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Thursday, 12 December 1996
Page: 7397


Senator LUNDY(6.04 p.m.) —I rise in support of the amendment moved by my colleague Senator Cook. Australian business must really be questioning their vote in the last election, believing that they would be voting for an environment of growth. All they have received from this government in the area of industry policy has been negative. Funding to Austrade and AusIndustry has been cut by $134 million. The computer bounty will be abandoned, while changes to syndication and tax concessions will reap no less than $2.2 billion out of industry research and development over the next four years.

The comparison is that carefully managed government intervention under Labor through targeted programs encouraged more investment in research and development and provided essential support to new and expanding exporters. This Liberal government's policies will inhibit growth in commercial investment in research and development that Australia has enjoyed over the last decade.

Ten years ago, Australia was trailing the world in research investment. We were destined to a lower standard of living if our industrial base did not become more sophisticated. This was recognised. The Labor government sought, through a variety of assistance and incentive schemes, to turn around this nation's investment in research and development. In 1983, commercial invest ment was at 0.23 per cent of GDP. Through government intervention, it grew to 1.61 per cent in 1994-95. If that growth continued for another 10 years, it would have seen Australia move from an economy of assets to an economy of knowledge.

This government's policies place this development in jeopardy. All respected commentators have claimed that this government's changes to what has been described as one of our most successful industry policies will result in a stifling of the expansion and momentum that has been gained in research investment. A major plank of this policy is the 150 per cent tax concession on research and development expenditure. This government's intention to reduce that to 125 per cent constitutes nothing less than a halving of the incentive, because its value is in the percentage beyond the 100 per cent that would be available if the expenditure is written off as a normal expense. So this government has effectively halved the incentive to business to invest in this area.

The government intends to also abandon the successful syndication scheme that has brought researchers together with financial backers to produce not only some of the strategies and programs outlined by Senator Sherry but also leading edge technology which we need to take our economy into the future. As Senator Cook and Senator Sherry both outlined, the syndication scheme is the embodiment of the cooperative and an attack on the provisions can be interpreted in no other way than a fundamental handicapping of small business, particularly in rural and regional Australia.

Even if this government recognises the value of research and development to our economy, it is taking a complete gamble that there will still be businesses willing to invest in research, regardless of the level of government incentives. I am sure there will be some, but all predictions are that many investments will just not go ahead, or they will go overseas where the incentives are far more attractive. Recent surveys of companies already investing in this area have indicated that up to a quarter of respondents would be considering moving their research overseas.

According to the Bureau of Industry Economics, the small business sector contributed almost $500 million to Australian research and development in 1993-94 and spending in this area by small business has had a faster average annual growth rate than expenditure by big business. Indeed, the sector expenditure on research and development trebled in the decade from 1984. If syndication becomes a scheme of the past, then many small to medium sized enterprises will cease investment in research because they cannot share the financial risk by taking on a partner. The government's alternative Start program does not offer small to medium sized enterprises any capacity to advance through research and development. It is, therefore, a bill that I believe exposes the muddled, mixed up and scatter-gun approach by this government to fostering small business growth and expansion. It will not assist anybody in the corporate sector unless they sit at the bigger end of town.

For a government which publicly commits the success of the national economy on the backs of small business, their policies are quite incredible. We are not talking about small enterprises like the local corner store whose investment in research probably would not get past a bit of community market research. There are a multitude of small enterprises who are technology and research driven in their quest to be nationally and internationally competitive. The information technology sector is one quite classic example of this.

Information technology, I believe, will be the major industry of the future. Australia really could be at the crest of the wave of this development—I have spoken about this in this place before. Revenue to Australia from information technology grew from less than $20 billion in 1990 to over $33 billion last year. Significantly, this is also an industry centred on dynamic, small enterprises.

The Australian Capital Territory and region is home to quite a vibrant information technology industry, dominated by small operators. Nationally, it is important to remember that 95 per cent of these businesses employ fewer than 20 people. Government incentive schemes meant that high risk ventures for small firms would be rewarded in some way, if not in product development. This government's industry policy will not severely hamper the development of this one sector that they are relying on so heavily to create jobs, from the micro to small and medium enterprises.

The minister for industry's recent attempts to secure further incentives for small business is another example of this government's patronising and narrow understanding. Yet we again see Mr Costello's juggernaut of fiscal contraction flatten Mr Moore's attempt to secure cabinet support for a Commonwealth procurement scheme that was promised by the coalition prior to the last election. According to press reports, this policy would have guaranteed at least 10 per cent of the Commonwealth procurement budget for small to medium enterprises and link the procurement process with local industry development. This would have been a sound policy that would have been applauded, certainly in my own region, the Canberra region, particularly having been starved of funds, with cuts to the public sector and a lack of innovative and forward looking policy for the national capital region.

This type of initiative could have alleviated some of the pain that is being felt by residents of the Australian Capital Territory and surrounding area, pain that the Prime Minister (Mr Howard) publicly acknowledged yesterday. But again, the anti-interventionist stance of the Treasurer (Mr Costello) has won through and steered the government away from a policy that would have embodied sound industry development. A smart government would be encouraging the nation's intellectual capacity. This government is putting it to sleep.