Productivity Commission

CHAIR: Welcome, Mr Banks and officials from the Productivity Commission. Thank you for your attendance this evening. Senator Cormann?

Senator CORMANN: Thank you, Chair. I just have one issue.

Senator Arbib: Sorry, Chair. I understand that Mr Banks has a very, very brief opening statement.

CHAIR: We had a seven-minute brief statement before. I do not want that.

Senator CORMANN: How about tabling it?

CHAIR: Table it and we will read it.

Mr Banks : Let me halve that and make a three-minute opening statement—

CHAIR: No, I would rather that you tabled the papers.

Senator CAMERON: That is not very productive. Three minutes when we could be asking questions.

CHAIR: Table it, Mr Banks, we will read it.

Senator Arbib: How about one minute and you can table it?

CHAIR: Table it, we will read it.

Mr Banks : It is all right. It does not matter. Let us go straight to questions.

Senator CORMANN: The government has now finally referred the selection in ongoing assessment of the five superannuation funds eligible for nomination under modern awards by Fair Work Australia to the Productivity Commission. Are the terms of reference a bit restrictive in that they appear to limit the scope of your review to the current situation, where Fair Work Australia nominates the five funds under modern awards?

Mr Banks : My understanding is that we do not feel restricted by the terms of reference. We have the opportunity under our act to look at matters relevant to the terms of reference in the task that we have been asked to look at. In many inquiries the scope of the inquiry is also partly conditioned by the emphasis that the different participants will place on different issues that they think are important and relevant, so we do not feel constrained.

Senator CORMANN: You would be aware of the government's MySuper legislation, which has currently before parliament. In simple terms it prescribes a certain series of basic features that a superannuation product would have to comply with in order to be eligible for registration as a MySuper product. It is essentially the basic features that make it in the best interest of the consumer in a particular set of circumstances. If you wanted, would you be in a position to recommend that any MySuper product which is compliant with the government's requirements for a MySuper product should be able to compete for the default super fund business? You would be in a position to do that? From what you have just said, you do not feel constrained by the current model?

Senator Arbib: I do not think Mr Banks can answer that question. You are asking him a pre-emptive question.

Senator CORMANN: I think you have already answered it.

Senator Arbib: You are asking him to pre-empt an actual inquiry. I think he has given you an answer and you have probably gone about as far as you can go. I note as well that you welcomed it when this review was announced—you actually welcomed it.

Senator CORMANN: No, I have. Indeed, I have been waiting for it for a long time. I am very pleased that—

Senator Arbib: Okay. There you go.

Senator CORMANN: I just want to make sure that Mr Banks can do all the necessary and important work that will get us to a more competitive and more transparent situation. I think you have taken it as far as you can. I am quite satisfied with that response, thank you.

Senator CAMERON: Mr Banks, how are you? I have had a look at your latest speech Industry assistance in a patchwork economy. Do you remember that one, to the ACCI?

Mr Banks : Yes, I do.

Senator CAMERON: Yes, I am sure you do. It seems to me that this is about some theoretical positions in a political-free environment. Is there any country in the world that actually has adopted these recommendations that you have put forward for industry assistance?

Mr Banks : It was a speech, it does not have recommendations in it. You will have to be a bit more specific about that.

Senator CAMERON: Your ideas, then. It is a speech, it is full of—

Mr Banks : I would not pretend that these ideas were unique to me. I think they are ideas that have a fairly wide currency.

Senator CAMERON: I will put some more specific questions on that on notice. I do not want to take up too much time. I have two very quick questions. On page 13 of your printed speech, you quote Treasury's Martin Parkinson talking about adopting new 'business models' and you say:

This provides a compelling reason for governments to devote more policy effort right now to identifying impediments to the adaptability of enterprises and employees.

You then go on to say:

Given the importance of organisational change to innovation and productivity throughout the economy, labour market policies and Industrial Relations regulation in particular are clearly one important candidate.

What is your thinking in terms of this flexibility in industrial relations? Where are you going with that?

Mr Banks : It is a general observation. With regulation that impacts on the flexibility of firms, an important part of that is regulation that affects how firms can organise themselves to deal with competitive challenges or opportunities. So the relations that they have with their workers and how effectively they work with their workers are conditioned not only by their relationships and personalities but also by the regulatory framework and rules around that. So I was making a very general observation.

Senator CAMERON: What does that mean? You are directing attention to industrial relations and you are saying it has to change. What is your thinking on the change?

Mr Banks : I am saying that this is one of a number of areas that I specify that bear on the adaptability and flexibility of enterprises right throughout the country, so it is obviously an area that government has to keep in mind in thinking about the performance and adaptability of enterprises, which ultimately are a key determinant of how successful the economy is.

Senator CAMERON: So it is a theoretical position you are putting forward, is it?

Mr Banks : I think it is a very practical one. In our report on retail, just looking at one particular sector, we had quite a lot of evidence and commentary about industrial relations matters, among many other things, so it is not a theoretical proposition.

Senator CAMERON: You have got some advice in here for government in relation to industry policy—lots of advice and ideas—but you have just got these sorts of general statements about IR. What are you proposing? What would you like to see government do?

Mr Banks : This was a speech in which I raised a range of things and, as you will see, I devoted a couple of paragraphs to broad areas that were important in the context of the adaptability and flexibility of enterprises, which are very important for the reasons that the Treasury and so on have talked about. The specifics will emerge through other, more detailed reviews. Our retail review looked at some specifics in that area.

Senator CAMERON: What a cop-out. Mr Banks, this is the biggest cop-out I have ever heard you give. Can you take on notice what practical issues you would want government to look at in relation to industrial relations change? Can you do that?

Mr Banks : This has already been done in the commission's retail report, where we identified a number of areas which are now being looked at in the two-yearly review.

Senator CAMERON: So we use that retail report—that is the pattern; that is your situation across the whole economy, is it?

Mr Banks : You were talking about it being theoretical. All I am saying is: that is one practical demonstration of one sector where issues were raised and where the government has the opportunity, through the review that is taking place right now, to look at those matters, among other matters.

Senator CAMERON: I would invite you to give it some further thought. Given that you have given some specific guidance on industry policy, can you give this committee the same guidance in relation to your thinking on industrial relations, in practical terms? Can you do that?

Mr Banks : As you appreciate, the commission does not make recommendations unless it has done an inquiry. We are not doing an inquiry into the industrial relations system.

Senator CAMERON: So you can just run around the place, go to the ACCI and say: 'We think there should be industrial relations change. There has got to be more flexibility, but don't ask us about what we should do'? You have got ideas on everything else, but not on IR?

Mr Banks : The argument—and we have also put this as a recommendation—is that there needed to be a review that covered the range of things that we had identified. Such a review is now taking place.

Senator Arbib: Senator Cameron, you were going to put the questions on notice.

Senator CAMERON: I will put the questions on notice.

CHAIR: The questions are on notice. Mr Banks's organisation will refer it to the government in due course, as it is a government decision whether it comes out. We will handle it that way. Senator Bushby.

Senator BUSHBY: I have in front of me a copy of page 18 of your Trade and Assistance Review 2009-10, a publication you put out. Can you outline for me specifically in the case of the car industry how you have calculated the net combined assistance figure shown on the right-hand side of the table? It is table 2.5, headed 'Combined assistance by industry grouping'.

Mr Gretton : I can provide this information in a table, but I will just summarise the answer to your question. The combined assistance is a combination of net tariff assistance and budgetary assistance to industry—in this case, the motor vehicle industry. This industry receives a positive assistance tariff of $1.3 billion and a negative assistance through inputs to the industry, which is tariffs on other products, of minus $400 million. In addition, there is budgetary assistance through tax concessions and budgetary payments. With regard to the budgetary payments, in the year you refer to of 2009-10 the main item is assistance provided by the Automotive Competitiveness and Investment Scheme of $520 million. The second most important item in that year was received through the car innovation fund of $108 million. But there were a number of other items as well. We can provide the details of those, if you wish.

Senator BUSHBY: Thank you. The headline tariff rate for motor vehicles changed from 10 per cent to five per cent from 1 January 2010. That is correct, isn't it?

Mr Gretton : Yes.

Senator BUSHBY: Given that we are looking here at the financial year 2009-10, that change would have occurred right in the middle of that year.

Mr Gretton : That is correct, yes.

Senator BUSHBY: So if that had stayed at 10 per cent for all of that year presumably that net combined assistance figure would have been higher.

Mr Gretton : Yes.

Senator BUSHBY: Similarly, if it had been five per cent all year it would have been lower.

Mr Gretton : Yes.

Senator BUSHBY: Can I just confirm that on your figures there at that time there was no single industry in Australia that received more government assistance than the car industry, including in the agricultural and mining sectors?

Mr Gretton : At this level of aggregation that is correct. On the aggregation shown in this table, just looking down the column I think the motor vehicle industry had the largest amount of net assistance provided.

Senator BUSHBY: You have included this table in your publication. Is that because you think that this is a suitable aggregation for comparing levels of assistance for industry?

Mr Gretton : Yes, I think that is the case.

Mr Banks : That information has been developed over many years and the commission, in its various guises, has been reporting this information for quite a long time. So it is quite a settled methodology for looking at both the assistance on outputs but also some of the assistance as it affects input costs and getting a net outcome. In that sense, it provides a basis for comparing one industry with another.

CHAIR: Thank you, Mr Banks, and thanks to your officers for attending so late in the evening. Thank you for your assistance.