Dean Smith (WA, Liberal Party, Shadow Assistant Minister for Competition, Charities and Treasury) Share this | Hansard source

I rise to speak on the Future Made in Australia (Production Tax Credits and Other Measures) Bill 2024. In short, this bill establishes a hydrogen production tax offset that is available at a rate of $2 per kilogram of eligible hydrogen for companies that satisfy certain eligibility criteria. The bill also establishes a critical minerals production tax incentive for expenditure incurred in carrying out registered processing activities.

Let it be clear to all that the coalition will be opposing this bill, and with good and clear reason. Labor's Future Made in Australia policy is about building bureaucracies, not businesses. The coalition does not believe in permanently underwriting businesses with taxpayer funds. When faced with the COVID-19 emergency, a once-in-a-century crisis, the coalition rightly stepped in to ensure that Australian businesses could stay open, workers remained employed and families were supported. These measures were deliberately targeted, temporary and scalable, designed to address the unique economic and health challenges we faced. They allowed Australia to emerge from the pandemic in a world-leading position with record low unemployment, strong GDP growth and historically low interest rates. We made those decisions in the national interest, but we have been clear since the election that the time for these kinds of government interventions has passed.

Since taking office, Labor has taken Australia from a world-leading position to the back of the pack on interest rates, inflation, productivity and economic growth. Australian households and businesses are paying the price for Labor's economic mismanagement. Instead of addressing the fundamental issues holding back our economy, this government is doubling down on bad policy. The coalition will not support a policy that subsidises businesses for the costs of Labor's bad policies. On workplace relations, environmental approvals, the safeguard mechanism and company tax, Labor is strangling our manufacturing and resources industries.

Instead of fixing these problems, they are proposing a costly and bureaucratic subsidy scheme. This bill does not deliver widespread tax relief. It does not reduce energy prices. It does not cut red tape or remove Labor's punitive industrial relations measures so that businesses can reduce overheads, employ more staff and charge better prices. Instead, it establishes production tax credits that will not provide a cent of benefit to most businesses for years, while costing billions of dollars to the taxpayer into the 2040s.

Australian small businesses have already been hit hard by Labor, and this policy does nothing to support them or the minerals and resources industry. Even businesses that do qualify will face enormous hurdles just to access these tax credits. According to Labor's own analysis, applying for these credits will cost businesses at least hundreds of thousands of dollars in the first year alone, and hundreds of thousands in annual compliance costs over the duration of their operation. Why? Because Labor is burying business in more red tape and regulation.

To receive these tax credits, businesses must navigate multiple layers of bureaucracy, engaging with the Clean Energy Regulator, the department of industry, and ARENA—all before even reaching the tax office. Worse still, businesses that are seeking access to these credits will be hostage to Labor's undefined community benefits principles, which the Treasurer will determine via regulation. This is a back door for social procurement and ultimately for the CFMEU. Under this scheme, if there is no union agreement there is no tax credit.

There hasn't been a policy space invented yet that Labor cannot somehow wrangle into a sweetheart deal and opportunity for the Australian trade union movement—a union movement so increasingly irrelevant to the lives of ordinary working Australians that Labor is forced to legislate its continued existence through policies such as this. Such is the apathy and, frankly, disdain that ordinary Australians now have for the trade union movement.

The coalition opposes the bill because, first, it ties businesses up in red tape instead of providing them with widespread tax relief. Second, it locks in subsidies for decades, until the 2040s, and we do not support ongoing taxpayer funded handouts for businesses, believing instead that government intervention must be temporary, targeted and scalable. Third, the community benefit principles are unclear and politicised, leaving companies to comply with vaguely defined criteria in order to receive a tax credit, giving the Treasurer sole discretion over community benefit principle requirements, and there are concerns about potentially forcing businesses into union agreements to qualify.

Fourth, the bill does not apply equally across all businesses. It excludes major sectors, such as gas and nuclear power, despite their strategic importance to Australia's energy future. The coalition thinks the instant asset write-off is a fairer and more effective industry initiative. Fifth, there is a concerning lack of transparency, with key decisions bypassing the National Interest Framework. And, again, the Treasurer, not industry experts, decide which sectors will receive funding. And sixth, the bill's economic viability is questionable. Treasury and the Productivity Commission have not endorsed elements of the plan and warn that it could divert resources from more-productive sectors.

Much of this was raised in greater detail by coalition senators in their dissenting report in the recent inquiry into the bill. We noted some additional critical failings that went undisputed by Treasury and witnesses, both supportive and hostile to the policy. These included the fact that tax credits did not come into effect for more than two years, that a failure to comply with the community benefits principles will lead to a reduction in the tax credits available, and that in addition to union agreements the community benefits principles could range from duplicative environmental or Indigenous consultation practices to onerous tax disclosures.

It's important at this point to share some perspective from stakeholders. The Minerals Council of Australia noted concerns over duplication and regulatory burden in its submission to the inquiry:

The Australian minerals industry produces critical minerals utilising world leading sustainability standards, including best practice environmental management and community engagement…

We understand that the requirement to comply with 'community benefit principles' is an overarching requirement of the Future Made in Australia Act.

However, there are already extensive and rigorous approvals process that mining and mineral processing projects must adhere to makes this an unnecessary and duplicative feature of the CMPTI.

That was the view of the peak mining industry association of our country. This was also the view of the Australian Chamber of Commerce and Industry, who submitted to the inquiry:

The additional engagement processes required by the community benefit principles parallel existing requirements of the planning and approval process. This is simply adding a further layer of administration and compliance, without any clear benefit.

In contrast to the government, the coalition has a better plan for Australia's economy. We will extend the instant asset write-off and make it permanent, providing an investment allowance for tens of thousands of Australian businesses. This policy rewards businesses that invest in themselves and in Australia by lowering their tax burden. Unlike Labor's scheme, which won't take effect for years and will only benefit select industries, our policy applies to all industries immediately. It supports new investment, boosts productivity and helps businesses to grow. It does not subsidise businesses just to keep their doors open.

Labor has the chance to vote for this policy. We'll be moving an amendment to an upcoming bill over the next parliamentary sitting week and we invite Labor's endorsement. But, of course, we know that they will vote against it, like they have with previous bills, because for Labor it isn't about growing the economy or growing the economic pie so that more Australians can benefit and so that we can have more productive businesses, hire more staff and increase wages; unfortunately, for Labor, it's about backing big businesses and big business cartels. It is about picking winners for Labor, because Labor know that they know best—increasing government control over the expertise of private enterprise. However, that is simply the path to economic stagnation, rather than economic progress, because we've seen it for 2½ years under this Anthony Albanese-Dr Chalmers led administration.

Labor's second-term economic plan is already unravelling. Their first-term economic policies led to higher inflation, rising interest rates and declining productivity. Their second-term agenda is more of the same. The Productivity Commission has raised serious concerns about Labor's Future Made in Australia plan. A $1 billion commitment to manufacturing solar panels in Australia should have been subjected to a tougher national interest test, but of course it was not. By allowing sectors to bypass the national interest framework, Labor is undermining its own rules and processes.

Key investments critical to Australia's energy future—carbon capture and storage, gas, blue hydrogen, uranium and nuclear—have been explicitly excluded from Labor's Future Made in Australia policy. The Business Council of Australia has warned that these procurement rules risk subsidising industries that Australia will never have a competitive advantage in. That is not how to build a productive and resilient economy in a fast and ever-changing world. Indeed, Danielle Wood, the Treasurer's hand-picked productivity commissioner, stated that supporting industries without long-term competitive advantage creates an ongoing cost and diverts resources from more productive parts of the economy. Indeed, former Productivity Commission chairman Gary Banks described Labor's plan as a 'fool's errand' that risks repeating past mistakes by propping up politically favoured industries.

Of course, this particular legislation has raised important concerns for Western Australia. In their dissenting report, coalition senators paid special attention to Western Australia and the threat posed to its international competitiveness. I echo those remarks again here this morning. Western Australia, of course, faces unique challenges in competing for critical minerals investment. Renewed commitment and technological advancement overseas, including in the United States, Canada, South Africa, Indonesia and China, present serious challenges to the prosperity of this sector in Western Australia. The inquiry evidence was that Western Australia is already losing out to global competitors, who are already implementing production tax incentives.

Critically, the tax credit in this bill is not available until 2027. So, in fact, this characteristic of the bill actually creates a competitive disadvantage for Western Australia. Those familiar with the west will know that projects there already face significant regulatory delays. The bill fails to address these significant regulatory delays that already exist in the system, missing an opportunity to make WA more attractive for investments. AMEC noted:

Australia has long approval timeframes, land access issues and high construction costs.

The PTI must be paired with serious regulatory reform to reduce the regulatory burden faced by companies developing projects.

WA's resource sector clearly needs more than tax credits; it requires streamlined approvals and infrastructure support. Of course, all of that is absent from Labor's plan. Absent from Labor's plan are any steps to reduce already long approval times. Absent from Labor's plan are any steps to improve land access issues, and absent from Labor's plans are any efforts to reduce high construction costs.

Finally, there was ample evidence to confirm that Western Australia already has a high level of existing regulatory standards which make the community benefit principles an unnecessary regulatory burden for Western Australia in particular. To mining firms that already adhere to strict regulations, the principles represent red tape and cost to Western Australian projects, which, again, jeopardise WA's future competitiveness.

This bill is a folly. Unfortunately, some have advocated for this initiative, even in my home state of Western Australia, and they should be careful what they wish for. This is, indeed, an attempt to re-regulate, reimpose consultation process and reduplicate already significant costs to Western Australian projects. I suspect it will end in tears for many Western Australian industries and, indeed, future projects. Thank you.