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Tuesday, 25 June 1996
Page: 2704

Mr KELVIN THOMSON(9.03 p.m.) —Labor oversaw a transformation of the Australian economy during the 1980s from one based principally on primary exports to one with a more diversified range of exports, particularly in manufactured goods and services. Had our training base not been so diversified, we would have seen, in the words of the member for Lalor (Mr Barry Jones), the `economy vaporise' because of diminishing returns from primary exports and a long-term decline in returns from agricultural products.

We were able to diversify, and a growing proportion of our exports of manufactured goods has been through small and medium sized firms—for example, the firms identified by McKinsey in his 1993 report titled Emerging Exporters. McKinsey identified that many of the small and medium sized firms discovered their export markets as a consequence of local production, but the critical step towards sustainable and increasing exports depended largely on government assistance.

That assistance has taken several forms. We have had contact within foreign markets, and the former government built up Austrade as a principal aid to businesses entering foreign markets. We had the 150 per cent research and development taxation allowance. We had the development import finance facility scheme, the DIFF. Finally, we had the subject of this bill, the export market development grants.

The small and medium sized firms that find capital raising and lines of finance hardest to secure need the greatest assistance from government to overcome the vagaries of the market. The EMDG scheme has helped to provide this valuable assistance. The roll call of the EMDG scheme is impressive. In 1994-95, some 3,279 companies participated in the scheme. They did so in recognition of the fact that the scheme was a valuable contributor to the nation's export development.

There is now great concern within business circles about what is seen as the Howard government's triple whammy. First, there is the proposal to abolish DIFF. The Minister for Foreign Affairs (Mr Downer) wants us to believe that DIFF is a lightweight matter of little consequence. I think that has been comprehensively demonstrated in recent days not to be the case. It matters a great deal to our trading partners, as it does to companies like Transfield Defence Systems, which, until the minister's announcement, had reasonable prospects of building warships for the Philippines navy.

Secondly, research and development taxation deduction applications have been effectively frozen for months. Many companies across Australia have utilised these programs at critical phases of their development. How many of these will falter with the reduction in support proposed by the government? How many companies that could follow that path will be denied the opportunity as a result of these cuts?

Thirdly, we have the export market development grants scheme, with which the opposition is greatly concerned. I will give the House an example from my own electorate of the impact of the triple whammy. Farley Cutting Systems, a company located in Glenroy, employs 80 highly trained workers. It is concerned about the situation in relation to research and development. It is concerned about export market development grants. It is also concerned about the impact of reductions in bounty and, in particular, the recommendations of the Industry Commission, the now Productivity Commission, that the bounty disappear as of 30 June next year.

People in the company have indicated to me that small to medium sized businesses such as theirs cannot have the grants radically withdrawn all in one hit. It could make their company unviable. Their company has had no consultation with the government. They have written to the Prime Minister (Mr Howard) and received no response. The value to them of export market development grants is in the order of $130,000 for this financial year. The value of the bounty to them is of the order of $300,000 this financial year. As I have said, it has been proposed by the Productivity Commission that the machine tools and robots bounty be withdrawn as of 30 June next year. The value of research and development to this company is of the order of $600,000.

Changes on all fronts would be very damaging for this company which employs many people in my electorate and also provides exports dollars for this nation. Some 50 per cent of their product is exported. The bounty enables them to employ better skilled people. They can differentiate their product. It provides them with an important competitive advantage in world markets. Without this they will be less competitive. Farley Cutting Systems is most concerned about the government's proposals.

Southcorp Whitegoods received an EMDG of $16,900 in 1994-95. This company is based in Brunswick and is a major employer in my electorate. Yakka Industrial Wear received an EMDG in excess of $9,000 in 1994-95. Yakka has established itself over many years as one of the world leaders in industrial work wear manufacture. It has invested in warehousing and storage facilities in the northern suburbs of Melbourne. It has introduced EDI, cartonisation, bar coding, carousel picking and garment management systems. They have all helped make the Yakka distribution centre one of the most efficient and modern facilities of its type in the country.

I draw the attention of the House to an example outside my electorate—Vision Systems. This company is in the electorate of Chisholm. It specialises in video based and other security systems. It has indicated that it finds the changes to research and development, tariff concessions, EMDG and DIFF, and the retrospectivity that may come with them, counterproductive to its future operating plans. I suggest that the Minister for Health and Family Services, the member for Chisholm (Dr Wooldridge), as a participant on the Expenditure Review Committee, might have a difficult time explaining to Vision Systems the government's moves in terms of industry policy.

The government is being small minded. It needs to do more rather than less to promote exports of manufactured goods and services. This is the second time the Prime Minister has tried to fiddle with this scheme. The first time was back in 1987. That resulted in the very public resignation from the Liberal Party of the then President of the Australian Chamber of Manufactures, Mr Peter Frankel. I believe that the Prime Minister can expect similar reactions if the August budget sees the demise of the EMDG scheme.

The government needs to recognise that it is precisely the small and medium-sized businesses which have benefited most from this scheme and that the record shows that in excess of 70 per cent of the 1994-95 grants went to companies with less than 25 staff. It concerns me to hear the pejorative expression `business welfare' going around. Some believe that we need to cut back on business welfare.

It is a pity that some people think that by invoking the expression `welfare' they can label something in an adverse way. I think we all have an obligation to provide for those who are less fortunate than us. I am disappointed that that expression is used. It is also disappointing to hear it because the manufacturing industry earns export dollars and provides jobs for this country.

I am concerned about the fact that this represents, if the export market development grants scheme is indeed abolished, a breach of yet another coalition promise. From a government which has made such a virtue of honesty, we have seen a procession of promises jettisoned and abandoned. I draw the attention of the House to the fact that the Deputy Prime Minister (Mr Tim Fischer), for example, indicated to the National Press Club on 15 February that EMDG would stay. We had numerous coalition statements saying, `We will maintain the export market development grants scheme.' Finally, in the area of tourism, we had the coalition promising to extend the export market development grants to that industry. It said in one of its documents:

The Coalition will end Labor's deliberate discrimination against the Tourism Industry and its operators under the Export Market Development Grants (EMDG) scheme.

What a piece of monumental hypocrisy it would be for a government that promised to extend the scheme and made much of its proposal to extend the scheme to now abandon the scheme. I support the position taken by the opposition. Export market development grants have worked well in this country and they should be maintained.