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Senate Select Committee on the Scrutiny of New Taxes
01/09/2011
Carbon tax pricing mechanisms

CHASTON, Mr David, General Manager, Geelong Galvanizing

[09:13]

CHAIR: Welcome to the hearing. Do you wish to make a short opening statement?

Mr Chaston : Certainly. Good morning, senators. I am Managing Director of Geelong Galvanising and also the current Vice-Chairman of the Galvanisers Association of Australia. I will just bring your attention to a letter that the GAA sent to the Multi-Party Climate Change Committee secretariat back in April. I will use this as an opening statement, if you do not mind: 'Galvanising plays an integral role in the building and construction sector, where steel products are commonly used. We have a membership base of 32 businesses spread throughout the various states and territories of Australia, many of which are family owned. We have a collective industry workforce of over 3,000 people. A large proportion of this workforce is categorised as unskilled, without a trade qualification, which is a clear indication that the galvanising industry provides employment opportunities for people unable to secure employment in skilled occupations, especially in the mining industry. Galvanising plants require considerable capital investment as well as ongoing investment in maintenance and upgrading of equipment and machinery during the plant's operating life. As you may or may not be aware, the galvanising industry is energy intensive, being major users of electricity and gas during our process. The domestic industry is highly competitive but is now becoming increasingly trade exposed to international galvanisers, especially those located in the Asian regions, where the industry is witnessing more and more pregalvanised finished steel products and assemblies being imported from Asia into Australia.

It goes without saying that the GAA and the industry it represents is most concerned about the implications of a carbon tax on its businesses, especially if such a cost burden makes it less able to compete against pregalvanised steel imports that are not exposed to the same carbon tax costs. Such an outcome would obviously no doubt be wealth destroying to the business owners and cause massive job losses throughout the industry. The GAA is not about preventing pregalvanised steel imports but is seeking support from the Australian Commonwealth government so that a carbon tax will not jeopardise the long-term future of the galvanising industry in Australia.'

CHAIR: Thank you very much, Mr Chaston. What are the areas where your industry faces additional costs? Would your industry end up being in the top 500 emitters that the government is targeting or is it through the increased cost of electricity, increased input costs and so on?

Mr Chaston : As a whole industry, I have not got those figures. I can give you a plant-by-plant figure and you can extrapolate that out across the 35. For example, at my plant, which is only 12 per cent of the Victorian market share and possibly less than one per cent of the Australian market share, we use over $100,000 worth of electricity per year. That of course is going up. With the carbon tax price it will continue to increase. If you extrapolate that over the 35 businesses, you would say the industry is energy intensive. Where it falls in the top 500—

CHAIR: Where is your main competition? Who do you compete with internationally in terms of imports coming in that might take market share from you?

Mr Chaston : You only have to look at some of the large projects in Western Australia and the Top End that have now been fully imported pregalvanised. We are talking hundreds of thousands of tonnes. I can get you figures.

CHAIR: When it comes to international competitiveness, it is already on the edge.

Mr Chaston : Absolutely.

CHAIR: So your argument is that the carbon tax will—

Mr Chaston : It will put another impost on Australian galvanisers, which does not affect the importers.

CHAIR: So where is most of your competition coming from? Is it China?

Mr Chaston : Out of China.

CHAIR: How do you compare with your competitors in China when it comes to emissions intensity? Is your Chinese competition more or less environmentally efficient?

Mr Chaston : Having seen some Chinese galvanising plants, they are definitely less environmentally friendly.

CHAIR: So they are higher intensity when it comes to emissions?

Mr Chaston : Yes.

CHAIR: To the extent that you lose market share because a carbon price in Australia is going to make you less competitive than somebody who is more polluting in China, all you are doing is shifting emissions over there.

Mr Chaston : That is our opinion.

CHAIR: Seems ridiculous, doesn't it?

Mr Chaston : We do compete now and we are not against competing against pregalvanised imported steel structures. No doubt this committee will have heard from or will be hearing from the Australian steel manufacturers and they will have a bigger argument against that than what we will put up. We are not against competing, but we are against competing against a product that comes in that has not got the same tax impost that we are being exposed to.

CHAIR: What are the principal locations in Australia for your industry? Is there a concentrated area in Australia where you are?

Mr Chaston : Mainly the capital cities. There are several galvanisers in Perth, Brisbane, Melbourne, Sydney and Adelaide.

CHAIR: So it is 3,000 people right around Australia.

Mr Chaston : Yes, and downstream suppliers increases the amount of people involved in the industry.

CHAIR: Have you made any efforts in recent years to become more environmentally efficient or to use less energy?

Mr Chaston : It is part of our sustainability pact as an industry. We continually look at upgrading burners for our kettles to use less energy. In our plant, we have installed technology to reduce the amount of gas we use and the amount of heat required. We are continually looking to become sustainable.

CHAIR: You have done all that without an additional tax impost?

Mr Chaston : We have done this well before this.

CHAIR: Presumably, it makes economic sense for you to keep your costs low?

Mr Chaston : Of course it does.

Senator CAMERON: Have you been to China?

Mr Chaston : Not China, no. We have recently had people over there. My direct boss, the owner of the Furphy group, is in China at the moment. So I have some exposure to China.

Senator CAMERON: Are you aware what China is doing in response to climate change?

Mr Chaston : I am aware of some items. I have been listening to you here. I could not say that I am across it.

Senator CAMERON: So you are not aware of what is happening in China?

Mr Chaston : No.

Senator CAMERON: Have you had a look at the draft exposure for the legislation?

Mr Chaston : No.

Senator CAMERON: Given you say it is going to destroy your company and your industry, don't you think you should have a look at it?

Mr Chaston : We would, yes.

Senator CAMERON: But you have come here to give evidence and you have not looked at the legislation.

Mr Chaston : On notice, I was asked just over a week ago—

Senator CAMERON: Who asked you?

Mr Chaston : Senator Madigan's office.

Senator CAMERON: Okay. Have you spoken to your local member about these issues that you have raised here?

Mr Chaston : I spoke to Grant Dew just last night who is from Richard Marles' office.

Senator CAMERON: Last night was the first time you raised it with your local member?

Mr Chaston : With my local member, yes.

Senator CAMERON: So I assume then that you have not spoken to the minister's office about these problems that you are raising?

Mr Chaston : As far as GAA are concerned, our principal person of contact is Mr Peter Golding, who is the CEO. He will do the lobbying on our behalf.

Senator CAMERON: Are you aware if he has spoken to the local member of the minister's office?

Mr Chaston : I am unaware of that.

Senator CAMERON: Have they spoken to the department?

Mr Chaston : No.

Senator CAMERON: The reality is that you are really unsure about where this is going—is that right?

Mr Chaston : I think everyone is unsure about where it is going.

Senator CAMERON: Have you had a look at any of the department's fact sheets for manufacturing that have been put?

Mr Chaston : I have only looked at it across the galvanising sector and the costs associated with the galvanising plants.

Senator CAMERON: I am talking about the facts; the fact sheets for manufacturing. Have you seen those?

Mr Chaston : No.

Senator CAMERON: Okay, you have not looked at that either. You say that it will be 'wealth-destroying with massive job losses'. Do you stand by that statement, given that you do not know how the legislation will work and you are not sure what the effects are going to be?

Mr Chaston : The effect, as far as we are concerned, will be an increase in operating costs, which will have to be passed on.

Senator CAMERON: Sure. But you are saying it is 'wealth-destroying and will result in massive job losses'. Is that just for effect?

Mr Chaston : Anything that reduces the bottom line is wealth-destroying.

Senator CAMERON: Okay. So if there is an increase in petrol prices that is job-destroying?

Mr Chaston : No. We are talking about pre-galvanised imported steel products that are not under the same scrutiny as we are here.

Senator CAMERON: Let us come to that because, in my view, that may be a similar but different issue. Have you looked at the Jobs and Competitiveness Program that the government has instigated for the manufacturing industry?

Mr Chaston : I have actually been involved in the past in such programs.

Senator CAMERON: No, I am talking about the program that the government has put in place to keep manufacturing strong—the one associated with the carbon legislation.

Mr Chaston : Not that one, no.

Senator CAMERON: So you would not know about the Clean Technology Investment Program?

Mr Chaston : We are involved in clean technology—

Senator CAMERON: No, I am not asking you about what you are involved in. You do not know that there is an $800 million program to help industry in that area?

Mr Chaston : Absolutely. I have heard of the programs, the grants and the funding that is out there. I have not looked into it.

Senator CAMERON: Tell me the programs that you have heard about.

Mr Chaston : There was a gentleman from last night who is involved in the clean tech that spoke about the money that is out there for investment in renewable energies.

Senator CAMERON: So you did not know about it until last night?

Mr Chaston : Generally, no. I knew generally about the funding out there, but—

Senator CAMERON: So you do not know about the Clean Technology Food and Foundries Investment Program in manufacturing?

Mr Chaston : No. It is not something I would be involved in.

Senator CAMERON: In your submission you say there are problems for the steel industry. Are you aware of the steel industry assistance package?

Mr Chaston : I am aware of that. I am not aware of the detail.

CHAIR: Do you qualify for that?

Mr Chaston : No. We are just a galvaniser of steel.

Senator CAMERON: Are you aware of the support that the government has for small business?

Mr Chaston : Aware of it in that it has been spoken about. I have not looked at what the packages are.

CHAIR: If you are aware of small business support, can you tell us, because I am not aware of it.

Senator CAMERON: Chair, I thought you were going to try to behave yourself.

CHAIR: Always.

Senator CAMERON: If you do not want to behave yourself then I am quite happy to go down that track.

CHAIR: You are being very aggressive—

Senator CAMERON: I am being aggressive, did you say?

CHAIR: Yes, you are being very aggressive with the witness.

Senator CAMERON: Chair, point of order. If anyone can point out where I have been aggressive to the chair, then I will accept that, but I am entitled to ask the witnesses questions. You might think it is aggressive asking reasonable questions, but you set this up and I am entitled to ask questions.

CHAIR: You ask your questions and treat the witness with respect please.

Senator CAMERON: If you just butt out and let me ask the questions.

CHAIR: Indeed.

Senator CAMERON: So basically you do not know about any of the programs or any of the assistance; that is the reality, isn't it?

Mr Chaston : I would imagine there are a lot of programs and a lot of assistance out there that a lot of senators would not know about.

Senator CAMERON: Let me come to this wealth destruction and the massive job losses. How much is the carbon tax going to increase the cost of you doing business? Have you done any analysis on that?

Mr Chaston : Do you want to break it down to gas or electricity or—

Senator CAMERON: Yes. I have done the breakdown on the figures.

Mr Chaston : Two cents a megawatt hour on electricity, so 25 per cent. I think it is $1.18 a gigajoule in gas, which is another 20 to 25 per cent. It is 6c a litre for diesel. Online suppliers of chemicals is an unknown factor. We do not know how they are going to be affected. The paint and blast side of the business is of course going to go up because of the energy intensive way of—

Senator CAMERON: Just before you go on—I am happy for you to go through some more—let's come back to the big ones. In your submission you say that your annual turnover is $11 million.

Mr Chaston : That is our plant alone, yes.

Senator CAMERON: Your electricity costs are $100,000.

Mr Chaston : Yes.

Senator CAMERON: You have had significant increases in electricity over the last few years in Victoria, haven't you?

Mr Chaston : Yes.

Senator CAMERON: Not associated with the carbon price?

Mr Chaston : That is correct.

Senator CAMERON: According to Treasury, the carbon price would increase electricity costs by 10 per cent. Are you aware of that?

Mr Chaston : I have only got the figures that we put at a bit more than 20 to 25 per cent.

Senator CAMERON: Where do you get 20 to 25 per cent? Nobody else has got that figure.

Mr Chaston : It is based on 2c a kilowatt hour.

Senator CAMERON: Where do you get the 2c a kilowatt hour? Where does that come from?

Mr Chaston : There was a report put out by Ernst & Young dealing with the carbon tax for the next four years. I am sure you have read that.

Senator CAMERON: The Treasury say that the increase to electricity would be 10 per cent, so that is $10,000.

CHAIR: In year one.

Senator CAMERON: $10,000 per annum. Gas would go up nine per cent. That takes you from $75,000 to $81,000. If you use about 5½ thousand litres of diesel, which is about average for the $8,000 that you say, it would be up 6c a litre. We agree with that. So the overall cost to you in terms of energy costs is about $17,000 on a turnover of $11 million. Is that correct?

Mr Chaston : There are other costs.

Senator CAMERON: That is 0.155 per cent of your turnover. Are you saying that, by increasing your costs by 0.155 per cent, that is destroying your wealth and there will be massive job losses at your company because of that?

Mr Chaston : Am I saying that?

Senator CAMERON: Yes. That was your submission.

Mr Chaston : That is what possibly could happen. I am hoping it won't.

Senator CAMERON: That could possibly happen by an increase of 0.155 percent. What agreements do you have with your employees in terms of wage increases?

Mr Chaston : They are on a workplace agreement.

Senator CAMERON: Yes, but what percentage increase is factored into that workplace agreement per annum?

Mr Chaston : The last one?

Senator CAMERON: Yes.

Mr Chaston : Over three years it was 10 per cent.

Senator CAMERON: So you have managed to deal with a three per cent per annum increase in wages, but you cannot deal with a 0.155 per cent increase in power. Why aren't these wage increases destroying jobs?

Mr Chaston : They are creating jobs because we are negotiating with that and we are increasing our competitiveness by up-skilling. Senator, you of all people know about productivity gains through wage negotiation and what you can do in the workplace—

Senator CAMERON: Yes, I know what some companies can do. I have to wind up here—the chair is winding me up—but the point that I just cannot understand is that you have considered that you have to pass through an amount of 0.155 per cent to your customers. That is not going to destroy jobs in your company, is it?

Mr Chaston : I disagree with your percentage points and the increase in costs.

Senator CAMERON: That is a different argument.

Mr Chaston : That is right. I disagree—

Senator CAMERON: Let us assume I am correct. Does that destroy jobs?

Mr Chaston : This assume you are not correct because you are not in the industry.

CHAIR: We are now going to Senator Madigan.

Senator MADIGAN: Thanks, Mr Chaston. First of all, I would like to declare that I am a user of your services—Industrial Galvanizers, Geelong Galvanizers—so I have a fairly intimate knowledge of the galvanising industry. As far as I know, and you can correct me if I am wrong, over the past 10, 15, 20 years there have been enormous improvements in the galvanising process. Am I correct?

Mr Chaston : Absolutely.

Senator MADIGAN: I understand that galvanising firms such as yours—Industrial Galvanizers, GB et cetera—have had environmental levies to improve their processes, which their customers, such as me, have worn over the years to improve the process. Would you be aware of what the Steel Institute are saying about the amount of imported structural steel coming into the country for major mining projects—

Mr Chaston : Yes.

Senator MADIGAN: and that more and more of this is coming in from Asian competitors and that, if our galvanising industry in Australia were to be decreased, there would be less competition and also be fewer jobs? The Galvanizers Association of Australia are very concerned about the cost pressures. You are trading on an open market with the cost of zinc, which is one of your major input costs, is it not?

Mr Chaston : It is.

Senator MADIGAN: Do you see the carbon tax as, in effect, a reverse tariff on Australian business?

Mr Chaston : It is interesting, because I have been involved in the vehicle industry, the aerospace industry and now the galvanising industry. I worked at Ford for quite a few years, and I saw the reduction of the protection tariffs and what that has done to that industry. I am not saying that it is wrong to remove tariffs—let us all compete fairly—but we are now getting a sort of tariff, in the way of a carbon price, on what we do here, whereas what is imported does not have the same tariff.

Senator MADIGAN: So you are not comparing apples with apples, are you?

Mr Chaston : No—absolutely not.

Senator MADIGAN: Your firm is one of the smaller galvanisers in the nation, so your margins would be very tight in relation to your competitors here and abroad, would they not?

Mr Chaston : Absolutely, as a small player in the industry. Galvanising knows no geological boundary—if you put it on a truck you can get it galvanised—and we compete with South Australian and New South Wales galvanisers alike just in the domestic market, let alone what comes in from overseas.

Senator MADIGAN: Would the greatest concern of your firm and the industry as a whole be the fact that, as the carbon price floats, from day to day you will not know what you are going to pay in a floating market?

Mr Chaston : After the four years?

Senator MADIGAN: Yes.

Mr Chaston : Yes, absolutely. It is the uncertainty.

Senator MADIGAN: So, if it is the galvanising of a section of steel—$1.23 a kilo at the moment—you will not be able to quote a business in the future, will you? At the moment you have a price list on different sections of steelwork. You will have to quote every job from there on, won't you, because you will not have any idea?

Mr Chaston : Either that or you put a surcharge on your service. A new surcharge will float with whatever fluctuation there is.

Senator MADIGAN: So, really, when anybody is quoting on a job, even for a mining situation today, they are going to have no idea what they are going to be paying for the galvanising, are they?

Mr Chaston : If they get it imported they will.

Senator MADIGAN: But to do it in Australia—and we are all concerned about jobs in Australia—it is going to be very difficult for Australian companies to quote and it will make them far less competitive against overseas competition.

Mr Chaston : There is an uncertainty—that is correct.

Senator BUSHBY: Senator Madigan asked about your margin. Is galvanising a tough game in Australia? Is it a highly competitive industry where margins are slim and there is not a lot of fat in it?

Mr Chaston : Galvanising is a fairly successful industry in Australia. There is no doubt about that. It is very capital-intensive to get into. Just to build a plant costs about $14 million now. There are a lot of EPA regulations and ongoing regulation, which makes it very hard to continue to galvanise within the scrutiny of the regulations we have. The margins are okay. We continue to reduce wherever we can and remain competitive on what is a more and more competitive market. Imported structure—not only black steel but prefabricated galvanised steel—is increasing.

Senator BUSHBY: The international competition is an increasing trend?

Mr Chaston : Absolutely.

Senator BUSHBY: I guess that is forcing Australian galvanising companies to look at how they address their costs and things like that.

Mr Chaston : Absolutely.

Senator BUSHBY: So it is becoming more and more competitive as a consequence of international pressures, despite the fact that, as you say, there are significant barriers to entry within Australia—

Mr Chaston : Yes.

Senator BUSHBY: which have, I guess, enabled you to be reasonably comfortable until now, but in recent years it has become more competitive. Is that a fair summary?

Mr Chaston : The galvanising industry rides on the back of how well our construction and manufacturing industries do. We have seen a boom time in the last few years and the galvanising industry has certainly done well out of that, but the issues going forward are certainly worrying.

Senator BUSHBY: We heard this morning that you have an $11 million turnover—

Mr Chaston : Yes.

Senator BUSHBY: Presumably, that turnover will deliver a profit but, from what I hear, it is a reasonable profit but not a super profit of any shape or form. Against that turnover, you would obviously have a lot of costs. We have gone through what your electricity, gas and diesel costs are, which is obviously a small proportion of the overall cost. I presume that a large proportion of your turnover goes to meet the cost of production.

Mr Chaston : Yes.

Senator BUSHBY: What other costs do you have?

Mr Chaston : Our biggest single cost in production is zinc. It is up to 24 per cent of our costs.

Senator BUSHBY: What percentage of it is labour?

Mr Chaston : Labour would be around 20 per cent.

Senator BUSHBY: Of your costs, 80 per cent are costs other than labour?

Mr Chaston : Absolutely.

Senator BUSHBY: There is zinc and power. What other costs are there?

Mr Chaston : Transport.

Senator BUSHBY: All of those are the costs. Can you think of any of those costs that you have expenses for in that 80 per cent that would not be affected by higher energy or transport costs?

Mr Chaston : Not one.

Senator BUSHBY: Zinc is a good example. I am a senator from Tasmania and we have a major zinc smelter in Hobart. That is going to have significant increased energy costs. One of its major input costs is energy. That is going to have significant increased costs as a result of a carbon tax. I think probably it will be one of the top 500—we do not know because we do not know who they are—so it may well be directly hit. It is going to have to pass those costs on, so that will have a significant on-flow in costs to you, given that zinc is 25 per cent of your input costs.

Mr Chaston : Yes, I have spoken quite in depth to all my suppliers about how this is going to affect them and to Sun Metals, up in Townsville, and Nyrstar, who are the smelters in Port Pirie and Tasmania. They have guaranteed me that in the first year of the carbon tax there will be no significant increase in the thing. Beyond that, there are no promises.

Senator BUSHBY: Quite clearly—I do not know how they are going to deal with it in that first year—energy is a major component of their costs. Unless they can absorb it, which I cannot see they are going to be doing in the longer term, that will have an impact on their pricing. Similarly you say one of your costs is transport. Unless you are a private motorist, from 2014 you are going to be hit with costs for transport—moving everything around. When you do the analysis, look at it and say your electricity costs are $100,000 and ask what impact it is going to have on your gas and diesel, that may appear, when you compare it against a turnover of $11 million, to be quite small, but the fact is that 80 per cent of your costs—without going into what the percentage of costs is against basically what your profit margin is. But a significant proportion of $11 million would go to meeting your costs, and a significant portion of that is going to be impacted.

Senator CAMERON: I hope we are going to come to a question here. This just a lecture to the witness.

CHAIR: I am chairing, Senator Cameron.

Senator CAMERON: I am just trying to find out his question—

Senator BUSHBY: To satisfy Senator Cameron, my question to you is: do you think that a characterisation of the impact of a carbon tax on your cost is, from memory, 0.015 per cent of your overall costs, or do you think it is going to have a higher impact that reflects its impact on the 80 per cent of your input costs that we discussed?

Mr Chaston : We have estimated a five per cent increase. So, if the carbon tax comes in tomorrow, we would see a five per cent increase across the board in all costs.

Senator BUSHBY: Against an $11 million turnover, that is a significant amount of money.

Mr Chaston : When we are paying that price against the stuff that is coming in that does not have that tax, that is the issue.

CHAIR: What matters really, though, is your profit margin rather than your turnover. At the end of the day, the question is: how much margin do you have left to deal with additional increases in costs beyond the costs that you already carry?

Senator THISTLETHWAITE: Mr Chaston, how much have your electricity costs increased over the past one to two years?

Mr Chaston : It has gone up over the last three years—our costs, our pricing structure, our contracts—so it is about 12 to 15 per cent.

Senator THISTLETHWAITE: Have you had to lay off any workers because of those costs?

Mr Chaston : No, I have replaced as much equipment as I can to become less energy intensive.

Senator THISTLETHWAITE: The Treasury modelling indicates that electricity costs will increase by 10 per cent as a result of pricing carbon. Isn't it a reasonable assumption that you will be able to absorb that cost, you will not have to lay off any employees and you will remain competitive?

Mr Chaston : Absolutely. There is no intention of anyone in the industry or in my plant to lay one person off. In fact, in my plant alone we have increased our capacity. We have put on another 10 employees in the last 18 months through building another structure there and increasing our capability—expanding into blasting and painting as well as galvanising. In fact, the reason our turnover has increased by $3 million in three years is the expansion, and it is not to do with galvanising. The galvanising has been fairly stagnant. We have seen no growth in the galvanising industry in the last four years. Our growth has come from diversifying and changing our product mix.

Senator THISTLETHWAITE: Have you got projections for growth in the future?

Mr Chaston : I have never projected growth. I have always projected a status quo and if I get some growth, that is great.

Senator THISTLETHWAITE: Where do you sell most of your product? Which industries do you sell to?

Mr Chaston : The galvanising industry are involved with clean energy. We galvanise all the wind towers that are currently being put up around Port Campbell, Warrnambool and that area. Unfortunately, the government has just said that 80 per cent of Victoria now cannot have wind farms put on it, so that curtails any growth in that industry. We galvanise in the transport industry, the agriculture industry, the marine industry. If it is steel and you want it to last, we will galvanise it.

Senator THISTLETHWAITE: So you have had a substantial advantage for your firm from increased manufacturing of wind turbines?

Mr Chaston : Absolutely.

Senator THISTLETHWAITE: Under a carbon price, wind power becomes more competitive. We would like to think that there will be greater opportunities for production of wind turbines in Australia as a result of that. Won't that be an advantage for your company?

Mr Chaston : It would be an advantage for the galvanising industry not specifically for my company.

Senator THISTLETHWAITE: Based on that I cannot see how you would have opposition to pricing carbon when there is competitive advantages for your company in terms of markets.

Mr Chaston : I am not and the association is not against a price on carbon. What we are against is an uneven playing field with the imported, prefabricated—

Senator THISTLETHWAITE: You say that most of your competition is from China—

Mr Chaston : And India.

Senator THISTLETHWAITE: Are you aware of what China is doing in terms of policies to reduce emissions and put costs on emissions into their atmosphere?

Mr Chaston : As I said to Senator Cameron, I am aware of sweeping statements but I am not aware of any detail.

Senator THISTLETHWAITE: Are you aware that China is trialling an emissions trading scheme in a number of provinces?

Mr Chaston : No, I was not.

Senator THISTLETHWAITE: Are you aware that as part of China's five-year plan they have a proposal to develop an emissions trading scheme economy wide?

Mr Chaston : No, but that would be excellent.

Senator THISTLETHWAITE: I take it that your point is that if the rest of the world were to act in this area, you would not have a problem with the policy settings.

Mr Chaston : Absolutely.

Senator THISTLETHWAITE: Thank you.

Senator FIFIELD: I have a pretty basic question to start with. Do you think it should be the role of government to help reduce the costs of doing business or do you think it is the role of government to increase the costs of you doing business?

Mr Chaston : I think their role should be to assist business to be competitive but you cannot assist people that cannot be helped. In the industry you have got to want to do what you are doing.

Senator FIFIELD: But you would take it as a pretty universal view that government should be in the business of trying to help enterprises be more competitive rather than add to their input costs?

Mr Chaston : It would stand to reason.

Senator FIFIELD: It would, wouldn't it. Good. I have just been wondering whether there is something I have been misunderstanding or missing of late because that is what I understand that governments traditionally try to do. I was just wanting to make sure that there was not something that I had been missing in this recent debate over the carbon tax. Leading on from that, who do you think is in the best position to determine the effects of increased input costs on your business—is it you or is it government?

Mr Chaston : Unless government want to sit at my desk day after day, it would be me.

Senator FIFIELD: It would be you. Thank you. Again that is what I would have thought but I have been hearing a lot of late that somehow government seems to know the inner workings of individual businesses and the effects of increased input costs better than the individual businesses themselves. So thank you for that. Has anyone from any Commonwealth government department called you or called the business to offer to explain what the effects of a carbon tax would be or how the proposed carbon tax would work?

Mr Chaston : No-one has contacted me.

Senator FIFIELD: Has any government member of parliament contacted you or the business to endeavour to explain?

Mr Chaston : No. In fact, as an association we had to send a letter to the climate change committee secretariat. That was the first contact as an association that we have had with any government department to do with the carbon tax.

Senator FIFIELD: So you would not exactly say that you are being inundated with information or offers from government departments or governments to try and explain how this might work.

Mr Chaston : No.

Senator FIFIELD: It probably follows that the answer to this question is no, but I will ask it anyway. Has any person from a Commonwealth government department or a government member of parliament visited the business to ask how you think the carbon tax would affect your business?

Mr Chaston : No.

Senator FIFIELD: Would you have hoped or expected that someone from government, say, a local government member or senator might have—

Mr Chaston : 'We're from the tax department; we're here to help'!

Senator FIFIELD: That's right! They might have actually come to say, 'I am interested in local businesses; I am interested in local industry. Here is what is proposed. I am interested in your initial thoughts as to how your business would be affected.' Is that something that you would have hoped might happen?

Mr Chaston : Absolutely. As an association we would have hoped that not only on this issue but on other issues that affect the industry.

Senator FIFIELD: We did touch briefly in earlier questioning on whether the government did have a fund. I forget the exact name of the fund but it would be a fund to which application could be made to assist businesses to re-engineer, I guess, some of their operations to reduce their energy efficiency. What would be the preference of your business? Would it be that there be no carbon tax or that there be an application based funding program where you might, if you were successful, get some money to re-engineer some of your processes? Which would you prefer: no carbon tax or an application based fund to try and deal with the damage?

Mr Chaston : Given the fact that we continually look at it and we continually re-engineer, you can throw money at us but we are going to do it anyway, so our preference would be no carbon tax.

Senator FIFIELD: If you happened to be in the fortunate—or unfortunate; I am not sure—position of being the Prime Minister for a day, what decisions would you take to give your business a better competitive position?

Mr Chaston : My own business or—

Senator FIFIELD: Yes, your own business.

Mr Chaston : the industry in general?

Senator FIFIELD: Both. Your business and the industry in general.

Mr Chaston : I would not have one clue as to the first decision I would make. I would need more than a day.

Senator FIFIELD: It can be anything. Are there any particular taxes that you would want to see gone, any changes to industry policy or changes to government regulation?

Mr Chaston : There are quite a few issues that I would like to address. There are the uneven taxes across the board and the unlevel playing fields going into other sectors. But as a question without notice I could not tell you one thing that I would do.

Senator FIFIELD: Feel free to take that on notice, because part of the purpose of this committee and these hearings is to hear from businesses as to how their lives could be made easier and how their position could be made competitive. If you could take on notice those things which would particularly assist your business and your industry, that would be helpful.

CHAIR: Thank you very much for your contribution to the committee.