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Tuesday, 25 June 1996
Page: 2690


Mr JENKINS(7.49 p.m.) —I rise in support of the second reading amendment moved by the honourable member for Perth (Mr Stephen Smith). The export market development grants scheme is without question a great success story in Australia's attempts to create export growth. The Export Market Development Grants Amendment Bill (No. 1) is the reintroduction, with some minor amendments, of a bill introduced by the previous government. Therefore it has the support of the opposition in the type of refinements to the program that it is trying to achieve.

The Hawke-Keating Labor governments were extremely committed to the EMDG scheme. Since the inception of the scheme in 1974—an initiative of the Whitlam government—around 80,000 grants have been made. Some $273 million was provided for the scheme in the last budget, with an expectation that about 3,700 applications would be lodged. The amount of money allocated to the program was forecast to grow to $292 million by the financial year 1998-99. It was envisaged that the export market development grants scheme would provide assistance to approximately 5,000 exporters per annum by 1999.

The previous government's commitment contrasts greatly with the confusion and disarray now surrounding this successful scheme. To satisfy its ideological ends, the Howard government is attempting to rush through the sale of Telstra and smash Australia's industrial relations system with undue haste, but the government refuses to give clear direction in many other areas. The export market development grants scheme is one area where it has abdicated its role as the government.   Repeatedly at question time, we get the glib answer `Wait until 20 August' to many legitimate questions. This is not good enough. The government's lack of direction is having a detrimental effect on business—a cause they claim to hold so dear. While awaiting a decision on the future of this scheme, many businesses had to put their plans on hold, effectively jeopardising many millions of dollars worth of exports. This export uncertainty is definitely something the coalition did not promise before the last election.

On the contrary, the coalition's statements on the future of the export market development grants scheme were clear and explicit. On page 30 of the coalition's trade policy document, `Meeting the challenge', it states:

We will maintain—

I repeat: `We will maintain'—

the export market development grants scheme.

One cannot get much clearer than that, yet businesses are now being subjected to uncertain and ambiguous statements by the government regarding the future of the scheme.

A small business on the border of my electorate operating in Greensborough, Mi-Sporting Products, trading as Blades Sports Footwear, has raised with me its concerns about its future under this government. Blades employs six people, but its economic significance is far greater than that. It provides the core business for about 14 subcontractors and has a turnover of several million dollars.

In a contribution to this debate the honourable member for Jagajaga (Ms Macklin) highlighted the tale of Blades Footwear. It should be remembered that this is a very innovative company that has developed a type of footwear that has great advantages to the users in many of the contact sports that we have in Australia. This company fought long and hard to get a toehold in the domestic market because the interests of multinational companies tried to squeeze them out. These multinationals, which used deals with organisations such as the VFL/AFL to ensure that their footwear could not be used, had to be beaten. Now, slowly but surely, they are getting that success. At least one club in the AFL has a contract with the company to supply footwear.

The letter I received from Blades makes two important points about the EMDG. Firstly, it indicates the damage that would occur to its business as a result of the abolition of the export market development grants scheme. The letter says:

In common with many other businesses in your local area, our continued growth and viability depend heavily upon expansion of our export markets . . .

Continuation of the export market development grants scheme is essential to our strategy for expansion into these markets.

Over the last 12 months we have developed a responsible and cost-effective export development strategy which will enable us to compete with . . . foreign companies . . .

We have invested a great deal of money, time and effort and now everything is ready to go . . . but the economic viability of the program depends upon the continuation of the EMDG.

The letter continues, and this really exposes all the nonsense of the government about honesty in government:

We—

that is, Blades Sports Footwear in Greensborough—

developed this innovative program on the basis that the EMDG scheme would be continuing because:

(a)   the coalition expressly promised that the scheme would continue; and

(b)   the coalition expressly committed itself to fostering small businesses such as ours.

Secondly, the letter indicates that this vibrant small business is being paralysed by an inability of their business to plan while a country drifts in neutral and ministers chortle, `Wait until the budget on 20 August.' The manager of Blades Sports Footwear raised his company's concern with the Deputy Prime Minister and Minister for Trade (Mr Tim Fischer) and got what he describes as a most unsatisfactory response. In their letter to me they say:

The Deputy Prime Minister's reply . . . is most unsatisfactory. Not only does it fail to effectively confirm the coalition's promises, it defers any decision until August.

We cannot wait until then; our program is being launched within weeks, and we have already made binding commitments for the next 12-18 months on the basis of the express coalition promises.

The government is prepared to allow innovative and export oriented businesses such as Blades to flounder rather than make a commitment to a program that it promised it would maintain before the election.

There are many such potential disasters developing. The so-called friends of small business are putting small business on the rack of their indecision by their determination to impose ideologically motivated cuts. In the Australian Financial Review of 27 May there is a report that the Australian Electrical and Electronic Manufacturers Association has stated that the rumoured abolition of the development import finance facility will have serious consequences. The report quotes from a submission to government to the effect that the scrapping of DIFF `could see loss of up to 10 per cent of the industry's exports, worth around $200 million'. This mindless vandalism is a pathetic excuse for public policy. The Australian people did not vote for this.

As I quoted in the House recently, eminent economists are warning that it is neither necessary nor desirable to seek to reduce discretionary spending by $8 billion over the next two years simply because the economy is forecast to grow more slowly.

As a result of Blades' letter, I wrote to the Deputy Prime Minister and Minister for Trade urging him to show some resolve and clarify now whether the government intended to honour its promises to keep the export market development grants scheme so that business in this country can get on with the job and not wait for an arbitrary date in August. His answer to me was as unsatisfactory as the answer that Blades received. But it had a striking difference. Instead of emphasising the so-called $8 billion black hole, it was given only very scant mention in the letter to me. In the letter to me the minister says that the coalition's overall approach is to address the shortfall in the deficit that was created by the previous government. Of course, in the letter to Blades he hides behind this $8 billion black hole, which is a con created by the Treasurer (Mr Costello). I think that the response by this company proves that they do not believe the contention that is being put by the minister. They want straight answers. They want confirmation of what was quite clear policy at the time of the election.

The majority of beneficiaries of the EMDG scheme are small to medium sized enterprises—the so-called SMEs. These are the busi nesses that the coalition continually refers to as the engine of the economy and whom the coalition continually purports to want to help. Export market development grants to SMEs account for about 70 per cent of all the grants under the scheme. It is an effective way to encourage the small and medium enterprises to seek out export markets and orientate their business around developing goods and services for export. It is creating an important export culture within this section of the economy.

When the Senate Foreign Affairs, Defence and Trade Legislation Committee examined this bill some of the comments of those testifying illustrated the enormous effect that this scheme has had. The Australian Publishers Association claimed that there has been a 100 per cent increase in exports in its industry over a four-year period. Furthermore, it claims that this export growth is directly attributable to the export market development grants scheme. The Australian Institute of Exports said before the committee hearing that independent research showed that, for every $1 paid in grants, $2.60 resulted in additional export marketing expenditure and between $15 and $25 in additional exports. That is a benefit from this scheme of between 15 to one to 25 to one.

A survey conducted by the Australian Business Chamber of its New South Wales members at the end of last year found that the export market development grants scheme was the most used program by its 509 members. These are very powerful statistics which clearly show the value of this program to the Australian economy as well as to the individual exporters applying.

There have been two comprehensive reviews of the EMDG scheme: the Auditor-General's efficiency audit in 1993-94 and Austrade's own review in 1994. Both reviews found that the EMDG scheme was effective and efficient. The previous government ensured that the recommendations of the efficiency audit were implemented, making the scheme even more accountable. The results well and truly bear out the effectiveness of this scheme.

The Austrade review entitled Helping to meet the export challenge found that the scheme is achieving its objectives in assisting Australian business to develop new export markets. It found this to be particularly true of the small and medium sized firms. It found that returns to the Commonwealth from taxes on grants and additional exports resulting from the grants scheme were calculated to recoup approximately 42 per cent of the entire scheme, which ratchets up the cost benefit ratio by another factor of two. This makes an already highly economically efficient scheme even more efficient.

One of the most pleasing aspects of the review's findings was that around 45 per cent of the exports created were in the services industry. With increasing emphasis on the burgeoning service economy, it is important for the future that exports be in these expanding sectors rather than in sectors whose importance to the economy is diminishing. Thus the scheme contributes not only to creating exports now but to establishing a basis for future exports by creating them in growing sectors. This review was an endorsement of the export market development grants scheme.

The constant speculation about the future of the scheme is hardly encouraging to other government programs. What does it mean for other programs of industry assistance in the run-up to the budget, particularly the ones that do well and are economically efficient? Even if a program fulfils its obligations, is found to be efficient, is able to return part of its cost to budget and contributes to improving our balance of trade, it is still not immune from this government's ideological obsession with cutting. The government is not being asked to do anything to the EMDG scheme that it did not expressly undertake to do prior to the last election.

Industry assistance must be recognised for the substantial role that it plays in strengthening the Australian economy and export potential. The government cannot afford to reject the notion of industry assistance out of some blind ideological obsession with small government or reject intervention in the economy per se. As has been stated continually in this debate, what this scheme is about is partnership—partnership between industry and government to achieve new export growth. The government cannot afford to because the EMDG scheme is proof of the value to the economy in providing strategic assistance. For the thousands of innovative and creative export orientated firms who have been thrown into confusion by the decision, it is time for the government to come clean on its plans for the EMDG scheme.

Whilst this debate has been truncated, which is disappointing and against what we were promised—to see the supremacy of parliament over the executive—the opposition would not have had to enter into this debate with as much gusto, given that in principle we are in agreement with the main points of this bill, if the Minister for Trade, the Leader of the National Party, the Deputy Prime Minister of this government, was able to come into the House and guarantee the continuation of the export market development grants scheme. It is a promise that was in the platform of the coalition before the election. It is a promise that, if it came out now, would give certainty to the many companies that are willing to take on the challenge of creating new export growth.