Grant Chapman (SA, Liberal Party) Share this | Link to this | Hansard source

Tonight I want to highlight the importance of innovation for Australian industries. Earlier this week Mr Kevin Rudd was elected Leader of the Opposition. In his ‘fork in the road’ comments, he asserted his intention to undertake a program to guarantee the future of manufacturing industries in Australia. The problem is that Mr Rudd is a bit late with his interest in secondary industry. This policy has already been actively pursued by the Howard government. Mr Rudd’s intention is typical of a party ruled by the union movement, which in its dying days needs to spark some appeal among that proportion of the private sector workforce which remains union members—now less than 18 per cent, many of whom work in manufacturing.

Let me make clear tonight what the results will be for secondary industries, who are so reliant upon the potential for innovation, if a Labor government is elected. Despite its new leader, it is the same old Labor Party. It is the intention of Mr Rudd, like Mr Beazley before him, to destroy the role of Australian workplace agreements, against all industry recommendations or, indeed, pleadings. If this occurs, experts agree that productivity in industry will go down.

In 2002, following the introduction of the Howard government’s groundbreaking industry innovation initiative Backing Australia’s Ability, Treasurer Peter Costello in an address on productivity said:

Lifting productivity growth requires continuing attention to fiscal policy, low and stable inflation and low interest rates, which facilitate investment and the roll-out of new technologies.

Rising productivity is not just an economic indicator of the rising standard of living of all Australians; it is also the necessary condition for the uptake of new technologies. We know innovation is accelerated by a rise in the uptake of technology and that this is achieved when interest rates remain low, enabling new capital investment.

Industry experts, such as Kevin MacDonald from Australian Business Ltd in New South Wales, call the Labor policy to wind back Work Choices, as advocated by Mr Rudd, ‘uninspiring and backward-looking’.

Eric Abetz (Tasmania, Liberal Party, Minister for Fisheries, Forestry and Conservation) Share this | Link to this | Hansard source

Hear, hear!

Grant Chapman (SA, Liberal Party) Share this | Link to this | Hansard source

I welcome the support of the minister in that regard. Tony Steven from the Council of Small Business Organisations of Australia—

Eric Abetz (Tasmania, Liberal Party, Minister for Fisheries, Forestry and Conservation) Share this | Link to this | Hansard source

Another good man.

Grant Chapman (SA, Liberal Party) Share this | Link to this | Hansard source

He is indeed. He said that he is hopeful that Mr Rudd may turn away from the union line on industrial relations. It is clear that the introduction of Work Choices by the Howard government, facilitates Australia’s workforce to operate at its optimum. The end of AWAs, as would occur under a Labor government, would be a direct assault on our productivity. The reduced productivity of the Australian economy under a regime of collective bargaining would trigger events that would destroy the economic wellbeing of all Australians. Under a Labor government with reduced productivity, innovation in the private sector would be undermined and the resources directed by government to assist the quicker commercialisation of ideas would be underutilised.

To stimulate innovation the Labor Party argues for further funding of research initiatives. The Labor Party is still not clear on the economic damage that can come from excessive spending by government. The high interest rates when they ran the country were due to excessive government spending and general economic mismanagement. As we enter a period of strong international competition with the emerging giants of China and India, it is essential that we remain innovative. We cannot expect that to be achieved under a Labor government where Mr Rudd will destroy the potential for innovation in the private sector as a result of reduced productivity. His approach sounds awfully like old Labor’s approach of picking winners on which to lavish taxpayers’ money.

Manufacturing is important to the Australian economy but so are other industry sectors—communications, financial services, mining and agriculture, to name a few. Innovation is crucial to the continuing success of all these sectors and more. Fundamentally, innovation is always about people who are the enablers of innovation. Innovation is about the way we creatively apply knowledge, old and new, with the objective of producing additional value and wealth. As such, innovation does not necessarily involve technology and technological knowledge nor the creation of new knowledge. It can, for instance, be reflected in productive changes to systems of organisation, such as investment models in the financial services sector. Equally, innovation can be reflected in reduced costs while the selling price remains the same, as can be seen, for example, in the application of mining and agricultural technologies to primary industry output. In the context of global markets, innovation is the ability to fulfil needs and solve problems for customers in ways superior to competitors. Commonly, a range of innovations across areas of expertise and sectors of the economy work together in the goal of developing a competitive advantage.

With these points in mind, innovation systems can be defined as our nation’s capacity to generate, diffuse and use economically significant knowledge in generating internationally competitive outcomes across industry and government. Rapid evolution of information, communication and transport technologies has enabled new and consolidated forms of wealth creation, scientific discovery and economic organisation more broadly. This is reflected in global markets which are increasingly dominated by a greater dependence on knowledge, information, high levels of skills and an increasing need for ready access to all of these.

Core to remaining competitive, therefore, is the ongoing adaptation of processes and structures for the management and diffusion of knowledge. This includes the competitive imperative to adapt and transform management systems and skills across the private and public sectors. One important key to all of this is flexibility in the workplace—flexibility that a Rudd Labor government would destroy. Another key is low interest rates to foster capital investment. The Labor Party under Mr Rudd, for all its bluff and bluster, cannot cover up the fact that it will take its ‘fork in the road’, leading to fiscal irresponsibility and backward, union-dominated workplace relations—‘a bridge too far’, which will destroy the potential for innovation in manufacturing and elsewhere.

Where is Mr Rudd’s plan? Where is his consistency? Yesterday, at the parliamentary lunch for the Korean President, he extolled the virtues of free trade. What is it to be under Labor: more interventionism or more market-driven economics; or is it to be more of the populism we have seen from Labor in the past, telling different interest groups what it thinks they want to hear?

A high level of innovation is essential for Australia to have a sustainable export industry of value-added manufactures. No other government in Australia’s history has given greater support to science, research and innovation than the Howard government. I seek leave to incorporate in Hansard just some of its initiatives relating to manufacturing alone.

Leave granted.

The document read as follows—

Industry Achievements since 1996:

Provided a long-term industry plan for the automotive sector. From 2000 to 2015, the Automotive Competitiveness and Investment Scheme will provide more than $7 billion to secure the future of Australia’s car industry. It is the largest assistance program in the history of the industry.

Included within ACIS is the $150 million Motor Vehicle Producer Research and Development Scheme, including the $7.2 million Supplier Development Program.

Encouraged productivity and innovation across the Textile, Clothing and Footwear industry through key strategic programs such as the five-year $678 million Textile, Clothing and Footwear Strategic Investment Program and the $747 million, 10-year TCF successor package.

The successor package includes:

• A $600 million 10-year extension of the TCF Strategic Investment Program, commencing 1 July 2005. The program provides support for innovation and capital investment activities.
• $50 million for a 10-year structural adjustment program to assist workers displaced by large plant closures.
• $20 million to support major capital investments that would strengthen the local supply chain for the clothing and finished textiles sector. (Open to companies not receiving benefits through the TCF Structural Improvement Program).
• $50 million for a product diversification scheme;
• An extension to 2010 of the Expanded Overseas Assembly Provisions, which provide duty concessions for the Australian content of finished products imported into Australia after processing offshore. This scheme is expected to cost $27 million in duty foregone.
• A gradual, ten-year program of tariff reduction, with tariffs paused between 2005 and 2010.
• The package is part of the Government’s targeted, long-term plan for Australian’s TCF industry. It provides industry with the long-term certainty it needs to make major investment decisions over the next decade.

Initiated 33 Action Agendas, providing growth strategies for key industries, including printing, cement, pharmaceutical, chemicals and plastics, and the electronics industries.

Established a five-year, $150 million pharmaceutical industry program called the Pharmaceutical Partnerships Program (P3). P3 capitalises on Australia’s leading edge medical and biotechnology capabilities by encouraging R&D partnerships between international pharmaceutical companies and local researchers. The program builds on the success of the $300 million Pharmaceuticals Industry Investment Program, which ran from July 1999 to June 2004 and induced a significant amount of new R&D and production amongst participating companies.

Joined the System Development and Demonstration Phase of the Joint Strike Fighter program, providing Australian industry with the unprecedented opportunity to bid for development, manufacturing and ongoing support work over the next 30 to 40 years.

Developed the Auto Industry Strategic Group (August 2005). This group, chaired by Ian Macfarlane and comprised of key industry representatives, will ensure a closer and more constructive relationship between Australia’s vehicle producers and component manufacturers. An early achievement of the group has been the formation of a “Team Australia” approach, which sees major vehicle producers, component manufacturers and the Howard Government working together to strengthen the position of Australian automotive manufacturers in global supply chains. As part of this approach, the Minister led an industry delegation to Japan and Thailand where they promoted Australia’s automotive capability to head offices of Toyota, Nissan and Mitsubishi. A further trip to head offices of Ford and General Motors in the US proceeded in early 2006.

Boosted support for business innovation through the $2.9 billion Backing Australia’s Ability package and its $5.3 billion successor, Backing Australia’s Ability: building our future through science and innovation. Business innovation programs supported within the BAAII package include:

• $1 billion for Commercial Ready—the Government’s one-stop-shop for business innovation support;
• $100 million for the Commercialising Emerging Technologies (COMET) program; and
• $390 million for the R&D Tax Offset and 175% Premium R&D Tax Concession.

South Australia Specific Initiatives:

Provided $40 million to support 19 job-creating projects under the Structural Adjustment Fund for South Australia, including:

• $1.6 million for Redarc Electronics’ expansion of its electronics business at Lonsdale, in Adelaide’s southern suburbs;
• $1.8 million for Alloy Technologies International’s project to develop a light metals foundry at Wingfield;
• $3 million for Resourceco’s expansion of its waste processing operations (all announced 1 September 2005); and
• $954,000 for Cubic Pacific’s construction of a new motor vehicle parts plant. (announced 17 May 2005).

These projects represent total investment of more than $250 million and are expected to generate more than 1300 direct jobs. The projects highlight the diversity and growing specialisation in the Australian manufacturing sector.

Announced on 23 October, with SA Deputy Premier Kevin Foley, the Innovation and Investment Fund South Australia.

This $35 million package aims to attract new investment in South Australia and comprises:

• $5 million in labour market assistance to help affected Electrolux employees find alternative employment; and
• $30 million ($25 million of which has been provided by the Australian Government) to establish the IIFSA. The fund will operate in a similar manner to SAFSA.

Upcoming in initiatives:

In July 2006, Minister Macfarlane announced the development of a comprehensive Industry Statement to set the future policy direction of Australian industry. Key themes include export directions, global integration and innovation.

The statement will be announced in early 2007.

The Howard government is implementing these outstanding initiatives which support innovation in our secondary industries. The Minister for Industry and Resources, Ian Macfarlane, will release a comprehensive industry statement setting the future policy direction of Australian industry next year. I am confident this will be a forward-looking statement, unlike Mr Rudd’s intention to turn back the clock. Backing Australia’s Ability 1 and 2 and ongoing related initiatives have created the foundation on which an effective integrated policy framework approach to innovation can be developed for a third generation of innovation reforms.

A strategically integrated whole-of-government focus would be advantageous. Specifically, this should involve an integrated governance and funding focus which works through broader policy frameworks that have regard to building long-term national competitive strength. The Organisation for Economic Cooperation and Development has estimated that innovation is a key driver for economic growth in developed countries, with at least 50 per cent of growth directly attributed to it. A recent special report on innovation in Business Week explained that building effective innovation systems takes synchronisation from the centre and requires cross-boundary collaboration and structural changes.

This should not be interpreted as advocating a strategic policy environment of micromanagement, picking winners or the bureaucratisation of the innovation process. Rather, in terms of government, it highlights that the creative and dynamic force of people and economic organisation need to work through a very diverse range of policies and programs in order to invest in the full range of economic and social capabilities required to lock in long-term economic prosperity.

An integrated policy frameworks approach to innovation is supported in various ways by recent findings from many peak body reports representing industry, science, economics and government. Various innovation inputs, including management practices, governance structures and mandates, customer service, global supply chain logistics and a system that allows scientists to remain inspired and engaged in their work, contribute additional value to outputs across industry, R&D, the not-for-profit sector and government.

In conclusion, I will say that, on the basis of the issues that I have raised in these remarks, the Howard government can continue its strong reform commitment based on the solid foundations of Backing Australia’s Ability 1 and 2, adding long-term strength to an already world-leading innovation system.

Paul Calvert (President) Share this | Link to this | Hansard source

Senator Chapman, your time has expired.

Grant Chapman (SA, Liberal Party) Share this | Link to this | Hansard source

Mr President, I seek leave to incorporate the balance of my remarks in Hansard.

Leave granted.

The speech read as follows—

Strategic policy partnering could broker solutions which offer superior provision for business and R&D, such as:

• New performance measures and outcome criteria linked to longer term economic and social policy objectives.
• Greater attention paid to how venture capital and private equity infrastructure can be incorporated into more holistically designed policy solutions which better support collaborative needs across the spectrum of networks, clusters and more formal partnership type arrangements.
• Anchoring multinational enterprises in strategic sectors in order to more effectively capture spill-over benefits through the vital skills, resources and networks they harvest and deliver.

Consideration should also be given to the establishment of a National Innovation Council reporting directly to the Prime Minister which has a more focused concentration on issues relating specifically to innovation than is possible for the wide-ranging Prime Minister’s Science, Engineering and Innovation Council.

On this basis, the Howard Government can continue its strong reform commitment based on the solid foundations of Backing Australia’s Ability I and II, adding long-term strength to an already world-leading innovation system.

In contrast, Labor continues its rudderless short-term grab for political attention.