George Christensen (Dawson, National Party) Share this | Link to this | Hansard source

I rise to speak on the Automotive Transformation Scheme Amendment Bill 2014, which is a prime example of the Liberal-National government making a sound economic decision to rein in another wasteful spending measure by the previous Labor government. The Liberal-National coalition first announced the savings to be made from amendments that are in this bill in 2011, and took this commitment to the 2013 election. This is a substantial and economically sound commitment which will deliver substantial savings of $900 million. It will be achieved by reducing the assistance available under the Automotive Transformation Scheme over the next three years, saving $500 million; and closing the scheme altogether from 1 January 2018, saving another $400 million.

That scheme will close altogether because there will no longer be an automotive industry in this country to transform. Though it will undoubtedly be a sad day for many when the last Australian manufactured vehicle rolls off the production line, it comes down to the difference between economic reality rather than romantic notions. When it comes down to the question of who you want in charge of the nation's purse-strings there is no doubt that it is the economic realists rather than the romantics who will make the right decisions for the nation and the taxpayer.

There has long been a romantic notion that we could continue to build cars in this country. It is the kind of romantic notion which underpins that old Aussie, or so we thought, car commercial, with the slogan, 'We love football, meat pies, kangaroos and Holden cars'. This was a jingle from 1976 which claimed to capture what it meant to be Australian. Interestingly enough, that little ditty is about as Australian as the car industry actually is—it was not Australian at all. It was actually a rehash of an American Chevrolet commercial, and the original lyrics were, 'We love baseball, hot dogs, apple pie and Chevrolet'. This is the kind of romantic notion which flourished in the hearts and minds of Labor politicians, who relentlessly continued to throw good money after bad in their attempts to prop up an industry whose time was past.

In 2012 and 2013, when car manufacturers cried out for more money, it was Labor that was giving it away like the money was going out of fashion. They gave $34 million to Ford, $29 million to Toyota and a massive $215 million to Holden. This was on top of billions of dollars in other assistance, such as $2.5 billion under the Automotive Transformation Scheme, which was scheduled to run from 2011 to 2020. Remember that one? Former Prime Minister Julia Gillard saying that we would save the car industry, have Ford continue going until 2020. Short memories those have on the opposite side, because it was under their watch, under their reign, with their money on the table, that actually Ford decided it would leave. They had $1.3 billion under the Green Car Innovation Fund, and $35 million—partly federal, partly state—for the Automotive New Markets Initiative. That figure of $35 million was then increased to $47 million when Ford announced it would stop manufacturing in Australia in 2016.

This is millions upon billions, for an industry which had become used to such assistance—an industry sadly out of touch with economic reality and out of touch with Australian consumers. In fact, the automotive manufacturing industry in Australia is one of the most heavily assisted industries in this country. The Productivity Commission inquiry report Australia's automotive manufacturing industry, which was released in March this year, stated that about $30 billion was provided to the automotive manufacturing industry between 1997 and 2012. During that period, there were 5.186 million vehicles manufactured in Australia—5,186,765 vehicles, to be precise. This equates to $5,784 per vehicle of government support or taxpayer dollars during this period. In August 2008, Productivity Commission Chair Gary Banks warned that on current assistance levels or subsidy levels each job 'saved' in the car industry actually came at a cost to the taxpayer of $300,000 a year. This massive taxpayer funded subsidy was described by The Australian's editor at large, the esteemed Paul Kelly, as:

… one of the epic failures in public subsidy in Australia's history.

And yet, even with all this assistance, the industry could not survive in a highly competitive global market.

Holden recently announced its worst ever loss, a $553.8 million loss for calendar year 2013, taking its total losses to about $1 billion for the last eight years. Ford recently announced its third-worst ever loss, a $267 million loss, taking its total losses to $1.1 billion for the last eight years. Some other economic realities are outlined very clearly in the Productivity Commission inquiry report. Reality number 1: the report states that most analysts believe an assembly plant should produce at least 200,000 to 300,000 vehicles each year to be cost competitive. In 2012 Toyota produced just over 100,000 vehicles, Holden produced just over 80,000 vehicles and Ford produced less than 40,000 vehicles. Reality number 2: due to strong competition motor vehicle producers are increasingly moving to large-scale plants in low-cost locations where there is growing demand—places like Brazil, China, India and Thailand. Higher cost plants in the US and some parts of Europe, as well as Australia, have closed or are closing.

There has been another romantic notion at play on the subject of cars, and that is that Aussies like to drive Aussie-manufactured cars. But that is not the case. The reality of what car consumers want can be seen in every car park and every road across this country. We like diversity and we like value for money, and we don't give a hoot where it comes from. That is the reality. Though Labor failed to comprehend the economic realities afflicting the car industry, others in the wider community certainly could. Deloitte Australia's senior economic adviser, Henry Ergas, put it best when he was quoted in The Age on 13 January 2012:

Taxpayers have every right to wonder whether they're getting value for that money. We don’t have any comprehensive assessment of the effectiveness of that assistance.

He said the car making industry in Australia remained hooked on the public purse:

This is an industry that has always had dependence on government assistance. It was created by government assistance, and has survived thanks to it.

Here is a quote from the ANZ's industrial economist, Julie Toth, who saw the writing on the wall way back in 2008. She said in TheSydney Morning Herald of 10 November, 2008:

With regard to the Big Three, no matter how generous the Australian Government is to our three remaining local car makers, the main game for them is not in Australia. Huge losses, liabilities, declining sales and other problems in the US and elsewhere will be quite rightly foremost in the attentions of their respective parent companies.

Even one of their own on the opposite side, former Labor leader Mark Latham, criticised the plan to spend billions of dollars. He said in the Financial Review of 7 November last year:

As a Victorian powerbroker, Carr relies heavily on the support of the Australian Manufacturing Workers’ Union … Carr’s strategy was to pay huge amounts of public money to industries such as car manufacturing to prop up the union’s membership coverage and consequently, its influence inside the ALP.

If that is correct, what a disgraceful use of taxpayer dollars by the former minister, Kim Carr.

It would be nice to think that governments have these big buckets of money to throw at any individual, business or industry that faces tough times. The actions of the former Rudd-Gillard-Rudd Labor government would make you believe that is the case—that government does have this big bucket of money. I know there are thousands of mining and construction workers, businesses and service industries, in my electorate of Dawson and throughout Central Queensland and North Queensland, that also wish that was the case. Those workers and businesses are dealing with harsh economic realities and the realities are hitting home at an escalating pace. Today we have heard of the closure of the Isaac Plains mine, which will cost 300 jobs. Last week, BMA announced they were cutting 700 jobs from their mining operations throughout the Bowen Basin. That is the loss of a thousand jobs within a week. In fact, over the past two years there are estimates that upwards of 12,000 jobs have been lost in that sector. No-one has come along with a big fat chequebook in order to save them. You can imagine the response from those opposite—particularly from my 'friends' in the Greens—if, for example, BMA cried out to the federal government for an industry assistance package, or if Thiess jumped up and down and put their hand out for a fistful of dollars.

Adam Bandt (Melbourne, Australian Greens) Share this | Link to this | Hansard source

Are you going to cut the diesel fuel rebate? Or your support to fossil fuels? What do you call your fossil fuel subsidies then?

George Christensen (Dawson, National Party) Share this | Link to this | Hansard source

We have this clown over here going on about fossil fuel subsidies. I say: what about those subsidies we give to green groups? We should cut them too—they get tax deductibility status to destroy jobs in the mining sector. There is no such thing as these fossil fuel subsidies they carry on about. The fact is, the diesel fuel rebate is given to them because the fuel they use is for off-road purposes, when the diesel fuel tax was brought in for on-road usage of that product. Let us stop the nonsense; we could do that by simply not listening to the Greens so much.

You can imagine the response if the federal government suddenly handed over a large cheque to a group like BMA. That suggestion would be laughable and it would not be considered. Why? Once again, it comes down to economic realities rather than romantic notions. The time of the Labor free lunch is past. The government is dealing with the debt and deficit disaster we were left with and getting the country back on track. Even the car companies involved understand those economic realities. GM Holden boss Mike Devereux said in December last year:

As painful as it is to say, building cars in this country is just not sustainable.

Ford president, Bob Graziano, said:

Our costs are double that of Europe and nearly four times Ford in Asia. The business case simply did not stack up, leading us to the conclusion [that] manufacturing is not viable for Ford in Australia in the long-term.

Toyota Australia president and chief executive officer Max Yasuda said:

We did everything that we could to transform our business, but the reality is that there are too many factors beyond our control that make it unviable to build cars in Australia. Although the company has made profits in the past, our manufacturing operations have continued to be loss-making despite our best efforts.

The heads of those companies—GM Holden, Ford Australia and Toyota Australia—also made public statements that the level of government assistance did not influence their decision to close. There are voices raised by those opposite to oppose these saving measures. There might even be claims that cutting this scheme from $2.5 billion to $1.6 billion over the next three years will hasten the demise of the car industry. It would be absolutely reckless of any individual in this place to spend an extra dollar of that $900 million we are trying to pull back when these companies have publicly announced they are leaving this country. We would essentially be piping taxpayer dollars out of the pockets of mums and dads around this country into the coffers of foreign multinationals for no long-term gain whatsoever. That is what the Labor Party want us to do today. Shame on them for wanting to rip taxpayer dollars out of the pockets of mums and dads and put it into foreign multinational coffer; shame on them.

There is still assistance available to assist workers and businesses through the transformation of the car industry. There is $700 million assistance in the Automotive Transformation Scheme available to the industry over the next four years. Other measures which will assist those who will be affected by the end of automotive manufacturing in this country are included in the $155 million growth fund announced by the Prime Minister and the industry minister on 30 April last year. The assistance is there as the transition takes place.

The economic reality is that this transition away from automotive manufacturing in this country must take place. It does not spell the end of manufacturing in this country. There are other areas of opportunity: food and agribusiness; mining technology and services, particularly in my area of Dawson in North Queensland; and there are the opportunities highlighted in the recent green paper on developing northern Australia. It is a decision that has been made by economic realists in this room that will deliver $900 million back to the budget bottom line. I support this bill.

Adam Bandt (Melbourne, Australian Greens) Share this | Link to this | Hansard source

As you head out of Melbourne and go on the bypass around Geelong, you go over the Lewis Bandt bridge. The Lewis Bandt bridge is there because Lewis Bandt invented the ute when he was working for Ford back in 1932. A farmer came to him and said, 'I want something that will get my pigs to market on Saturdays and my wife to church on Sundays,' and Lewis Bandt, working for Ford, invented the ute. That to me stands as a symbol for the innovation that this country is capable of, especially in manufacturing. But we need to remember that innovation and manufacturing need support.

Manufacturing in this country has been under enormous pressure, especially from the mining boom. The mining boom has driven up the Australian dollar and the mining boom has been great for those states that are resource rich. But in the south-eastern states, where much of the manufacturing is concentrated and where you do not have the same benefits of the mining boom, you get the pressures of the mining boom. You get a high Australian dollar, which affects your costs, especially if you are wanting to export. You have to compete with rising costs of labour and other inputs with the mining and resources sector that can afford to pay more, and you find yourself—as we have in Victoria—under Liberal governments at the state and federal level with the gross state product per capita going backwards. We have had negative economic growth in Victoria when the Liberals have been in charge at both levels. We are seeing that happening at the same time as some significant decisions are being made that will affect Victoria and the south-eastern states in particular, with the car makers moving out and will all be gone by 2017. That is a fact: they are going. And they will be gone in 2017.

We have to decide between now and then, and with an eye to what happens after that, is the transition for states like Victoria and South Australia that get the pressures but not the benefits of the mining boom, and where there are many people employed in manufacturing and associated industries. What we have though is a government that believes vision is a dirty word and that refuses to have a plan to ensure that the Australian manufacturing sector will survive the pressures of the mining boom and the pressures of global competition.

It is not as if this government is not prepared to support some industries. There is $13 to $18 billion in subsidies going to the mining sector that are quite prepared to bankroll the Liberal Party to ensure that they got into power so that they could then repeal the mining tax for them. They are quite happy to say to the likes of Gina Rinehart, 'We will give you a subsidy on your petrol and your diesel so that you do not have to pay the same tax that everyone else has to pay.' They are quite happy to write out the cheques for several billion dollars every year on accelerated depreciation concessions and other forms of generous treatment to those in the industry that they like. They are quite happy to say to the four large banks, 'Look we have heard the IMF say that the Australian public is actually subsidising you to the tune of about $3 billion a year by standing behind you with a taxpayer guarantee that allows you to go and borrow more cheaply in a way that your smaller competitors cannot. We are quite happy to give you that form of public subsidy.'

We are quite happy to have an industry policy that says big mining and big banks are worth billions and billions of dollars every year. But what we are not prepared to do is come up with a transition for the manufacturing sector that will help Australia move to a clean energy future where there are jobs if we have the vision to ensure them. Instead, they are coming along and saying, 'We want to cut off the lifeline that we have given you that will be there for a couple years in order to transform your sector. We want to cut that off early. We are not content with you leaving in 2017 and with people trying to find work and trying to find additional contracts for their businesses over the next couple of years. We want you to leave in an unplanned fashion at severe economic cost'.

I think transformation in our motor vehicle and transport sector is a great idea. We have been calling for some time for governments, Labor and Liberal, to come up with a plan to transition our car-making sector to the vehicles of the future, where there are lower emissions and where we grasp the opportunities that electric vehicles provide. This is not something that is fanciful. A year or so ago, the front page of the Herald Sun drive section previewed the electric Commodore. The electric Commodore was put together by a small consortium of Victorian manufacturers with Holden support, working on a shoestring, to take a best-selling car in Australia and make it electric. And they had worked out how to do it. They were asking for support to get that up and running so that that could be something that might sustain car making in Australia in the future. Similarly, when we look around the world, we see that the German and the United States governments have set targets in their countries for electric vehicles, about how many electric vehicles they want to have on the road within the next decade or so. That is the kind of thing we could be doing in this country and that would drive that innovation.

We, as the Greens, want to see much greater investment in public transport. But public transport needs rolling stock. It needs components. It needs equipment and resources that can be found in this country.

Tony Pasin (Barker, Liberal Party) Share this | Link to this | Hansard source

It needs customers too.

Adam Bandt (Melbourne, Australian Greens) Share this | Link to this | Hansard source

The interjection is that public transport needs customers. Up until a little while ago, there was some federal government money going towards public transport projects. This government has come along and cut it out because, apparently, that is not what federal governments do

They are quite happy to put billions into a road that will then in turn support car retailers but they are not happy to put money into public transport that could create jobs locally.

So if we want to build that rolling stock and other components for public transport we could do that here as well—even renewables. The solar plants that you see that have a large number of solar panels that all face the sun at a particular point in time and which all tilt and turn as the sun moves around require gears and hydraulics. And there are companies in Australia that are now able to manufacture those. In fact, they are being scouted for by overseas solar plant developers in countries where they have a far more farsighted view about renewable energy than this government does. But even that requires manufacturing. There is a future for manufacturing in this country if we choose to grasp it, but we need a plan.

It is all well and good to talk about high-tech, high-value jobs in advanced manufacturing being what will sustain us in the 21st century, but advanced manufacturing needs a general manufacturing base. It is that interaction between the innovative designs, being able to test them in the place that makes them and then being able to continue that loop that is essential. If you gut the country's manufacturing base then you cut the capacity to innovate in the same way as you otherwise could.

One thing that this government does not seem to understand—none of the speakers that I have heard so far speaking to this bill have addressed this—is that, yes, everyone in this parliament, and I expect everyone in the country, accept that the car makers will be gone in 2017. Yes, there is an argument about why you would continue any particular scheme after that. But what is not spoken about is the position, not of the people who work for the car makers but of the people who work for the components companies.

No-one from the government side is talking about this. There are tens of thousands of people who work in those component-manufacturing companies in the components sector. What is crystal clear is that if this scheme is brought to an end early then that includes removing support for the components sector early, because that is part of this bill as well. And if the money is removed from the components sector then the car makers themselves may not be able to source the components locally and may in fact move out much earlier than 2017, or when they have otherwise planned.

In other words, cutting the subsidy early may have the effect of hastening significant unemployment for tens of thousands of people who work not just for the car makers but for the components manufacturers as well. That puts them in a very difficult position, because people are relying on this next couple of years to diversify their companies. People are relying on this next couple of years with planned government support to say, 'I can see the writing on the wall with car makers going and so maybe only to find a new market for the components that I make. Maybe I need to look overseas. Maybe I need to diversify into renewables. Maybe I need to go somewhere else entirely.' If this bill passes they will not have that option to transition; the rug will have been pulled out from underneath them.

But it is not just the businesses who are going to be significantly affected if this bill goes through. It will not be just the big businesses and the small businesses in the components sector but a group of people who the government very rarely thinks about, which is the workers in those sectors. One thing should be very obvious, and that is that if you are about to lose your job in a couple of years because the car maker is about to pull out, and you know it, you can plan for it. You can plan to retrain and you can plan to go and look for another job. Anyone will tell you it is much easier to find a new job if you are in an existing job. If you are in an existing job you have the security to then be able to go and look for new work elsewhere. That is what the car makers are doing at the moment with their employees—helping them find work elsewhere.

But if you pull the rug out from under these people now then you are going to put tens of thousands of people into the labour market at the same time and force them all to look for a job while living on $250 a week. And if they are under 30 they will probably spend the first six months not getting any money at all, if this government gets its way. But the government will be forcing people who have been working in this sector for some time all to go into the job market at the same time and all to try to find jobs while all of them have $250 a week. That is this government's brilliant plan for dealing with growing unemployment. And I can tell you, Mr Deputy Speaker, that it is going to hit the south-eastern states hardest and that is where we are already suffering, as I have said before.

There is a different way. If the government had the guts and a vision to realise where the rest of the world is going—to realise that there is a clean energy future and to understand that there is a place for manufacturing and advanced manufacturing in that—there is a place for us. In Germany there are about 400,000 jobs in the renewables sector. That is about 100,000 in Australian terms. And that is right across the spectrum—that is not just the people who put solar panels on your roof but it is the people who make the wind turbines. It is the people who lay the cables. It is people in manufacturing and especially in advanced manufacturing. In Germany they do not have to put up new wind turbines because, with their advanced manufacturing capacity, people are able to go back and retrofit existing turbines with new gears that generate between two and four times as much electricity from the same turbine. That is the kind of innovation and the kind of advanced manufacturing that this country is capable of. But it needs a plan and it needs a vision.

This government comes in here, saying, 'The only plan that is on the table at the moment is to support people as they transition out of an industry which is closing, and we're going to take that away without anything to put in its place.' In fact, it scorns the idea that you would possibly have a plan, because somehow a plan is something akin to a Stalinist command economy, whereas this government simply says, 'Let it rip and whatever happens, happens.' We are not going to be part of that.

Yes, we want to see Australia move to a clean energy future and, yes, we want to see Australia moving away from heavy reliance on cars to electric cars and public transport, but that is not this government's vision. This government is quite happy to prop up its mates at the big end of town if they will bankroll this government and everyone else can go hang. We will not support that. (Time expired)

Paul Fletcher (Bradfield, Liberal Party, Parliamentary Secretary to the Minister for Communications) Share this | Link to this | Hansard source

I am very pleased to rise to speak on the Automotive Transformation Scheme Amendment Bill 2014. This is an important bill, which gives effect to decisions announced by the government in the context of the 2013-14 Mid-Year Economic and Fiscal Outlook—the MYEFO—and gives effect to budget decisions taken by the government in respect of the Automotive Transformation Scheme.

In the time available to me this evening, I would like to make three points. Firstly, Australia has had for some years an automotive industry which by world standards is subscale and uncompetitive. Secondly, Labor in government refused to acknowledge this reality, whereas the coalition government, the Abbott government, has acknowledged this economic reality and has acknowledged that to promote our competitiveness as a nation we need to move away from industries such as automotive, in terms of where funding goes, and play to our strengths as a nation. And, thirdly, consistent with that, this bill makes sensible savings by reducing the extent of public subsidy to an industry which is no longer competitive in world terms.

Let me turn to the first point, that the automotive industry has been for some years in Australia subscale and uncompetitive. Let us look at the figures for domestically made cars in recent years and the market share captured by domestically made vehicles. Between 2007 and 2012, in just five short years, domestically made cars fell from 19 per cent of total car sales in Australia to less than 13 per cent. In other words: consumers were voting with their feet and that resulted in a situation where an industry that was already subscale by world standards became even more subscale.

Let us have a look at the numbers in terms of automotive manufacture globally. These are the figures for the 2013 year from the global automotive peak body. In 2013 there were 87.3 million vehicles manufactured: China manufactured 22.1 million; the United States, 11 million; Japan, 9.6 million; Germany, 5.7 million; Korea, 4.5 million. And where was Australia? The total production from Australia sounds like a rounding error when compared to the numbers that I have quoted. Production for Australia in 2013, according to the world automotive industry peak body, was 215,926 vehicles—a tiny, tiny fraction of global production.

And why is this important? It is important because automotive manufacturing is a scale game, and if you cannot have large-scale production and large production runs, then you cannot be world competitive in your pricing, and that is a fundamental difficulty that the Australian automotive sector have got into. I need hardly add that that very small quantum of production was spread across multiple manufacturers, so the production run per manufacturer was even smaller by world standards. Therefore, the question in public policy terms becomes: does it make sense to be putting public money into subsidising an industry that is clearly struggling to be competitive? Is this a good allocation of public money?

The issue about global competitiveness for Australia is one that needs to be recognised as we think about spending taxpayers' money. We need to think about the global competitiveness of Australia. The Business Council of Australia recently released a report from consulting firm McKinsey entitled Compete to prosper: improving Australia's global competitiveness, which makes the point that a great deal of Australia's industry assistance has been allocated to declining sectors, and, sadly, the automotive sector has been one of those. We are clearly in a position where we have allocated as a nation very substantial subsidies, very substantial amounts of public money, to an automotive sector which, as the figures demonstrate, is struggling to be competitive. Indeed, according to the Productivity Commission, total support to the automotive industry between 1997 and 2012 has been around $30 billion. During that period, the number of vehicles manufactured locally was slightly over five million and so, working through the maths, the support per vehicle over this period was approaching $6,000. A very substantial amount of public money to subsidise one particular industry, and yet, as the numbers I have quoted indicate, it is an industry that is struggling to survive in a highly competitive global market.

We have recently seen from Holden the worst ever loss being announced—$553 million for the calendar year 2013, taking its total losses to approximately $1 billion over the past eight years—and Ford recently announced its third worst ever loss—$267 million, taking its total losses to $1.1 billion over the past eight years. So given these fundamental competitive dynamics, the inevitable result has been a decision by the global automotive manufacturers to cease manufacturing in Australia. It is hardly surprising that they have done that when you look at the tiny production runs in this country, the difficulty in operating economically and the many other difficulties that they face. What did then chief executive of Holden in Australia, Mike Devereux, say when he announced Holden's decision to close in December 2013? He had this to say:

… Australia's automotive industry is up against a perfect storm of negative influences including the sustained strength of the Aussie dollar against almost all major trading currencies, the relatively high cost of production and the relatively small scale of the local domestic market.

… building cars in this country is just not sustainable.

These are not easy decisions, and nobody is saying—the government is certainly not suggesting for a second that the departure of automotive manufacturing in Australia is going to be easy for the country or for the affected communities.

Debate interrupted.