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Thursday, 9 December 2004
Page: 62


Senator GEORGE CAMPBELL (1:38 PM) —I rise to respond to the Governor-General's address, in particular to the government's arrogant and misleading claims regarding its record of economic management. If we are to take this government's claims at face value, they are the economic managers who have done no wrong. By their reckoning every man, woman and child in Australia is living in complete economic security, and all Australian businesses have to worry about is how to spend their profits. While this government may be content to bask in false glory and indulge in endless rounds of self-congratulatory backslapping, the rest of us actually live in the real world. The truth is that the government are more interested in spin than in good economic management.

As both the election campaign and the Governor-General's address showed, this government is highly selective when it comes to the state of our economy. It only wants to hear the good news. When confronted with bad news the government is content to turn its back and look away. But just ignoring the hard issues does not make them go away, nor does it adequately deal with them. There is no doubt that Australia's economy is performing strongly in a number of respects, but it is equally true that this government's inactivity and lack of policy vision in a number of key economic areas threaten our nation's future prosperity and thus the standard of living that the next generation and those that follow will be able to enjoy.

Thanks to this government's ineptitude, Australia's foreign debt has spiralled out of control. Back in 1995 John Howard and Peter Costello promised that one of their main economic objectives would be to bring down foreign debt. Who can forget the spectacle during that period of the infamous debt truck as it travelled around the country, with Peter Costello driving it and the Prime Minister sitting in the front seat, professing the disaster that Australia's foreign debt was to the national economy. And what have they done about dealing with that issue? Nine years later they have fallen asleep at the wheel. Net foreign debt has now reached a staggering $406 billion and is nearly double the amount it was when Labor left office—a huge growth over that nine-year period. Thanks to the activities of this government, every Australian now has a personal debt burden of just on $20,000. What are the government doing to tackle the debt? The answer is painfully clear: the same as they have been doing for the last nine years—nothing. They have no strategy, they have no policies and they have no idea how to deal with the explosion of our foreign debt and our current account deficit.

In addition to the foreign debt, in the corresponding period under the Howard government we have seen an explosion in household debt. The ratio of household borrowings compared with income has ballooned from 50 per cent in the early 1990s to 150 per cent. In fact, Australian families are now amongst the most indebted in the world. It is argued by representatives of the coalition that this is not necessarily a bad thing, that this is people borrowing mortgages in order to buy property. The reality is that when you look at the breakdown of the debt, it is not just about borrowing for mortgages. Many families are selling their equity in their homes to borrow to consume. The biggest borrowing that is occurring in our economy at the moment is for the purposes of consumption, not for the purposes of purchasing assets. That bubble has to finally burst. It will not take much movement in interest rates to see this economy suffer and to see families in very serious difficulty indeed, trying to service their debt levels.

A similar story emerges with respect to our nation's disappointing export performance. Our current account deficit has risen to $13.7 billion, which is about 6½ per cent of GDP. In its recent report card on the Australian economy the International Monetary Fund was concerned enough to highlight our CAD as a potential risk to the nation's future economic health. Under Peter Costello, Australia has suffered 29 trade deficits in a row. Average annual growth rates in exports has more than halved when compared to Labor's 13 years in government. Left unchecked, this gap represents a serious constraint on sustainable economic growth. Australia's poor export performance stems from this government's inability to think strategically about the future of our economy. In its nine years in office the government has consistently failed to invest in Australian innovation. This has cost Australia dearly in potential export revenue and jobs.

After cutting around $5 billion of support to industry between 1996 and 2000, the government attempted to correct its horrendous mistakes with the Backing Australia's Ability package. Whilst this package contained many positive measures, it was in essence too little, too late. This year's supposed revamp, Backing Australia's Ability II, commits the same mistakes as its predecessor: on the surface the $5.3 billion program looks impressive; however, it does not allow for inflation. After peaking in 2005-06, spending under the program slumps by one-third as a proportion of GDP before slumping again to just over $1,000 million in 2010-11.

Business has reacted accordingly to these years of chronic policy failure: only four per cent of Australian firms do any research and development at all. In 2002-03 only 37 companies spent more than $10 million on R&D and only 30 companies spent more than the equivalent of three per cent of sales on research. This is well behind world's best practice. In Australia, private R&D spending accounts for around 0.56 per cent of one per cent of national revenue. Compare this to world leaders, Finland, whose R&D expenditure is roughly 1.2 per cent of national revenue. Australia's private sector invests at half the rate of the US and at one-third of the rate of Japan and Finland. We are barely treading water while our competitors are investing in a better economic future and creating a competitive advantage over Australian companies seeking new export markets.

But nowhere have the government's economic policy failures been more keenly felt than in Australia's manufacturing sector. Since the Howard government came to power 63,800 Australians have lost their jobs in manufacturing. What is more, exports of manufactured goods have plummeted under this government's watch. Australia now has a trade deficit in manufactured goods of over $74 billion. In 2002-03 alone, for every dollar's worth of manufactured goods that was produced in this country for local consumption, we imported $2.55 worth of manufactured goods from overseas. Particularly disturbing is the long-term downward trend in the growth of elaborately transformed manufactures. Since this government came to power, ETM export growth rates have slumped from 17.7 per cent under Labor to a dismal 1.8 per cent. The only OECD countries we now outperform in this area are Turkey, Greece, New Zealand and Iceland.

This is probably one of the greatest travesties of the past nine years of this government. This country made enormous sacrifices in the eighties under the Hawke-Keating government to get our industrial base competitive so that we could compete in the global marketplace as part of the expansion of the global economy. This was done by getting efficiency and higher productivity into our industries and, as a consequence, we got significant growth in the export of manufactured goods. That investment made by every worker in this country during that period has been squandered by this government over the past nine years, and it has put our economy in a substantially perilous state to meet the challenges of globalisation into the future.

The sad fact is that it is these very industries, value-adding high technology manufacturing industries, that Australia needs to nurture if we are going to sustain a competitive base and a competitive economy globally well into the future. It is these industries that will provide the jobs and new export markets that will sustain our economy in the years to come. But these industries are being denied the chance to grow. Under the coalition, Australian investment in manufacturing is one-tenth of the average achieved under the previous Labor government. What is more, under the Howard government we are attracting less than one-third of the global investment we were attracting under Labor.

This whole situation has been exacerbated by the skills shortages we are suffering right across all our industries. This is now identified as a major impediment to, a major constraint on, the capacity of our industries and companies to grow, maintain their competitive edge and to compete globally with international competitors. Manufacturing, along with a host of other industries, is in the grips of a skills shortage. Manufacturing businesses of all sizes cannot find the skilled labour they require. The problem is especially acute in the traditional trades: car manufacturing, electrical, electronics and construction—the list of industry sectors suffering from a shortage of skilled labour goes on and on. In fact, over the next five years 170,000 people will be leaving the traditional trades and there will be only 40,000 new entrants coming into them.

How can you expect Australian industry to continue to create wealth, to compete effectively in the export market and to create jobs when they cannot even find enough staff to keep their businesses running, let alone grow them for the future? Once again the government has badly let down Australian industry. Until the recent election the government completely ignored the skills crisis that has been consistently raised as an issue. There have been inquiries by Senate committees in respect of the issue, and the government has stood, substantially flat footed, and allowed the crisis to continue to grow without taking any initiatives to try to address it.

We have seen a belated response to it during the last election. We have seen the government announce that they will put in place 24 technical colleges to be run by industry, the private sector. One has to ask the question: is this a genuine attempt to address the issue of skills shortages in our community or is this the start of a process to transfer the public sector capacity that exists in our TAFE system into the private sector for the delivery of skills and vocational training in the longer term? Is this in fact the start of a wind-down of our TAFE system? I think there is a genuine concern out there that that is the real strategy behind the government's announcement of the new technical colleges. Why would the government go to the extent of introducing these technical colleges to address a skills shortage? There are ample examples around this country of existing programs in place within industry that are delivering skilled labour across a range of sectors and working very well. Those could have been built upon very effectively, very efficiently and at a minimum cost to expand the capacity of our industry to train new tradespeople.

There is the example in the construction industry of the skill centres run as a result of levies applying in that industry. There is in fact an industry training centre operating in the minister's own electorate with a capacity to train something like 3½ thousand construction workers or apprentices a year. There are examples like Austool, at Ingleburn in the seat of Macarthur, which has been specifically set up to train toolmakers for the toolmaking industry, to address a shortage. That could have been substantially expanded at a lot less cost than that required to establish these technical colleges, and that would have been able to get people into training much more quickly. I refer also to the Hunter Valley training facility; the Australian Aviation Centre, in Brisbane; the Bosch-RMIT program, in Victoria; and the Toyota T3 program, in New South Wales. All are in existence, all are targeted at providing skilled labour for particular key industry sectors and all could have been substantially expanded at a minimum cost to our economy. They could have dealt with the issue much more rapidly than the planned technical colleges will.

Simply moving in the direction that we are moving is going to put greater pressure and strain on our underfunded TAFE network as it currently exists. The TAFE system is providing enormously effective training in a range of skills to a range of industries across the country. It is in existence, it has the resources, it has the teachers, it has the equipment, it has the knowledge, it has the understanding and it has the respect of the people who are seeking that training. It would have been a much more efficient use of taxpayers' dollars to have focused on building and investing in those TAFE colleges rather than on moving to establish the sort of structure that the government has proposed to deal with the skills issue.

In conclusion, I simply want to make three points. The government has now set its fourth term agenda and, sadly, it looks to me as if we are about to see history simply repeating itself. There are long-running economic sores in this country and fragilities in the Australian economy which are currently being ignored or treated with bandaid solutions and which, in terms of their impact on the economy over the longer term, will have serious ramifications when they start to crack open. The reality is that the motherhood statements that we have heard from this government are no substitute for having a strategic vision. It is time the government showed some courage and actually identified what are the hard issues and, more importantly, started to adopt policies to address them.

Debate (on motion by Senator Minchin) adjourned.

Sitting suspended from 1.58 p.m. to 2.00 p.m.