Senator HURLEY (2:05 PM) —My question is to the Minister for Innovation, Industry, Science and Research, Senator Carr. Can the minister inform the Senate what action the Gillard government will take in response to the International Monetary Fund’s call to maintain balance in the Australian economy?

Senator CARR (Minister for Innovation, Industry, Science and Research) —I thank Senator Hurley for that question. The IMF has once again strongly endorsed the government’s economic policy and its handling of the global financial crisis. It has also confirmed that growth in the resources sector creates challenges which reinforce the need for responsible economic management. As the Treasurer has noted, the government is determined to create a stronger, broader and more competitive economy that benefits all Australians. A diversified economy will reduce the risk of instability in any one sector or any one major export market, which might, in fact, if it were to occur, drive down confidence in the whole economy.

Diversity does not mean propping up inefficient and non-competitive industries. It means we must support productivity growth across the economy through our investments in education, skills, infrastructure and innovation. This is one reason why we are investing so heavily in universities and science research programs to enhance the productivity and the productive capacity of our industries. That is why we are driving innovation and renewal in established industries and it is why we are reforming research and development tax incentives to support small and medium sized enterprises prepared to engage in innovation. That is why we are doubling the level of support for small and medium sized enterprises engaged in genuine R&D and that is why we will be calling upon this parliament to support those reforms. (Time expired)

Senator HURLEY —Mr President, I ask a supplementary question. How does the minister respond to claims that the government’s support for industry will stifle opportunities in the mining sector?

Senator CARR (Minister for Innovation, Industry, Science and Research) —I thank Senator Hurley. First, I remind senators opposite that manufacturing is a strong and critical part of Australia’s economy. It adds value to the resources that we mine. It provides some 10.2 per cent of GDP and accounts for some 9.2 per cent of employment. Mining, by comparison, accounts for eight per cent of GDP and I think some 1.2 per cent of employment. Second, it remains a straw man argument to claim that mining and manufacturing are locked in some sort of zero-sum contest. The fact is that both sectors benefit from the resources boom. The mining boom is creating great demand for products and services. (Time expired)

Senator HURLEY —Mr President, I ask a further supplementary question. How does the minister respond to the suggestion that the government must hasten Australia’s return to surplus by slashing research and development spending?

Senator CARR (Minister for Innovation, Industry, Science and Research) —I was appalled that during the election campaign the coalition sought to slash research and development expenditure. They sought to impose a policy upon this country of removing $1 billion from the EIF program. They sought to do that and still they could not cover up the $11 billion black hole that they left in their own costings. We saw that this government believes in responsible economic management, including targeted investment in programs that drive economic growth.

Honourable senators interjecting—

The PRESIDENT —There is a little bit of excitement in the chamber on both sides. The time for debating the issue is at the end of question time.

Senator CARR —Let us not forget that the IMF has said that the time frame that this government has set for the return to surplus is appropriate. This is in sharp contrast to the slash and burn policies of those opposite. Investment in research and development by government and industry will boost our capacity to generate, identify and take advantage of new ideas and new investments.