Kim Carr (Victoria, Australian Labor Party, Shadow Minister for Industry) Share this | Hansard source

I move:

That the Senate:

(a)

acknowledges the critical place of manufacturing in the Australian economy, particularly its contribution to business research and development, innovation and exports;

(b)

understands that innovation is the key to enabling Australia’s manufacturing sector to compete in a challenging and rapidly evolving international marketplace;

(c)

condemns the Howard Government for its failure to sustain the high rates of growth in manufacturing exports and research and development achieved under the former Labor Government; and

(d)

calls on the Howard Government to show leadership on this critical issue, end the blame game and work with the states and territories, industry and the research community to build a comprehensive national innovation system in Australia.

This motion essentially outlines the concerns of the Labor Party and the position that we have argued strenuously up and down the country. We acknowledge, as we always have: firstly, the critical place of manufacturing in the Australian economy, particularly its contribution to business research and development, innovation and exports, and that innovation is the key to enabling Australia’s manufacturing sector to compete in a challenging and rapidly evolving international marketplace; and, secondly, that the government can, either by its actions or its inaction, dramatically affect the capacity to develop an innovation imperative which will enable those in this country to work in a partnership between both its manufacturers, in terms of the owners of businesses, and its workers within those industries, and to work with government and the research community to ensure that Australian industry is able to prosper into the future.

The third point of my argument is that it is quite clear, beyond any reasonable doubt, that the Howard government has failed to heed the innovation imperative. It has presided over a slump in the rate of growth in research and development spending. Therefore, I would argue, it has also directly contributed to the decline in manufacturing exports.

Finally, it is my argument that national leadership is the key to our sustained prosperity. If we were to stand alongside Australian industry, if we were to believe in it, if we were to be optimistic and confident about the future, and if there were the right policy settings in place, we would be able to see a significant improvement in the position of Australian manufacturing. So I condemn wholeheartedly the Howard government’s failure to show the national leadership that is required, particularly when it comes to industry and innovation policy and, more specifically, to promoting a vision of a thriving Australian manufacturing sector.

I also condemn the Howard government for failing to even participate in the National Manufacturing Forum, which was a high-level forum convened by all the states and territories comprising industry groups, experts in varying fields and unions, which made recommendations about how to take Australian manufacturing forward into the 21st century. Further, I condemn the Howard government for allowing Australia’s national innovation system to languish, to become a forest of red tape, a forest of lantana with gaps and duplications aplenty.

Under the Howard government, Australia’s innovation pulse has grown faint. When I go up and down this country, manufacturers—particularly international firms that are working in the international environment—tell me that when they talk to their parent companies all too often the view reflected back to them is that there is no serious commitment by the Australian government towards manufacturing. There is a view abroad that this country is governed by a Liberal Party that has essentially turned its back on manufacturing. In mid-November 2006, the Prime Minister was celebrating the 20th anniversary of the ‘Australian Made’ logo. In a report that appeared on the ABC on 5 December 2006, the Prime Minister was asked to comment on the prospects of Australian manufacturing. The report said:

Prime Minister John Howard was there to mark the occasion and reflect on how his government intends to support those who, in dwindling numbers, are making things in this country.

John Howard is reported as saying:

There will always be some who believe that globalisation has been allowed to go a little too far and there will be others who believe that as a consequence, Australian manufacturing in particular is not getting a fair go.

He went on to say:

I don’t have a ready answer to the resolution of that tension.

That sums up the government’s approach to manufacturing. They do not have a clear vision of the future, they are stale and out of date and they essentially live in a world which is well past. They are a government that essentially have a static view on what is a dynamic industry. As a consequence, we are faced with a situation where the government are unfit to meet the challenges of the future.

Like the leader of the Labor Party, Mr Kevin Rudd—who hosted the national manufacturing roundtable on Monday—I take the view that there is cause for optimism for manufacturing in this country. In coming to the leadership of the Labor Party, Mr Rudd made his position crystal clear. He said that he did not want to be a Prime Minister of a country that does not make things anymore. That was not some sort of stunt or ideological posturing; it was a clear statement of values and belief. The abiding goal of the Australian Labor Party is to ensure that we as a nation pass on to our children a country that is in a better condition than the one that we inherited—one that is fairer, stronger and more self-assured. A stronger Australia is an Australia in charge of its own destiny—that is, a country that takes advantage of its opportunities and that makes its own luck. I believe, and I am sure this is a view that is very widely shared within this country, that a thriving manufacturing sector has real opportunities in this country and certainly will be a key part of a stronger Australia under a Rudd Labor government.

Manufacturing is 12 per cent of the Australian economy. In South Australia it is 15 per cent and in my home state it is 14 per cent. Manufacturing directly employs over one million people and a third of those are in Victoria. Manufacturing could employ many more people today if the growth in exports and in research and development achieved under the previous Labor government had continued under the Howard government. Manufacturing currently accounts for $75 billion of exports and, without this contribution, Australia’s ballooning current account deficit would be looking even worse than its current woeful state.

Despite the Howard government’s neglect, Australian manufacturers continue to innovate and to compete in a very tough international environment. Take, for instance, the case of Australian Defence Apparel in Bendigo, which is now exporting textiles and ballistic protection vests to Vietnam. AstraZenica’s factory in North Ryde is the only one in the world that is certified to export products to Japan without a further quality check when they arrive in that country. And of course ResMed, the manufacturer of medical devices which address breathing sleep disorders, now operate in over 65 countries worldwide. In recent years, Australian manufacturers have been selling solar panels to China, landmine detectors to the United States and fast ferries to Japan—not to mention the Australian food and wine industries, which are world renowned for their innovation in production and packaging, or our global suppliers of mining and mine safety equipment.

It is unfortunate that coalition ministers, while rightly enthusiastic about the innovative services sector, have so little understanding of the importance of manufacturing. They do not seem to understand that many service sector jobs are reliant on manufacturing. They do not seem to understand that Australian manufacturing adds value to the resources—both mineral and agricultural—that they are so fond of talking about. I bet that there are few coalition ministers who would be able to tell you that manufacturing accounts for almost 40 per cent of Australia’s research and development. The fact is that manufacturing is a critical source of technical knowledge and of process and organisational innovation. You only have to think of ‘just-in-time’ and ‘teamwork’ to understand the impact that manufacturing innovation has had on the rest of the economy as a consequence of the innovation that has occurred in those processes. However, it is disappointing that so few in the government seem to be aware of the importance of manufacturing business and that they are the most likely to be the innovators in this country. It is a sad and sorry state that we hear so little from this government about the importance of manufacturing.

When you look back over the 12 years of the life of this government and at the issue of industry policy, you can see just how terrible the neglect has been. The Productivity Commission made the point that manufacturing plays a major role in the Australian economy, with levels of output and employment considerably exceeding mining and agriculture combined. Manufacturing continues to be the dominant source of technological innovation in the business sector. More recently, KPMG’s international survey of manufacturing executives, Globalisation and Manufacturing, considered whether it is important for developing countries to retain a manufacturing sector. It concluded:

... the answer is yes. The continued importance of manufacturing as a source of wealth in developed markets should not be underestimated.

In today’s world Australia simply cannot compete globally on the basis of cheap mass production. Instead, Australian industry needs to be smarter than its competitors. Elsewhere in the developed world, there is a real sense of urgency about the need to improve competitiveness and innovation. All around us—in Asia and in Europe—our international competitors have been increasing their R&D spending at incredibly rapid rates. This government does not share the same sense of urgency about our competitive and innovation position. Anyone who understands manufacturing in the 21st century understands that innovation is vital. Labor has a very strong record of achievement in this area. Labor understands the importance of change in the manufacturing industry to enable the industry to move up the value chain. Labor understands the importance of innovation to ensure the long-term sustainability of the manufacturing industry in this country.

On Monday we were privileged to be joined by former senator and Labor industry minister, the Hon. John Button. At the beginning of his speech former Senator Button relayed an anecdote about the Prime Minister, which I cannot repeat in its full glory because of the standing orders. It went back to 1998, when former Senator Button happened to be at the same function as the Prime Minister. The Prime Minister approached him and said that he felt that the Labor government had really understood innovation. Mr Button’s response—which, as I said, cannot be repeated here, so I will paraphrase it—was that it was enlightening to know that the Prime Minister had at least acknowledged that the Labor government did appreciate the importance of these issues and that the coalition had no idea when it came to innovation policy.

It is quite clear that there has been a major breakdown in the development of industry policy under this government. It is quite clear, in our performance in exports and research and development, that this country is slipping internationally. This government has halved the R&D tax concession. As a consequence, we have seen a collapse in the Australian private sector R&D effort. It has taken the better part of this last decade to recover to the position we were in back in 1996. Expenditure did not recover in real terms until 2002-03. As a proportion of manufacturing value added, the recovery took until 2003-04. Between 1995 and 2001, Australia was one of only three OECD countries to reduce its tax subsidies for R&D, while 12 countries increased the level of support. Since then, a number of countries have increased their support for R&D through their taxation systems, including New Zealand and the United Kingdom this year. In 1999 Australia ranked seventh in the small and medium business tax subsidies in R&D, but it had dropped to 14th by 2006. For large firms, Australia stood at No. 6 in 1999 but it is now down to No. 11.

The reduction in Australia’s relative support for business R&D comes at a time when the internationalisation of research and development is actually growing. International comparisons indicate that our position is moving in exactly the opposite direction to that of our competitors. It is particularly instructive to look at what is happening in China. China is doubling its research and development expenditure every seven years. We are seeing a situation here now where China has committed to lifting its research and development expenditure as a proportion of GDP to 2.5 per cent by 2020. China is now the second-largest source of expenditure on R&D in the world.

Unlike the Howard government, Labor understands that complacency is not an option. That is why Labor says that a national government must sit down with industry, roll up its sleeves and ensure that Australia can maintain a position of its own choosing in the international marketplace and not a position foisted on it by others. That is why it is absolutely a matter of urgency that national leadership be demonstrated, that we build upon the prosperity that we currently enjoy, that we ensure that that prosperity is sustained and that the growth in Australian manufacturing R&D increases rather than decreases, as it has done under this government.

The average growth in manufacturing R&D spending has fallen from 16.6 per cent under Labor to only five per cent under John Howard. Over the last five years, the average annual growth in manufacturing exports has fallen from almost 15 per cent under Labor to less than two per cent. As a result, Australia’s productivity compared with the United States has retreated and has lost virtually all the relative gains of the 1990s. This country is facing serious challenges. As a society, we are facing serious challenges. We need to apply a whole-of-government approach to ensure that we develop a national innovation system and that opportunities are seized rather than our relying upon an outdated view of the importance of manufacturing. Labor has made a number of commitments to ensure that that occurs. Labor has already committed $500 million for a green car program.