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Monday, 22 August 2011
Page: 5066


Senator COLBECK (Tasmania) (18:19): I note that my colleague Senator Birmingham made a statement at the com­mencement of debate on the Carbon Farming Initiative legislation about how disorganised the government was in the development of that bill. These next pieces of legislation are again symbolic of the shambles that the government's industry policy is under Minister Carr. We have seen the absolutely devastating figures that were reflected today with the announcement by BlueScope Steel that it is going to shut down one of its blast furnaces at Port Kembla, with 1,000 job losses. This comes on top of the announce­ment last week of 400 job losses at OneSteel. You can understand the uncertainty that exists within industry given the complete mess that the government has got itself into with this legislation. When this legislation was first brought up we were told that it was a legislative priority. It was in fact supposed to commence operations from 1 July 2010, and here we are in the second half of 2011 just starting to debate the legislation in the Senate for the first time.

Right from the start, the consultation guidelines and the consultation process that Minister Carr undertook were being criticised. They were, as I said, an indication of the complete shambles that industry policy is under Minister Carr. This is a statement from the dissenting report by coalition senators on these bills:

Consultation timelines have been highly condensed. The second exposure draft was released by Treasury on 31 March, with submissions from stakeholders due by 19 April, a total of only 10 working days. This is not sufficient time to digest 134 pages of legislation and provide substantive comments, particularly given that the second exposure draft incorporated a number of new concepts, including a completely new definition for core R&D. In addition, the tight timeframes meant that Treasury had not completed its redrafting in time for the 31 March release. As a result, the second exposure draft did not include redrafted feedstock provisions, and instead merely stated that “a feedstock adjustment rule is under consideration.”

That comes from page 21 of the dissenting report. It goes on to say:

Stakeholders were not provided with an opportunity to comment on this aspect of the legislation until after it was introduced into Parliament …

So here we have the government rushing to get through a piece of legislation, rushing to start a process, and yet it clearly was not ready itself. The initial consultation process had quite obviously gone very badly and there were some changes that had to be made before the second draft came out. Even they were not completed before the rushed process was required to commence. It was interesting that it came out during estimates that the minister himself had not even looked at the modelling for this piece of legislation. While we were trying to ascertain the impacts of this through the estimates process, the minister himself had not even taken the time to acquaint himself with what was going on.

All through this process we have been given examples of how this measure will restrict access to R&D. In fact, the government has said that this is about providing greater access to R&D. The suspicion of the opposition is that this will be a cost-saving measure for the government dressed up as a way to redistribute opportunities down through the system so that smaller operations can get more access. I do not believe that any business that is involved in research and development would genuinely not be claiming its entitlements now.

There are some provisions within this legislation, particularly the tax credits process, that we are quite happy to see go ahead, but there are a number of significant concerns that industry and the opposition continue to maintain. The first is around the definition. When they came into the hearings, witnesses were absolutely definite that the definition of core R&D was inappropriate. There were real concerns held that it would lead to additional red tape. We stated that in our report. Mr Ian Ross-Gowan, manager of Michael Johnson Associates Pty Ltd, said in part of his evidence:

It splits off the development of new knowledge from the development of new or improved product processes, devices, materials and services. If you have a manufacturing process where you are trying to develop a new process, under the current scheme you will have a project that might be a certain size. The first 30 per cent of that might be the creation of new knowledge, and the remaining 70 per cent would be the development of the new process, which by this definition is R&D. It is that 70 per cent that will get lopped off by this legislation.

All through the inquiry process, we have heard this concern about the definition of R&D. The government tried to tell us that the R&D definition was in accordance with the Frascati model. It actually transpires that it refers to only a part of it because it omits the second and critical element of Frascati. If we go to the Frascati definition, it says:

… creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of humanity, culture and society, and the use of this stock of knowledge to devise new applications.

But the government's definition, as I said, omits the second critical element of the Frascati model about the use of this knowledge to devise new applications. I think the government may have backed away from its claim that it is currently using that definition. There is no question that industry continues to have concerns about the definitions that are being proposed by the government under this process.

A significant number of submissions expressed concern about the dominant purpose test. That was a major concern for industry. Again, there is the concern that it will be a large impost on industry. I go to KPMG, who said in part of their submission:

The overwhelming feedback from our diverse client base indicates that a “dominant purpose” test will exclude a large proportion of production trial activity that is a necessary and legitimate part of the research and development cycle.

We have seen in the last couple of days significant job losses in the manufacturing sector. We have seen the loss of more than 105,000 manufacturing jobs since this minister has been in the portfolio. We have also seen the worst manufacturing employment figures since ABS records were first collected. So you really have to wonder why the government wants to push ahead with this process that industry express so much concern about. And yet the govern­ment claims to be a supporter and a friend of manufacturing. It is the manufacturing sector that, in my view, will be most negatively impacted by this piece of legislation.

I come back to the dominant purpose test. A number of submissions talked about providing alternative models. Industry was out there as a part of this process looking to provide alternatives for perhaps legitimate government concerns. They looked at things such as a 'purpose directly related to' test, substantial purpose, an apportionment of expenditure, some dollar capping around extended production trials, specific provisions for specific excesses and time limits for trials and pre-approvals for projects with certain values.

I think industry has been quite willing to work with the government on these particular measures and it is quite disappointing that the government, as it appears to do on a fairly regular basis, continues to ignore industry and ignore suggestions. We saw it with the last piece of legislation. They are not prepared to work with anybody else.

Sitting suspended from 18:30 to 19:30

Senator COLBECK: Before the dinner break I was discussing the unwillingness of the government to listen to some very sensible perspectives that have been put to it, particularly by industry, through this debate. The government has ended up having to wait until it was able to do a deal with the Greens to get this legislation passed. As I said earlier, the government's objective was for this legislation to commence operation on 1 July 2010. Its unwillingness to listen to industry and the opposition, particularly in relation to the definitions within the bill, including on the dominant purpose test, has left it in the situation where it cannot get support for the legislation. I think I said during one of the estimates hearings that we supported some elements of this legislation, but were not prepared to compromise on bad definitions.

We heard the minister say today in question time that he is a friend of industry—a friend of manufacturing—despite the fact that, under his watch, 105,000-plus manufacturing jobs have disappeared from the scene completely. He said that he would stand beside industry. I am not sure what it achieves to have the minister standing beside industry while it is busily and madly shedding jobs. He said that he would stand beside the employees, and now he is going to spend $100 million, of a $300 million scheme that has not even been legislated, to support BlueScope. The govern­ment is prepared to spend that money even though the legislation has not been passed and the mechanisms for the allocation of that funding have not been designed yet. One wonders how the government can claim any credibility on economic policy and economic management. That has also been a feature of this debate.

One of the arguments for reform in this sector that the minister has used is rorting. Apparently, claims are being made that should not be made and claims are being made that are not justified. When we actually interrogated that at estimates we found that something of the order of 24, 28—somewhere in that range—cases over 10 years were not justified and that those cases were all being investigated. They were all being pursued in some way by the department. There is plenty of evidence to say that the cases that the minister was suggesting did not fit within the guidelines and should not have been made actually did fit within the guidelines as they stood at the time. The coalition's perspective is that we are supporting a system that has been in place for 24 years and that is well understood by industry—and the industry is happy both to work with this system and to see some changes made to the taxation regime—but we are not trying to invent some new definitions under a new act.

The claims being made by the minister were not justified. Far from being a friend of manufacturing and far from being prepared to stand beside industry, and particularly manufacturing, he is prepared to lob grenades over the barricades when it suits him and he is prepared to use the circum­stances he claimed were a reason to change the legislation. He is happy to do all that. But then it comes to the crunch and we see an unfortunate situation, such as we saw today, where 1,000 people might lose their jobs through the circumstances that BlueScope Steel have found themselves in, in addition to the 400 at OneSteel last week. You really have to wonder whether the minister is a friend of industry and manufacturing. Industry group after industry group, even the unions, came in to talk to us during our inquiry into this legislation, and they were concerned about the definitions—particularly about the new definitions and the claims being made about them by the minister.

It really does not stack up that the government can be the friend of industry that it claims to be when we see the continued rollout of bad news from the manufacturing sector. In my home patch, on the north-west coast of Tasmania, we feel it as badly as anybody. We have not had a OneSteel or a BlueScope, I know, but we have had the Tascot Templeton carpet factory close with the loss of a significant number of jobs. It was the last carpet factory of its type in the country. It was an absolute tragedy to see a business of that nature close down. We have also seen McCain move its vegetable processing offshore to New Zealand.

Tasmania is synonymous with the manufacture of paper. We have seen two paper mills, one at Burnie and one at Devonport, close down. All of that has been on the watch of the minister. The perform­ance of the minister over the closure of the paper mills is nothing short of dismal. He set up a consultative group but did not even get the terms of reference designed before the decision was made to close down the mills. His statement was that the process was to work hand in hand with the decision-making process of the company, yet the company had given up and made its decision to close down the mills before the minister had even drafted the terms of reference for the pulp and paper consultative group. This minister cannot claim to be a friend of industry. He has presided over the loss of more than 105,000 jobs from the manufacturing sector in his time in the portfolio. In the words of the AWU national secretary, Australian manufacturing is in 'one of its worst periods since the Great Depression'. That is a significant indictment of both the minister and his manufacturing policy. He has been sitting in this chair for four years now. We are at the anniversary of the re-election of the government and we continue to see the bleeding of jobs out of the manufacturing sector. We also see the worst manufacturing employment figures since ABS records were first collected and the worst contractions in this sector for more than two years.

The opposition will not be supporting this legislation. We know that the government have waited until they have been able to do a deal with the Greens. Unfortunately, we know that when the government deal with the Greens the outcomes are not good for industry. All I can say is that things do not bode well for the future in the manufacturing sector. There are significant concerns, as I have indicated on a number of occasions, around the definitions. It is a pity that the government are not prepared, as we talked about in the last piece of legislation, to work with industry. They claim to be a friend of industry but obviously they are not. This particular minister's record is abysmal. We keep on hearing of historic and generational change in industry policy. Unfortunately, the record for this minister is that those historic and generational changes in industry policy have been for the worst and not for the benefit of industry. With this piece of legislation we see that process continuing.