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Tuesday, 25 June 1996
Page: 2698


Mr McMULLAN(8.31 p.m.) —I am very pleased to have the opportunity to briefly join in this debate and to support the remarks put by the shadow minister for trade and the shadow minister for tourism in this matter. In so doing I am pleased to speak after the member for Isaacs (Mr Wilton), because I remember during the election campaign, when he was candidate for the seat of Isaacs, attending functions in what is now his constituency and dealing with this very issue of how we could get more small business in his region into the export business with the assistance of Austrade and AusIndustry. They were very effective programs, and I was very pleased to receive his assistance in doing that at that time.

I am particularly concerned not only about developments in relation to the EMDG scheme but also about the pattern of developments which is being displayed. We are seeing under threat every government program that has, at its core, the enhancement of Australia's economic engagement with Asia. One has already gone; that is, DIFF—a very important scheme that has successfully brought many companies into the export business in our region and has formed a base upon which many of them have built ongoing, successful businesses in the region.

I know from first-hand experience about putting forward what one thinks are very effective submissions to ministers in the countries in our region on behalf of Australian companies—successful, efficient, competitive Australian companies. The example most vivid in my memory—but not unique—is where I spoke to an Indonesian minister on behalf of an Australian company. His response was, `What terms can you offer?' If there had been no DIFF scheme, we would have been off the list. That company would have hit the wall and failed to achieve a contract which it could otherwise have won, and Australian jobs would have been at threat. As a consequence of the unwise decision of this government, that will now happen.

This matter has sometimes been dismissed lightly. It has more recently become the subject of all sorts of political controversy about issues to do with misleading the House. But the core question about whether Australia should have abolished the DIFF scheme has been brushed aside. I suggest to those people who think this is not important that they attend the factories and offices and other workplaces where the DIFF scheme has generated employment opportunities and sustained jobs and explain to people—the executives, the middle managers as well as those on the shop-floor—why this scheme is not important and why all their competitors should have it but not them.

When Alcatel is looking to fill a contract around the region they can look at any of their subsidiaries except their Australian one. Their French subsidiary will have access to soft loan finance, all their other subsidiaries will have access to soft loan finance—but not their Australian subsidiary.

The Australian infrastructure consortium program—a new, emerging scheme—was earlier suggested to be under threat. I hope that does not continue to be the case. I saw directly significant potential for that to assist Australian companies too small individually to compete for major contracts to form Australian based consortia and win substantial parts of them. There is a trillion dollar infrastructure business in this region.

The most vivid example was the development of an Australian consortium pursuing the second Guangzhou airport—a very important project involving billions of dollars. Australia will not get all of it, even with this scheme. But, if the Australian infrastructure consortium program goes, we will get none of it. That will be a tragedy for many fine architectural firms, many fine engineering firms and some of the construction firms—those very successful Australian firms which are developing hi-tech capacity for input into major airport projects. If they cannot form a consortium, if they cannot be part of a bigger project team, they will not win bits and pieces; it will go to some other consortium, funded with assistance like this from a host government in Europe or North America.

In the AICP's case it was essentially a revolving fund. There were not the great outlays by the Australian government, which is also the case for the international trade enhancement scheme. I cannot believe the rumours that that is under threat because, in effect, there is no appropriation for the ITES scheme. It is a revolving fund, but I have seen practical examples of companies in every state in Australia building on their export performance, enhancing their export performance, as a result of ITES loans. I remember particular grants made in Western Australia to Bates Saddlery and in South Australia to some of the big wine companies, enhancing export performance and winning trade opportunities for Australia.

Some people tell me the export access scheme is under threat. It is directly run by industry organisations particularly to assist small business into some of the key export markets, including Japan and the United States. There are also the overall cuts to Austrade itself. Those five examples—the cuts to DIFF and the AICP program; the threat to export access, to ITES and to Austrade—are the background against which one could look with alarm at the EMDG reports.

Initially it was speculated that the scheme was to be abolished. I have to say I never found that credible. I find it incredible that there is even now serious consideration that the scheme might be halved, but that seems to have the ring of authenticity from the Expenditure Review Committee. As someone who has been through an Expenditure Review Committee on behalf of EMDG, I thought, `How could you halve expenditure on a program that is not appropriation based but which is application based?' If people fulfil the criteria, they get the money. It is not a share of a fixed pool; it is determined by the quality and number of the applications.

It seems to me there are only three ways. One way is to reduce the 50 per cent grant to 25 per cent. Quite obviously, all other things being equal, that will halve the outlays. I think that is probably going to form the category of `too smart by half' and is not likely to be proceeded with. If it were, it would, I suppose, achieve the perverse effect of bringing tourism up to the top rate, because everybody would have come down to the tourism rate. But that is not my expectation. I think that is not likely.

A second way is to convert the scheme into a capped grants and application scheme. In other words, you do not get your entitlement by meeting certain legislative criteria, but there is a capped amount of money and you apply. It is a process similar to ITES, by which the board of Austrade, or someone else, makes decisions to make grants against that capped amount. The problem with that is it would take much too long to get that scheme established, you would not get any savings in the first year and there are significant administrative costs. So I think that is unlikely.

I looked to a third alternative—the one I think is the most likely—which is to devise a program to cap the outlays: not dissimilar to the way that it is done, for example, at the Australian Wheat Board, where a fixed pool of money is allocated and the amount that each applicant gets is determined by the number of successful applicants divided into the total pool of money. Perhaps you would get an initial grant—not unlike an advance to the Wheat Board—at the 25 per cent level and then a top up, depending on how much is left in the pool and on the number of other successful applicants.

That seems to me to be the most likely, but what does that mean for exporters? It means, firstly, as a matter of definition less support and, secondly, less certainty in the amount of support. When you make commitments and you are measuring your annual budget, you cannot be sure how much support you are going to receive under EMDG—you have to speculate. It may be that, after five years operation of a scheme like that, you could pretty well assess what your chances were of getting support. But certainly in the first few years there would be a high degree of speculative risk activity, exactly what we tried to avoid with EMDG: reducing the risk of making financial commitments in exporting, particularly for small companies.

I would be concerned if any of those three schemes are developed and their net result is that the funding to EMDG is halved. I think the third one—which, I suspect, is the most likely—has a significant downside for small business and for Australia's export performance. That flies in the face of any rational assessment of economic and social objectives that any government should be setting down for Australia. Any rational assessment of Australia's future says that what we should be focusing on is increasing manufactured exports, increasing high technology services and increasing our economic engagement with the fastest growing region in the world at our doorstep—Asia.

To move through that way—moving to the higher growth path that the report which I released in January established was possible—so that Australia can sustain about a one per cent higher growth performance than it has traditionally been able to do without starting to run into the constraint of the current account deficit will enable us to establish and maintain that level of economic growth at about four per cent, and that will mean unemployment can come down. It would be a tragedy if that capacity which we have generated in the last decade were to be turned around by short-sighted policies—particularly in relation to the Export Market Development Grants Amendment Bill (No. 1) 1996—and by cuts to EMDG.

Cuts in outlays are one thing. We have debates about our preferred views of fiscal policy, and we disagree with the government's fiscal policy and with this artificial requirement that they have generated that, somehow or other, they have to cut $8 billion. It does not matter if the starting point shifts; they still have to cut $8 billion. They have to move a predetermined amount from wherever the starting point is. But, if they must make those cuts, let us approach it with some strategy and purpose. Do not make the cuts in the areas that maximise our engagement with Asia and our manufacturing and high technology service exports. Do not interfere with that boom in our exports of high technology goods and services.

This is a scheme that has been measured time and time again, reviewed time and time again, and found to be effective. The most recent reports say that typically mature exporter firms in most industries will generate 15 to 25 times the grants paid to them in additional exports. Less experienced exporters will achieve a lower level. The survey suggests the scheme also has some effect on encouraging firms to accelerate their planned development in new markets, a significant impact on improving firms' business practices such as quality management and best practice production technologies, and a moderate impact on improving firms' overall competitiveness in the domestic market—that is, developing to meet the international competi tive market enhances domestic performance also. And it is not surprising.

It was also assessed by Tim Colebatch on Thursday, 2 May when he was looking at the cut options this government might be addressing. In a long article, from which in other circumstances I would quote extensively, he said that if they must cut the budget:

. . . one of their priorities . . . should be to choose savings options that will have least impact on future growth.

Later in the article, he says:

The trick now is to keep the momentum going to take us to the higher part and the biggest rewards.

To do that, the Costello razor gang must abandon the soft option of slashing funds for business to grow and export.

In the course of a debate with me during the last election, the now Minister for Trade (Mr Tim Fischer) said, `EMDG stays.' Everybody who was listening did not think he meant just the title; they thought he meant the scheme. I hope that my worst apprehensions, that now we will have the title but not the scheme, are not fulfilled.