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Wednesday, 26 June 1996
Page: 2294

Senator SPINDLER(6.32 p.m.) —The Senate tonight is debating two bills cognately, the Customs Amendment Bill 1996 and the Customs Tariff Amendment Bill 1996. The first bill is one that the Australian Democrats will support. It is designed to revamp and streamline the administration of the policy by-law system and, generally, to reform the tariff concession system to ensure that Australian industries are protected and advanced in their efforts to maintain jobs.

The bill seeks to remove the market test from the core criteria. It will leave substitutability as the sole criterion for determining whether a concession will be granted. Clearly, this will provide additional protection for Australian manufacturers by making it more difficult for importers to obtain concessions. In particular, it will remove the scope for importers to obtain the concession on the grounds that it will not significantly adversely affect Australian manufacturers.

The Democrats believe that it is important to remove this test because of the difficulty faced by Australian manufacturers in showing that markets for its goods will be adversely affected. The only core criterion that will thus remain is the substitutability test which will ensure that concessions will be available only where there is no domestic manufacturer of a substitutable good. We agree that the honours for demonstrating that there are no substitutable goods produced in Australia should rest with the prospective importer, not with manufacturers. This part of the bill will remove a considerable burden from industry. Overall, the Democrats believe that this bill introduces changes which, while tightening up the tariff concession system, enhance it and improve the assistance it provides to Australian manufacturers.

I turn to the second bill, the Customs Tariff Amendment Bill 1996. It is interesting to note that the Minister for Industry, Science and Tourism, Mr John Moore, said that it was dreadful policy. It was proposed by both the ALP and the coalition during the election campaign and very clearly was designed to raise revenue. But like so many other measures that this government is seeking to introduce in response to pressure from the Treas ury and finance departments, it bears little resemblance to a carefully constructed policy based on what effects the moves to gain revenue will have. It runs counter to many statements that have been made by industry leaders and also by authoritative bodies that have looked at the effectiveness of the tariff concession scheme. In a 1991 inquiry, the Industry Commission found:

No case for terminating a tariff concession system which alleviates taxes on production inputs and on other goods in a wide area of economic activity.

That report identified lower consumer prices and higher national income as the result of these tariff concessions.

The government backed down on the initial proposal to impose a five per cent tariff after a tremendous outcry by Australian industries along with Queensland and Western Australian government backbenchers. Thus, we have the present bill, which is a compromise that really satisfies no-one. The effect will be to apply in substance a three per cent tariff where previously there was none.

As has already been stated by Senator Cook, this is a breach of an election promise. Despite government claims to the contrary, a tariff is, in effect, a tax. The industry minister, the Hon. John Moore, has admitted this. It is a three per cent tax on both consumers and industry and therefore on jobs. Let us make no mistake: if we load additional costs on our manufacturers and industries, it will mean that they will be less competitive in domestic and international markets. Their market share and sales will drop. Jobs will disappear and unemployment will rise.

That is the net effect of this bill which the government has brought to this chamber. One wonders what the policy substance of the bill is. What considerations lead to a bill which will demonstrably mean the loss of Australian jobs? It is also a backdoor GST, as has already been said in this chamber. Ordinary household consumers will be hit by price rises to a large identified raft of imported goods. Some of the items which will be hit include television sets, microwaves, vacuum cleaners, children's toys, playground equipment and neonatal equipment.

The Democrats believe that this very clearly is in breach of the government's promise not to introduce a new tax. The Democrats will therefore attempt to exclude this section. I understand that the ALP opposition is considering opposing this section of the bill. The Democrats are of a mind to support the opposition. However, we are also mindful of the government's need to raise revenue. We will therefore suggest to the government that—I have communicated this to the minister, the Hon. John Moore, this morning—if it wishes to separate luxury goods from necessity of life items in the list of consumer items, the Democrats would be quite prepared to accept the three per cent tax on luxury items.

It is very clear that the sole purpose of this bill is to raise budget savings. Very clearly, it is not good industry policy. I have already said this and I will say it again: to the Australian Democrats, that part of the bill which imposes a three per cent tax on components which go into Australian products for both domestic and international markets and on capital equipment which our industries have to buy is by far the worst part of this bill. It will very clearly and quite demonstrably cost Australian jobs. Once again, one needs to ask: what is the thinking behind this bill put by the government whereby, at a time when our unemployment is trending towards 10 per cent, it is happy to introduce a bill that will hamper our industries, make it harder for them to compete and make it necessary for them to reduce the labour force and throw people onto the scrap heap?

Australian manufacturing is already suffering. A survey undertaken this month by the Australian Business Chamber and the State Bank of Manufacturers in New South Wales found that for the sixth consecutive quarter the main indicators of production, sales, orders and profitability have weakened and that manufacturers have more than doubled the number of jobs they intend to shed over the next 12 months. Extrapolating the figures for New South Wales nationally, this suggests that overall job losses in manufacturing could be well over 12,000.

This bill will merely exacerbate the present situation and result in a further reduction in domestic manufacturing and an increase in unemployment. So much for the government's commitment to help small business. It will simply make life more difficult for many of them.

The government may well argue that this measure will not cause excessive pain to Australian industry and that a shift in the dollar has more impact on Australian industry than this change to the tariff concession system. But this simply ignores the fact that every percentage point of input costs matters and that, unlike changes in the value of the dollar, we do have control over whether we introduce this measure. This government is quite intentionally and deliberately introducing a measure that will harm industries and cost jobs.

The government is concerned to increase revenue. It is talking about the $8 billion black hole. We already know that the $8 billion black hole has been based on the extremely rubbery concept of economic growth forecasts, which have already been shown to improve, and that the $8 billion is no longer $8 billion. Be that as it may, the Democrats understand that the government wishes to increase revenue and reduce the deficit. It is a policy that we do not oppose. But we call on the government to give some thought as to where they cut and to consider the consequences of whichever cuts are imposed.

We believe that the government should not automatically follow the Treasury line. Indeed, I quote once again the industry minister, the Hon. John Moore, who himself has attacked this monopoly of advice which is coming from Finance and Treasury:

The conventional wisdom, the views propagated by those two departments, are virtually unquestioned.

I quote the Hon. John Moore:

I think it is very unhealthy that you just have this Treasury line. I am saying they are not always right.

Too right, they are not always right.

Only the other day, on 17 June, it was reported in the Australian Financial Review that the minister believes that the government's unilateral tariff reduction program may have progressed too quickly and been too far in advance on nearby countries. He said:

I think some of the past negotiations on APEC . . . have been a bit like the Dance of the Seven Veils, in which Australia has been getting them off and nobody else has.

That is certainly well and truly on record. Apart from New Zealand, Australia is the country that has been pursuing tariff cuts with the greatest alacrity. Our tariff bindings under the WTO agreement represent a commitment not to increase tariffs above certain levels, except by negotiation and with compensation for affected trading partners.

But, following the GATT Uruguay Round, Australia's commitments involved achieving an average tariff cut of 44 per cent relative to 1986-87, with an average final bound tariff of 10.9 per cent. However, the Australian government has announced a program of tariff reductions well in excess of that commitment involving a reduction in average tariffs of 70 per cent and a simple average tariff of 6.3 per cent in 1996-97.

If the government wants extra revenue, revenue that will not harm our industries, revenue that will not increase unemployment and not cost Australians jobs, the Australian Democrats are happy to give the government an out, to give the government an avenue where it can raise additional revenue. All it needs to do is to slow down the tariff cuts by 12 months and collect $700 million. It is very simple.

It is possible to do that well within the obligations that we have under WTO. It will not harm our industries; it will benefit our industries. It will give the government $700 million. We are prepared to move that amendment during the committee stage and we will challenge the government to accept it. I seek leave to continue my remarks later.

Leave granted; debate adjourned.