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Tuesday, 8 November 2011
Page: 8578

Senator XENOPHON (South Australia) (18:05): As the chamber knows, I did not support the government's legislation which passed through the parliament today in relation to the carbon tax and other measures. But, given that it has passed, I indicate I will be supporting this Steel Transformation Plan Bill 2011 because I believe it is important that assurance is given to the steel industry in light of the carbon tax that will apply from next year. The steel industry is facing a number of pressures: low demand, increased costs and a very high Australian dollar. The introduction of the government's carbon tax will add to the industry's pressures, and this legislation will assist the steel industry, through compensation of $300 million in entitlements over five years from 2012-13 as well as $164 million in advances in this financial year.

I want to highlight, again, that an intensity based scheme such as the one proposed by Frontier Economics would not require this compensation package because it would not unnecessarily raise tax revenue or prices for consumers in the same way the carbon tax or the proposed emissions trading scheme that will follow it will. I think it is worth reflecting on the comments of Frontier Economics and the evidence they gave to various Senate committees in relation to this. It is also worth noting that in a paper they prepared in May this year, Magic pudding is vanilla economics, they were very critical of what has just been passed.

This is not an efficient way to deal with pricing carbon; this is not an efficient way of dealing with the dislocation amongst industries; this is not a good way to deal with the transitional effects of such legislation. There are better ways to transition to reduced emissions. This will lead to distorting taxes. An emissions trading scheme is only more efficient if governments use revenue to offset other distorting taxes, but this is not a feature of the legislation that was passed just a few hours ago. That causes me considerable concern as to the impact that it will have on our economy. The steel industry is subject to great competitive pressures. We are talking about an emissions-intensive trade-exposed industry. I have very real concerns about the additional pressures we are putting on our steel industry.

Under the Frontier Economics scheme, which would result in less revenue churn, not to mention greater environmental benefit, the steel industry would not face the additional pressures the carbon price will impose. That is because you would be able to deal with electricity prices in a way that will transition the effects, that will smooth out the costs and shocks to the economy that will occur. But, as a result of the government's carbon price legislation being passed and the increased costs to the steel industry that will come with it, I will support this bill to give assistance to the steel industry. I should also say that I support the provisions in this bill that the Productivity Commission undertake two reviews of the steel industry, one being the impact of the carbon price on the competitiveness of the steel industry.

Australia's steel industry and associated manufacturing activities employ some 100,000 Australians and earn revenues of some $29 billion annually. We export around two million tonnes of steel and import between two and three million tonnes a year. It is a $7 billion industry for Australia and one we need to support. It is an industry that faces pressure from dumping of below-cost steel imports. A bill that I introduced some time ago attempted to deal with that problem. The government has picked up some of those issues, and I welcome that, but more needs to be done because not only does the steel industry have to deal with the high Australian dollar; it has to deal with goods being dumped from overseas at below cost and it now has to deal with a carbon tax. I worry that that will be a tipping point for some of our steel mills.

I believe that this bill needs to be supported but, having said that, I want to put something on notice for the government when they respond to the second reading debate contributions. In August this year, it was revealed that BlueScope senior executives, on the day that a thousand workers were sacked and when the company was taking $100 million in assistance from the government, paid themselves more than $3 million in bonuses. The details of the bonuses were tucked away in the company's financial reports for the 12 months ending 30 June 2011. According to the company's documents, bonuses across management totalled $3.052 million, with CEO Paul O'Malley pocketing $721,000 on top of his base salary of almost $2 million. The point needs to be made: this company was laying off 1,000 workers and it had its hands out for taxpayer support to the tune of $100 million, yet it still had the gall to pay its executives these obscene bonuses. The company's operating cash flow was only $21 million last year, so 15 per cent of that has gone in executive bonuses. I do not think that is the right thing to do.

The federal government should insist the executives give back their bonuses, and they ought to make it a condition of the compensation package. I ask the government on the record, on notice: given that a thousand workers have been sacked, was anything raised between the government and this company about these bonuses in the context of this assistance package? BlueScope operates in my home state of South Australia at Wingfield and Gillman, and I think it is very important that that question be answered. Paul O'Malley says, 'We are experiencing an unprecedented combination of economic challenges,' but when it comes to bonuses for senior executives, including himself, sadly, nothing seems to change. It is not good enough, and my questions to the government are: have you discussed the issue of their bonuses in the context of this assistance package and will you consider tying the level of their bonuses to the assistance package? I do not think it is good enough, given what those 1,000 workers and their families have faced. I do not think we should be mugs about this assistance. I want to have a strong, viable steel industry in this country. This package is part of it. This package acknowledges the additional pressures of a carbon tax. We need to tackle issues like the dumping of low-cost goods by competitors in countries with artificially devalued currencies who compete on an non-level playing field. These are matters that need to be addressed as well.

I support this package because I believe not to do so would not be responsible, given the passage of the carbon tax package of bills earlier today, but I do look forward to the government addressing these issues with respect to the obscene bonuses being given to BlueScope executives and the $100 million handout they are expected to get from the Commonwealth government, from the taxpayers of Australia.