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Thursday, 21 August 2003
Page: 19266

Mr McARTHUR (10:28 AM) —Firstly, I acknowledge the importance of this debate on the ACIS Administration Amendment Bill 2003 and the Customs Tariff Amendment (ACIS) Bill 2003. I have no doubt there will be some comments about the member for Corangamite at a later stage in this debate. It would be most unlikely if that did not occur. I am delighted that the member for Rankin, as the shadow spokesman, is supporting the legislation, apart from his tirade on the industrial relations part of the industry. Of course, the opposition are taking a second guess to have yet another review of the automobile industry in, I think, 2008, or at some later date, when most of this legislation will be in place. The member for Corio will no doubt make allegations that I have a `zero' attitude towards tariffs, which he has said on a number of occasions. That is not true. I have been supportive of the view that tariffs have a downward trend, and this legislation is a manifestation of that outcome.

I place on the public record the good work of Senator Button, for whom the member for Corio worked. So, ironically, the member for Corio was an architect of a very good automobile plan, which concentrated the manufacturers to the big four and resulted in a reduction in tariffs from 57 per cent to the now lower levels. I commend the Button plan because, under considerable opposition from unions, vested interest groups, car manufacturers and others, Senator Button pursued this objective.

However, I note that the opposition at that time supported the plan to reduce tariffs in the automobile industry across the board and supported that gradual reduction without a political bunfight in the parliament and in the public domain. Unlike some changes of heart by the Keating government when there were some arguments about tariffs in 1993, when Prime Minister Keating changed his stance, we have been consistent. I have been consistent in the face of quite strong opposition to the argument on car tariffs, and these two bills today are a manifestation of the good work on both sides of the parliament in reducing the level of tariffs in a gradual way to reach, ultimately, a five per cent level across the board so that the car industry and, hopefully, the TCF industry, which is somewhat closer, in world trade terms will have about a five per cent tariff barrier.

The ACIS Bill 2003, as it is known, is part of the government's competitive liberalisation policies and it implements the post-2005 government package of assistance for the transitional tariff reform. So it is on the downward trend; it is moving the tariff regime to that ultimate five per cent with the provision of ACIS in helping the car industry to make these changes. It is an extension of ACIS until 2015 and, if the fundamental thesis is correct, there will be money allocated to the car industry in research and development to assist it to make these changes. It will assist the imported motor car and related vehicle components industry. The tariff will be reduced from 10 per cent to five per cent, again reaching the ultimate level of five per cent. The assistance will be phased out in December 2015. Members opposite and critics of the lower tariff regime may say that phasing tariffs out totally would be a terrible thing, but 2015 is a fair way away. It will be the ultimate for those of us who have advocated this reduction of tariffs in those two industries which have made it difficult for other industries around Australia to compete.

This bill amends the ACIS Administration Act 1999 and it commits $4.2 billion over 10 years. Those opposite and those in the industry should be aware of that amount of money: $2.8 billion from 2006 to 2010, and $1.4 billion from 2011 until the phase-out period of 2015. That is additional to the $2.8 billion that has been provided for 2001 to 2005. They are very big amounts of money provided by the government to an industry which is certainly becoming more competitive, becoming quality oriented and certainly improving quite dramatically. Motor vehicle producers will have access to this uncapped assistance from ACIS. As I have said, it will cease in 2016, having received $1.2 billion over the 10-year period. This is quite an interesting position, as I have been advocating publicly and in this place that tariffs should gradually be reduced over time. ACIS helps manufacturers to meet a new internationally competitive world.

The capped assistance will be divided into two funding sectors, giving fair representation to the components sector. That is the important part: the 55 per cent for vehicle producers and the 45 per cent for the components sector and the supply chain. So we have not only the assemblers and car manufacturers but also the component manufacturers, which are now very much part of the vehicle industry. As anyone who knows anything about the industry would understand, component supply to the assemblers is a critical part of the way in which the car industry operates in Australia.

The final package will provide funding for innovation, research and promotion. Again, that is a step in the right direction, moving away from the age-old debate of tariff support and tariff protection to emphasising quality, innovation and the research component of the car industry, which is now a worldwide industry. They are getting assistance from the government to be competitive in a worldwide environment—and from Detroit, which makes these investment decisions for Ford and GMH—to ensure that, in this transitionary stage, they are able to compete with their home based operators and on a worldwide basis, and so become self-reliant.

The companion bill, the Customs Tariff Amendment (ACIS) Bill 2003, relates to the reduction in tariffs. The existing legislation provides for automotive tariffs to be reduced from 15 per cent to 10 per cent on 1 January 2005. Those of us who have been around this debate for some time would realise the significance of that. As I mentioned earlier, car tariffs were in the range of 57 per cent not that many years ago, but we have now reached the stage where, by 2005, they will be 10 per cent. As I will explain later, the impact of currency fluctuations has a much greater impact than the tariff regime. The bill also provides for the reduction to five per cent from 1 January 2010.

There we have it. The legislation is the culmination of many years of debate on both sides of parliament, within the industry, and with the Productivity Commission, arguing about the tariff debate and the impacts on employment and industrial relations, and about the impact of imports, which, it was alleged, were unfairly competing with Australian products. In 2010 we will have a tariff barrier that is compatible with those in the rest of the world. That will give us a very good position in the World Trade Organisation and in the free trade discussions with America. In those two industries where we have had difficulties in the past and where we have had high protection levels, we are moving towards a world free trade position here in Australia which will be most helpful to our commodity exporters in the rural and mineral industries.

The bill also allows for a further Productivity Commission inquiry in 2008. I must say that the car industry has had so many inquiries that one worries about what the next one will discuss. Details of propositions have been put forward, not so much last time but the time before, when there was a great debate in South Australia and Victoria about the impact of tariffs. Those arguments are yesteryear arguments now, and hopefully in 2008 the Productivity Commission will look at the state of the industry—its productivity and quality—and at industrial relations.

The shadow spokesman talked a fair bit about industrial relations and the arguments that the AMWU was putting forward about industrial relations in the car industry. From my personal observations of Ford and GMH, I would have to say that industrial relations within the car industry are improving. Generally speaking, because of the competitive pressure, the unions have been doing a much better job.

Mr Gavan O'Connor —That's a change!

Mr McARTHUR —The real problem with industrial relations lies outside the car industry.

Mr Gavan O'Connor —It's your minister.

The DEPUTY SPEAKER (Mr Lindsay)—Order! The member for Corio!

Mr McARTHUR —The member for Corio would know this. He has been to some car factories, although not recently. He would know that the pressure of Dougie Cameron and the AMWU is still alive and well. They are out there pressing their claims. Now that we have the just-in-time process, it is critical for those component manufacturers, with one- and two-hour delivery times to the car plants, to continue to deliver on time with equality and not be held up by industrial action. We see a small element of the trade unions in some of these small component suppliers—and even the member for Corio would concede this—which holds up the whole of the car industry. The four major operators can be held up by a small component supplier because of an industrial strike.

We have included a $1 million contingency fund to ensure that there is an improvement in this industrial relations process so that some of the big car companies and some of the smaller component operators cannot be held hostage to unfair and difficult industrial action by a few militant members. It is fair to say that the unions now fully understand that the Australian car industry needs to be internationally competitive, that it needs to implement the just-in-time process and ensure that it works and that they are acting irresponsibly if they interfere with that production chain. We got support for these measures. The car industry received $4 billion worth of help. The Australian Industry Group said:

The greater emphasis on R&D spending in this package will further encourage the industry to become more competitive and continue to be a pace-setter in export growth.

We see that competition, these bills and this support for the industry have changed the whole face of the car industry. As I have been saying, the car industry's import quotas have been reduced from 57 per cent to 20 per cent. In those dark years of 1978 to 1987 we had tariff barriers and quotas in an attempt to protect the car industry.

We now have a $17 billion industry and employment has gone up, as I understand it. It now employs 55,000 people—mainly in Victoria and South Australia. Those forebodings of doom where people thought that the industry would lack jobs have come to nothing; in fact, we have improved job opportunities in the car industry. The Ford Motor Co. in the Geelong area have made a major turnaround. They are now profitable, and I compliment the managing director, Mr Geoff Polites. They have changed their model and a number of their production line processes, they have improved their productivity and their industrial relations practices, and they are now back on the road to profitability. They have sold more models, they have improved their profitability and, whilst they do not export, it is clear that they are in a much stronger position than they were.

It is interesting to look at some of the figures that we have. Exports have increased from seven per cent of production in 1995 to 32 per cent today. So not only do we have an internal industry that was formally protected by tariffs; we now have, in some cases, an export industry oriented towards the world market. In 1995, with a tariff of 27 per cent, Australian manufacturers produced 312,000 vehicles and exports totalled 23,000 vehicles. In 2001, with a lower tariff of 15 per cent, production was nearly 350,000 vehicles and exports totalled 111,000 vehicles. We see tariffs coming down, exports going up and production increasing, which is very much a different scenario to that which was argued by many people, including the member opposite. The declining tariffs in the industry have made the industry much more competitive.

Those export success stories are now going to be influenced by the exchange rate. Certainly, as the Australian dollar appreciates against the American dollar, it does make it more difficult to remain competitive. In the Australian on 20 May 2003, an article by Neil McDonald entitled `Car exports face bingle, imports appeal', said:

The rising dollar, combined with strong consumer confidence and a low interest-rate environment is likely to push sales to an all-time record of 850,000 vehicles this year.

The article also said:

... a sustained strong dollar could have a negative widespread affect across the automotive manufacturing and component sector.

Companies like Holden and Mitsubishi yesterday agreed they were in a win-some, lose-some situation.

“A stronger dollar makes imports cheaper but at the same time it hurts exports,” said Mitsubishi spokesman, Charles Isles.

The exchange rate has a bigger impact on the car industry than tariffs, which we have had so much argument about over the years. The shadow spokesman mentioned the impact on the Doha Round and the arrangements for free trade with Thailand and free trade with the US, and that we should be more proactive with the US FTA. Some of the export success stories to Thailand and to the Middle East by Toyota and by GMH are to be commended. They are certainly seeking access to those markets. There are difficulties even with their own parent companies where they wish to support their operations in the US or in Japan.

This is a seminal debate and, in many ways, it comes to a conclusion with the passage of this legislation. There are allocations of government support on a declining basis. There is a downward trend in the tariff regime so that by the year 2015—I might still be here but the member for Corio will be long gone by then—the car industry will be competitive like the rural industries. They will be exporting around the world. The Geelong and Broadmeadows Ford factories will be world class—which they are reaching now. GMH at Fishermens Bend will be really very good. Toyota are developing their research and development capacities. Hopefully, Mitsubishi will have improved some of their industrial relations and the four big companies will remain very much part of Australia's manufacturing sector. Hopefully, the impact of enterprise bargaining will make sure that the quality and the industrial relations will have improved. When I am in the parliament in 2015—when the member for Corio is playing football for his team—we will have a wonderful car industry, and I will send a letter to the member for Corio just drawing to his attention that the very good policies of his former boss, Senator Button, are coming to fruition, and that the strong advocacy of the member for Corangamite brought about a new era in the car industry in 2015.

The DEPUTY SPEAKER (Mr Lindsay)—I thank the member for Corangamite. Comments about being in the parliament in 2015 could be taken as misleading the parliament!