Skye Kakoschke-Moore (SA, Nick Xenophon Team) Share this | Hansard source

I, and also on behalf of Senators Xenophon, Griff and Rhiannon, move:

That the Senate—

(a) notes that:

  (i) the value of Commonwealth Government procurement contracts in the 2014-2015 financial year was more than $59 billion,

  (ii) the current Commonwealth Procurement Rules fail to take into account the social and economic effects of buying and procuring Australian made goods and local services,

  (iii) asbestos has been found in building products imported into Australia as part of projects funded by governments, and

  (iv) it was disclosed this week, that in April 2015, the Department of Defence awarded a $9 million contract for non-combat uniforms for the Australian Defence Force to a company that will have the uniforms made overseas rather than Australia; and

(b) calls on the Government to amend the Commonwealth Procurement Rules, in order to take into account:

  (i) the economic, social and environmental effects of local procurement, including employment outcomes, tax receipts and economic growth,

  (ii) the need for Australian Standards to be complied with in any procurement decision, and

  (iii) whole of life benefits of a local procurement.

This is not my first speech. Today, I welcome the opportunity to talk about a significant matter that is of critical importance to the sustainability of South Australian industry and, indeed, for domestic industries across all states and territories. I wish to talk about the government's approach to its procurement processes and how these processes in their current form are failing Australian companies and Australian people.

Australia's existing government procurement policies have a very narrow definition regarding value for money, and this is at the expense of broader industry development and economic goals. Specifically, contract costs are seen as the dominant factor when deciding on procurement outcomes. There is scant consideration given to how these procurement policies affect jobs, skills and industry capability. We have seen how the government's policy on procurement has been out of step with the expectations of normal, everyday Australians.

How can it be that we have awarded the contract for non-combat uniforms for our Defence Force members to a company that will make these uniforms overseas? Why is it that the government insists on purchasing steel from overseas companies while at the same time allowing the massive Australian steelmaker Arrium, once a vibrant and major industry in South Australia, to be on the verge of collapse and dependent on state government assistance? Arrium is more than $4 billion in debt, and, as it is under administration, thousands of jobs are under a cloud. If Arrium goes under, it will devastate Whyalla, and the flow-on effects will lead to social dislocation, widespread unemployment and the demise of a famous industrial centre in South Australia. It should not be that hard to do the right thing by Australian manufacturers and Australian jobs.

Today, I and my parliamentary colleagues—Senator Xenophon, Senator Griff and our member for Mayo, Rebekha Sharkie—are calling for change, but not a radical change by any means. We call on the government to reconsider its policy on purchasing and procurement decisions and to implement a policy that would first ensure preference for local procurement for all government contracts. We are not talking about a few Commonwealth vehicles and desktop computers here. Last financial year, the Commonwealth spent a total of $59.4 billion on 69,236 contracts. We need to change the rules of the game so that Australia benefits as a whole. Of course the government should act in accordance with the principles of value for money, but it should give just as much consideration to the social and economic impacts of supporting domestic industries.

In an increasingly competitive global marketplace, we are competing with nations who have a plentiful lower paid workforce or whose domestic industries are underpinned by government subsidies which make it practically impossible for Australian industries to compete on a level playing field. Successive governments have taken a strictly literal approach to the many free trade agreements that we have signed up to. This dogmatic, inflexible and unwavering adherence to international free trade agreements is clearly taking precedence over providing support for Australian jobs, and this is damaging Australia's industry. Instead of the government making purchases by looking at narrow contract specifications, the government must give consideration to the significant social and economic flow-on effects as a result of supporting Australian companies. In short, the Australian government's current procurement policies are stacked against local manufacturers and suppliers. They are fighting in a highly competitive global marketplace with one hand tied behind their backs.

Australian manufacturing is in crisis. Manufacturing is portrayed by the government as an old, vanishing industry and something that Australia should not worry about. Well, manufacturing is not an old industry. Manufactured goods account for over two-thirds of world merchandise trade. In fact, manufacturing is the most innovation-intensive sector in the whole economy, and no country can be innovative without the ability to apply innovation in manufacturing. In Australia, over 200,000 manufacturing jobs have disappeared since 2008, and the rate of job loss is accelerating. Manufacturing employment fell six per cent in 2015 alone. The government must focus on supporting manufacturing, particularly advanced manufacturing, because, as a South Australian, this is an important part of our growing advanced economy. What we are witnessing is driven by the policy decisions of successive governments. The decline in Australian manufacturing output and employment is not typical of other industrial countries. Australia is well behind our counterparts and now has the smallest share of manufacturing in total employment of any OECD country.

It is disappointing that, despite the widespread support for buying Australian, there remains little desire on the part of the Commonwealth to take similar steps to strengthen our local manufacturing industry. One of our closest trade partners is a relevant example. The United States's approach to free trade agreements contrasts sharply with Australia's. The US supports local manufacturers. The United States government has legislation that ensures their government buys American-made products before buying abroad. This legislation, called the Buy American Act, has been enshrined in law since President Hoover was in office in 1933. There is also more recent legislation that requires flags on US government buildings and Defense establishments to be made in the United States. No such legislation exists under Australian law. It seems that those in the United States are prepared to do what is in their national interest first and foremost, but Australia does not.

There is a widespread perception amongst many Australian manufacturers and workers that successive federal governments have literally tripped over themselves to get brownie points at world trade forums, to the nation's detriment. All successful manufacturing nations—South Korea, Germany, the United States, Japan and others—have negotiated free trade agreements that have expanded the terms of their national trade, but, still, they are able to use government procurement and other vigorous government policies to develop globally competitive domestic manufacturing industries without breaching their free trade agreements. The government has negotiated poorly with our free trade partners. It has stuck to its free trade dogma and conceded far too much. It seems that the government will strike free trade deals at any cost, going for quantity, not quality. But, even if it costs a little more, we must think about the multiplier effects of keeping local jobs and the significant flow-on effects of these employees spending their wages and profits in the local communities in which they live and work. Buying Australian is an obvious decision for most of us given the high quality of our products and the flow-on benefits to the community, but, for some reason, it is not obvious to the government.

Australian industries are facing significant difficulties in being able to survive. We must recognise the benefits to the Australian government of buying Australian. Are we so dedicated to our free trade partners that we will sacrifice our manufacturing industry at the expense of Aussies at home?

When will the government get the message? The mums and dads in the suburbs and towns understand what is happening. They know too well the devastation that comes as more factories close and more workers lose their jobs. The current state of play regarding Commonwealth procurement is deplorable and cannot be allowed to continue. There must be political will to tackle this issue.

A couple of years ago an example of this ardent commitment to looking at cost only in contract procurement negotiations occurred in South Australia. In 2014 the Defence Materiel Organisation rejected a tender for up to 100,000 pairs of work boots over five years from Rossi Boots of Adelaide, a company that has employed generations of Australians in South Australia since it opened its doors in 1910. It eventuated—we know as a result of the debriefing process with the DMO—that the ultimate decision was made on the basis of cost, and the contract to supply members of the Australian Defence Force with sturdy work boots was awarded to a foreign importer.

The Rossi case is symbolic of much of what is wrong with government procurement and encapsulates the economic philosophy of the coalition government. The Rossi Boots chief executive said that all he wanted was a fair go and said that the procurement system is almost designed to make Australian businesses and manufacturers disadvantaged in comparison to overseas suppliers. While Rossi's price may have been marginally higher than that of the winning tenderer, does this justify the government's decision to favour other manufacturers? Rossi could have delivered substantial benefits to the Commonwealth and to Australia had it been chosen to fulfil this procurement contract. In addition to factors such as quality, boot durability and whole-of-life customer support, Rossi would have employed more Australians and supported Australian families and the economy. Tax receipts would have increased by tax payments by the company and employees, and intangible benefits such as meeting Australian standards for employment conditions, the environment, OH&S and industrial relations would have been realised.

We have not looked after the national interest and we have sacrificed good manufacturing jobs—many tens of thousands of jobs—on the altar of free trade fundamentalism. I want the Australian government to adopt a much more hard-headed approach to trade and industry policy. We must have greater parliamentary scrutiny of our trade negotiations. We must ensure there is an assessment by independent review bodies of the costs and benefits of buying Australian first. We must overhaul government procurement laws to ensure that Commonwealth, state and local governments take into account the social and economic benefits of local procurement, and we must push the Australian government to look at the wider national interest in supporting a diverse economy in our trade negotiations.