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Early Agenda -

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SUBJECTS: Ford jobs, automotive industry, small business

KIERAN GILBERT: Joining me now from Melbourne, the Minister for Small Business, Brendan O'Connor.
Mr O'Connor, thanks for your time. I want to talk about a few issues with you.

Obviously, the Ford job cuts are concerning a lot of people at the moment. The Age headline says
"Ford Leaves PM Red Faced". That pretty much sums it up, doesn't it, after the millions of dollars
in bailout funds announced just in January - yesterday, 440 job cuts.

BRENDAN O'CONNOR: Well, the money that we've provided for Ford and for the vehicle industry
generally has been to ensure that they can restructure in order to be viable. It is a very tough
industry and indeed we are - these job losses, can I say, Kieran, are very disheartening. I would
have constituents of mine in my own electorate, I think, that would be potentially made redundant
as a result of the decision by Ford. But the investment we've made, along with the Victorian
Government, to help Ford restructure will continue. And indeed, the design and engineering of the
2014 Ford needed that support.

And the real question is what would have happened if we hadn't dedicated that resource, dedicated
those funds, to Ford. And what would have happened, of course, if we'd taken the lead of the
Opposition, who would rip out $1.5 billion dollars out of the $5.4 billion New Car Plan.

So this is a very disappointing decision, no doubt about that, in relation to Ford's redundancies ...

KIERAN GILBERT: But I suppose - you say that things...

BRENDAN O'CONNOR: ... and I feel for the families that are affected...

KIERAN GILBERT: Obviously ...

BRENDAN O'CONNOR: ... but we still should be investing in manufacturing.

KIERAN GILBERT: Yeah, we do feel for all of those concerned, absolutely. That's a unanimous
position. But is there a prospect that after hundreds of millions of dollars spent, over many, many
years, that continues to be spent, I think it's about one and a half billion dollars the current
package is put together, that the whole industry falls over anyway?

BRENDAN O'CONNOR: Well, that's the last thing we want to see happen. We've got a commitment from
Ford until 2016. We need to see them, of course, pitch themselves to consumer sentiment. I mean,
what Ford has made very clear is that the model, or their product, has been in decline, in terms of
demand, consumer demand. People are going for smaller, more fuel-efficient vehicles. The investment
we've made is to allow them to get to that point, and indeed the Victorian Government I know has
put in some money as well, and that's allowing the company to restructure at a time when there's
been a very significant shift in consumer demand for smaller vehicles rather than larger vehicles.
And that has taken its toll in a devastating way for 440 workers and their families.

KIERAN GILBERT: What do you say to people running small businesses also struggling in a two speed
economy - you're the Minister for Small Business - let alone other industries, like tourism,
struggling with the exchange rate, that the Government has spent so much and yet we're seeing these
job cuts continue just months after the bailout was announced?

BRENDAN O'CONNOR: Of course any job loss is tragic and we'll do everything we can to provide
support for those 440 redundees.

KIERAN GILBERT: But is it value for money? The point is, is it value for money and is it fair?

BRENDAN O'CONNOR: Well, I think the question - yes, well, it is important. I think people want to
see us make things in this country and continue to do so. And I think it's important that we accept
that the manufacturing sector and other sectors of our economy are confronted with some very
difficult challenges, not least of all the fact that the Australian dollar is parity or above
parity with the US dollar, which has led to real challenges for all companies, and indeed all
sectors that are trade-exposed, and that's why we have made those investments.

But the other things we've done, and you mentioned - you touched upon small businesses and that may
be businesses in the manufacturing sector or tourism or other sectors of our economy that are doing
it quite tough because of the high Australian dollar. I mean, people ask me why did we introduce
the Minerals Resource Rent Tax? Well, we introduced that Minerals Resource Rent Tax so we could
provide revenue to other sectors of our economy - we could actually initiate schemes and provide
tax relief for small businesses.

And I'll give you a couple of examples. The instant asset tax write-off for small businesses to
purchase as many assets as they like, provided each asset is under six and a half thousand dollars
and get the full 100 per cent depreciation on the purchase of those assets in one year...

KIERAN GILBERT: Okay.

BRENDAN O'CONNOR: ... not only is a really good thing for cash flow, but it reduces red tape, in
terms of depreciation schedules. And the loss carry-back scheme too is really important for
businesses that go into a loss position. That money has come from the MRRT to spread the benefits
of the mining boom to other sectors of our economy.

KIERAN GILBERT: Let's look at the - another report today on the carbon tax. A couple of quick
issues, if we can get through them quickly on that. The Fin Review suggesting that the Queensland
Office of Liquor and Gaming Regulation figures show that poker machine revenues jumped by seven per
cent in May. When the carbon tax compensation went out, that the pokie revenue went up. Same -
similar situation in Bendigo in Victoria. And the other states haven't got their data out yet, but
a local government with a similar experience. That's not what the money was spent for, obviously.

BRENDAN O'CONNOR: No. And I don't think anyone is suggesting that anything more than a negligible
amount may have been spent in that manner. But that is an indicator, as in fact you'll find
indicators across the economy, that things are improving. There have been some issues with consumer
confidence and business confidence. And there is no doubt if you're comparing May this year with
May last year, June this year with June last year, we are seeing an increased level of confidence
in the economy. That will then show up in the way in which people decide to spend discretionary
income. There's no doubt people have been holding on to their money. They have been paying down
debt, which is not a bad thing. They have also been holding on to money because they're looking -
they've turned their eyes to Europe. They've been concerned, quite rightly concerned, about the
potential global shocks. But I think it's fair, Kieran, that our announcement to return the budget
to surplus, the response by the Reserve Bank to reduce the official cash rate by 75 basis points in
the last few months has led to an increased confidence amongst consumers...

KIERAN GILBERT: Okay.

BRENDAN O'CONNOR: ... and businesses.

KIERAN GILBERT: Finally, on the issue of Joel Fitzgibbon's comments, earlier in the week. You're
one of Julia Gillard's strongest and most loyal supporters. What did you make of the comments?

BRENDAN O'CONNOR: Well, I think it's important for all parliamentary Labor colleagues to think
about what they're doing and make sure that what they're doing is in the interests of the Labor
Party and the Government. We need to, of course, be united, be disciplined and work hard to make
sure that we expose the scare campaign of Tony Abbott, the fact that he is not working with facts,
he's working with fiction, that fact that since 1 July, the economy is still ticking along very
well and the alarmists ...

KIERAN GILBERT: You don't think Joel did that? You don't think Joel Fitzgibbon did that obviously...

BRENDAN O'CONNOR: Well, I think ...

KIERAN GILBERT: ... with his comments?

BRENDAN O'CONNOR: ... there's no doubt that - look, there's no doubt people have raised concerns
about the way in which he explained himself. He made clear he was committed to the Prime Minister,
he made clear that he wanted to see things improve. We all do. But I think it's very important that
we focus on the things that we're doing well and also expose those alarmist claims being made by
Tony Abbott.

I noticed again the Leader of the Opposition is overseas, but he chooses to question our defence
capabilities while being on foreign soil. Now, that is not the behaviour of a future Prime
Minister.

KIERAN GILBERT: Brendan O'Connor, thanks for your time, this morning. I appreciate it.

BRENDAN O'CONNOR: Thank you very much, Kieran.