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Tuesday, 7 December 2004
Page: 22


Senator ELLISON (Minister for Justice and Customs) (1:56 PM) —I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

Textile, Clothing and Footwear Strategic Investment Program Amendment (Post-2005 Scheme) Bill 2004

The purpose of the Textile, Clothing and Footwear Strategic Investment Program Amendment (Post 2005 Scheme) Bill 2004 is to extend the Textile, Clothing and Footwear (TCF) Strategic Investment Program (SIP) for another ten years and to establish the TCF Small Business Program.

The Strategic Investment Program is the centrepiece of the Government's strategy for the TCF industry for the next decade. As announced on 27 November 2003, the Government proposes generous long-term assistance for the industry worth $747 million. The Government's package includes:

$575 million for extending TCF SIP;

$25 million for a ten year TCF small business program;

$50 million over ten years for a product diversification scheme;

$20 million for a supply chain efficiency program from 2010 to 2015;

$27 million for extending the Expanded Overseas Assembly Provisions scheme for a further five years; and

$50 million for a ten year structural adjustment program to assist both displaced workers and encourage industry restructuring.

By setting policy in place for a decade, the Government is providing the industry with long-term certainty so as to encourage investment and innovation.

A gradual reduction of TCF tariffs is integral to this assistance package. As tariffs impose substantial costs on Australian families, and are ineffective as protection for local industry, the Government will lower tariffs in two steps over ten years. Two 5 year tariffs pauses are contained in the Customs Tariff Amendment (Textile, Clothing and Footwear Post-2005 Arrangements) Bill 2004.

The Government's policy was developed after a lengthy period of consultation. This consultation confirmed the Government's view that support must be focused on activities which will make a lasting difference. Investment in new plant and equipment, and in innovation, must be the priority. It also became clear that assistance should be weighted towards those parts of the sector facing the greatest adjustment, in particular clothing and finished textile firms.

The package is supported by peak bodies, such as Textiles and Fashion Industries Australia and the Carpet Institute of Australia, and leading companies.

The new Strategic Investment Program will be broadened and simplified. The current five grants will be reduced to two. New activities, such as brand support and non-production information technology, will be supported. With these changes, more firms can be expected to use SIP. SIP already supports most of the industry—firms receiving SIP account for 75 per cent of industry value-add and 63 per cent of jobs.

The subsidies offered in the new program—80 per cent for innovation and 40 per cent for capital equipment—are the most generous available to any industry. For the first five years, funding for SIP will be worth about $100 million a year. To direct support to firms facing the greatest adjustment, firms producing leather and technical textile products will only be eligible for grants for capital investment. In the main, these firms have not been affected by tariff reductions since the mid-1990s. For the same reason, funding after 2010 will be limited to firms manufacturing clothing and certain finished textile products (ie. those firms still to face a tariff adjustment). $100 million will be available to this section of the industry after 2010.

For small TCF firms which may not meet the $200,000 threshold for SIP claims, a new $25 million TCF Small Business Program will be available.

The Government will also introduce a Product Diversification Scheme. $50 million in duty credits will be available over ten years as an incentive for firms to increase their local production as well as to diversify their product range. Introducing this scheme will require amendment to the Customs Tariff Act 1995 through the creation of a new Schedule 4 tariff item—this amendment is part of the Customs Tariff Amendment (Textile, Clothing and Footwear Post-2005 Arrangements) Bill 2004.

The Government has already extended for 5 years the Expanded Overseas Assembly Provisions scheme, at an estimated cost of $27 million in revenue forgone.

As clothing and certain finished textile manufacturers will face a tariff reduction in 2015, the Government will further assist this sector through a $20 million Supply Chain Program. After 2010, competitive grants will be available to support major capital investments to strengthen the local supply chain for these TCF sectors. The program will be open to manufacturers of clothing and certain finished textile products (and their related textile suppliers) who would otherwise not be in receipt of benefits under the Post-2005 SIP.

In all, by the time the Government's plan expires in 2015, the sector will have received about $1.4 billion in direct assistance (and about $13 billion indirectly through tariff protection).

It is essential to recognise that TCF tariffs cost the community up to $1 billion a year, disproportionately affecting low income households. The 2.1 million Australians living in households earning less than $301 per week spend twice as much of their income on clothing as other families.

For its part, the industry is clear that firms benefit far more from direct financial support for innovation and investment than through tariffs. For this reason, the Government believes that TCF tariffs should be reduced to the general manufacturing rate. Consistent with the Government's 1998 decision, tariff reductions will be staggered to allow industry time to adjust. The Government's policy is that all TCF tariffs should be 5 per cent by 1 January 2015. TCF tariffs will be paused at their 2005 rates for 5 years, and then the majority of TCF tariffs will be reduced to 5 per cent on 1 January 2010. The exceptions to this rule will be clothing and certain finished textile articles which will be reduced to 10 per cent on 1 January 2010, held at this level for 5 years and then reduced to 5 per cent on 1 January 2015.

To help firms, workers and communities affected by restructuring in the industry, the Government will establish a $50 million Structural Adjustment Program. The Program will have three objectives: assisting TCF employees who have been retrenched to secure alternative employment by providing streamlined access and additional assistance under Job Network programs; assisting TCF firms to consolidate into more viable entities, and to assist communities adjust—especially in TCF dependent communities. The value of the package is commensurate with the anticipated employment impacts.

This Government has taken a balanced approach in developing its policy. The policy assists firms to become more competitive by providing long term policy certainty; incentives to invest, innovate and diverse their product range; it reduces tariffs in a measured way via a series of tariff pauses which the industry can absorb; it will reduce the price of TCF goods over the long term; and it provides assistance to those who might be affected by restructuring.

The Government's TCF plan is backed by ample funding. By any benchmark, $747 million is a significant amount of taxpayers' money. With the sole exception of the much larger automotive industry, the TCF sector receives far more assistance than any other part of the manufacturing sector and this support will continue for the next decade.

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Customs Tariff Amendment (Textile, Clothing and Footwear Post-2005 Arrangements) Bill 2004

The Customs Tariff Amendment (Textile, Clothing and Footwear Post-2005 Arrangements) Bill 2004 contains amendments to the Customs Tariff Act 1995.

Those amendments are complementary to the amendments contained in the Textile, Clothing and Footwear Strategic Investment Program Amendment

(Post- 2005 scheme) Bill 2004. Together, these Bills extend the provisions of the Textile, Clothing and Footwear Strategic Investment Program for another ten years.

The Customs Tariff Amendment (Textile, Clothing and Footwear Post-2005 Arrangements) Bill 2004 will reduce customs duty rates applicable to clothing and certain finished textiles to 10% from 1 January 2010 and to 5% from 1 January 2015. The Bill also reduces customs duty rates applicable to other textile, clothing and footwear goods to 5% from 1 January 2010.

The enactment of the post-2005 duty rates at this time provides transparency and certainty for textile, clothing and footwear manufacturers, enabling sufficient time for planning prior to the reductions in 2010 and 2015.