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Economics References Committee
05/04/2016
Future of Australia's steel industry

GABB, Mr David, AWU Delegate/Steelworker, Onesteel

LAMPS, Mr Peter, Acting State Branch Secretary, Australian Workers' Union South Australia

MARTIN, Mr Scott Andrew, Branch Organiser, Australian Workers' Union

McMILLAN, Mr Steve, Organiser, Australian Manufacturing Workers' Union

[12:58]

ACTING CHAIR: Welcome. Do you have any comments to make on the capacity in which you appear?

Mr Gabb : I have been a steelworker at the steelworks for quite a long time.

Mr McMillan : I am based here in Whyalla.

Mr Martin : I am a branch organiser for Whyalla and Eyre Peninsula.

ACTING CHAIR: On behalf of the local member, Mr Rowan Ramsey, and me, thanks very much for allowing us to participate in your rally earlier. It is not a traditional position for me to stand in front of a bunch of guys like you, but I thank you for facilitating that. I invite each of the two groups here to make a brief opening statement, should you wish to do so. Then we will ask you some questions.

Mr Martin : My main concern, of course, is keeping the steel industry viable in this country, but just as important, if not more important, is what it would do to this community if the steelworks, the mining or both collapsed and were mothballed.

As has been mentioned in previous press releases, we have some real issues in Whyalla, like a lot of regional communities do.

We are quite an isolated community out here. As you guys could see, there is not a town down the road or around the corner. The closest town, which is Port Augusta, is a 45 to 50 minute drive from here. As in all regional towns, we have issues with social problems: drug and alcohol, and unemployment. We need a major industry to keep this town viable, keep it supported, keep the community going and keep everybody in a state of mind where the crime does not increase and the drug and alcohol problems do not increase and the social impacts that come of those do not increase. I have got some stuff I would like to say but that is an overview of where I come from.

Mr McMillan : Thank you for the opportunity to submit supporting information to the Senate. The Australian Manufacturing Workers' Union represents approximately 100,000 members working across major sectors of the Australian economy. The AMWU members are primarily based in manufacturing industries which often use steel within that manufacturing, as well as steel manufacturing itself in Port Kembla and here in Whyalla.

The AMWU has long held the view that the Australian steel industry is an industry of vital strategic and economic national interest. We view its future as central to a diverse and secure nation, and we view governments, at all levels, as having a vital role in ensuring its future. This submission provides a brief outline of the challenges that face the workers and the broader community of Whyalla.

As a union official of the AMWU, I am also a long-term resident of Whyalla. I did my apprenticeship with BHP and worked in the industry for 20 years. So when I represent members, I am representing friends, neighbours, mothers and fathers of my children's friends and grandparents of the kids that I help coach on my local football side. I believe that this is paramount in understanding the challenges that face us all here in Whyalla.

I would put a few questions. What will the impact of the closure on workers be? Closure, or placing the plant into care and maintenance, would impact the workers of Whyalla severely. It would have dire psychosocial consequences and economic costs not only to their families but to all workers in the community. It would also impact the state and national governments by way of income tax losses and the cost of welfare services.

Would there be opportunities to find work in their residential region? The simple answer to that is no. At present in the region we have a pending closure of the Alinta power station in Port Augusta. We have had one of the major engineering companies that serviced the steelworks, Link Engineering, go into voluntary administration just under a month ago; they have since closed their doors. We have seen all other service contractors in the region go through restructuring to assist Arrium and OneSteel reduce their costs, with a total loss in excess of 600 jobs in the last 18 months. The AMWU's view is that there would be limited, if any, new opportunities for employment.

How have these job losses impacted the community and region? The fallout of the current job losses has had a major impact on workers at many levels—people leaving Whyalla to find work to support their families, breaking up the family unit for weeks at a time, and whole families packing up and moving interstate to follow work or to increase opportunities to gain employment. Along with the above, some have stayed, taking unsecured, lower paid employment, mostly casual in nature due to the uncertainty. Some are still looking for employment or retraining opportunities, with limited options.

What have the employees done to assist to secure the viability of the steel industry? Over the past 12 months the direct employees have contributed both economically and practically to ensure the ongoing sustainability of the steelworks and mines. This has been achieved in many ways. They have injected ideas on cost savings and productivity improvements, moved to multiskilled roles to allow for reduction of numbers of their fellow workers and still maintained production outputs. At present, there is a variation being voted on to reduce their take-home pay, base pay and allowances by 10 per cent and forgo a three per cent pay increase under their current enterprise agreement, a total of 13 per cent. On top of this, the restructuring in late 2015, which reduced employees' pay by up to 15 per cent, reduced costs to company in the way of roster changes, shift penalties and the like.

In summary, the AMWU's view is that the recommendations that come out of this Senate committee and others and out of the submissions tabled for the Senate committee be considered to secure the viable steel industry in Australia that is vital to the economic and sovereign security of our local, state and federal governments. Once again, I thank you for the opportunity.

ACTING CHAIR: Thank you very much, Mr McMillan. Mr Lamps, do you want to make a contribution?

Mr Lamps : Thank you very much, Senator. First of all I will take the opportunity of thanking all of the honourable senators for taking time to speak to the broader community this morning. I know for some that might have been a more robust exercise than others, but the exercise was more centred around giving the visitors in town an opportunity to speak rather than us having a chat to our members and/or the broader community, which we can do at any time.

I support the initial opening statements made by colleagues. In a former life I was the product of a strong, viable manufacturing sector, which, sadly, over the last 30 or so years has been in a steady decline. Most of manufacturing needs a stable diet, and in this country that stable diet is steel in some way, shape or form. Whether it is electrical accessories, whether it is ships or submarines, whether it is motor vehicles—sadly—steel is a basic ingredient in much of the manufacturing processes in this country, and whilst we sit here this afternoon and contemplate our navels in regard to Arrium, there are, we believe, measures that government can play a significant part in, notwithstanding also Arrium obviously has some matters that it needs to consider in the next 24 or 48 hours.

We say that because, as a South Australian branch, we also support, obviously, the submission made by the AWU national office, which honourable senators would be in receipt of, and we have supported much of the information that has been tabled. Clearly, from our perspective, it would be an absolute travesty to have all the basic ingredients to make steel and send the basic ingredients offshore to bring it back as a finished product when we know that we can make it here and make it to a quality and quantity that is fit for purpose.

It is incumbent on all of us, honourable senators, to ensure that there is a vibrant steel industry that continues in this country, because, as we remember, especially in a town like Whyalla, when the shipyards closed in the late seventies—and Whyalla took a significant hit at that time—it was the steelworks that continued the town's survival. We are now talking about the steelworks not being around, if it is not supported by all facets of the community, including governments both state and federal, and the impact on this town will be a legacy that will be left for generations to come, without overexaggeration.

We in the Australian Workers Union, like my colleagues in the AMWU and those who have not made a submission, say that an ongoing steelworks needs to continue in this country. An industry needs to continue because if it does not then what are we really all about. I will end my opening remarks there. Thank you, honourable Chair.

ACTING CHAIR: Mr Gabb?

Mr Gabb : Thank you for letting me put this across. As a family man and a worker at the steelworks, I feel I am what you would call a major shareholder and that it all revolves around me, my place of work, my town and my community. I have lived here since 1969. I am married, have four children and have 12 grandchildren. My wife worked as the welfare manager at the Salvation Army. She did that for 12 years here. Even the welfare sector in this town has collapsed in on itself as well. They reduced it to a quarter of what they had and thus made her redundant. I have been a rotary for over 13 years and when the food bank project was started here, for the first two and a half years, I volunteered there two days a week as well as doing my 12-hour shifts at the company. My father worked at the steelworks when we first came here and then I worked there. I have been employed as a caster operator casting molten steel for the last 27 years. My son is employed by a company that is contracted to the steelworks. My daughter, grandson and daughter-in-law are all employed by local businesses which, in turn, rely on the steelworks. My grandchildren attend Samaritan College. So, as you can see, my whole family's existence revolves around the steelworks.

Since the steelworks laid off 250 people, more businesses have closed. The town notices it because at the shopping centre you see a lot of empty stores. We made a sacrifice to save $100 million, and that target, apparently, has been achieved. We have done that. But then they came back and said, 'No, we need another $60 million.' That $100 million, by the way, we got from restructuring wage cuts, shift changes, overtime bans and other cost-saving measures, so we all hurt to get that. That was only six months ago that they came out with that, and we did it. We got it. And myself, I suffered a great financial loss through these changes and, because we now have less people, I do the work of two people compared to what I used to do. As I am getting older, in an ideal world life should be getting easier, not getting harder.

With this extra $60 million that they are asking for, the mining sector has been asked to take a 13 per cent pay cut. Steelworks is still waiting to find out what they want from them, and they may close altogether. This sort of action has a huge domino effect. Businesses will close, houses will become vacant as people exit the town, schools will close as the community reduces and the community will collapse in on itself. I have always hoped that the steelworks would provide permanent employment not only for me but also for my children and my grandchildren. Thank you.

ACTING CHAIR: Thank you very much, Mr Gabb. Have you had any discussions at all in the last 24 hours with any of the management about the current situation?

Mr Lamps : Sadly, not at this stage; hopefully we will over the next couple of days. We will try and get those discussions going. But, at the moment, the company seems to be in a bit of, for want of a better word, lockdown mode given there is a trading halt. That seems to be the excuse that is being used.

ACTING CHAIR: It is probably fair to say that you will not hear from them until after an announcement is made, whenever that announcement is made. But you stand ready and willing to talk to whoever is in charge of that—

Mr Lamps : Always.

ACTING CHAIR: about some sensible outcome about what may proceed. The thing is, your business of what you do out there, making steel, still has a very high percentage of customers here in this country. I said it before. Your structural steel division, which is a third of your business, has a very high market percentage that you capture, so you have obviously got very popular steel and everybody likes using it. It just seems tragic to me that we are down the track some 16 years since it was spun off from BHP. Perhaps BHP had some insight as to where everything was going to be in 16 years. I do not suggest for a minute that they did, by the way. We now hear that, under a series of management decisions, you may all be asked to come back to the table and have a look at what is required to keep everybody in work here. The demand for the product is still very strong. Do you want to comment on that?

Mr O'Brien : Suffice to say that it would be the AWU's view that this situation comes in two parts. There is obviously the internal Arrium management direction and how that will spin out. As a broader industry—because Arrium is part of a steel industry—there are certain mechanisms, certain levers, for want of a better word, that governments can assist in. That may well even include, depending on what announcements come out over the next few days, some temporary support by both the federal and the state government. We can start looking in areas such as the importation of substandard steel being used in significant projects. There is a whole construction site down on Darling Harbour that is not using one ounce of Australian-made steel.

ACTING CHAIR: The suggestion is that it is substandard—those are your words—and that it does not comply with Australian standards and therefore is not suitable for the structure. That is a fairly serious allegation.

Mr Lamps : That is not my allegation. That has been widely reported, especially in the industry itself—steel being dumped into this country and not meeting Australian standards.

ACTING CHAIR: That is another issue, but antidumping continues to be addressed. There is legislation in place and a government of any persuasion takes antidumping very seriously, as does this one. The allegation in what you are saying, though, is that there is substandard steel—that is, steel that does not meet Australian standards—which suggests a safety issue. Is that your contention?

Mr O'Brien : That is what is being reported more widely. Yes, Senator. I am only repeating what I have read and seen and have been told.

ACTING CHAIR: If that is the case, then, if they are building at Barangaroo, as you say, all of the structures with substandard or non-safe or noncertified steel, that would be a scandal?

Mr Lamps : What I indicated at those sites was that there was not one ounce of Australian-made steel; it was Korean; it was imported steel. I did not say it was substandard; I said it was imported steel. As to whether or not it meets the Australian standard, I cannot comment.

ACTING CHAIR: For your sake: in the words that you used here, that was the inference. What you say about the origin of the steel may indeed be correct, but the steel that is being used in that construction is fit-for-purpose?

Mr Lamps : It may well be. I am not trying to link the two.

ACTING CHAIR: That is right.

Mr Lamps : They are separate issues. One was substandard steel coming into this country and the other issue was that there is a whole Darling Harbour project site that is not using one ounce of Australian-made steel. So there are two issues.

ACTING CHAIR: That is a private construction, is it?

Mr Lamps : To my understanding. It is a little bit out of my jurisdiction, but, to my understanding—

ACTING CHAIR: You are giving evidence on it here today. I guess that whatever open sources you have available to you might not have got to that level of detail. Why do you think they did not choose Australian steel over imported steel? What would be your contention, because you do not really know and nor do I?

Mr Lamps : It is my understanding that, unlike certain states—and I understand that Victoria has a relatively high mandated use of Australian-made steel; New South Wales—

ACTING CHAIR: In government projects?

Mr Lamps : In government projects. My understanding is that there is some cascading of that into the private sector as well. I understand that it is not the same case in the state of New South Wales.

ACTING CHAIR: I understand that, but what do you think is the reason that the private development at Barangaroo is not using one per cent of Australian steel? I want everybody to use 100 per cent Australian steel.

Mr Lamps : There is speculation that it may well have been price. However, price should not be the overwhelming consideration given the fact that dollars are being spent. Whether they be taxpayer dollars or private dollars, surely as a society we should be ensuring that any money spent on any construction should be to the benefit of the broader community.

ACTING CHAIR: Okay.

Senator KIM CARR: The Australian Steel Institute has put a submission to this inquiry. Are you familiar with that?

Mr Lamps : I am across the broad points of it, yes.

Senator KIM CARR: I will quote because this was in Arrium's submission. It makes the observation that there are 'significant examples of non-conforming or non-compliant imported products':

Observable defects such as substandard welding that needed to be ground out and replaced, laminations in plate that could cause catastrophic failure, substandard corrosion protection affecting the life of an asset and generally poor workmanship were found unfortunately to be commonplace on imported structural steelwork.

Is that the observation that the union would concur with?

Mr Lamps : I would concur with that.

Senator KIM CARR: I am wondering if there are any examples you have heard of where there have been catastrophic failures in structural steelwork that is undertaken as a result of using substandard steel.

Mr Lamps : I understand but cannot confirm that in the state of Victoria certain overpasses of a pedestrian nature across culverts and bridges have been found to be using that quality.

Senator KIM CARR: This is quite an important standard, is it not? I ask any of the other witnesses if they want to comment on this; I do not want Mr Lamps to have to carry the full burden of this inquisition. The South Australian government has said that they needed to find mechanisms whereby anybody that wanted to tender for work for South Australian projects had to produce Australian-standard steel. Is that your understanding?

Mr Martin : I think that was a lot to do with the prefabricated stuff that was coming in. There was a lot of stuff that in days gone by would be fabricated in Australia. The steel might come in, and then you fabricate it here with your welding, as you were just saying then. But what is coming in now is prefabricated stuff from overseas that is not up to Australian standards. That is being transported onto our construction sites.

ACTING CHAIR: I will explore that. We hear about substandard steel. What would you use substandard steel for? Surely steel is graded—

Mr Martin : Fabrication is the welding that puts the steel together.

ACTING CHAIR: Okay.

Senator KIM CARR: And it is cheap.

Mr Martin : Of course it is. If you have someone overseas doing it before it comes in, you do not have to pay an Australian worker to weld it together.

Senator KIM CARR: The question then is: is this a safety hazard? Is the question of standards a matter of public safety?

Mr McMillan : I would definitely say so. We have had some reports about the Port Pirie smelter where they brought over modules of framing. I believe it was made in Korea. They were made from Korean steel fabricated over there. They got over here and they have had to rework it to get it up to standard to fit into the plant.

Senator KIM CARR: The standard goes not just to the fabrication though; it also goes to the chemical composition of the steel, does it not?

Mr McMillan : It does. Without any testing of the steel, we do not know, and that is the problem with the modules coming in. They come in as already fabricated modules of international steel from wherever they get it, and it would not be tested to the standard of the steel here.

Senator KIM CARR: If we are talking about a bridge or a structure for a sports stadium—

Mr Martin : manufacturing plants or anywhere they need prefabricated steel—any sort of expansion like what was happening at the smelter at Port Pirie is what we are talking about here.

Senator KIM CARR: Oil rigs.

Mr Martin : Yes.

Senator KIM CARR: Are these matters of significance in regard to public safety?

ACTING CHAIR: If I would like to put Australian steel in the Adelaide Oval, I could put 100 per cent Australian steel into that but I could put a standard of Australian steel into there that does not fit the standard that is required for the engineering to cope with the weight of the roof. That would be substandard.

Senator KIM CARR: And criminally liable.

ACTING CHAIR: And criminally liable. That is what you are suggesting. If I build a bridge with Korean steel that is substandard, I could build the same bridge with Australian steel that is equally substandard. Before we get too heightened about this, we just saw a bridge fall over in Pakistan, killing 22 people, and the engineers have been arrested. Everybody can do things which are illegal. I am not defending any particular case here, but let's watch the rhetoric that we are using. Everybody can manipulate any kind of construction and use Australian or imported steel illegally.

Mr Martin : That is the issue though. We should be using Australian made steel that supports Australian jobs. What you just said is exactly the problem that we are all here about today: you guys are bringing in cheap steel that is made by cheap labour that has no quality control as we have here in this country. We know that, when we get steel out of this plant here, it is bloody good quality steel that will go into any construction site in this country, be good and do the job it is made for. I cannot say that for stuff that has not been tested in this country and comes from overseas.

ACTING CHAIR: And I can take your very well made steel, put it into a stadium and put a roof on top of it which is going to make it collapse. I am trying to defend the quality of your steel but make the issue about how it is used.

Senator KIM CARR: There is a question here about the role of government. I am putting to you that there has been a submission received by the Steel Institute that says:

The non-compliances are not limited to poor quality and bad workmanship but extend to deliberate fraudulent behaviour with examples such as falsified test certificates, welds made with silicone rubber and then painted, attachment of bolt heads with silicon rather than a through bolt and water filled tube to compensate for underweight steelwork with fraudulent claims that their products meet particular Australian Standards.

ACTING CHAIR: That is a scandal.

Senator KIM CARR: I am glad you think it is a scandal. I ask the witnesses: are you aware of that submission and do you agree with the statements made?

Mr Lamps : I agree with those statements made. I became aware of them at a recent steel task force set up by the South Australian government where the Steel Institute or steel industry made that presentation to the wider audience of about 300 to 400 people in the auditorium from right across the steel industry. They showed us pictures and evidence of exactly that. So I take it on board. They are the professionals. I am not a metallurgist; I am a union official and former fitter.

Senator KIM CARR: And you are here representing your members.

Mr Lamps : Indeed.

Senator KIM CARR: Is it your concern that there has been sufficient action taken by government in compliance terms to ensure that we do not have substandard steel going into Australian construction projects?

Mr Lamps : I do not believe there has been sufficient compliance or sufficient auditing when a lot of that product either comes in from offshore or is installed.

Senator KIM CARR: That is why the South Australian government has chosen to enforce these measures, but in Victoria the government has gone a bit further and actually demanded Australian made steel in its rail projects. It is not just a question of standards but of ensuring that Australian made steel is put into government projects. Is that the type of policy you believe is practical?

Mr Lamps : Certainly from an AWU perspective it is practical. If we are talking rail, we understand Arrium makes approximately 90 per cent of the rail product for Australia. Certainly there is an opportunity there should there be some co-investment to up the ante there to start looking at fast-rail projects. But to do that we need everybody on board—if you will pardon the pun—to make that happen.

Senator KIM CARR: I have read your national office's submissions, and you are calling for other actions from government. Would you care to outline what other actions you would like to see from government? I ask Mr McMillan to comment too because the metalworkers have put in a second submission.

Mr Lamps : Maybe the metalworkers might go first. I am finding myself with a heavy load again.

Senator KIM CARR: Have a drink.

Mr Lamps : Thank you; I will.

Mr McMillan : As already articulated by several people at the rally today and here at the committee, the antidumping regulations definitely need to be tightened up and regulated a lot better. That is one of the submissions.

Senator KIM CARR: Can you expand on that point? What particular measures do you think are loose?

Mr McMillan : There would have to be tariffs. We have seen the governments in the UK and America put higher tariffs on imported steel. I think that is a definite—

Senator KIM CARR: That is dumped steel.

Mr McMillan : Any imported steel.

Senator KIM CARR: The Anti-Dumping Commission deals with dumped steel, not with all steel.

Mr McMillan : But it has to flow on, I think, for the survival of the steelworks and for the economic survival of steel and the strategic position of steel within our country to any steel that is brought into Australia to have tariffs on it; to mandate the use of steel of Australian-made steel from Australian mills.

ACTING CHAIR: That will land us in the trade court.

Senator KIM CARR: But why doesn't it land Victoria in the trade court?

ACTING CHAIR: Sorry, is that a question?

Senator KIM CARR: You have been objecting; I am just making the point here.

ACTING CHAIR: I suspect that—

Senator KIM CARR: This claim is made again and again.

ACTING CHAIR: I suspect it will.

Senator KIM CARR: No, it is made again and again. What is the evidence for that?

Mr Lamps : I have not seen that here as yet. It may be coming, Senator, I don't know, but it is a long wait. I do not see many other countries in the world being hauled before a trade court by invoking severe anti-dumping penalties. We note a number of countries are anywhere up to 500 per cent now. We note also that other countries do mandate very high percentages of their own steel to be used before they allow imported steel to access—

ACTING CHAIR: So Tata are looking at closing their steel division in the UK with the loss of 15,000 jobs, because they face the same issue that Australia is facing. What are they doing?

Mr Lamps : The flip side of that is that I note the Chinese have just put a 46 per cent tariff on EU steel now coming into China. There appears to be a bit of tit for tat going on. I understand that, yes, the English steel industry is under direct stress. I would like to help them out but, at the moment, my focus is on Whyalla and some practical measures that we, as a committee and a nation, can do. Understand, as I said in my earlier opening submissions, Arrium have got to get their act together as well, but certainly we can, as a nation, move some levers so that we do not seem to be this Taliban free trade movement where other countries are supporting their industries. We do not seem to be giving the same levels of support to our industry—this being steel.

Senator KIM CARR: We are halfway through an answer there. Perhaps you could give me some specific advice: what do you want to see the Australian government do?

Mr Lamps : I will pick it up and then the others will chime in, Senator, if I may. We look forward to seeing an outcome as far as anti-dumping measures on countries that are doing that similar to what is happening in other countries where countries are dumping steel. We want to see the same levels of penalties being applied to those countries, not just 'Yes, you're dumping' and a two or three per cent penalty is applied—we want real action in that area.

As far as procurement is concerned, I guess from an AWU perspective, we support the South Australian model as a branch—that being Australian spec steel made in Australian spec mills. We do not mind the Victorian model either just for the Victorian senators in the room; we believe that is a good model.

Senator KIM CARR: At least one.

Mr Lamps : But lifting the procurement purely to 80 or 90 per cent will save the industry as a whole from the 40 to 50 per cent and will support the industry and that is Arrium and BlueScope, if we are looking at a wider level.

We also would like to see the jobs act and all the bit and pieces that plug into that being beefed up. It has been our view from an AWU perspective that that seems to have lost its way, lost its leg, by being underfunded. Certainly, in the state of South Australia, we have the government industry advocate, which I think has similar elements to the job act

Senator KIM CARR: We used to have a steel industry advocate in Canberra—now that has gone by the board.

Mr Lamps : Indeed. I think that there needs to also be a national standards enforcement from an AWU perspective. Picking up on issues that have been raised by the Steel Institute as far as substandard steel, there should be a tripartite committee that actually reports back in very quick time as to the level of a national standard that we want to see and that that is enforced. That will also address any concerns that may be out there about safety that the chair has raised as well. As far as procurement is concerned, as a union we have no difficulty in linking grants money to procurement.

Senator KIM CARR: I will finally finish on this point: I saw you on TV last night saying that you would—

Mr Lamps : Was that the night time, Senator?

Senator KIM CARR: It was a very good report on the ABC last night—

ACTING CHAIR: Were you on it?

Senator KIM CARR: I do not think we were on that particular program, but we will get over the shock of that. Mr Lamps, I heard you say that the unions—and I presume you were referring to other unions in Whyalla—were prepared to continue to work with the company to find that extra $60 million if required. Did I understand you correctly?

Mr Lamps : You did indeed.

Senator KIM CARR: The workforce here made extraordinary sacrifices collectively in terms of jobs and in terms of conditions and you are still prepared to continue talks about further reductions in terms of an award variation. Is that right?

Mr Lamps : That is not quite correct. Without going into too much detail, certainly as unions we have seen areas of opportunity for cost improvements. I guess, from a company perspective, the company probably has not been embracing of the observations that we have made where we say there can be some cost efficiencies. This, given the last 24 hours, may be an ideal opportunity to encourage the company to revisit those cost initiatives that we see that they do not.

Senator KIM CARR: It may well be that the company is obliged to go into what is euphemistically called 'voluntary administration'. Are you able to comment on the prospects of that in terms of the capacity to maintain steelmaking in this city?

Mr Lamps : Certainly it has been the AWU experience that where companies have gone into administration, if that is indeed the case, the unions that sit around this table have worked with administrators. I personally was involved in a number which traded out of those difficulties and were sold and continue to this very day.

Senator KIM CARR: Did you have reason to be confident that that can be achieved?

Mr Lamps : I am always confident. I am always optimistic rather than being misty-optically.

Senator SIMMS: I think Senator Carr has covered a lot of the issues in terms of advocacy at a government level, so I might focus a little bit more on the impact of this period of uncertainty on the local community here. Mr Gabb, you talked a little bit about this in your presentation: the impact that this uncertainty was having on the community in terms of mental health. Has the union done any surveying of members around that? Do you have any more anecdotal evidence that you could share with the committee around the impact that is having on the community, in particular around people's mental health?

Mr Gabb : One thing I can tell you is that, when it was announced that we were going to have the 250 job cuts—it was a bit different for the steelworks, as to what happened at our end, but, to put it mildly, there was a hell of a ruckus at our end—at the steelworks there was a consultative process of sorts. I kind of have a problem with that word because the company has a tendency to use the consultative processes. They say, 'Tell me what you want and we'll implement it without asking you if that's really what you wanted anyway.' The psychological bit was a little bit hard to handle because we had a time frame saying that some of us were going to lose our job. We would find out in about eight or nine weeks time, so there were nine weeks of pure hell for a lot of people.

The things that made it a bit smoother were that the union made available to us that we could go and see them at any time and if we needed outside assistance they would provide it for us. When we had our interviews the union officials were there at five o'clock in the morning. We had to go from our workplace to the canteen, wait at the canteen and were then called over in separate groups to HR. They were there for us if we wanted to talk through anything. If we wanted them to go in with us at the same time, we were able to do that on as well.

Even afterwards they hung around. It would have been nearly 9 o'clock by the time it was all over and done with—just to make sure that they had seen the last one come out of there in case they needed any help. Or, as the case may be, they may have wanted to dispute getting tapped on the shoulder. But as far as the union is concerned, they have provided a good framework for the employees.

The one thing that everybody asks at the steelworks—the guys that I work with, when I told them I was coming here, they all said one thing—is, 'Why can't you get these guys to—'. I do not think they quite understand why we are not cash positive. We are getting the sales, but we are going and getting the sales for nothing. We are basically saying, 'Yes we will take that contract of 100 million tonne,' or whatever it is, 'but we might make a dollar a tonne on it, simply because we would rather hang on to it than have it go somewhere else.' Because we have to compete with something that is coming in from overseas we have dropped the price. Basically, we are running ourselves into the ground.

Senator SIMMS: Mr Gabb, I might just bring you back to the issues around mental health within the community. You talked a bit about the good support that the union provided; what about your employer? Did they provide any support during that period of time?

Mr Gabb : I remember them saying that part of the redundancy process was that after you had been tapped on the shoulder, if you wanted to,

Mr Martin : Employee Assistance Program.

Mr Gabb : That was it. It was made available for you to be able—

Senator SIMMS: What was that, sorry? I missed that one.

Mr Martin : Employee Assistance Program. The company just basically hand balls you on to someone else.

Mr Gabb : Apparently that was supposed to have some government standing as well so they could turn around and say to you, 'Right, this is how we can help your skills and get you back into the workforce.' I do not really think that they—companies seem to make themselves a little bit devoid of what is happening in the family home. Sorry—

Senator SIMMS: That is fine, I think you have answered that for me—thank you. Can I ask—and this may be a question for your colleagues—has the government offered any particular support to deal with some of the mental health issues that have been presented within this community? Either the state or federal government during this time?

Mr McMillan : Not that I know of. My partner works at the Whyalla hospital, and services are actually being cut—fund based services. They have to struggle for everything they get.

Senator SIMMS: Were those state government cuts?

Mr McMillan : I think it comes back from the federal $80 million that was cut out of education and health. The state governments have to pass that on. As you know, they only have a limited budget as it is.

ACTING CHAIR: The $80 million that was never there to start with, by the way?

Senator KIM CARR: If it never was in the budget, how can you take it out then?

ACTING CHAIR: It was never there, so you cannot take it out.

Senator KIM CARR: Then how did you take it out?

ACTING CHAIR: But anyway: do we want to hear about steelworks or do we want to do the partisan line?

Senator KIM CARR: It was a very helpful bit of advice.

Senator SIMMS: Chair, my questions are actually relating to the impact on the community.

Mr Martin : You can be flippant about that, Senator Edwards, but it is real. The health services in this town have suffered because of the cuts and that is a fact.

ACTING CHAIR: I will tell you what is real—putting in money that this country does not have into a budget that it could never spend. That is what is real, and it was never there.

Senator KIM CARR: Rubbish!

Mr Martin : That is the budget that you are still trying to fix up after five years—that budget.

ACTING CHAIR: Senator Simms, if you want to use your lines and not Senator Carr's, we will continue with questions.

Senator SIMMS: I am asking my own questions, thank you.

Mr Gabb : Just one other thing: with my association with Rotary, we help out different groups. We have seen the demand from these groups in the community increase quite significantly, simply because of all of this. That is from all parts—from the YMCA right through to the hospital. They are all suffering.

Senator SIMMS: Yes. What I was trying to identify was whether the federal government had offered any support, particularly to the community. But from what you are saying, you are certainly not aware of any support that has been provided. It does not sound like there has been any provided during this time.

Mr Martin : No.

Senator SIMMS: What about in terms of representations made by the government to the union? Have they approached you to ask what they could be doing to assist your members during this challenging time?

Mr Lamps : Certainly, from the AWU South Australian branch perspective and also the national perspective, we understand very clearly that the South Australian government is ready to act and assist. We understand that they have done some initial measures centred around the forgoing of various royalties as far as that magnetite coming up from the mines is concerned. There are some matters around the wharfage area. The South Australian government, as we understand it, is ready to get themselves into some co-investment sorts of strategies. I understand that there is some conversation going on between the South Australian government and the federal government on what that might look like. The short answer is: yes, but that is about as much detail around that as I have.

Senator SIMMS: For my final question, we have heard mentioned a little bit today the impact of the abolition of the carbon tax on the local community in terms of improving the lives of people in this area, creating new jobs and so on. Has that been the experience of the union? Has that had such a life-changing impact?

Mr Martin : It has not made one iota of difference.

Senator SIMMS: Thank you. I will leave it at that.

ACTING CHAIR: So you are saying the current company's debt structure would not have been influenced at all by having to pay a carbon tax.

Senator SIMMS: I think the question has been answered and Nick Xenophon wants to ask something.

ACTING CHAIR: No, I am interested in the question.

Mr Martin : They told us they could cover the carbon tax expense.

ACTING CHAIR: At a cost of $60 million?

Mr Martin : What has put the company in the position—

Senator KIM CARR: They got $120 million out of the Labor government.

Mr Martin : They just about got it all covered.

ACTING CHAIR: So this is good. We give them $120 million so they can give $60 million of it back over successive years to pay for the carbon tax.

Mr Martin : I will go back to the point—

ACTING CHAIR: Is this about steel making or is this about political points?

Senator KIM CARR: You are the one that raised it.

ACTING CHAIR: No, you have raised it.

Mr Martin : Going back to your original point, Senator Edwards, the reason the company is in the position they are in has nothing to do with the carbon tax being in place or being taken out of place. It is to do with what they did up at Southern Iron—establishing a mine up there that basically had to collapse as soon as they got the thing up and running. They spent $600 million of capital expenditure that they had to go to the market to get. They built that mine and the rail lines, expanded the port and put ore sheds in out here. Within five minutes of doing that it was gone. That is what has put the company in this position; it has nothing to do with the carbon tax.

ACTING CHAIR: How can you suggest that any kind of expenditure would not have put this company under more pressure than it currently has? It is an expenditure item.

Mr Martin : It is an expenditure, but it is not $600 million of wasted money they spent on a mine that is not operating anymore and is also costing them—

ACTING CHAIR: Now we are coming back to the issue.

Senator SIMMS: A point of order, Chair.

ACTING CHAIR: What is your point of order?

Senator SIMMS: My point of order is that the witness has already answered the question that has been put.

ACTING CHAIR: He is answering a new question.

Senator SIMMS: He has already responded to the question which I put originally, and now we are going back and forth debating it. I think Senator Xenophon had a question he wanted to ask.

ACTING CHAIR: I think the point Mr Martin made about the $600 million that Arrium spent—I asked one of the earlier witnesses where the fork in the road was for Arrium. This man has just pointed out—

Mr Martin : It was not the carbon tax, I can tell you that much.

ACTING CHAIR: This man has just pointed out that there was a $600 million fork in the road where the company might have made a bad decision. So thank you for that; I appreciate it.

Senator XENOPHON: Mr Martin, I need to take you to task. I think you said the government has been in for five years; it has only been a bit over 2½ years.

Mr Martin : It seems that long!

Senator XENOPHON: Going on from the previous line of questioning, debate or discussion, it is true that energy prices in South Australia are somewhat higher than the eastern states, which does make a difference for an energy-intensive industry. I think it is just a matter of fact. I will just go to these issues in terms of your role in the community of having a finger on the pulse as to what is happening here. As economic activity is contracted in the region, how would you say governments have reacted in terms of what positive measures you have seen employed by government and whether there have been alternative projects? The other question I want to wrap into that and which really concerns me as well is that as work opportunities in the region have decreased and people have gone elsewhere, what has that actually done to the housing market? For most people around here their home is their castle and their main asset. What is happening to housing prices in this community as more and more jobs are being lost?

Mr Martin : That is a great point. That is my major concern. I know we are here to try to support the steel industry and to try to do what we can to get some answers. Hopefully, the senators will go back with some good suggestions and some great ideas. Without an industry, without the steelworks, we have no Whyalla. We say that quite regularly, but it is the truth. The housing market has dropped by—

Senator XENOPHON: Sorry to interrupt. Our first witness, Nicholas Bindi from ICE Engineering and Construction, said—and I wrote it down—that this could mean that Whyalla will turn into 'the largest ghost town in the country'.

Mr Martin : Yes, and there is already a high unemployment rate here now. The housing properties have dived 20 per cent in recent times. There are over 600 properties on the market in Whyalla at the moment. Some of them have been up for sale for a number of years and cannot sell because nobody wants to buy into a town that does not have a future, and that is a fact. Rentals have dropped, so people cannot rent their houses now. There are places out there that have been vacant for a long, long time that cannot get rented and there are places that are on the market that cannot get sold. And there are people who have just invested in housing, young families, who had jobs at the steelworks or the mine and who are now contemplating selling it or giving it back to the bank. We have heard stories of banks reclaiming housing and we have had houses out the back in a half-built state that have not been completed because of people losing their jobs and the downturn in the industry.

My main concerns are unemployment, the housing market, crime and drug and alcohol use. An isolated town in a region like this needs a major industry attached to it to keep the place surviving, as well as all the contractors. We support and work with all the contractors too, and you are talking about half a dozen major firms in this town that would also pull the pin if anything happened to the steelworks.

Senator XENOPHON: Because of time constraints, I only have two more questions. The New South Wales government essentially bragged—I do not know why—a couple of weeks ago, and they said, 'We've just brought in 100 kilometres worth of steel rail track from Spain.' With back-of-envelope figures, I imagine that contract would have been $8 million to $10 million. What difference would that have made if Whyalla had had that contract?

Mr Martin : It is an accumulation. All those jobs, if they were come to Australian steel producers, would make a huge difference. It is a matter of adding all those jobs up, putting them together and saying, 'Yes, if we do that it's fantastic and it would work.' I noticed that the federal government had a couple of ships built over in Spain as well, so obviously there is a lot going on in Spain at the moment.

Senator XENOPHON: Minister Pyne said on radio this morning that the $2 billion contract was a minor, or relatively small, contract.

Mr Martin : Well, obviously, the people in Spain did not think it was minor or small or they would not have picked it up! It would have been a major infrastructure project for us here in South Australia, and so would have the rail. This is when it gets bad. We are not here to argue and bitch; this is not a political thing for us. This is us being serious about keeping an industry alive in this country and keeping this town alive to go with it, but there is also a huge sovereign risk. I do not know any one person that I have talked to who can imagine an Australian country without some sort of steelmaking capacity within it.

Senator XENOPHON: Because then the fabricators will go, won't they?

Mr Martin : Yes, it will be a domino effect. That is what will happen; it will be a domino effect.

Senator XENOPHON: I have one final question. You may not know this, but I asked questions of the Minister for Defence on notice back in January of this year in relation to the Army's Cultana Training Area Expansion Project because I understand that the construction costs were meant to be about $67 million to $70 million. It would need a fair bit of steel and quite a few jobs would be created in the construction of that. Does anyone know what has happened to that? It was supposed to kick off in mid 2015. It is a genuine question: does anyone know what happened to that?

Mr Martin : I think it is a great question to ask. But no, no-one has heard a thing. Part of our mantra here is that Defence spending should be looking at Aussie steel as well. If you are spending money on Aussie defensive devices, and they need steel to be made, I do not see what reason you could come up with to give it to another country to supply other workers with work and to bring the steel back into the country and use it here. It is crazy to me. We all bang on about free trade and what it does to this country, and I know there are two political divides of how this free-trade mantra goes, but surely anybody who is Australian wants to see Australians kept in jobs? Surely it is better for the economy to have people getting money, getting wages, going on holidays, buying cars, spending down at the local shops, going to have a coffee at the cafe and doing all that sort of stuff that you cannot do when you are unemployed?

ACTING CHAIR: Fellas, just before I let you go—it has been fun—will the steel industry benefit from the $39 billion continuous surface frigate build in the shipbuilding industry that was announced on 4 August last year by the Prime Minister?

Senator XENOPHON: On a point of order, Acting Chair: you mentioned $39 billion, but do we know how much of that will actually be spent in South Australia?

ACTING CHAIR: It is a $39 billion continuous shipbuilding program and it relates to steel from, hopefully, the Whyalla Steelworks.

Senator KIM CARR: What is the local content?

ACTING CHAIR: That is what I am asking.

Senator KIM CARR: That is the issue.

ACTING CHAIR: I asked: do you expect a benefit from that?

Mr McMillan : Unless there is any structural steel in—

ACTING CHAIR: Because we are talking about infrastructure projects.

Mr McMillan : Yes. Regarding the ships themselves, there would be minimal steel coming out of the steelworks here. For infrastructure to support the bogies and the like, to drop them in the water and all that, yes, the structural steel would come from here. On the ships themselves, very little.

ACTING CHAIR: Let's hope that we can capture more and more of it. Thank you very much for your evidence here today. Over the next days you fellows will be, more than likely, involved in discussions. Let's hope that those discussions are fruitful. I think Whyalla has quite a bit to look forward to in terms of its steelmaking capacity. The business model that surrounds it is the issue going forward, in one way, shape or form. Early in his contribution, Senator Carr referred to other vehicles you may be dealing with, and I can only hope that that will find a way for you to get back to normal business. Thank you.

Mr Martin : Thank you, Senator.

Mr Lamps : Thank you.

Proceedings suspended from 13:56 to 14:08