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Monday, 16 June 2003
Page: 16480

Dr EMERSON (8:52 PM) —The Export Market Development Grants Amendment Bill 2003 slices the EMDG pie more thinly. It is a piece of legislation born out of a necessity, a necessity created by the government's cuts to the Export Market Development Grants Scheme. This scheme was a very important policy instrument under Labor. Labor was genuinely com-mitted in government to promoting exports, to the point where Labor's Export Market Development Grants Scheme reached a total of $202 million. One of the first moves of the incoming Howard government was, in its first budget, to cut both the Export Market Development Grants Scheme and the 150 per cent R&D tax concession—two crucial policy instruments for taking Australia on the high road to high skills and high wages. It cut the Export Market Development Grants Scheme from $202 million back to $150 million. To compound the felony, it capped the EMDG Scheme at $150 million.

The operation—a combination of that cut from $202 million to $150 million and the capping at $150 million—has meant that there has been a 36 per cent cut in the value of the Export Market Development Grants Scheme in real terms under this government. Under the pretence of increasing access to the EMDG Scheme for small business, the government is dishing out an ever smaller EMDG pie to more applicants. This is typical of this government. It is a government that claims less is more. In the great traditions of the Ministry of Truth in George Orwell's Nineteen Eighty-Four, it claims that less is more, that a cut is an increase. In fact, it is very well known for its capacity to cut a program, two years later to partially restore it and then claim it as an increase. But that has not happened with the Export Market Development Grants Scheme. It has not increased it at all—it has only cut it. It cut it once dramatically, in 1997, from $202 million to $150 million, and then let the corrosive effect of inflation in subsequent years reduce the value of the EMDG Scheme, in real terms compared with the level it reached under the previous Labor government, by 36 per cent.

Members of parliament and the broader community may not be aware of the term `modulation'. Modulation is what this government practices in relation to schemes such as this. Because the pie is fixed in total, it has to be sliced more thinly amongst the applicants. How does the government do that? The answer is modulation. Modulation means that any grant above $60,000 is then not paid in full. Two years ago in Senate estimates it was revealed that the government was paying grants in excess of $60,000 only to the tune of 75 to 80 per cent. More recently the government had indicated that, because the EMDG Scheme has been held constant and is therefore contracting in real terms, the modulation would mean that grants above $60,000 would only be handed out to the extent of 50 per cent. But in a more recent estimates hearing it became clear that modulation was having a greater impact than that—only 30 to 50 per cent of payments above $60,000 were being made.

Let us be clear about this. The Export Market Development Grants Scheme is the chief policy instrument for encouraging exports. It is quite astonishing that at a time when exports could hardly be said to be going swimmingly the government is slicing the EMDG pie more thinly, having cut its value by 36 per cent in real terms. When I say that exports are not going swimmingly, I could be accused of an understatement. In the last year, 2002, Australia experienced its biggest export slump since Melbourne hosted the Olympics back in 1956. That is a very long time ago, but we experienced our biggest export slump since 1956 just last year. It was no one-off event: already Australia has recorded 17 successive trade deficits, with no end to this succession of trade deficits in sight.

How is the government responding to these 17 successive deficits? The trade minister, in commenting on December's trade deficit, which was $3 billion neat and the worst trade deficit in Australia's history, welcomed that trade deficit as a sign of investor confidence in the Australian economy. Presumably, if the trade deficit had been $3.5 billion, he would have welcomed it even more warmly. If it had been $4 billion, he would have enthusiastically embraced it—because it seems that the bigger the trade deficit the better the news, the greater the investor confidence in the Australian economy. We were pretty amazed at that sort of response. It came to our notice that subsequently, in commenting on the next deficit, the trade minister said that it was not `cause for concern'. Then, in April, the most recent trade deficit—a new record of $3.1 billion—the trade minister said, at last, that this was `not good'. It was a bit of an understatement.

A $3 billion trade deficit, a record in December, he welcomes as a sign of investor confidence. Subsequent trade deficits he says are not cause for concern. Then finally the penny drops. When we have another record trade deficit of $3.1 billion, the trade minister finally concedes that this is `not good'. You would think after 17 trade deficits in a row he had probably cottoned on to the fact that Australia had a problem—the problem is trade deficits that contribute each and every month to Australia's record foreign debt, which has now crashed through the $360 billion mark. I will have more to say about Australia's foreign debt when I resume my comments on this bill at a later time, because I notice that the time is getting perilously close to nine o'clock.

When the government is asked, by way of explanation, `What's the problem with these trade deficits? What's causing them?' the answer is, `The worst drought in 100 years.' The worst drought in 100 years could not be responsible for each and every one of those 17 successive deficits, because there was not a drought when that succession of deficits started. I notice that the clock has struck nine, and I will resume my speech at a later time.

Debate interrupted.