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Wednesday, 9 February 2005
Page: 112

Senator LUNDY (4:49 PM) —Well, well, well, it is amazing to see the crutch of the myth of the so-called Beazley black hole get a good dusting-off in this chamber today. We have heard speaker after speaker hark back 10 years trying to build an argument on something that obviously has very little relevance to the state of the economy today and the issues that Labor is raising right now about the massive current account deficit and the negligence perpetuated by the Howard government.

I want to talk about an area of economic policy that relates to our capacity as a nation to continue growing and relates to our capacity as a nation to innovate and to make the most of the opportunities for economic growth that present themselves to us. That is infrastructure, innovation and industry policy. This neglect has led to a whole raft of chronic symptoms that include a trade deficit that is almost beyond belief.

It is worth going back to cover a bit of history. The 1996 and 1997 budgets saw the coalition government walk away from earnest efforts of the Labor government to encourage industry to innovate and adapt to the new challenges of a global economy, and since then there has been a series of policies that in an ad hoc way have tried to backfill the neglect perpetuated in the late 1990s that saw the coalition squander a crucial period of productivity growth, particularly in well-developed economies that were capitalising on the technological boom and using that technological boom to upgrade their existing industries. In many respects we are left with what could have been. There is no doubt that the Australian economy has experienced growth, but the question goes to what could have been had we not squandered that period of growth and had the coalition not ignored the opportunity that investment in industry, innovation and infrastructure would have meant at that time and since.

Minister after minister in the industry portfolio in the coalition government can be characterised only as visionless, reactionary and weak. There is not any indicator that highlights the neglect of these policy areas more starkly than our consistently poor trade performance. As I said, while the rest of the world invested in the sorts of industries that would see their economies continue to grow strongly well into the 21st century, we have seen—and I can remember debating this in this place in 1997, 1998 and 1999—the disastrous results of this government’s lack of commitment to research and development investment. We have also seen its lack of commitment to developing information and communication technology industries and elaborately transformed manufactures—all of which underpin the upgrading of our existing industries which we continue to rely on. So, at a time when the government should have been making hay while the economic sun shone, Mr Howard, Mr Costello and Mr Anderson seemed to laze around on the veranda, perhaps perfecting their dog whistle, watching the capacity of Australia diminish through uninterested eyes.

The chronic symptom of this lazy neglect is, of course, the largest ever trade deficit—the seventh trade deficit in a row. Australia’s share of world exports is now less than one per cent, which is the lowest level for at least 25 years. In measuring up against the countries with which Australia competes, this country is being beaten soundly. This is not good news for Australia’s economy. So it is quite outrageous for the Howard government to continue to boast about being good economic managers, to mount the pitiful arguments we have heard in the chamber today, and to argue—as Senators Minchin and Hill did in question time—that this is somehow related to Labor’s efforts.

The contribution of manufacturing, for which I have portfolio responsibility, underpins Australia’s export success—not least because it is critical to strengthening our economic base through enhancing the value of our intellectual capital and natural resources. More than any other industry, the broad manufacturing capability can contribute to rapid economic growth. I refer again to my experience in the ICT portfolio, at a time when we knew it was possible to calculate the benefit of growth in that industry to our country’s economic growth. Predictably, the Howard government has been more focused on ensuring that those jobs and opportunities for contracts in Australia went overseas instead of developing our industry here.

In a paper published last year, Peter Brain, the Executive Director of the National Institute of Economic and Industry Research, stated very clearly the core reason why manufacturing is a strategic industry and more important than others; that is because it is the industry which transforms raw knowledge into wealth creation. The paper states:

If an economy allows its manufacturing sector to degrade relative to the rest of the world, it is allowing its technology creation potential to decline, which in turn will eventually lead to a fall in the overall per capita GDP growth rate. Manufacturing is strategic in producing elaborately transformed products which are skill, knowledge and innovation intensive. Relative to other industries, manufacturing purchases a relatively high proportion of goods and services from other industries.

So it has that flow-on effect as well. It is worth putting on record the Howard government’s dismal performance. Under this government we have seen 50,000 jobs lost in manufacturing between the years 2000 and 2004. Another pressure on manufacturing is the fact that the cost of inputs to manufactures has surged by 8.1 per cent—higher than last year and the highest rise in 14 years. We know that the share of total exports of manufactured goods has steadily declined under the present government and, according to the Department of Foreign Affairs and Trade’s own figures, the trade deficit in manufactured goods for 2003-04 currently stands at $76 billion. This deficit is at its highest in 2003-04 at nearly $77 billion—nearly double the $41 billion deficit that was recorded in 1996-97 just after Labor left office.

Meanwhile, manufactured imports climbed a staggering $42 billion between 1996-97 and 2003-04. In 2002-03, this meant that, for every $1 worth of manufactured goods produced in this country for local consumption, we imported $2.55 worth of manufactured goods. This alarming stall in export growth in the manufacturing sector does not seem to have even ruffled the feathers of government ministers. They choose to ignore trade and innovation policy to pursue a perennial ideological campaign of attacking unions. Outrageously, we have witnessed today, on several occasions, Howard government ministers huffing and puffing like mad to create a smokescreen of so-called industrial relations reform to try to obscure the export decline caused by their neglect. It is not an industrial relations issue that limits Australia’s trade performance; it is mismanagement and neglect of trade, industry and innovation policy, which is a critical part of economic management of this country. That is where the neglect lies. We heard nothing today refuting that, except this sideways smokescreen effort holding up an ideological campaign. When are they going to try to establish a credential on the issue of trade? It is just not possible to sit in this place and think that this government has any credibility in this area at all.

It is also worth putting on the record that in the 1990s, under the Hawke-Keating Labor government’s integrated trade and competitiveness strategies, we did lift this country’s productivity, open new markets and generate increased export growth. It was the policy agenda that emerged from around 1990 that put exporting at the centre of the new industry policy in Australia. The success of emerging manufacturing exporters in Australian states—and Victoria is a standout—can be attributed to federal Labor strategies implemented at the time and, since then, a renewed focus by the Bracks Labor government and other state Labor governments to support and lift their export potential. This is in spite of the lack of attention and care by the Howard government at the federal level.

Under Labor our exports grew, on average, 8.1 per cent annually. Under the coalition it is a dismal result, and we have seen the trade deficit widen to 3.6 per cent under the coalition government. It was interesting in question time today to see Senator Hill confronted by these facts. The government do not know where to turn. It has been a bad week for the Howard government. Closely following the record trade deficit figures, the Reserve Bank of Australia released their statement on monetary policy, which described the growth in manufactured export volume since 2000 as lacklustre, with growth in exports nearly 25 per cent lower than our global competitors and our performance ‘weak, especially compared with the experience of the 1990s’.