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Wednesday, 16 June 2010
Page: 5577


Mr TRUSS (Leader of the Nationals) (5:54 PM) —This is my third attempt to complete this speech in response to the Export Market Development Grants Amendment Bill 2010, which makes some significant changes to the eligibility for receiving export market development grants. In my previous comments on this matter, I made reference to the fact that these changes reverse most of the decisions and promises that the government made at the last election—promises which were not funded and therefore have led to a significant blow-out in the cost of the EMDG Scheme. The government said at the time these changes were made that they were sensible changes and would revitalise and update the EMDG Scheme. Subsequently there was a review by Mr David Mortimer, who recommended that these changes should be reversed. In fact, that is what this legislation proposes. It is an example of government policy in disarray. The bill breaks four of the election commitments that the government made in relation to the EMDG Scheme, and one commitment, in relation to a negative list for eligible claims, was never even implemented. So this is another example of trashed government election promises.

This bill will reduce the maximum grant available under the scheme from $200,000 to $150,000, reduce the maximum number of grants available for an individual recipient from eight to seven, cap the intellectual property registration expenses at $50,000 per application, increase the minimum expenses threshold from $10,000 to $20,000 and increase the eligibility income limit for members of approved joint venture consortia from $30 million to $50 million.

The EMDG Scheme reimburses eligible enterprises for 50 per cent of costs spent on specific export promotion activities above a threshold. The scheme has been capped at $150 million per annum since 1997 and through the forward estimates, except in 2009-10, when a $200 million cap was applied. Labor knew that its changes to the EMDG Scheme would cost more, but it only funded the increase in the cost for one year. It did provide a top-up in 2008-09, but that was to allow for better refunds for claims in the 2007-08 year under the previous government’s scheme. The ALP made the criteria for the scheme more generous even though there was insufficient money to pay for the old scheme. In reality, industry had been used to getting a full reimbursement—they had relied upon this because it had happened consistently under the previous government and then also under this government—but now there is simply insufficient money to meet the obligations under the scheme. So the government is choosing to wind back the eligibility rather than provide additional funds.

Claims are reimbursed retrospectively for expenditure incurred in the previous financial year, pro rata, up to a cap. Around 5,100 enterprises per year apply for grants, of which 80 per cent are SMEs. The government has made a complete mess of the EMDG Scheme. To repeat: soon after taking office the government expanded the scheme by lowering the eligibility expenditure threshold from $15,000 to $10,000, increasing the number of grants from seven to eight and increasing the maximum grant from $150,000 to $200,000. The cost of these changes was estimated at $50 million per year, but increased funding was only provided in 2009-10. The government commissioned Mr Mortimer to carry out a review of the EMDG Scheme. Mr Mortimer reported in September 2008 and Minister Crean promised a government response by the end of that calendar year. Then a response was promised in the 2009-10 budget and then in the 2010-11 budget. In reality, while there has been no specific response to the Mortimer review, the review recommended that most of Minister Crean’s earlier changes be reversed and so this bill is a partial response to the Mortimer report.

There is now a shortfall of about $30 million for grants payable in 2009-10 and there will be a shortfall of $80 million in 2010-11. This means that exporters who have invested in good faith in developing markets will have their reimbursements drastically reduced. The bill continues the government’s record of broken election commitments and administrative incompetence and is a major embarrassment to the minister. I suspect that he would have asked for the extra money that he needed to fund the scheme but was knocked back in the government’s expenditure review process, no doubt because the government needed to find $1 billion to fix the pink batts insulation mess, $1 billion to deal with asylum seeker issues and $1 billion or more to cover up for the extra costs of the school halls initiative.

These changes that the government made, which were underfunded, are now being reversed because the government could not find the extra $50 million or thereabouts to make this grant scheme work as was originally intended. The changes proposed by the government will reduce the total value of grants claimed to about $200 million per annum. This means there will still be a shortfall of $50 million per year in 2011-12 and subsequent years and payments of grants will be reduced accordingly. The shortfalls of $30 million in 2009-10 and $80 million in 2010-11 will remain. In other words, the changes made by this bill do not solve the problem. Every year from now on applicants will receive a small initial reimbursement and every dollar claimed over this amount will be reduced by up to 80c. The impact on small exporting businesses and on the credibility of the EMDG Scheme will be devastating.

I have received a letter from one small business owner who lodged a claim this year for just under $200,000, which had been approved. He stands to lose about $70,000 and now will be unable to expand the export arm of his business, including plans for further employment. He says that during the global financial crisis:

I kept my nerve and did my best to retain my team and keep driving our position overseas. I did this believing I had the backing of my federal government to do so. Now they are reneging on a substantial sum of money, yet in all of their hollow rhetoric they claim to be the champions of the economy and small business.

Remember that this small business owner spent the money in 2008-09 and he had no reason to expect that his claim would not be paid in full, particularly as the previous government paid 100 per cent of claims and Labor topped up the 2008-09 shortfall in the 2009-10 budget. The Mortimer review had something to say on the need for business certainty. Mr Mortimer said:

The Review considers, however, that a priority is to give applicants certainty about the level of funding they will receive. The current uncertainty, created by demand for funding under the scheme greatly exceeding the available funding levels, substantially negates the objective of encouraging exporters to commit additional resources to export promotion.

These comments were backed up by a representative of Chocolate Graphics International, an SME located on the Gold Coast, who was quoted in the Mortimer report as saying:

Can I emphasise that it is very important that the applicant knows how much they will receive back, as the uncertainty as it appears will happen in 2008 is absolutely a disaster for our cash flow for a small company like CGI. We had planned to participate in export shows in communication with Austrade in Italy and China. But considering we will not receive our entire claim, plus the future is uncertain, we will have to cancel these planned export events.

The only certainty that this bill provides is that the level of reimbursement will remain uncertain. In spite of the cutbacks in this bill, the EMDG Scheme is still underfunded. The government is anxious to have this bill dealt with before the end of the 2010 year. It is clearly not an uncontroversial bill. There is quite a lot of dispute and concern about it, but the opposition will cooperate with the passage of the bill. Businesses do not like the changes—they have been let down yet again by the Rudd government; more promises have been trashed—but they will know the rules. There will be some degree of certainty if we allow this legislation to be passed. It is a sad thing that many will now decide not to export, not to try. There will be lost opportunities for our businesses, but at least with the passage of this bill there will be some certainty as to what level of government support is likely to be available. That will be much less than business has been used to and there will be more uncertainty than has been the case in the past but at least they will be certain that it will be uncertain and can make their decisions on that basis.

Australia has recently been questioned about its sovereign risk. This is yet another kick for business. No-one can ever be sure when next the government will break the next of their election commitments. The opposition will not oppose the bill. We recognise that it is important that there be certainty for industry, but we are disappointed that the EMDG Scheme will not be properly funded and therefore those who tackle the difficult task of seeking to export from our country will not get the financial support they have expected and received in the past.


The DEPUTY SPEAKER (Mr KJ Thomson)—Order! The question is that the bill be now read a second time. I have pleasure in calling the honourable member for Denison and advise the House that points of order are unlikely to be entertained!