours on wages. It is a road to a low-wage, low-skill economy. Labor believe in a high-wage, high-skill economy and we believe in an expanding manufacturing sector. Labor’s industry policy will appreciate Australia’s place in a globalised market. It will map a long-term, forward-looking strategy that is sensitive to the competitive advantages of the Australian economy and the pressures being felt by Australian industry.

With Kevin Rudd’s education revolution we will make the right investments that are needed in the skills and education of our people. Australia cannot stand ready to meet new challenges and take advantage of emerging industries if the Howard government continues to reduce public investment in universities and TAFEs while other OECD countries increase it. Labor’s industry policy will ensure that Australia’s great research institutions, including the CSIRO, are supported, heard and respected for the work they do. It will foster a culture of innovation that will not just advantage manufacturing industries but will also allow our mining and agricultural sectors to build their skills and add value to exports. It will position Australia such that it can offer our region the banking, financial, educational and environmental services of the future. It will be an internationally competitive Australia that is proud of its modern manufacturing, smart services, cutting-edge health and medical research, innovative mining and sustainable agriculture.

There is an example of what is occurring, particularly in the automotive industry, at the moment in my electorate of Grayndler. When I was first elected, the Tristar plant in Marrickville employed over 600 Australians. By and large, these are Australians who came here after the Second World War, many of them migrants from southern Europe. They have worked hard and made an outstanding contribution to the economy, to the local community and to Australia as a whole. It is an outrage that 30 of those proud Australians have had to put up with the extraordinary actions of the owners of Tristar, who have moved the work offshore to China and who make those workers clock on every day and sit in a vacant factory simply because their redundancy entitlements of four weeks per year of service would entitle them to a considerable redundancy payment. These are Australians who have worked in the manufacturing sector for years. The late John Beaven worked in that factory for 43 years. It was the only job he had. The 30 remaining workers have an average service to the company of well over 25 years. They rely on the manufacturing sector. Many of them will find it very difficult to find other employment; therefore, the securing of their entitlements is vital for them and their families.

Yet, when we raised questions about this issue in the parliament on 10 August last year, when the Tristar workers came to parliament in November and we asked questions again in the parliament, and when the workers wrote to the Prime Minister, they were treated with contempt by this government. They were thrown on the scrap heap, just as large portions of the manufacturing sector have been regarded as unimportant. They are the personification of Australia’s decline in manufacturing. Labor will continue to campaign for them to receive the payments to which they are entitled. This is nothing more and nothing less than theft by this company. The government, which treated those workers with contempt for many months, has now acknowledged there is an issue but has failed to take real, effective action.

To conclude, Australia’s manufacturing industry, including the automotive industry, is now at a tipping point. For more than 10 years, the government has failed to demonstrate the national leadership required to secure Australia’s industrial future. Australia must develop a forward-looking industry policy and strategy. Our long-term prosperity as a nation cannot depend on exporting more raw materials to developing nations, or slashing wages and working conditions such that they are lower than other nations. Australia’s ongoing future prosperity will be guaranteed by being innovative, with leading businesses and individuals that are the best and most productive in their fields. Complacent governments like the Howard government generally concentrate on distributing income rather than generating it. More than 10 long Howard years represent a missed opportunity that will impede Australia from sustaining our prosperity and compromise our ability to remain internationally competitive. The alternative Labor formula is simple: investment equals productivity equals growth equals sustained prosperity—prosperity for Australian industry and sustainable prosperity for all Australians.

Stewart McArthur (Corangamite, Liberal Party) Share this | Link to this | Hansard source

I have listened with interest to the remarks of the honourable member for Grayndler and commend him on his thoughtful speech. However, I do observe his very gloomy figures on jobs and the fundamental truth that in all Western nations—the member for Grayndler, who is leaving the chamber, might like to hear this, because I am referring to his speech—

Anthony Albanese (Grayndler, Australian Labor Party, Manager of Opposition Business in the House) Share this | Link to this | Hansard source

I’ve got a tactics meeting, sorry.

Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Minister for Defence) Share this | Link to this | Hansard source

I’ll let him know, Stewie.

Stewart McArthur (Corangamite, Liberal Party) Share this | Link to this | Hansard source

In all developed Western democracies there is a problem with changing technologies. Jobs have moved out of the manufacturing sector fundamentally because of improved technology. Of course, some jobs have moved in the component industry to low-wage countries. He talks about a sound industry policy. Like the Leader of the Opposition, we are still waiting to see what a sound industry policy actually means. My final observation is that he makes the untruthful remark that the Howard government has managed to support the manufacturing industry by cutting wages. The reality, as the member for Hunter knows, is that real wages have increased by about 16 per cent from 1996 to 2006. Contrary to what the member for Grayndler was saying, manufacturing has provided jobs and real wage increases to those workers, even though there is a fundamental change, as we all know, in the manufacturing sector in Australia and other westernised nations.

I am delighted to contribute to the debate on the ACIS Administration Amendment (Unearned Credit Liability) Bill 2007. You may recall, Mr Deputy Speaker, that I have had a strong interest in Australia’s automotive industry for many years, as Ford operates out of Geelong and is an important employer across the Geelong region.

ACIS, which stands for the Automotive Competitiveness and Investment Scheme, was introduced by the Howard government in January 2001. The ACIS program is part of the government’s strategy to enhance the long-term competitiveness, profitability and sustainability of the Australian automotive industry. The automotive industry operates in a very competitive international environment. Trade liberalisation has put significant pressure on Australian car manufacturers over the past 20 years to reform, to adopt new technology and innovation, and to embrace more flexible industrial relations practices in order to compete successfully on the domestic market in competition with imported vehicles and to enhance the industry’s position by exporting Australian manufactured cars to markets overseas. The ACIS program encourages new investment and innovation in the automotive sector through the provision of import duty credits to help the transition to a new low-tariff environment.

It is important to recognise that the Howard government has provided the automotive industry with certainty in moving towards a low-tariff environment. By contrast, the Labor Party has flip-flopped over recent years on the automotive industry tariff question. Under the Hawke government, the Labor Party took an enlightened approach to the industry. The Labor Party MPs at that time recognised the importance of the future for our domestic automotive sector of moving away from the high-tariff protection of the past to a low-tariff environment. I particularly commend Senator Button for his contribution to that policy debate. Those of us who were sitting opposite at that time supported Senator Button’s endeavours. Unfortunately, Labor in opposition have often reverted to a parochial position on tariffs and industry policy, playing to the high-tariff protection prejudices of union leaders like Doug Cameron, who is well known to many in this House. Labor members know the future of our manufacturing sector lies in international market liberalisation, but they try to pretend otherwise to get some union support and win a few union votes.

In this regard, I was interested to note that on the day of his election as Labor leader the Leader of the Opposition nominated a renewed emphasis on industry policy. It has never been explained what Labor’s new belief in industry policy means—whether it is just a return to the bad old days of protectionism: an inward-looking, uncompetitive and unsustainable industry propped up by taxpayers and consumers. Those of us on this side of the House wait with interest to learn of the opposition’s policy plans for the manufacturing sector. We hope it will not take the country backwards and we look forward to a more precise position from the Leader of the Opposition and the member for Grayndler on industry policy.

Under the ACIS program approximately $2.8 billion of transition assistance was provided to the Australian automotive industry between 2001 and 2005 in the context of a reduction in the automotive industry tariff for passenger motor vehicles and automotive components from 15 per cent down to 10 per cent in 2005. That debate on tariff reduction has been very much part of my philosophic stance over many years and I am delighted that now the Australian automotive industry is becoming world competitive in terms of both price and quality.

The ACIS program is continuing between 2006 and 2015 with an estimated additional package of $4.2 billion of assistance to encourage the industry to move to a long-term sustainable position with the proposed further tariff reduction to five per cent in 2010. That five per cent is basically a negligible tariff level. That position has been the subject of considerable argument. The exchange rate has a much greater impact, as members would be aware, than the tariff itself.

Over the full life of the ACIS program to 2015, some $7 billion in assistance will be provided to the automotive sector under the program to help industry move to a viable and internationally competitive position. Under the ACIS program the industry has been able to plan for the future and invest with confidence. I emphasise that point. The success of the government’s approach to the automotive industry is demonstrated by the very positive results being achieved by the industry. In 2005-06 Australian automotive exports reached a record value of $5.2 billion. That is a far cry from what the member opposite said—that the manufacturing industry was in decline. The automotive component exports were last year valued at $1.76 billion, and there was $3.44 billion in vehicle exports. Again, this is a far cry from the historical position where the automotive industry was basically designed for the domestic market. Some 126,000 vehicles were exported in 2006 to destinations including the Middle East, the United States, China, South America, South Africa, New Zealand and South-East Asia. Again, that is a remarkable transformation from what was an inward looking industry. In 2006 our domestic automotive manufacturers exported 38 per cent of local production. This is compared with only seven per cent of local production exported under Labor in 1990.

As tariff levels have declined, the Howard government has helped industry compete internationally and export to foreign markets. Holden has recently announced it will be commencing significant new exports later this year to the United States of the Commodore, as the Pontiac G8. The Ford Motor Company, which is well known to me in Geelong and Broadmeadows, plans to export some of the new versions of its Falcon and Territory models. These developments demonstrate that Australia is becoming a competitive producer of quality motor vehicles under Howard government policies.

Nationally, the automotive sector has a turnover of $24 billion and employs 70,000 people—a far cry from the remarks of the member for Grayndler. The sector is much larger than just the four major vehicle producers, with 250 component producers, machine tool producers and service providers. Again, I emphasise the importance of the component producers in the regional city of Geelong, in Melbourne and in Sydney.

In this more internationally competitive environment, where the market is much more important to car manufacturers than government programs are, the Howard government support for the automotive industry remains strong. The government has initiated an Automotive Industry Strategic Group to work towards a coordinated effort to access global supply chains and secure more international work for the Australian automotive component sector. Ford Australia has received a $52.5 million grant to develop the next generation of Falcon and to design and engineer a pick-up truck platform for the world market. The government has provided a $6.7 million grant to Holden, matching the funding by the Victorian and South Australian governments, to introduce safety and fuel management improvements and further reduce greenhouse gas emissions from Commodore vehicles. There can be no doubt of the government’s commitment to a viable automotive sector.

In addition to the ACIS program, which is providing transitional assistance and encouragement for the automotive industry to move to a low-tariff environment, the Howard government has improved competitiveness of the automotive industry through the following fundamental policies. Firstly, there is the lowering of inflation through our policies of strong economic management, thus minimising the rise in domestic input costs. That is a very key component of making our automotive industry competitive internationally. The government has also provided an improved business investment environment by creating conditions of low interest rates, which again is a very important factor for those manufacturing facilities. Finally, there is the introduction of greater flexibility in the industrial relations system, which provides significant benefits to our large manufacturers and also to the smaller businesses manufacturing automotive tools and components and those businesses delivering services to the automotive sector.

I was recently in the Toyota factory and saw the results of the more flexible approach to industrial relations, and I commend that particular company for the way in which they have organised their workforce and their quality control. That was a standout example of what the manufacturing industry is doing in car production, and I think the changes in industrial relations have helped that quite large workforce adapt to the quality control and delivery of very high-quality vehicles to both the Australian and the international markets.

Of course, there has been some indecision and evasion from the opposition over its position on Work Choices reforms and what the Labor Party would do if they were elected to government. It is hard to ascertain exactly what the deputy leader says on industrial relations—whether it be on unfair dismissals, big business or small business. We await the debate this afternoon. There might be some enlightenment on where the Labor Party stands on industrial relations, because it is very hard to understand from the public comments exactly what they have in mind, except to rip up the current legislation.

The Labor Party’s position on IR should be of great concern to Australians employed in the automotive sector. Even smaller businesses with fewer than 100 employees providing services and components to the automotive sector would be concerned about employing new staff because the Labor Party might restore the unfair dismissal provisions, which they voted against. As the honourable parliamentary secretary at the table, Mr Hunt, knows, the Labor Party voted 44 times in this parliament against the unfair dismissal legislation. Now the Leader of the Opposition is saying, ‘We might look at it; we might not.’ It will be interesting to see where he finally ends up on unfair dismissals.

Small business operators know that these provisions have helped to create jobs by giving employers the confidence to employ more people, secure in the knowledge that they can take action against lazy or unruly employees. As the honourable member who is at the table knows—the Hunter Valley has many small businesses—small businesses now know that if they put somebody on and it does not work out they can put somebody else on without parting with about $7,000 because of an unfair dismissal claim. In this context it is important to recognise that more than 240,000 new jobs have been created since the introduction of the Work Choices reforms in March 2006—240,000 more Australians have jobs as a result of the government’s policies. These jobs would be at risk if the Labor Party were elected and returned to the old industrial relations laws.

In the context of this debate on ACIS—a program providing transitional assistance to the automotive sector to adjust to a low-tariff environment—I wish to make a few comments on other policies that might impact on the sector and the future of manufacturing in Australia; in particular the debate on greenhouse emissions and climate change. Climate change is a topical debate in this House and in the broader community. Climate change radicals, including the Leader of the Opposition, the member for Kingsford-Smith and the member for Grayndler, persist in trying to scare the public on climate change. For years the Labor Party has been talking up radical premonitions of climate ruin and the need for equally radical measures to address climate change, such as emission targets, renewable energy targets and emissions trading schemes. The Labor state governments have even proposed going it alone, introducing emissions trading schemes to win the plaudits of the green movement at the detriment of our industries. Only this last week we have seen an argument about the coal industry erupt in some of the Labor electorates. The Leader of the Greens is saying that the coal industry should be wiped out over the next three years. What a remarkable policy position the Greens have on the coal industry!

Over the last week the Leader of the Opposition got himself into some trouble with his climate change policies, which put at risk major industries such as coal. There has been an ongoing debate about this. I notice that the Labor Party have changed their position because of those of its members who have historically represented the coal mining electorates. Labor has not put on the record what the implications of signing the Kyoto protocol would be for Australian industries or the impacts of other related policies, such as increasing the mandatory renewable energy target—

Harry Quick (Franklin, Independent) Share this | Link to this | Hansard source

Order! I find that the comments of the honourable member bear little relationship to the Australian automotive industry and the ACIS bill, so I would ask him to come back to the bill under discussion.

Stewart McArthur (Corangamite, Liberal Party) Share this | Link to this | Hansard source

I was referring to greenhouse emissions. The automotive sector is struggling to adjust to reductions in industry protection with the reduction of tariff levels. It is appropriate to raise the potential impact of the suggested radical new greenhouse taxes on the automotive sector. The National Greenhouse Gas Inventory 2004 reports that the transport sector contributes 13.5 per cent of Australia’s net emissions, and transport emissions are one of the strongest sources of emissions growth in Australia. Transport emissions were 24 per cent higher in 2004 than in 1990, and are increasing by 1.5 per cent annually. If the climate change radicals in the Labor Party want to address emissions and want to introduce emissions trading schemes, which effectively represent a tax on industry, then the transport industry must logically be one of the sectors targeted. The unilateral imposition of emissions trading in Australia would put domestic industries and manufactures at a disadvantage.

The approach of Labor and the unions to the automotive industry raises some questions. If reductions in tariff protection can have an impact on the profitability of the automotive sector, then what would be the impact of the new emissions taxes on the sector? How would the industry cope with higher energy costs raising the price of manufacturing inputs resulting from emissions trading and higher mandatory renewable energy targets? What impact would that have on the profitability of Ford in Geelong and other manufacturers in Victoria and South Australia?

Returning specifically to the amendments introduced in this bill, the purpose of the bill is to amend the ACIS Administration Act 1999 to clarify the Commonwealth’s powers to issue an unearned credit liability in circumstances where the ACIS participants have received credits from the government to which they are not entitled. I understand that the need for this amendment has arisen as a result of a recent decision of the Administrative Appeals Tribunal. The tribunal’s finding limited the Commonwealth’s ability to issue unearned credit liability notices to very specific circumstances as under the act. This is a serious matter. Under the ACIS program, credits are paid in advance and audited after to ensure the payments are eligible. As a result of the tribunal’s finding there is a risk that ACIS credits could be paid to automotive industry firms without a guarantee that the payments could be recovered later if the audit found that the firm was not eligible for the payments. This circumstance is contrary to the understanding reached between the industry and government when the scheme was established.

Unless these amendments are made to the act, the government might need to consider an alternative approach to administration of the ACIS which would see claims for credit fully audited prior to the payment of credits, resulting in untimely delays that would be unacceptable to the industry members eligible for credits. These amendments would assist the smooth and efficient administration of this important industry program.

I am pleased to voice my support for the bill in supporting a more competitive and sustainable automotive sector in Australia. I commend the bill and I commend the sentiments of the ACIS program. I put it on the record that I am delighted with the dramatic change that has taken place in the automotive industry. They are now competitive. They are now efficient. I have been an advocate of lower tariffs and the lower tariff regime has brought about this set of circumstances.

Bernie Ripoll (Oxley, Australian Labor Party, Shadow Parliamentary Secretary for Industry and Innovation) Share this | Link to this | Hansard source

I have great pleasure in rising to speak on the ACIS Administration Amendment (Unearned Credit Liability) Bill 2007. I will start by going through what the Automotive Competitiveness and Investment Scheme is. Basically it is an industry assistance scheme for the Australian automotive industry. It is administered by the Department of Industry, Tourism and Resources. The responsibility for the program delivery comes under AusIndustry. The scheme commenced on 1 January 2001 and expired in December 2005. It replaced a Labor government scheme, the Button car scheme, previously called the Export Facilitation Scheme. Since then it has been renewed and extended. In fact, in December 2002 the Australian government announced a new assistance package for the automotive industry. Under the package and after the scheduled reduction in January 2005, automotive tariffs are to remain at 10 per cent until January 2010, when they will be reduced to five per cent, and they will remain at least at that level until 2015. The package also includes an extension of the ACIS scheme from January 2006 to December 2015, albeit with some modifications, including a phasing down of assistance between 2011 and 2015.

The ACIS program, in short, is massive—it is a huge program. It is a massive scheme. In fact, the Productivity Commission stated:

Although assistance to both motor vehicle producers and parts suppliers has declined significantly since the mid-1980s, the automotive industry remains one of the most highly assisted industries in the manufacturing sector. This assistance derives largely from tariffs and tariff concession schemes, particularly the Automotive Competitiveness and Investment Scheme (ACIS).

ACIS is in fact the single largest government tax concession scheme. It represents a massive proportion of industry assistance, and automotive assistance in itself represents about 38 per cent of all manufacturing budgetary assistance. It is a good thing, and it is certainly something we support. We are supporting the amendment to this bill—it is very necessary—but questions still remain and need to be answered on the outcomes of the scheme and whether the Commonwealth and industry are getting bang for their buck rather than perhaps what is taking place at the moment.

The purpose of ACIS is to improve the automotive industry’s investment and competitiveness in the lead-up to the planned implementation of free trade under the APEC Bogor goal in 2010. There are a range of firms that are eligible for assistance. Mostly they are motor vehicle producers. There are also automotive components producers, automotive machine tools and tooling producers and automotive service providers. There is a variation in how they are assisted, through either production credits or investment credits on plant, equipment and expenditure on R&D. Duty credits can only be used to offset an import duty liability within the Australian Customs Service, which is in fact what this bill is about—trying to rectify something which was not in the original intent of the bill in the way it was originally set up. As import duty liabilities arise, a holder of a duty credit can use that credit in lieu of cash to meet that particular liability. Duty credits can also be transferred—that is, they can be sold to any other person—but there are restrictions on their use. The offsetting of an eligible import duty liability still remains.

What today’s amendment to the ACIS Administration Act 1999, and hence the ACIS scheme, does is no doubt necessary and in the best interests of the efficient use of this enormous financial resource set aside for the scheme. However, it is what it is—a minor amendment at the end of the day, a minor amendment to the one and only policy tool that the Howard government has been able to devise to assist the Australian automotive sector. If you took the toolbox of available instruments that the government has, you would see that it is a very large tool but that it is the only tool in its box.

The Minister for Industry, Tourism and Resources is not bringing before this House a vision. There is no new direction, nothing has been planned and there is no considered strategy for the Australian automotive sector. This simple procedural tinkering at the margins is not what the Australian economy needs, nor is it really what Australian industry needs or, for that matter, what the automotive industry needs. I am very happy to have the opportunity to speak on ACIS and on the broader automotive industry and industry related issues, but at the end of the day, while the amendment is supported by Labor, it is a very small, minor amendment.

Labor has for many years now been advocating a much more considered approach, a much more comprehensive whole-of-government approach, to innovation in Australian industry. I do not think anyone would argue that there is no better time than the present to actually get on with that job. The leader of the ALP, Kevin Rudd, has recently articulated a vision for the Australian economy that involves using the great prosperity we currently have through our resources boom to invest in our economic future. That is very important to the economic future of the automotive industry and, more broadly of course, right across industry.

While the government’s only policy response to lift our productivity has been to introduce ill-advised and unfair labour market reforms, the ALP is thinking much bigger and much smarter. We want to invest in our human and physical capital. We want to invest in our ability to innovate. We want to invest in the future. To do that you have to do it today. Innovation is at the forefront of Labor thinking in finding new solutions and formulas for the Australian automotive industry and for industry.

The Labor Party’s record on automotive industry policy is actually quite impressive. It was the Hawke-Keating government that made the hard, necessary decisions to break down trade barriers. We just heard from the member for Corangamite, who laments tariff reductions—mind you, tariff reductions supported by his own government, of course, because they are necessary. They are necessary to drive that very important tool, the most important tool that industry has, that is international competitiveness. Without that in your toolbox you cannot compete and you cannot survive. All you can do is rely on protection for some short-term gain, and eventually your industry will collapse.

The result of the government not having a focus, not looking at what it ought to be doing, is that the automotive parts industry is struggling. We made the hard decisions on trade barriers, on liberalising capital markets and, yes, on the sensible, measured labour market reforms that were needed at the time. The result was that an industry that was once inward looking is now much more efficient and has endured many decades of competition. It will continue to do so if it becomes more internationally competitive, more focused on the international market and more export oriented, but there is no doubt that it does need assistance from government and some vision in that area.

Because of the Hawke-Keating government, the consumers of Australia have been provided with an automotive industry that makes sense and delivers forward for them, an automotive industry that has rationalised its structure and an automotive industry that has improved its methods, its R&D performance and its export focus. The previous speaker talked about some of those improvements and some of those things that happened, and those improvements today can be seen in the sale to the United States of rebadged Commodores, the success of the Ford Territory, the sale to the Middle East of the Holden Statesman and so forth. All those success stories were not built in the last five years or in the last few years; they were actually built on previous Labor plans—on the Button plan, in fact, which no-one really questions.

If you look at the Button plan and its rebadging as the Automotive Competitiveness and Investment Scheme today, you will find that there is not really a great deal of difference. That in itself is okay; it is okay that the government just picked up Labor’s policy and ran with it. The problem that exists today is that they have not adjusted that policy, that they have not looked forward. The policy was fantastic in its day and delivered much for the Australian automotive industry, but I think it needs another review. I think we need to look a little further down the track. What is going to be the policy for the next two decades? We cannot just sit on a policy that was once successful and say, ‘That’s enough,’ because one thing you can guarantee in life is that a past success does not guarantee a future success. We need to seriously investigate ways to do a better job. Just merely sitting on the policy plans of others is not going to deliver that.

It is almost a great irony that while Labor put in the hard yards, the many years of reform not only in the broader economy but also in industry—and it was quite involved, with vision and leadership required to actually deliver those 16 years of economic growth that we enjoy today—and while the government ride that wave of prosperity, the only policy solution they have is called industrial relations. By giving the tools to drive down wages and making it easier to get rid of people, they think that that is somehow going to deliver greater prosperity, productivity growth, innovation and increased skills. All those things that we actually need will not be delivered just through that one simple tool that this government are using in terms of industrial relations.

As I work through this legislation, I also want to mention that the government’s other response to the automotive industry was a four-page action plan. It is quite uninspiring and, frankly, does very little. What is even more worrying about this action plan from the government is that it ended in 2002. There has been nothing since. There was very little to inspire us back then, but now there is no action plan at all for the automotive industry. It is as simple as that. It has been five years since the government sat down and actually thought about it and asked: ‘What do we need to continue to make the proper adjustments that we need?’

What Labor believes in and what the government ought to be doing is looking at properly investing in skills, in research and development, in human and physical infrastructure. This is what needs to happen, and a myriad of data is there to back that up and prove it. Whenever we raise this data, people say we are talking down the industry or that somehow we are trying to paint a gloomy picture. That is far from the case. Australian industry certainly is doing well, but it can do much better. It certainly needs to do better in the area of emerging technologies and it certainly needs to catch up with the rest of the developed world, particularly the OECD.

When the member for Grayndler made his contribution to the debate on this legislation, he talked about some of the very poor and sad figures about where Australia stands on its spending on education and skills. We are at the bottom end of the OECD when we should be at the forefront, when we should be leading. Australians have a great heritage and great history of being thinkers, innovators and doers—practical people. Partly because of where we come from, our geography, the tyranny of distance and all those harsh elements of Australia, we have always been able to adjust and be innovative. But you need to support that innovation.

If you ask any man or woman in the street, one thing that always concerns them is that all the best ideas that are thought of here in Australia walk their way offshore. We heard from the member for Grayndler about Dr Shi and solar hot water technology. What a great loss to Australia that this technology was actually invented here but was not supported. There were no mechanisms or processes by which he could be assisted to make that happen in Australia, and he had to go back to China to make it happen. I will not go into all the details of that hugely successful story about Dr Shi and the technology, but I lament that great loss to manufacturing in this country.

There are a number of challenges for us and it is poignant to raise that in terms of how we spend our money. Because ACIS is such a large scheme, it is very important that we look at how we spend that money and how that gives us a much broader picture. We will hear much talk in this House about the threat of China and India and international competition, that battle for imports into Australia, but those fronts are not quite as they seem on the surface. We tend to consider that the really big threat coming from China is simply cheap labour, that cheap labour will be what makes us come undone because we cannot compete on that front and manufacture as cheaply as they can. Australia still has an advantage, though. We still have some natural advantages with our resources, we are still internationally competitive and we still innovate. We still put some money into R&D, but we are falling behind in R&D. The reality is that while Australia is marching backwards in its spending on research and development, China are increasing their spending year on year by 21 per cent. They have actually understood what is going to make them internationally competitive in the next two decades, and it is not the fact that they have cheap labour. That certainly will give them an incredible natural advantage, but what will give them an extra advantage, an extra leg-up over us here in Australia, is that they are now becoming the innovators as well.

Imagine the picture in Australia for the manufacturing and automotive industries, and for industry generally. Not only do we have to compete against countries in terms of cheaper labour but suddenly we have to compete in terms of how they innovate. I am referring to how they change processes—manufacturing and management processes—and financial industry products. When they start to become competitive and think outside the box, as we have always been known to do, we suddenly lose the last little bit of our natural advantage. We will be left only with resources.

Resources are great, and certainly we are now going through a once-in-a-lifetime boom, with the rivers of gold—taxation gold and revenue—that flow in to this government. I have to say that I don’t know what they are doing with this revenue. Are they keeping it for a rainy day? Shouldn’t they be investing it? Isn’t that what they do with our taxes? Should they hold onto the money or should they invest it, on our behalf, in education skills, in our children’s future, in industry, in the most innovative pathways, emerging technologies and new industries that will deliver the jobs of tomorrow? Is it the government’s role to just sit on huge surpluses and say: ‘Look, aren’t we great? We’ve got this big bag of money’?

While everything around us is crumbling—infrastructure is crumbling; industries are facing huge challenges globally—the government says, ‘Look, our bag of dollars is getting bigger and bigger.’ But it is not doing anything with it. Any mum and dad sitting around the table and doing the budget know they cannot buy a house by just sitting on a bag of money; they have to borrow and invest. That is the point. This government simply does not understand that aspect.

The moral of the story I am telling today in the chamber is a simple one. It would have been great if the minister had been here to hear it. The small, minor change contained in the bill that is before us is simple and straightforward. Labor supports that change; there is no question about that. It is something that needs to happen. But that is it; that is the end of it. There is just one small, minor administrative change to ACIS—the single biggest scheme from the government in terms of supporting the automotive industry—but there is nothing else. I think that in itself speaks volumes about the devastating figures that we have before us regarding where manufacturing is going.

If we look at some of the data, we see that manufacturing output has actually shrunk. No matter what the government says, output has shrunk; productivity has shrunk. So our capacity to grow is shrinking. While the numbers may vary, it is the growth figures that I think are the most important.

There is also a very sad side in terms of lost manufacturing jobs. Since 1996, 110,000 manufacturing jobs have been lost. That is sad. What is being done, though? I know that a lot of people who lose their jobs in traditional manufacturing areas, if they are skilled up, retrained, if there are packages in place for them, will go on to bigger and better jobs. They will go on to other industries—new, emerging industries. It is a matter of taking old industries and making them new again. So there is potential for them, but the government does not do that. This is not a government that looks forward; it is a government that reacts to what has happened in the past. Not only has it reacted by introducing ACIS, which rebadges a very good Labor program; it has also reacted in a backward fashion. It waits for people to be displaced from industry before it moves forward to do something for them. In my book, that is a little too late. It is a little too late, when somebody loses their job in manufacturing, to decide to give them some sort of assistance package to try and retrain them. It would be much cleverer if the government had packages in place that looked to the future to see where those new, emerging technologies, jobs and industries will be.

There are a whole range of sad figures, and I will not go through all of them. There are some good figures and some bad figures. Obviously, there are niche markets and areas where Australia does incredibly well. There are stories out of Victoria of a components manufacturer that once used to provide a bulk, generic type spring for a vehicle and decided that there was a great niche market for a high-performance, innovative product. It did that and now supplies a global market—Mercedes-Benz and other high-performance car manufacturers—with some great products.

In the short time remaining to me, I want to raise a couple of other points. With respect to the automotive industry, the action agendas—things that the government puts on paper that it wants to do—ended in 2002. In the five years since, there has been nothing. I assume it is no longer interested. There is no action agenda for the broad industry sector either. There is no action agenda for manufacturing. There is no action agenda for emerging industries. There is no action agenda for emerging technologies. Where is the government? Is it just looking backwards again? Obviously it is, because there is nothing in its own documents and papers to suggest that it is in any way interested about the future of the automotive industry or industry more broadly. It just looks to the past. It sits on its rear and hopes that, with a strong economy, driven by a resources boom which it has had nothing to do with, it can skate home and ride the wave of economic fortune. (Time expired)

Bob Baldwin (Paterson, Liberal Party, Parliamentary Secretary to the Minister for Industry, Tourism and Resources) Share this | Link to this | Hansard source

I say to the three members who have spoken in the debate on the ACIS Administration Amendment (Unearned Credit Liability) Bill 2007the member for Grayndler, the member for Corangamite and the member for Oxley—that we do appreciate their contributions. In relation to the most recent contribution, that of the member for Oxley, I say to him that perhaps he has been reading his own press releases and speeches for far too long and he has not actually taken a lesson in reality.

This government developed the action agendas on, and is working in, advanced manufacturing and tooling, and is progressing in the areas of the aviation industry and the motor industry. There is a lot to go forward. The whole idea is that the government works with industry but that industry takes a leadership role, because industry understands and knows the solutions. The action agendas are designed for industry to have its say to government and then for government to have the opportunity to enact the recommendations that come out of the action agendas.

Today, we are talking about ACIS, involving the automotive industry. There are some key points for consideration, and I will come back to the comments by others in a little while. One of the key points is that this is an exciting industry—an industry that has gone through remarkable change. It is an industry that is renowned world wide for its innovation; it is renowned for the quality of standards and, in particular, for expertise in design and engineering.

I want to give the House a level of understanding of this issue, which is perhaps highlighted by General Motors-Holden’s recently announced export deal. They will be sending Commodores to the USA, badged as the Pontiac G8. This shows that Australia can compete in an international environment. Americans in particular are very fussy about their motor vehicles.

Our motor vehicle sector has achieved a lot. It employs more than 70,000 people, has a turnover of nearly $24 billion, comprises four major motor vehicle producers and more than 250 component producers, machine tool producers and service providers. The ACIS provides assistance for research and development and is intended to assist investment in these areas in order to achieve further international competitiveness. It is an amazing sector that has gone through the ups and downs of industry, but a sector which has still achieved export volumes of $5.2 billion in 2005-06—a record figure.

In 2006, around 126,000 vehicles were exported to the Middle East, the United States, China, South America, South Africa, New Zealand and South-East Asia. As I said, last week Holden announced it would commence significant new exports to the United States from the fourth quarter of this year. Those exports are likely to be 30,000 units per annum, and possibly more. Ford will be producing new versions of its Falcon and Territory models, and has indicated some will be for export. Toyota has an excellent record in export; it is our leading exporter, primarily to the Middle East. The component sector is also performing well within its export performance arrangements. All of these factors are essential if we are to have a strong domestic industry. The export industry is the cream on the top of our domestic industry.

I listened with amazement to the comments by the member for Oxley. He talked about how it was Labor that got rid of the tariffs that built the viability of this industry. Unfortunately for the member for Oxley, he has not been here for the same period of time that I have. He does not seem to remember his colleagues voting against all of the tariff reductions this government put into place to enhance industry in particular and its competitiveness.

He talks about investment; he wants to talk like a drunken sailor spending. Ninety-six billion dollars was the black hole this government was left with. He wants to talk about increasing taxes so that the government has a bigger cash bag to spend as it sees fit. The best people to understand spending are those who pay the taxes. They do not mind their taxes being invested in a wise manner that returns the benefit to them or to Australia, but they do have concerns when they are used to ramp up spending and then go into an era where spending gets out of control—in particular, in the last year of the Labor government we were left with a $10 billion black hole, which accounted for roughly 10 per cent of the $96 billion worth of debt.

I contrast that to the comments by the member for Corangamite, who made a good contribution. He has been true and steadfast to this motor industry, predominantly because he has the Ford motor vehicle company in his electorate. The member for Corangamite could see the future and knew that, by reforming not only industrial relations, which he mentioned, but also reducing the tariffs agendas, it would provide a more competitive industry and would lead to a higher quality built product in Australia. He understands the industry.

The one who amazes me is the member for Grayndler. He gives the appearance of being a smart fellow, but his speech changed that interpretation. People like the member for Grayndler will continue to grandstand on false figures. It is this government, the Howard government, which is working hard to build a sustainable future for the Australian manufacturing industry. Its industry and workplace reforms have provided a sound economic framework, allowing industry to grow and adapt to a changing global market. As we heard the member for Corangamite say, ‘240,000 jobs have been created since the introduction of Work Choices.’

This is about reform. It is not about words written on paper; it is about affirmative action taken by government that delivers real results. The member for Grayndler talked about a lack of investment. I would say to him we are investing more than $7 billion in the automotive industry, plus another $1.4 billion in the textile, clothing and footwear sector, which he also mentioned, through our long-term industry plans.

It is within this positive economic climate that Australia’s manufacturing sector is achieving some impressive results. Manufacturing industry value added in 2005-06 was $96 billion in real terms, representing 10.4 per cent of GDP. That is sourced from the ABS national accounts figures. Our total manufactured exports on an industry basis rose by $11.4 billion in the 2006 calendar year to reach a record $83.1 billion. The source of that data was the ABS publication on international trade in goods and services. Over that same period exports of elaborately transformed manufactures, or ETMs, rose by nearly $1.4 billion to reach $27.4 billion. The source of that information is the DFAT STARS database. In fact, private new capital expenditure by the manufacturing sector was also at an all-time high last year, as sourced from the ABS publication Business indicators.

It makes a furphy of what those opposite have said: that we have driven back investment, that we have driven back jobs, that we have denied industry investment. I put it to you, Mr Deputy Speaker, that we have created the framework, we have made the investment and, in parallel with that, industry has made the development. In fact in 2004-05 research and development in the manufacturing sector represented almost 41 per cent of Australia’s total business expenditure on research and development, with total expenditure increasing by 3.8 per cent to a record of almost $3.5 billion. The source of that data is again the ABS, in its publication on research and experimental development in businesses. The government is working with industry, the government is creating jobs, the government is attracting investment. This bill, ACIS Administration Amendment (Unearned Credit Liability) Bill 2007 is part and parcel of that.

The government has been providing significant support to the industry through the Automotive Competitiveness and Investment Scheme—ACIS. ACIS is a transitional assistance scheme which encourages the industry to become internationally competitive through investing in its own future at a time of phased tariff reductions. Through these arrangements, the government has provided the automotive industry with a decade of certainty.

The participants in ACIS number about 250, and they include the four motor vehicle producers and the automotive component producers, automotive toolmakers and automotive service providers. ACIS will deliver assistance to participants through the issue of duty credits and will provide over $4 billion in assistance during the period 2006-2015. This will be of great benefit to the 70,000 employees who work in this industry.

Assistance is provided up-front—that is, duty credits will be issued on receipt of quarterly claims from registered ACIS participants. A subsequent audit process will ensure that claims are legitimate and eligible expenditure. If items of ineligible expenditure or other areas are identified in unearned credit liability, it will be issued to the participant and offset against their future ACIS credits.

A recent decision by the Administrative Appeals Tribunal has important implications for the Commonwealth’s ability to issue UCLs under the ACIS Act other than in a very limited range of circumstances. That decision has raised the prospect that the eligibility of claims from participants may have to be fully assessed prior to any credits being issued, and that will create more red tape for industry. This government is about reducing red tape for industry.

It would be unacceptable from a financial management perspective for the Commonwealth to issue credits unless it is certain that it has the ability to recoup any issued credits to which a participant is subsequently found to be not entitled. The up-front assessment of all claims would result in lengthy delays in the issue of duty credits, which could impose significant financial hardship on members of the automotive industry. The industry has long accepted that issuing credit up-front, and then issuing UCLs should ineligible expenditure be identified, is the best way for them to receive credits in a timely manner. The Commonwealth is keen to ensure that that approach continues.

This bill will confirm the Commonwealth’s ability to issue UCLs. It will ensure that industry can continue to receive credits as soon as practicable after they submit their quarterly returns, and it will ensure that the ACIS scheme can continue to be administered in the manner agreed by all parties when it was established.

In summary, the amendments being debated are designed solely to restore to the Commonwealth the power to administer the ACIS scheme in a manner that best meets the needs of the Australian automotive industry. As I said, members opposite need to take a reality check when they look at industry, which is becoming more competitive and needs red tape to be cut. This bill is a part of that process. I commend the bill to the House and I urge members opposite to support it.

Question agreed to.

Bill read a second time.