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Wednesday, 6 June 2001
Page: 27376

Mr SERCOMBE (12:39 PM) —In rising to speak on the Export Market Development Grants Amendment Bill 2001, I note that the member for New England indicated that the Export Market Development Grants Scheme has bipartisan support and he takes heart from that. We on this side of the House take heart that the government is continuing to support this scheme because, after all, it was a Labor government which introduced this scheme in 1974 and it was this government which in its first term posed a very serious threat to the continuation of the scheme as part of the cost-cutting frenzy in their early days. How times change: they are now spending money like a drunken sailor. Back in those early days, the Export Market Development Grants Scheme was one of the programs clearly under very serious and significant threat from this government. It was the role of the Labor opposition in defending the scheme and selling its merits that contributed quite significantly to its continuation. When the scheme comes back before the parliament for renewal, it ought not surprise the member for New England that we support it.

Very few issues are more vital to a prosperous and vigorous future for our country than continued development of our exports to a diverse range of markets and through a diverse range of goods and services. There is no doubt that this idea of diversity is fundamental in terms of both markets and the range of products and services we have on offer. Obviously, fluctuations in prices and the long-term decline in prices for commodities that this country has traditionally exported put a very high premium on the need for us to be looking continually and creatively at diversification of products. Also, in a world that is rapidly changing in all sorts of ways, there is obviously a need to continually pay attention to opening and growing market opportunities and not to rely on one particular segment of the world for our exports. This scheme is an important component in encouraging that diversity and creative approach.

An export culture also contributes significantly and in quite complex ways to the vibrancy of Australian business. The report produced last year on the review of the EMDG Scheme has some interesting discussion on innovation in Australian business and clearly demonstrates a correlation between positive, best practice outcomes in relation to networking of similar sized and focused firms and strategic alliances, increased R&D commitment, quality assurance, business planning, development of new products, introduction of substantially changed products and regular training of staff. All these things are very important to a vibrant business culture and business environment and correlate very positively with the propensity of a firm to engage in export activities. The benefits of an export culture extend well beyond just the most obvious benefits that arise from our trading position. There is certainly no room for complacency in relation to our trade position. Once again, this illustrates why the renewed commitment and focus on this scheme and other schemes is important. The Financial Review on 24 May carried an interesting article headed `Trade in surplus, but that may not last', which says:

While merchandise exports fell by 10 per cent, a larger 12 per cent fall in imports resulted in a trade surplus—

not necessarily the best basis on which to achieve an improved situation. The article goes on:

But economists have expected export growth to slow from the very fast pace that began midway through 1999.

Against that backdrop there is no room for any complacency. In an article in the Age on 1 June, Louise Dodson talks about one aspect of trade:

Already Australia's trade deficit in IT and telecommunications at around $9 billion in 1998-99 was equivalent to 60 per cent of the total trade deficit.

So in a whole range of areas it is very important that there be no complacency in relation to the importance of this country making continual and creative efforts in relation to this activity. The Export Market Development Grants Scheme has been and will be into the future a very important part of achieving this situation. As I said before, the opposition welcomes this continuation, but it is not continuing at the sort of level that it has in the past. For example, as I understand the statistics, some 3,000 firms are presently deriving benefit from the scheme, but that is some 500 fewer than has been the case in the past, particularly under Labor administrations. Some 59,000 jobs in Australia are presently supported in exports by this program, but that is some 17,000 fewer than in other times. So there is plenty of scope for improvement. As I said before, this program was started in 1974 under the Whitlam Labor government and it is vital, especially for small business, that it be consolidated. It is particularly important that confidence in the scheme run at a high level, given the fairly vandalistic approach this coalition government took to the scheme in terms of raising doubts about its future in the early days of the first term of the government. But this is welcome.

My colleague in the Senate Senator Cook was recently quoted in the following terms:

After dithering for nearly a year the Government has finally agreed to fund a continuation of the Export Development Grants Scheme. But despite its success, the EMDG scheme is still capped, at the same level of $150 million per annum, as it was when it was irresponsibly slashed in the first Costello budget. As a consequence the real value of Government assistance to Australian exporters continues to fall.

Senator Cook goes on:

Mr Vaile is good at riding with the successes of Australian exporters doing well from an ultra-competitive A$. But his job is to create new markets through trade policy and to win the necessary support for trade within Cabinet. On these he can now be judged a complete failure.

I think that is a fairly accurate assessment. We do have a situation, I repeat, where the scheme has been substantially cut back in terms of its potential. Its capping at $150 million is fully 37 per cent less in real terms than was available in 1996-97. Worse, the scheme is to be capped at the current levels for the next five years, thereby eroding its effectiveness. This is particularly disappointing when one realises the more specific benefits that flow from this type of scheme. For example, Professor Ron Bewley of the University of New South Wales, in a study that forms part of the review process, has shown that, on average, a dollar spent on the Export Market Development Grants Scheme resulted in $12 worth of new exports. A PricewaterhouseCoopers survey found that exporters also rated the scheme as highly effective. If the $150 million annual export limit is not lifted—and I think this is a finding of PricewaterhouseCoopers—more than 1,000 exporters will have the value of their grant entitlement reduced over the period. We are saying to the government very clearly that this has been a successful scheme. It is one that clearly produces on a benefit-cost basis a substantial benefit to the Australian economy, yet we continue to have a situation where the government has got its foot well and truly planted on the brake in its approach to these things. Frankly, that is not good enough.

We are not talking here about rarefied things; we are talking about real Australian businesses. When we talk about 1,000 Australian businesses possibly having their entitlements reduced and their capacity to create jobs reduced, we are not talking rarefied economic theory; we are talking real people and real jobs. An article in the Australian Financial Review of 2 May makes a very strong and accurate observation about Australian business and Australian industry. It says:

If a locally made product can flourish against import competition in the Australian market—

and we know it is a very fiercely competitive market—

it is highly likely—

that is, the product—

to be successful in a variety of export markets ...

Australian business certainly can, with the right incentives, the right partnerships and the right support from government, be a fierce competitor overseas, but it does need that encouragement.

The member for New England referred to a number of businesses in his electorate. I would like to read from the review report a little vignette of a particular business from the north-western part of Melbourne, which is where my electorate is. This company is called Va Vite Pty Ltd. Va Vite employs 26 staff. It has its own production facility which is specifically designed for the production of dusters. The review says:

In 1986 Va-Vite received its first EMDG grant. Since then the company has received 7 grants, totalling over $174,000. Mr Neville Miles—

the head of the company—

states that, “Without the assistance of EMDG, it is most unlikely that our company, with such a narrow product list and relatively small domestic market, would have had the financial strength or confidence to have been able to target export markets so early in our development”.

The report continues:

“After more than thirty years developing the international lambswool duster business, Va-Vite now finds itself in a mature market with only slow growth prospects. In order to continue growing, they have identified sheepskin paint rollers as a new product line. The marketing of paint rollers will commence—

would have commenced—

in the second half of 2000 with the focus on both the European and US markets.”

So right throughout Australia, including in the north-western suburbs of Melbourne, we are talking about real people, real jobs, a real situation—not just economic theory.

In addition to the criticism I have already made of the government in relation to its approach to the EMDG Scheme—its mean and short-sighted approach, which are characteristics of this government in a range of areas—there are a couple of other points I would like to make. One relates to not putting this scheme on a permanent footing. We have had a series of regular reviews—I suppose essentially piecemeal extensions—and we now have another one. This scheme, after 27 years, has demonstrated its substantial worth to the Australian economy. We all understand the need for this focus, and it is about time that we had legislation that did not just extend the EMDG Scheme on a temporary basis for another five years. We really ought to be putting it on a permanent footing.

Another point I would make arises from the apparent absence in the government's approach, as far as I can see, of picking up one of the recommendations in the review about extending eligible expenditures to cover bringing overseas buyers to Australia. The report makes the finding that:

Extending eligible expenses to cover bringing overseas buyers to Australia has considerable merit. It should be included as eligible under the EMDG Scheme if a source of funding can be identified.

The discussion in the report that leads up to that finding includes a very interesting observation from a Melbourne source described as Theatre Arts Export, who said:

I understand the cost of bringing overseas customers to Australia was once claimable.

I understand that is true. The quote continues:

I would push for this to be reintroduced. The nature of our business is such that international clients would gain a clearer understanding of what we produce if we could afford to finance an educational visit to Melbourne. It takes being amongst the creative atmosphere of Australia to truly appreciate how unique our talent is.

Indeed, I think that is true. We do live in an increasingly lively, interesting society. Melbourne in particular, without wanting to sound unduly parochial, very much fits that description. The opportunities of exporting a whole range of our products—whether through tourism or through the other arts programs and the like—cannot be fully capitalised on unless we do have the opportunity, as that quote in the report suggests, to bring people here. It is not just in that industry. The same point applies to a whole range of industries: they could bring overseas visitors —overseas buyers—to Australia on appropriate conditions to observe the opportunities. The report recommends it. As far as I can see, the government has not picked that up, and that is regrettable.

Online, Internet and e-commerce costs in respect of exports are another area where it seems to me, from the way the government has responded to this report, the government is not paying enough attention. The findings of the report are:

The EMDG Scheme provides strong support for the promotion of export through the Internet. This support needs to be more clearly communicated to business to encourage more Internet promotion. EMDG is not designed to support any capital or development costs therefore those costs ... are outside the scope of the Scheme.

However, there is a very interesting quote from the Winemakers Federation in the report:

The industry has recognised the need to develop electronic commerce as an emerging distribution channel. It is seen as especially important in view of the global trend of retail chain rationalisation. The industry has moved to establish its own wine industry portal to facilitate electronic commerce. Export capabilities would be enhanced with a quicker uptake by industry of electronic commerce. Consequently, if the EMDG Scheme targeted electronic commerce uptake amongst participants it would assist those participants in enhancing their export capabilities.

Clearly, unlike the recommendation in relation to overseas buyers, which I referred to immediately before this point, the findings of the review are not unambiguously favourable towards the winemakers' submission. Nonetheless, it is an area of increasing importance to the Australian economy generally and it seems that we would all benefit from a further look at the opportunities along the lines that the winemakers are suggesting. We could look at the application of the EMDG Scheme to ways that assist e-commerce operations and the like.

Coming back to where I started from, the opposition do welcome the renewal of the scheme. We do, I suppose, claim with pride some ownership of the scheme. We are pleased that the people on the other side have got over their temporary apparent burst of vandalism in relation to this important exercise as reflected in their earlier period in government. We hope they will address some of the other points I have made—and that I am sure other members of the opposition are making—to make the scheme even bigger, better and more successful in relation to promoting Australian exports.