Senator GEORGE CAMPBELL (1:01 PM) —I rise to make a number of brief remarks about the Taxation Laws Amendment (Venture Capital) Bill 2002 and the Venture Capital Bill 2002. You will not hear this government say it—and it is a fact that many Australians are not aware of this—but manufacturing is the engine room of the Australian economy. There are 45,000 private and public enterprises across the country, which currently provide over one million jobs and an annual turnover of more than $250 billion. Supporting and growing that sector has been of ongoing importance to Labor, and that is why I rise to support these bills today.

This legislation is not enough to ensure that our manufacturing industries achieve their potential. Only one party is going to be able to do that, and that is Labor; but the government are proposing a step in the right direction. The total capital in the venture capital sector now stands at $9.3 billion a year, thanks to a fantastic period of growth made possible by Labor's commitment to compulsory superannuation. This legislation will help lay the basis for newer and bigger foreign entrants to participate in the Australian venture capital market. The truth is that, for all this government's rhetoric about globalisation, it has been Australian super funds, not foreign private capital, that has been responsible for the growth in our venture capital markets. The coalition have now finally realised that they cannot just talk but also must act to address the situation. I am glad the government have come to this belated realisation. As Australians have suffered the downside of economic globalisation that has come from the government's policy program, they must also be able to enjoy the benefits such as foreign venture capital helping to grow our manufacturing industries.

The Venture Capital Bill 2002 is also cold, hard proof that free markets do not fix themselves, that the governments must be there to stimulate their operations and observe and respond to their failures. The government appears to be learning that it is a good thing to intervene to amend the operating environment of a market in order to promote jobs and security. Labor's support for the superannuation funds that provide the backbone of Australia's venture capital markets is in stark contrast with the government's failure to improve on Labor's legacy. Under the government's watch, the number of firms raising venture capital this year has practically halved since last year from 34 to 18, while the amount raised by venture capital in the past 12 months is only half of that raised in 1999-2000. Thankfully, something is now being done to address the situation—and the situation is urgent. We have fallen well behind the rest of the advanced industrial economies. We need a high-growth strategy for Australian industries to catch up, and this has got to get the balance right between what needs to be achieved by established businesses and what needs to be achieved by newly emerging businesses.

In Australia, the private equity manager base and funds available for expansion deals, turnarounds and management buy-ins appear to be adequate for established firms in manufacturing and other industries. However, for newly emerging firms the venture capital market manager base and funds for seed, start-up and early expansion deals are seriously deficient and a significant constraint on growth. The most recent data benchmarking Australia's underinvestment in venture capital suggest that Australia was investing 0.12 per cent of GDP in classic, or institutional, venture capital in 2000 compared to an average investment across 23 other countries of 0.23 per cent of GDP. Less than 10 per cent of what we do invest goes to manufacturing.

To ensure the maximum possible benefits are delivered to Australian society by this legislation, we must also be aware that changes may be made in the future. If venture capital funds face increasing running costs as they attempt to qualify for the concessions this bill proposes, it is our obligation to consider the ways to address this burden. Furthermore, while this legislation should provide significant assistance to medium and large enterprises looking for substantial capital injections, it will not assist those at the lower end of the market looking for perhaps a few hundred thousand dollars to develop their potential. This is an area of significant failure in the venture capital market, it is an area that remains unaddressed by this government and it is an area that is substantially impeding the early growth of many new firms and companies. If we as a nation are serious about backing Australia's ability, then we will be vigilant in backing everyone's ability, which includes looking after the lower end of the venture capital market. We cannot merely support glamorous projects, major developments or the work of politically friendly companies. I am committed to ensuring that Labor looks after everyone who needs access to venture capital, and I hope the government will do the same.

A good start for the government in taking the needs of small and medium enterprises seriously would be to look at what it can do to encourage angel investors to start investing where they are needed—and they had better do it soon, otherwise Australia will be so far behind the rest of the OECD that we will never, ever catch up. I would like to reassure those interested in this issue that, regardless of any government action—or inaction—on angel investors, Labor is committed to developing a comprehensive policy program on this matter. I do not think it will take us six years in government to address the issue effectively to provide a support base for small and medium enterprises who need it. I would like to conclude on a positive note. It is a pretty rare thing, but it is good to see the government actually deliver on one of its election promises, particularly one that is not about cashing in on human misery.