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Standing Committee on Industry, Innovation, Science and Resources
31/07/2018
How the mining sector can support businesses in regional economies

MORRISSEY, Ms Kate, Assistant Manager, Industry Councils, Chamber of Commerce, Northern Territory

O'GALLAGHER, Mr Brian, Deputy Chief Executive Officer, Chamber of Commerce, Northern Territory

PETERS, Mr Kevin, Executive Committee Member, Manufacturer's Council, Chamber of Commerce, Northern Territory

PIKE, Mr Owen, Chairman, Manufacturer's Council, Chamber of Commerce, Northern Territory

SEDMAN, Mr Paul, Member, Chamber of Commerce, Northern Territory

STONE, Mr Paul, Executive Committee Member, Manufacturer's Council, Chamber of Commerce, Northern Territory

[10:04]

ACTING CHAIR: Welcome to the hearing today, everyone, and thanks for giving evidence. The committee very much appreciates your participation in this inquiry. Do you have any comments to make on the capacity in which you appear?

Mr Peters : I am also the CEO of the Industry Capability Network.

ACTING CHAIR: Thanks. One thing I forgot to mention earlier but I will now since Mr Wagner is still here is that I encourage all witnesses to put in a submission to the inquiry. Having your say here today is fantastic and we really appreciate you coming along, but, if you want to put some things down on paper and send them in, that ensures we've got another avenue to make sure our colleagues understand these issues as they pertain to the Northern Territory. That's why I'm very thankful for your time—as an MP from the Northern Territory, I want to make sure our Territory voices are heard.

Although the committee does not require you to give evidence under oath, you should understand that this hearing is a formal proceeding of the Commonwealth parliament. Giving false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. I remind you that the hearing is public and is being Hansard recorded. The hearing is also being broadcast live.

I invite each person to make an opening statement of a couple of minutes, and then we'll go to some Q&A and discussion. I'll make sure everyone has enough time to have their say.

Mr O'Gallagher : I'll make a broad opening statement on behalf of the chamber, its Manufacturer's Council and its members. Three of the members here are heavily involved in local companies that are heavily engaged in the local mining industry and I thought it was important to bring that perspective here. My colleague Kevin Peters from the Industry Capability Network is also strongly involved in connecting local businesses to various projects, including mining projects.

On behalf of the Chamber of Commerce, thank you very much. We're very glad that the committee is hosting these hearings here in Darwin. Congratulations for doing so. It's an important topic, and the mining sector is a very important industry not only for Australia but also for northern Australia and the Northern Territory. Engaging local businesses and regional economies in that is absolutely critical. So I think the work of the committee is vital.

As I said, I represent the Chamber of Commerce, Northern Territory. We are the largest single employer organisation in the Northern Territory. We have around 1,250 company members. The majority of those members are small to medium enterprises. As we always say, the small and medium enterprises are the heart and soul of the economy—that is, not just the Northern Territory economy but also the Australian economy. In terms of the chamber, we are a single chamber across the whole of the Northern Territory. We have offices in Alice Springs and Katherine, and our head office is in Darwin. We did have an office in Nhulunbuy, but we couldn't justify servicing it given the low numbers. However, we do regular visits to Nhulunbuy. I'm sure my colleague Drew Wagner has emphasised to you the importance of the mining sector to the economy, and we could only concur with that: it's a major employer.

I think we need to put everything back in context again. The Northern Territory has—what? Let's say one per cent, or a very small proportion, of the Australian population, and yet the contribution across northern Australia in terms of export and wealth development is of national importance. When we do stuff for the rural, remote and regional areas of Australia, it's not being parochial just for those areas. We see it as a national benefit, and so any jobs in the regional areas are of national importance and any development of industry and economic development into our regional areas is of national importance.

In terms of the mining sector, it goes across the Territory. It is a major employer of regional communities, because that's where the mines tend to be located; they don't tend to be in the urban areas. Particularly, for the Northern Territory, it's also an important source of economic development for our Indigenous population. While the Indigenous population generally in Australia only represents about one per cent, in the Northern Territory it's 30 per cent. When we talk about mainstream development, Indigenous development is part of mainstream development across northern Australia, particularly in the Northern Territory. Just on that note, I think about 40 per cent of our young kids coming through primary school are Indigenous. So you can see how Indigenous involvement and stakeholdership in the future of the Territory are absolutely critical and therefore opportunities with mining and so on relate to that.

We do have some particular issues—and I know Owen will talk about some of those in more detail. There have been concerns not only here but across the nation about the growing trend towards fly-in fly-out and that we are missing opportunities for developing our regional communities and it's actually hollowing out some of our regional communities. That is a concern that our members have expressed, and I'd like to stress it again.

We're very happy and hopeful that onshore gas development will occur. There still seem to be a lot of regulatory barriers, but it's absolutely critical for the Territory to go ahead with it. It's absolutely imperative that there's a social licence to operate, and that licence means: you need to start giving value back to regional and local communities that you're actually operating in. That includes creating jobs—not only immediate jobs but jobs for the future—and pathways. It also means, in a fair and reasonable sense, utilising local supply and service, and developing opportunities not only for long-term job opportunities but pathways for our kids coming forward, including from our Indigenous communities. When people get a mining licence, they are given a licence to utilise a public good to make profits from—and we want companies to make profits; they're not there to make a loss as they won't survive. They're putting in desperately needed investment. However, I guarantee that there should also be an obligation that, if you're utilising a public good, you need to somehow recognise that it's the taxpayers of the Territory and Australia who are allowing you to do that, and they expect a return from it.

We've said before that onshore gas development is critical. One of the things we've been arguing is that one of the benefits of onshore gas is that it actually provides a source of own-source revenue for the Northern Territory government. It's an avenue for getting away from relying on federal money—and I think 80 or 90 per cent of the funding for the Northern Territory government comes from federal grants.

The opportunities from onshore gas—and it's still a way off—can create own-source revenue for the NT government. We believe that—and we've argued this before before other committees—the royalties from those developments should be paid from day one to the Northern Territory government for utilisation for important services, including regional services such as health, education and so on. That needs to be balanced with the investment profiles—I think it's fair—and most of our businesses, not all because our businesses are a diverse church, would certainly support the idea that royalties from day one go to the Northern Territory government so that they can invest in critical infrastructure and so on.

The Chamber of Commerce's Manufacturer's Council have been very active in seeking to raise the profile of local industry capability ourselves. Later this year we're looking to repeat what we did two years ago and take a selection of our local businesses—in partnership with the Northern Territory government, we hope, and also in partnership with our colleagues from the Minerals Council and the Industry Capability Network—out to the mines themselves to remind the mining management and their project supervisors about the local capability that is available. We cannot just always assume that they already know. I think there's an onus on business itself to get out there and market its capabilities, because we do have examples where mining operations and gas operations are set up and, by default, they go back to the normal supply chains that they're used to—be they from elsewhere in Australia or whatever. So there is an onus on us to be proactive and get out there and show there's capability. But I think there is also, as part of being granted the licence, a need that they understand there is an obligation to also look seriously at engaging local people and seeing the net benefit that that delivers.

I was going to talk about the issue of approvals processes, and we've certainly been aware that there are issues in the Northern Territory, in comparison to some of the approvals processes in WA and so on. They seem to have been held up and so on, but I think Drew may have already spoken about that, and he's certainly more qualified to talk about that than me. So, on that note, on behalf of the Chamber of Commerce, thank you very much.

Mr Pike : I will just add to Brian's comments regarding FIFO. I run my family's business that employs about 150 people in the mining and resources sector. A lot of them are FIFO. I grew up in a town that didn't have FIFO—or grew up in many towns that didn't have FIFO. But the other problem I see is not just regional where that mine is but subregional and the urban area of Darwin. With the projects being big enough to have bitumen airstrips, two of the four major mining companies here in the Northern Territory fly directly to other capital cities. The managers typically live in those capital cities, and their relationships are with contractors and suppliers of those cities. Significantly, for a Northern Territorian, seeing the amount of payroll tax revenue that flies out is a very sad thing for what's a resource here in the Northern Territory.

I just want to note the issues with FIFO. I directly see families breaking down because of FIFO and also mental issues. I don't have vision of other people's workforces, but it's definitely an issue in my workforce. I'd just encourage the feds to look at the very big topic of providing more significant tax relief for those who live in the north and who live in the harder areas. The public want money directly in their pocket not indirectly, so I'd encourage tax relief to make sure that more people live in the regional areas that are supporting the subregional areas.

Also, to add to the topic of the social licence to operate, for the issue of industry participation plans at state and federal levels, I think it's absolutely critical that at least an outline of what a project or a company is committing to has to be made public, and the reporting of that should be made public. Over and over again the Manufacturer's Council has been at the lead of the buy-local issues here in the Northern Territory. I don't think governments have the capability to be nimble enough to police the big, profit based businesses. They need the support of small businesses to make that happen. If their commitments are made public, the public and the business community will hold them accountable. That transparency, that IPP and the reporting of that has to be a public document. That's because governments—it's not that they won't—just don't have the capability that the public has.

If that doesn't change, I think we will continue to see projects making very brash claims of what they will commit to and then there's no policing of that. The one point I continually make there is we have had the world's biggest construction job and the Northern Territory government has had to subsidise the construction sector while we've had that in town. That is a complete failure of government, community, industry groups and unions. If we do the same thing again, the next major project will come—Northern Territory businesses typically aren't big enough to be tier 1s or tier 2s even—and the same thing will happen again. Something different has to happen there.

Mr BRIAN MITCHELL: I know this is your opening statement. Could you just explain that to me? It might be big news in the NT. It's the world's biggest construction job, yet the government is subsidising the construction sector. Can you just tease it out for me?

Mr Pike : At one point in time, the INPEX project was the biggest project in the world. During that time, we've had to have subsidies into the metal fabrication sector to keep it alive. We've had trade support schemes. There have been various different injections directly into the subcontractor level of the Northern Territory. That's because the industry was in that much pain. Those initiatives are still being looked at now.

The last thing—and it's relating to this as well—is that big miners and big projects don't employ enough apprentices. They demand such an influx of trades, but they're not committing enough back. I know this because my apprentices go to trade school with the mining companies. I look at my customers' revenue—which is hundreds of millions, if not billions—and I look at my revenue—which is not hundreds of millions, if not billions—and yet I've got more apprentices at that trade school than the big mining companies. They're the first ones to demand all the labour.

There's something else I'll say as well: I was critical of what happened on the INPEX project. They've just done what they've been allowed to do. When I said it's the failure of government, community, industry groups and unions, I think we're the ones who have failed in that regard. INPEX has only done what they have been allowed to do, which I don't think should happen again.

I'll tie in the apprentices and an IPP, but INPEX recently announced that they had 250 apprenticeships start. Some of them, I'm guessing, would have been completed during the project, but they've only had 250 start. On the scale of it, you hear 250 apprentices and you think that's a wonderful number. The project peaked at 10,000 on site for one day. At that time that there were 10,000 people there, there were 14,000 people engaged in the project in rosters, et cetera. I could only make an assumption that there's 20,000 to 30,000 to 40,000 who have been engaged in the project all up. That 250 apprentices starting an apprenticeship would be one per cent or less than one per cent of the total workforce. I don't think that that would be acceptable to any community group. If an IPP had been transparent at the first stage to say that our apprentices are going to be a one per cent, I don't think we would have accepted that. I just see that as another failure of government, and that's probably more down the union's track there. That's where I'll leave my five minutes.

Mr Peters : I will speak as the CEO of the Industry Capability Network. The ICN has a presence in each state and territory of Australia. Our fundamental reason for being is to promote the capability that exists in our jurisdiction and to promote the opportunities via an online portal that we have. We're fundamentally a not-for-profit organisation. We've got close affiliations certainly here in the Northern Territory with the Northern Territory government and also with the federal government via their Australian Industry Participation plans.

We're involved with all sectors, but specifically in the mining area we're looking at five mines in Central Australia that have the capacity to inject about $2.7 billion worth of work into that particular region. That's approximately 2,000 jobs in construction and 1,000 jobs in operation. As Drew mentioned earlier, there are issues around getting the financial support for those to go ahead. But if they do, it's a huge opportunity for Central Australia. There are other mines that add to that figure, but that alone is the Central Australia situation. They may proceed at the same time, which will apply all sorts of pressure to the capability that exists.

The problem that exists—and Owen alluded to it earlier—is that, of the five mines in Central Australia, four are headquartered interstate. This is an issue which is a constant for the Northern Territory, in that not only the head offices but the project offices can be situated in the capital cities. For us, we travel a lot because we've got to go to the site of those companies, where they're situated. They are the ones winning the contracts often enough, and they have their supply chains. That is an archenemy for business in the Northern Territory, in terms of trying to infiltrate those supply chains.

We've been conducting some mapping exercises in particular areas. We've been doing so in mining equipment, technology and services areas. We've identified about 133 packages of works. They might be situated in the civil contracting, fabrication or electrical areas. For businesses identified in the Northern Territory, there are about 1,078 that we think have the capability to play in those spaces. We can demonstrate quite effectively that there is capability existing in the Northern Territory. What we do see quite clearly is that most of the capability, not surprisingly, is in Darwin and most of the opportunities that will exist in the regions are at the subcontract level. Again, we've got to promote the capability that exists in the regions not only to the Darwin companies who will be active in that space but also to those interstate companies. It's difficult to drill down into the smaller categories, but it needs to be done to effectively produce the results that we're looking for in those regions.

It highlights the importance of the local content plans. Owen has made some very good points. In terms of these plans, they need to consider a number of things. Certainly, they need to consider the capability and the social license, but they need to be policed. Governments do have the capacity to do that. For all of those projects, I think—I could be corrected—$500 million is the point at which they require Australian industry participation plans. So the federal government can impact with their expectations, and the respective state or territory governments need to drill down on that and need to put in place very strict conditions to ensure that local capability is considered. We understand any project's right to have consideration for the commercial outcomes but we believe that they must be pressured into considering the capability that exists, and that is, as I say, a challenge that's faced across a number of different industries in the Northern Territory.

Other issues have been covered in terms of the training et cetera that impacts and really can expand the capability levels that exist within the Territory. Whilst we're mapping the capability, we are also looking at the lack of capability in particular areas with a view to upskill if the basic capacity is here or recruit if it's not. I reiterate that what the federal government can impact is the Australian Industry Participation plans and their ability to impact upon these projects and ensure at a high level that they understand what their commitments are to the regional prospects in the mining sector.

Mr Sedman : The gentlemen before me covered quite a number of the issues that I'd thought about. I am part of the supply chain. The company I work for and have done for some time is heavily involved in supplying to the resource and energy industries onshore and offshore. With regards to the resource industry here in the Territory onshore and right across northern Australia, I suppose, the one organisation that assists our company and others besides having direct contact with the resource sector and the various mining companies is the ICN, through the chamber and the related organisations. But the ICN, I believe, could do with perhaps more support throughout our northern area to get the message further across the mining companies, and through the Northern Territory and federal government. I think there are still members of our supply and business community who don't really know what the ICN does. These guys are doing a great job to get it out there. But I think it should be part of where we're going if the mining companies are looking for the support of business in the areas they are going to. I just see further encouragement for resource and energy companies to part with the ICN and team with Territory businesses.

On the other side, we've talked about fly-in fly-out. One of the problems with fly-in fly-out in a community is, as a broad and large Territory with a small population, that the community doesn't really get to know what the mining companies are doing, what resource is all about. They're busy getting along with their everyday jobs and the like. They're not part of a community that's got as many people in a major industry that helps to run the Territory's resource industry. Again, it comes back to an initiative, possibly by federal and NT governments, to encourage a close relationship between mining and energy companies towards educational training, and including educational and training organisations, to strongly promote pathways for young Territorians in the variety of careers and employment opportunities that the industry potentially needs in the future and to meet the industry employment requirements. To have the community involved, I think, is a major push. The federal and NT governments can initiate and put resources not only towards educating the children in, perhaps, the last year of their high school but to introducing them to what the grass roots of Australia are all about. When I went to school, I learnt at school that primary and secondary industries, which are basically your sheep and cattle, and resources, mining and energy, were a major part of the growth of our country. I see the Northern Territory as like the young Australia. I see it as a massive community with so much potential. We've now got a railway line coming up, which we waited years for, right into Darwin. I don't think it's utilised fully or understood fully by the rest of Australia, as to what it can give to our country as a whole.

With two-thirds of the world's population in a triangle directly above us—you can't throw a stone, I suppose Superman probably could—it's not all that far to get there in a jet today. They're so close. Singapore's got so much to offer with regard to the channels of supply of various products for the resource industry and the energy industry. Two years ago, we were flying pallets of products that were only made in Europe into Darwin via Singapore. From Singapore, it took two or three days to land and be cleared by customs. Today, anything over 50 kilos has to go to Brisbane or Adelaide by truck, unless you charter a FedEx or something, which is outlandish, because we don't have wide-body jets. That may be changing, but I don't believe it's the case, because we've got companies here that are dealing with the Navy when they need to get urgent gear over to over to Singapore—they might have a vessel sitting on a slipway over there—it's got to go to Brisbane. It's got to be actually packaged much better than it used to be because it's got to go by truck, and there are various products coming back the other way.

As far as Darwin possibly being a hub for offshore oil and gas or as a defence base for the work that's going on at Larrakeyah, I think the federal government can have a big input into looking at those freight factors, and looking at how we can team up with the transport industry of this nation to look at some inspiration and innovation there, but it has to happen soon.

In the Northern Territory, if you fly something in from interstate you pay a surcharge on an air bag because you're in the Northern Territory. You're in a remote region. It's ludicrous. Some companies will charge you $15, and the rest will charge you anything up to $70 for an air bag or a piece of freight. I see that as outlandish. I keep telling all of these manufacturers and supply companies in the south that Darwin is part of the Northern Territory. I just see that as a hindrance to—

ACTING CHAIR: Sorry, we're going to have to wrap you up, I'm afraid. Mr Stone, would you like to make some comments?

Mr Stone : I'll keep mine very short. I'll recap a little bit, because I'm obviously a committee member with the manufacturer's council. I reinforce the fact that we support the scrutiny that needs to be involved in a credible IPP—an ongoing scrutiny. One thing is from the construction phase of it. A business that I manage is involved in the initial construction phase. The utopian idea is that someone says, 'We're going to mine any type of mineral,' and everyone says, 'There are millions of dollars going to be spent.' We could actually break that down to: there's so much in infrastructure, so much in long-term employment and so much in other areas. So, essentially reiterating what everyone else has said, the scrutiny on what the money is being spent on in the infrastructure stage essentially goes to how many people it will employ, for how long, how many we need, et cetera.

Mr BRIAN MITCHELL: Sorry, Mr Stone, I missed where you're from.

Mr Stone : I'm actually a member of the Manufacturers Council, but I manage Darwin Galvanizing. On that note, the owners of our company invested on the fact that there was going to be billions of dollars spent on the aforementioned mine. The disclosure of where the infrastructure was coming from wasn't a requirement at the time. As I said, the INPEX group have done everything they've been allowed to do. There are now a lot of facilities that up-skilled without actually expecting to get money spent, and we're in a similar boat, but again I don't think INPEX has done anything wrong. The future investments, whether it's titanium, uranium or whatever, or whatever involvement there is in that initial stage of infrastructure, will lead companies to actually invest like the owners of our company did.

ACTING CHAIR: Thanks, Mr Stone. Ms Morrissey, did you want to say anything?

Ms Morrissey : I have nothing really to add to what Brian had said on behalf of the chamber and what Owen said for the Manufacturers Council, plus our members and Kevin Peters as well. I'll let them have more time.

ACTING CHAIR: Okay, there's a lot there. Do you want to kick off, Brian?

Mr BRIAN MITCHELL: I wouldn't mind; I've been taking a few good notes.

ACTING CHAIR: Thanks very much for all your contributions.

Mr BRIAN MITCHELL: We're meant to break at 11, but I'm not sure—

ACTING CHAIR: We can go past then. If anyone needs to leave, they can. This session was to wrap up at 11, but we can go past then.

Mr BRIAN MITCHELL: Please excuse me while I go through my notes; I'll try to make sense of them. I note Mr Wagner's still here in the public gallery. He mentioned in his closing statements that capital is fluid and that capital will follow the path of least resistance. Mr O'Gallagher, what you seem to be advocating is that we need pathways put in place. I don't necessarily disagree with you, don't get me wrong, in terms of fly in, fly out and, for want of a better term, local strategies. Both of those could be regarded as impediments to the fluid motion of capital. How do we get that balance right between making sure that there's a local commitment and making sure that capital doesn't decide to shove off somewhere easier for them.

Mr O'Gallagher : I agree generally. Investment is global and fluid and goes around the world in various projects. Having said that, there are sovereign rights. You see various nations across the world who implement very strong local capability enforcement or local taxes to suit their requirements, and companies still want to get access to resources. You can balance it out; it's not one or the other. I think there's a bit of a balance in between. I think what governments need to do is look at how they expedite their approvals processes. It doesn't mean you don't hold them to the right standard, but if you can turn it around in two months rather than in two years, that actually becomes an advantage. Governments need to seriously look at doing that. I'm not diminishing the standards. I previously worked in government. I know there is a lot of scope for government to fast-track its approvals process. That in itself becomes an advantage so you can turn it around.

Talking about the INPEX project, I was aware of the INPEX project. I was in government when that was coming forward. Everyone may not say we got what we wanted out of it and whatever, but there is no doubt that that project now goes for another 40 years and it creates long-term job opportunities. What we've got to try and do is make sure we capture as many local opportunities out of that operational phase as we can.

Mr BRIAN MITCHELL: Because often we will get the headline figure, 'This is worth X billions of dollars', but how much of that goes off offshore and how much of it stays? I take Mr Pike's point about the local buy-in. If can use a little bit of recent history about the former government's mining tax, the mining industry obviously played a big part in seeing that demolished. Are governments too gun-shy? Mining companies often have a lot of money behind them, and they make their arguments for their own reasons, which is fair enough. As you say, INPEX has done nothing wrong in the way it's conducted itself. It's acted within the law and within all the expectations put upon it. But are governments too gun-shy in promoting the local argument? Are they too scared?

Mr O'Gallagher : I think they can be, absolutely. I think we still recognise—and I think every business here would recognise—that the miners have to make a commercial return as well. They're making a commercial investment decision. They're not out there to go and subsidise the economy per se. Having said that, we've also seen where commodity prices dip and they go up, so there are long-term cycles. Some of these operations go for a long time, so they can amortise a lot of their costs over time. Some are shorter, and that's a bit different—for junior miners and so on, but Drew can talk more about those ones. But I don't think the public would have any problem about any government saying, 'We want you to maximise your local industry participation and we want you to tell us how you're going to do it—within your commercial framework, but tell us what you're going to do.' I think there are two issues here. One is about transparency, and I think we can all agree that there can be improvements in that sense. The other one is the enforcement of it. That's been the bit where, in a whole range of areas, in terms of government procurement, we've had issues. They say they're going to sign up to this, but where's the enforcement? That goes across the whole board, not just for the mining sector. So, yes, I think governments should be strong, and I think they would have the backing of the public and taxpayers to do so.

Mr BRIAN MITCHELL: I'm from Tasmania, where we have similar issues about local projects not having local buy-in. The interstate or international companies come in and use their own pre-existing supply chains. When there's talk locally of instituting a 'Buy Tasmanian' policy, it's actually some Tasmanian firms who say, 'No, don't do that, because, if you do that, then Victoria will do that, and, if Victoria does that, I won't be able to sell my gear in Victoria, because they'll be buying Victorian goods.' There's a concern that, if you have too much of a 'Buy local' campaign, it will lock your people out from being able to compete interstate. Is that a concern in the NT?

Mr O'Gallagher : The normal policy is that you look as local as you can when you start. If you can't get that, then you go out. For example, if you're doing a mining project down around Katherine, are there any local Katherine businesses that can meet the capability and—obviously not be gouged but in terms of fair and reasonable. I think we've got to keep using that sort of term. But, if not, if you go out 300 kilometres, you've got Darwin and so on, so can you look there? If not there, then you have to go wider. I think the ICN is a good source of helping companies link up with local capability. But, if there's nothing available in the Territory, then it would be fair to say to a company, 'Look elsewhere in Australia, preferably across the borders or whatever.' There may be cases where it's just not available in Australia, so they're are entitled to go offshore, and so they should. But I think the Australian Industry Participation plan—if they've actually showed they've done the market testing right, they can actually get a discount if they're going offshore. Maybe Kevin can talk more about that.

Mr Peters : There's no need for governments to be gun-shy. I don't think they need to be worried about chasing projects away. Fundamentally, if you don't look, you don't see. If they don't see the capability that exists, then they're not giving the locals a shot at it in the first instance.

Mr BRIAN MITCHELL: When I am talking about 'gun-shy', I mean a mining company will come in and say, 'We want to develop mine X, and it's going to create 1,000 jobs'—or whatever—'but, if you put any impediments in our way, then we'll walk. We'll go and develop a mine in Vietnam instead.' And governments go, 'Gee, we don't want to lose those jobs, so we'll sign up to anything,' rather than sticking to their guns and saying, 'We'll call your bluff. Don't open the mine. We'll lease the mine to somebody else.' That's what I mean by 'gun-shy'. Governments don't hold the line enough and they just sort of go to water. That's what I meant by it.

Mr Peters : I understood your meaning. Certainly from the capability point, there are other issues. Processors are a worrying aspect. There are outside pressures on government, particularly in the social and environmental areas, and justifiably so, but don't make the process so difficult. It turns people off. Certainly, from a capability point of view, it's a matter of putting the squeeze on these companies to explore the potential that exists.

Mr BRIAN MITCHELL: So at the very least there should be a policy setting that would say that if a company wants to do a certain project then it's a requirement that they can't just assume they're going to use their supply chains—they have to at least examine what value they can get from a local campaign or a local supply chain. In a former life I was a journalist. I know our local, independently owned newspaper didn't get a lot of government ads because they went through the big Murdoch-owned supply chains. That's because local decision-makers aren't authorised to make decisions. Are you aware of whether local mine managers have the authorisation to make local supply decisions, or are they hamstrung by head office back in Perth or Sydney? Would it be of assistance to you if people on site had the authorisation and a local supply budget?

Mr Peters : Absolutely. They've got to run the process efficiently and economically. But when they're on site they understand the social issues as well. The ability to consider a number of factors on site is really important to the outcomes. If you're far removed, you don't feel those considerations and there's only really one consideration in place: purely financial. That isn't necessarily effective anyway. We're talking construction of projects as well as operation, but if you're involved in the construction you're better equipped to be involved in the operation.

Mr BRIAN MITCHELL: A lot of mines—maybe not the mines themselves, but the companies—have cultural engagement officers, who make sure that local Indigenous heritage issues are sorted out and managed appropriately. Is there a mechanism for a local community engagement manager that's to do with supply chains or local business engagement? Are you aware of whether those sorts of positions exist?

Mr Peters : Yes, they do.

Mr BRIAN MITCHELL: Are they working well?

Mr Peters : It varies. There are a lot of pressures on those individuals because they get caught between the project and the contractors trying to just get the job done. The issue is that that they're employed to oversee as well. So they've got to get buy-in from management. They can't just exist because it looks good. They have to get buy-in from the manager. But most of these projects have those local content people in place that consider all sorts of things—Indigenous engagement, training and what have you. It's a fairly broad brief, but pretty much all have those people.

Mr BRIAN MITCHELL: Do they have enough authorisation to make decisions, in your view? Or is that too much heading back to corporate? Is it window-dressing or is it legitimate?

Mr Peters : It's generally legitimate in terms of the intent and why they exist, but they're battling all these other things—cost blow-outs et cetera—where at times it makes it difficult for them to accomplish their tasks. Whether those positions can be effective or not is all to do with the buy-in of the company and how they treat the importance and relevance of those positions.

Mr O'Gallagher : Just following up on that question, one of our members would ask me to raise with you that they certainly have concerns now with the McArthur River mine. May I say that they have been a very good local procurer. They used to have their procurement manager here in the territory. That position now seems to have gone back to Brisbane, and they've noticed that a lot of the contracts seem to be going back.

Mr BRIAN MITCHELL: I just note for the record that Mr Wagner is shaking his head in the gallery. I'm not sure how we can get that into Hansard.

Mr O'Gallagher : This is a quote from one of our members who has been supplying to the mine. He would want me to bring back to the table.

Mr BRIAN MITCHELL: Thank you, Mr O'Gallagher. Just a couple more from me, Deputy Chair. This was to Mr Pike, I believe. I think you've been talking about transparency of the IPPs.

Mr Pike : Yes.

Mr BRIAN MITCHELL: I love the idea of transparency of those things, and I'll put on record that I think it's a great idea that those documents be made public so the community can see what's going on. But what are the impediments in terms of commercial-in-confidence?

Mr Pike : There have to be some. The IPP has to be written in a way that some level of commitment can be seen and then policed. These businesses want a social licence, and like with any other social licence they have to commit to obeying the law and prove that they can pass the test. Then there need to be police on the roads making sure that they don't break the rules.

Mr BRIAN MITCHELL: You made the very good point that INPEX and others have acted within the guidelines and the law. Obviously they're acting to maximise their profit.

Mr Pike : Of course.

Mr BRIAN MITCHELL: It's the role of government to say, 'We want you to make a profit, but along the way you need to do these things too.'

Mr Pike : That is tailored to the fact that they advertise or promote what they're doing to gain that social licence. Right now we have no way of policing that. You made a point before about 'gun-shy'. These projects or businesses want the social licence, so I don't think governments should stand away from making them accountable for what they're committing to. I don't think they should be gun-shy. Also you made a comment about countervailing duties. You used the example of Tasmania and Victoria. We don't have Victoria sitting on our doorstep. We're only here to satisfy our own market, potentially, as I said before. The Northern Territory is not big enough to have mainly contractors to supply at the level that these megaprojects require. I argue that, cost-wise, these businesses come in and use their contract structures and their supply chains from other projects. But in my experience using local contractors is a cheaper option most of the time. It's not always about price with these businesses.

Mr BRIAN MITCHELL: It's about ease of doing business.

Mr Pike : Capital flows along the path of least resistance. So does an employee's effort.

Mr BRIAN MITCHELL: One last one from me. You started on fly-in fly-out, which has always been a concern for me—the communities are hollowed out, the schools don't get filled with kids, the communities don't get built. It's great for the companies: They get the workforce in and out, but the communities don't get built. Again, the companies will say that this is a really efficient way for them to do business. How do we manage that in a policy sense at a government level? Do you think governments should just prohibit fly-in fly-out? And what would it do to the investment profile of mining in Australia if we did that?

Mr O'Gallagher : As I said, I think there is a balance. They're making commercial decisions, absolutely. But it's not just all about finances, either. It's about access to resources. It's about operating in a sovereign environment where you have a much better legal system than some of those other potential ones offshore, where you might be able to get cheap labour but you may suddenly have your resource taken off you very quickly with no legal recourse. Don't underestimate the value of operating in Australia with our system and our communities.

So I think it's a matter of asking the companies, 'Within your commercial framework, how can you maximise local industry participation? Because that's the objective of the people who are letting you have the resources, the taxpayers. We want to know what your plans are.' They can be assessed on that. They will make that level within the commercial framework. But then they need to be held to account.

Mr BRIAN MITCHELL: You say 'ask' the companies. We can ask all we like, but if the law states that they can do fly-in fly-out—these are serious guys with serious money. They're not going to do it just because we asked nicely.

Mr O'Gallagher : I don't have the exact number, but I'm sure there was something in Queensland where as part of your mining licence you have to show that you're going to maximise your regional communities rather than using fly-in fly-out. I'm not across the detail of how that works. Drew may know more about that. There are mechanisms that governments can use if they want. If you're going to issue a mining licence—and you certainly want to get the mine in a commercial sense—you say that there is a balance. The community wants this. You have a conversation around that and you somehow say, 'How can we make a joint commitment?' And you enforce that commitment. The level of commitment may change depending on commercial realities.

ACTING CHAIR: It's been a great session with feedback from a variety of parts of the sector—manufacturing, mining, the chamber. Thanks very much for coming along. Part of the benefit of having you generously giving your time to come and speak to us is to test some policy settings that are being spoken about in the federal context. Obviously that's where we want to get feedback to make sure the federal government is doing what it can. The policy around the immediate write-off of assets of 20 per cent for Australian businesses—feel free to give some commentary on that. I note the issue of apprentices and that we have fewer of them. We have Charles Darwin University coming in this afternoon. I note that we've had about 150,000 fewer apprentices in Australia since 2013. One of the policy ideas is that for federally funded projects one in 10 employees need to be an apprentice. That is a policy that is out there. Any observations on veterans entering the workforce would be appreciated. Finally, there is a policy around an advanced manufacturing future fund and whether that could assist some organisations in manufacturing where lack of access to additional funds seems to be a barrier to industry.

I know that's a broad brush across a number of policy areas, but we would welcome any observations on those ideas or any other ideas about how the federal government can assist industry, whether it be in manufacturing, the supply chain or small and medium businesses in the territory, noting that the industry participation program advice is very much appreciated and taken on board. Access to capital, the ideas around apprentices for federally funded projects, or feedback on a policy about a 20 per cent immediate write-off—I just put it open to everyone.

Mr Pike : Can I make a comment about the apprentices? Three years ago we didn't pay payroll tax on apprentices. The CLP brought that. In the last budget the Labor government here removed a completion subsidy of $2,000 for apprentices. So an apprentice today, to do his or her apprenticeship, would cost around $10,000 to $15,000 more per apprenticeship, depending on the pay structure. That's at state level. Apprentices are not cheap to train. You don't make money from them until the last year or 18 months of their apprenticeship. Any form of subsidy has completely gone. The private sector is much more efficient and SMEs are much more efficient at training quality people. As an employer, I'm very wary of any apprentices that come out of big business. I'm not saying that I avoid them, but they're treated with a lot more caution. Any subsidy that can be thrown at an SME level would be a lot more efficient than some broad based scheme.

ACTING CHAIR: Obviously, in the Northern Territory we're very dependent on federally funded projects to keep the economy going around. Do you have a view on federally funded projects having a requirement to use apprentices?

Mr Pike : Yes, maximise it. That gives more capability of SMEs. A federally funded project that has a major contractor training the apprentices is a lot less efficient than subsidising the SMEs to train the apprentices. The small to medium subbies and small to medium businesses are the most efficient at training quality trades people. I don't think we want to see it holistically through the large contractors.

ACTING CHAIR: The primes and so forth?

Mr Pike : Yes.

ACTING CHAIR: I think I made the point when Mr Wagner was here: it seems that the issues across your areas of industry are where there's a real effort in Defence, and that is to break down the packages into smaller bits of work to give local companies a better go at it. Do you have any other feedback from a federal government policy perspective? We've probably got only another five minutes.

Mr O'Gallagher : In representing all of our businesses—and, as I said, we have about 1,250 company members—anything that reduces the tax burden on companies, particularly small to medium enterprises, is valuable because that provides more money for those companies to invest and grow their businesses and so on. Anything that reduces the regulatory burden on companies and allows them to get on with their business is valuable. We're not trying to escape obligations, but I'm just saying that sometimes the implementation of regulation devised by people sitting in offices doesn't actually streamline or doesn't actually achieve the outcome; it just delays things. You'll find comparisons across Australia where some work better than others. I'm not the expert. I'm sure Drew spoke about the implementation at the state government level of this sort of hybrid royalties tax and so on, which could actually be confusing in terms of how you implement and so on. So, if we're going to bring in any things, we need to actually road test them with industry and business and see how they work out on the ground. We've seen a lot of examples where good intentions have come in, but the implementation of government regulation has stymied business from getting on.

So, as a general rule, minimise the regulation, but have appropriate regulation—not a problem there—bring the tax down to a reasonable level, particularly focus on the small to medium enterprises and acknowledge that the small to medium enterprises across this nation are the heart and soul of the economy. There needs to be an acceptance of that and then a focus of policy around that. We talk about jobs growth. Any government of any persuasion wants to create jobs. If we can get our businesses that only have five people to increase to seven or 10, you'll get record employment growth across this nation and across this Territory. Taking the job lens, how do we let those businesses grow and spring up a bit? There's a big emphasis, and quite rightly so, on start-ups, but, more importantly from the chamber's perspective, we use the phrase 'spring up'. How do you help the established businesses who have already shown that they can keep going? Ninety-five per cent of start-ups fall over, but, if you help the established businesses where you've got people investing their money, including family money, to grow a bit more, you'll do a lot for the economy.

ACTING CHAIR: Did you make that up: spring-ups?

Mr O'Gallagher : Don't you worry about that!

ACTING CHAIR: Did you?

Mr O'Gallagher : I've used the phrase before.

ACTING CHAIR: It's the first time I've heard it, but I like it. Broadly across federal government, there's an acknowledgment of support for current SMEs to spring up.

Mr BRIAN MITCHELL: There's been bipartisan support for tax relief for those with up to $50 million turnover. I just make the point—and I don't necessarily want to have a debate—that I think you're right, coming from Tasmania. There are lots of small and medium enterprises. An increase from five to six or seven is significant. Lowering tax and flattening regulations are only part of that equation. The other part is economic activity, and you don't get economic activity by flattening wages or taking money off pensioners. I just make that point.

Mr O'Gallagher : I agree.

ACTING CHAIR: There's a dilemma here. We want our industry participation plans enforced, but, at the same time, we don't want too much regulation. It's about finding the right balance. Let me know if you—

Mr Pike : My point there is that, if they're transparent, the public will police it, regardless. It doesn't have to be—

ACTING CHAIR: Through the social licence?

Mr Pike : The Buy Local Plan is now policed by the local community. When a business makes a commitment, the business community know what that is. If they go outside of that, typically the small, nimble subcontractors point it out. It's not that the policeman's free.

ACTING CHAIR: Does anyone want to make any final comments? We could obviously continue our discussion all day, but we'll probably wrap it up. If anyone wants to make a final comment, they're more than welcome. I really appreciated what you were saying, Mr Sedman, about our place in the world and in our region in particular. We've got an enormous opportunity, with the right investment from the federal government, to make that hub idea, with rail access and wide bodied aircraft starting to do more freight. I'm not an expert, but I understand that Donghai are looking at doing stuff and now Qantas is a bit more interested in playing a role as well. That competition is going to be healthy for us. The more that we are able to maximise our potential—and it is still only potential, because it really needs the federal government and industry to get behind it—we will become a bigger player in the region and in Darwin. I appreciate your feedback and advice. We will call things to a halt, unless anyone has one more point. I really appreciate your time, with everyone coming in this morning. I know you're all very busy people. It's greatly appreciated, and we're keen to continue these conversations outside of this process. I encourage you all to put in a submission. It doesn't matter what length it is. Please feel free to put it in. Thanks again for coming.

Proceedings suspended from 11:13 to 11:46