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Monday, 9 December 2013
Page: 2002

Mr CONROY (Charlton) (19:17): I move the second reading amendment circulated in the name of the member for Fraser:

That all the words after "That" be omitted with a view to substituting the following words:

"whilst not declining to give the bill a second reading the House is of the opinion that the:

(1) Government has broken an election promise and back flipped on its previous pledge to oppose this measure; and

(2) Government's decision to not continue with the Australian Jobs Act, which was intended to be funded by revenue from this tax measure, is deplorable and this demonstrates the Government's lack of commitment to supporting Australian employment."

The DEPUTY SPEAKER ( Mr Craig Kelly ): Is the amendment seconded?

Ms Kate Ellis: I second the amendment.

Mr CONROY: I enjoyed the member for Bradfield's very well considered contribution. Unfortunately, he missed one vital point—which is that you can talk about better targeting of innovation funding but then you actually have to get away from the cut to what you are going to use the money for. He was very silent on that, because that is the giant hole in the argument from the coalition. This is an important savings measure that will better target innovation support, but only if the money is returned to supporting industry and innovation policies, which is exactly what the last Labor government intended when they announced this measure.

The Tax Laws Amendment (Research And Development) Bill 2013 in effect demonstrates the hypocrisy of the coalition. Denying the R&D tax incentive to the largest firms in this country represents another broken promise of the new coalition government.

These changes were introduced to better target support for innovation as part of a way for paying for the $1 billion for Australian jobs announced by the previous, Labor government around February this year. Those opposite are opposed to the Aussie jobs plan, yet they pay lip service to support for existing and new industries. They criticise this savings measure, yet they are taking it and not committing to the new innovation agenda.

As I said, this bill represents a broken promise. The coalition went to the last election stating that they would reverse the government's decision to make this change to the R&D tax incentive. A couple of quotes illustrate this case. The then coalition industry spokesperson, Sophie Mirabella, said the following:

Julia Gillard said this was about jobs and innovation but this policy announcement is destroying confidence in a tax incentive that makes industry responsible for its own innovation.

She went on to say:

We know that large multinational companies won't be hit by the R&D tax cut. It is Aussie companies that will be struck by the cut, perversely the opposite of Labor's claim to be creating Aussie jobs.

The now Treasurer, the member for North Sydney, said:

More recently the government—

the previous government—

announced with no warning it was funding its Orwellian Plan for Australian Jobs package by cutting the R&D tax break for large companies, reaping $1 billion over four years. The government has become immensely unpredictable on tax policy, despite the charade of consultation.

So on the one hand we had empty, hollow criticism from those opposite before the election, but now they are happy to take the saving. What is worse is that they will not even put the money back into supporting innovation in this country. Yet again, it is the coalition saying one thing before the election and doing the exact opposite after the election. The Australian people are quickly realising that this is not the government they voted for.

As I said, this savings measure is about better targeting innovation assistance. International experience and studies have shown that companies that have over $20 billion in domestic turnover, large companies, are able to self-fund their innovation activities. But that is not a reason to pull the funding back from them and just return it to consolidated revenue; you need to use the funding to better target innovation policy.

The member for Bradfield earlier identified innovation policies and the growth of clusters and other things in other countries—whether in Israel, Silicon Valley or Europe. That is what this funding was going to do, through the plan for Australian jobs. This Aussie jobs plan was the result of extensive consultation, primarily through the Prime Minister's Taskforce on Manufacturing. This was a tripartite body, not stacked with stooges of any political party. It was very representative. It had good industry leaders, such as Ian Thomas from Boeing, Phil Butler from Textor Technologies, Rebecca Dee-Bradbury from Kraft Foods, Mike Devereaux from General Motors Holden and Innes Willox from AiG. It had some very notable, world respected innovation leaders in people like Professor Goran Roos and Professor Roy Green, and it had some very good union leadership in Dave Oliver, Paul Bastian and Paul Howes.

This tripartite task force came up with an agenda to revitalise manufacturing in Australia, an agenda to boost innovation and an agenda to look at what is happening around the world and take it and implement it in Australia to help business innovate and grow. We had to fund it, and we funded it through this responsible savings measure. The $1 billion plan that this savings measure was to fund covered three important points. First off was backing Australian firms to win more work here and abroad through improving Australian industry participation plans, making sure that large projects in this country—projects worth over $500 million—gave Aussie companies a fair shot, gave them a chance at the start of the process to tender for the massive amount of work. It gave them a fair go by ensuring that they did not issue the tender specifications in overseas standards, which would have excluded Australian companies from the get-go. This also included strengthening antidumping reforms to ensure that goods were not dumped in this country at below market prices. So, that was the first aspect of the plan that this savings measure was to fund.

The second important measure was supporting Australian industry to increase exports and win business abroad, and this was through the $500 million precincts initiative. Precincts, or clusters, have been proven overseas to be a great way of growing industry. There are strong economies of agglomeration and clustering, and we were trying to implement this and look at overseas examples as a way forward. The precincts initiative would have funded up to 12 precincts around the country. The first two announced were manufacturing in south-east Melbourne and food headquartered in the western suburbs of Melbourne. They were two great examples of bringing together industry both large and small, academia, the great research organisations that are in this country and workers to ensure that learning by doing, economies of agglomeration, and cumulative and circular causation were all happening so that these industries would get off the ground.

It was a great initiative. We had well over 50 applications for precinct funding. Unfortunately this has all fallen into a void now, with a new government. I am certainly calling on the new minister, the member for Groom, to honour this policy, because it is not just Labor's policy. It is a policy industry called for. It is a policy industry championed—whether it was big industry, through Boeing; SMEs, through Textor Technologies; or academia, through Professor Goren Roos. They are all saying that this is the direction Australia needs to head in. I am glad the member for Bradfield identified overseas examples of exactly where this clustering is occurring. So, that was the second arm of the plan for Australian jobs that this tax measure was going to fund.

The third arm was helping Australian small and medium businesses to grow, principally through venture capital. The previous speaker talked about needing to boost start-ups, and one way of boosting start-ups is through improving venture capital arrangements in this country. So, the Aussie jobs plan had a series of initiatives to support venture capital in this country—most importantly, another round of the innovation investment fund, worth $350 million, which would leverage another $350 million in private sector funding for a $700 million venture capital fund that would help grow Aussie SMEs and make them the large Australian companies of the future. This is so important if we are to grow Australian employment.

Unfortunately, this is all in jeopardy now with the new government. They are happy to take the billion dollars in funding but not fund the very sensible, rational initiatives that accompanied it. Unfortunately this is symptomatic of a government that does not respect industry policy, does not respect supporting innovation and really pays only lip service to supporting the growth of new industries and support for established industries. We have seen this in the attempted abolition of $15 billion of innovation and industry policies under the Clean Energy Future package. This included the $10 billion Clean Energy Finance Corporation, the $3 billion ARENA institution and the $1.2 billion clean technology programs. All these programs were aimed at funding and supporting innovation, complementing the R&D tax incentive. In fact, the CEFC, as we heard from the chairwoman, Jillian Broadbent, recently, would actually make money for the government while supporting late-stage commercialisation of new technologies—something so vital if we are to compete in the 21st century. The countries that develop and commercialise the new technologies to decarbonise the world are the countries that will prosper in the 21st century. This is why Labor put together $15 billion worth of industry policy, supported by the R&D tax incentive, and all this is under attack by the new coalition government, who, if the answer by the Minister for Agriculture in question time is representative, wants us to return to being a country built on the sheep's back. That is important; agriculture has a vital role. But, as an aside, I had the brief picture that we were in the 1950s here, when the only two things we exported were wheat and wool, and maybe in a good year iron ore and coal. That is not what Australia is, and it is not what Australia should be in the future. That is why Labor's reforms in the last government were very important.

Another aspect of the R&D incentive debate is the importance of industries that really drive innovation, that really lift more than their share in R&D and drive how that flows on to the rest of the economy. A great example of that is the automotive industry in this country. This is an industry that makes up around five per cent of manufacturing employment, about one per cent of total national employment, yet it does 25 per cent of R&D in the manufacturing industry and around 10 per cent of R&D in the national economy as a whole. And this is another industry under attack by the coalition government. This is a coalition government that has already announced that $500 million is being ripped out of funding before 2015. Depending on what day of the week it was, they were going to take away the entire $1.5 billion after 2015—sometimes it was $2 billion, sometimes it was $1 billion; it really depended on what side of the bed the Prime Minister, the then member for Indi or the member for Groom got up on. This is another example of them ripping away support for the industry and innovation policy agenda. It is not just about corporations; it is about workers. The automotive industry employs 50,000 people directly and another 200,000 people indirectly. They do an awfully large amount of training in the manufacturing sector, and I guarantee you that, if you go to other parts of the manufacturing sector, you will meet a fitter and turner, a welder or a production engineer who probably started at GM, Ford or Toyota.

These are just three examples of the government's lack of respect for innovation. It should not come as a surprise, because one of the first acts the Howard government undertook when it first came into power in 1996 was to slash the R&D tax break from 150 per cent to 125 per cent. So I would submit that this government has form in ripping away support for innovation policy.

I return to the main purpose of this bill, which is to restrict the R&D tax incentive to companies with less than $20 billion in domestic turnover. This was a hard decision, and it is a hard act because it means reducing support for innovation for around 15 to 20 companies in this country. I would submit, and I think the data and the advice from Treasury and the Department of Industry is, that they will generally be able to self-fund that important work. But the most important thing is that money be returned to supporting innovation in the industry policy because we need to grow the industries of the future. That is vital.

Unfortunately, the failure of the coalition to honour this great opportunity demonstrates their hypocrisy. It is another broken promise. They caterwauled, they screamed and they complained when the Labor government took a sensible but hard funding savings decision before the election, and now they just try and slip it quietly through in the dead of night. They try and get it through, grab the $1 billion to fund God knows what—it could be their preposterous Paid Parental Leave scheme that rewards high-income earners at the expense of low- and medium-income working Australians in my electorate.

This is an important bill. It is an important savings measure. I would urge the new government to reconsider their decision and to support the $1 billion plan for Australian jobs because it is a plan built on what industry wants, what industry thinks will work, what international experience says will work. That is why it is so vital that we implement this particular initiative. I commend the bill to the House.