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Monday, 2 March 2015
Page: 1728


Dr GILLESPIE (Lyne) (21:15): I rise to speak about government achieving value for money and the concept in reality of reverse tariffs. Achieving value for money is always important in any transaction, but it is critical when you are purchasing $40 billion worth of goods and services with third party funds. This is the situation that the federal government departments find themselves in annually. State and local governments also have enormous procurement, and a similar principle of achieving value for money is just as paramount for them.

Regular transactions of size by the federal government mean that government decisions exercise enormous influence in the markets in which they purchase goods. Long-term government supply contracts often run for years and can deliver successful tenderers a degree of certainty and an ability to plan and enact long-term efficiencies to put a solid base under their businesses that allows them to invest and achieve other outcomes that otherwise would not be possible. On the flip side, the loss of a long-term contract, whether it is with a private purchaser or government, can render any business a major blow. But many Australian domicile companies producing goods are often unsuccessful at securing government contracts on the basis that value for taxpayer dollars is equated to the lowest ticket price alone.

It is entirely sensible and good practice in business-to-business transactions to assess value for money on the criteria of ticket price and quality of goods that fit the purpose alone. But it is not exactly the same for governments as different consequences follow government transactions. Governments not only own the good or service but also can recoup a large slice of the purchase price if they purchase from Australian domicile producers. When a federal, state or local government department purchase goods from genuine domestic based producers, treasuries can potentially receive a rebate of up to 40c in the dollar between all of them down the line from PAYE tax, Medicare levies, company tax and GST as well as all of the same from associated local suppliers who benefit from the local economic multiplier effect.

There are even benefits to the humble local council government with councils raising rates from businesses and employees as well as equipment purchases of businesses in their local area that attract miscellaneous fees and charges. The Department of Social Security also benefits when local employment continues and government avoids the subsequent liabilities of Newstart benefits and employment stimulus and retraining programs.

Decisions on huge government purchases appear to be too often made within departmental silos without the costs of benefits to Treasury or Social Security being assessed. For example, in the paper industry, manufacturers recently asserted that 15 of 22 federal government departments purchased simple A4 copy paper and other paper supplies from overseas manufacturers. Yet recently one plant in the Shoalhaven announced its closure, and 75 people will soon be unemployed. This same paper industry have analysed their benefits to government. For every ream of paper they produce locally, the government gets an immediate return of $1.88. All across the country, returns in taxes from local production amount to $430 million annually.

Recently an Australian boot manufacturer was unsuccessful in a government tender that was awarded to a company importing boots produced and assembled overseas. How ironic and sad that that same bootmaker is now applying for federal government assistance for retraining and transitional programs that were designed for automotive manufacturers.

Too often government departments are ignorant to or do not calculate the impact of long-term embedded government regulation standards and taxes that function as reverse tariffs as the competitors of domestic companies are excused compliance with them. They all increase the price of Australian products, and it is very hard for any company to tender in competition with overseas competitors when the same government ties the hands of local companies behind their backs with red, green and industrial relations tape and taxes— (Time expired)