Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Economics References Committee
10/03/2015
Future of Australia's automotive industry

GREEN, Dr Michael, Director, Industry Programs, Department of Economic Development, Jobs, Transport and Resources

MEEK, Mr Jason, Acting Deputy Secretary, Business Engagement, Department of Economic Development, Jobs, Transport and Resources

WONG, Mr Christopher Jason, Manager, Industry Programs, Department of Economic Development, Jobs, Transport and Resources

Committee met at 13:00

ACTING CHAIR ( Senator Ketter ): I declare open this hearing of the Senate Economics References Committee's inquiry into the future of Australia's automotive industry. The Senate referred this inquiry to the committee on 25 November 2014 for report by the first sitting day in November 2015. The committee has received 11 submissions so far, and they are available on the committee's website. The closing date for submission is 29 May 2015.

These are public proceedings, although the committee may determine or agree to a request to have evidence heard in camera. I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee, and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee. If a witness objects to answering a question, the witness should state the ground upon which the objection is taken, and the committee will determine whether it will insist on an answer, having regard to the ground which is claimed. If the committee determines to insist on an answer, a witness may request that the answer be given in camera. Such a request may also be made at any other time.

Welcome. Thank you for appearing before the committee today. I invite you to make a brief opening statement. I am sure there are a number of questions that Senators would like to ask.

Mr Meek : The automotive sector is of great importance to the state of Victoria. The exit of three vehicle manufacturing companies in 2016-17 will have a significant impact on the state's economy and employment. Stability of the automotive sector as the supply chain transitions is critical. The Automotive Transformation Scheme, along with other structural adjustment programs, provides a platform for this stability as the Victorian automotive sector transitions to global supply chains and new industries.

The Victorian government's interim submission to this inquiry recommends the Commonwealth government not proceed with cuts to the Automotive Transformation Scheme which will negatively impact the stability of the Victorian automotive sector. We also acknowledge and welcome the announcement today that those cuts will no longer take place. We also recommend that support for the automotive sector should be extended and increased to assist business to transition in the global automotive sector and diversify into new industries. Finally, any further proposed changes to the ATS should only be considered in consultation with vehicle manufacturers and the broader supply chain to ensure the full usage of the funds.

The Victorian government has an ongoing engagement with the automotive vehicle manufacturers and the broader supply chain to support their transition. The Victorian government welcomes the opportunity to be here today and will be making a full submission to the inquiry in May.

ACTING CHAIR: I have a couple of questions. We have been to a manufacturer this morning and heard about the steps that that manufacturer has taken over some years to attempt to diversify. I am interested in the extent to which the industry in Victoria has or has not taken those steps. Are you able to give an indication of the proportion of components manufacturing businesses that have diversified to the extent that they are sustainable, have begun to diversify but are not yet sustainable or have not really started down that track of diversification?

Mr Meek : I will give you a broad overview of what the Victorian government is doing to assist transition. I will respond to the question. The Victorian government is working very closely with the supply chain. Some of that information is obviously very sensitive and commercially in confidence, but we have been working to support them to transition into new industries. We have a series of trade missions—inward bound—that the Victorian government is supporting to give them exposure to global supply chain opportunities. This week alone is automotive week. We have over 120 international people visiting Melbourne this week to give exposure to that supply chain and allow them to look at business opportunities direct. We have also been supporting the supply chain through conference sessions where they have exposure to alternative industries. So we are specifically looking at potential high-productivity growth areas such as medical devices, defence, construction and the resources industry. We have taken steps to work with some of them to understand how they can proceed with supplying to that area. In terms of the specific numbers, I do not have that information at hand, but we are taking extensive steps to talk with them about those opportunities.

The last point I would make is we also use what Melbourne has in terms of major events. We recently had the Avalon air show and provided a briefing session at that air show about defence and aerospace opportunities. That event brought in terms of trade about 40,000 international delegates down, which allowed them some exposure to what they could potentially support transitioning to. We also ran a conference last year called the International Mining and Resource Conference, which gave exposure to the resources industry as it moves from an investment phase into an ongoing phase, guiding people through the use of that.

ACTING CHAIR: Thank you. Senator Carr.

Senator KIM CARR: Thank you very much for appearing today on behalf of the Victorian government. I noted your submission is only an interim submission and look forward to reading your final submission after you have had the opportunity. How many component manufacturers do you have in this state?

Mr Meek : We broadly have directly about 150 companies in the supply chain for the OEMs.

Senator KIM CARR: So not all of those are actually registered for ATS support. If there are 150 in this state alone, how many people do you think are employed in automotive in this state?

Mr Meek : Directly or indirectly?

Senator KIM CARR: Whichever way you want to take it. You know I'll get there sooner or later! So how do you see it? What are the employment implications for Victoria?

Mr Meek : In terms of the broad automotive industry, we look at a number roughly around 25,000 people employed in the automotive sector.

Senator KIM CARR: Directly and indirectly?

Mr Meek : Primarily that is directly, encompassing car manufacturers, suppliers and after-market manufacturers.

Senator KIM CARR: The total number?

Mr Meek : Twenty-five thousand.

Senator KIM CARR: That is it? It is just that there are various studies that suggest the figure could be as much as 100,000. There are university studies from Adelaide and Monash. You dispute that?

Mr Meek : When you look at the methodology, those reports look at direct and indirect. I am talking primarily about the direct space with those numbers.

Senator KIM CARR: Okay. So what are the total employment numbers for the state of Victoria, in the view of the Victorian department of industry, that are employed in automotive?

Mr Meek : I do not have that total figure at hand. I can only tell you at this stage what we know around the direct.

Senator KIM CARR: Okay. The government has announced a $200 million future industries fund. What is that for?

Mr Meek : The $200 million future industries fund is to support industries for potential growth in this state and are transitional opportunities for some of the supply chain in the automotive sector. Those funds will be used to support those industries and potentially will have an impact on the broader business community, including the supply chain.

Senator KIM CARR: Do you see any way in which you could improve the coordination between the Commonwealth and state governments with regard to support for jobs in this industry?

Mr Meek : The Victorian government obviously has a comprehensive back to work plan that is looking to create those 100,000 jobs. To elaborate: there is obviously payroll tax relief of around $100 million that will help support employment. There is a premier jobs and investment panel of around $500 million that will help support jobs here. Then there is the $200 million future industry fund that will focus on the sectors that I have previously mentioned and a $200 million regional jobs fund for creating jobs and projects as part of a regional Victoria strategy. So there is considerable support there at this point in time.

Senator KIM CARR: I will not go to confidential conversations, but before the Senate estimates the Commonwealth officials have indicated there have been three approaches from major investors for investment in the automotive industry. Are you aware of that evidence that has been provided?

Mr Meek : The Victorian government has had ongoing dialogue with investors in automotive internationally, and at this stage none of those companies have made a decision on how they would like to proceed in the state of Victoria.

Senator KIM CARR: You are in conversation with three of those companies, or is it more?

Mr Meek : There are a whole series of companies we have had discussions with.

Senator KIM CARR: More than three?

Mr Meek : I could not give you the defined number.

Senator KIM CARR: It should not be too hard. I could probably count on one hand the particular companies that I know about. You presumably would know a great deal more. Is it in that order? Is it fewer than 10 companies or just the three?

Mr Meek : To be honest, I will take it on notice and come back to you, but I will say there is an extensive number of companies we are talking with.

Senator KIM CARR: Okay. Given the question of confidence is critical to the future here. I take it you have done some international studies of what has happened with countries that have faced a similar situation. For instance, have you looked at what happened in England?

Mr Meek : The work to date done by the Victorian government, to my knowledge, is basically focused around the Victorian and broader Australian industry and the direct impact existing here. Over the years there has obviously been work done in engaging with other markets, but I have nothing specific that I can report around the UK market.

Senator KIM CARR: Would you agree that the issue of confidence is critical to future investment?

Mr Meek : Business confidence is obviously a key factor when driving investment. Yes, I would agree with that.

Senator KIM CARR: There have been three new applicants for ATS support. Are you aware of that?

Mr Meek : No I am not.

Senator KIM CARR: How strong would you say the communication is between your officers and the Commonwealth officers if that is the case?

Mr Meek : I will ask Michael Green to respond to that.

Dr Green : As you are aware, the registrations under the ATS are confidential. Those are not divulged to us in the Victorian government. They are not divulged to anyone else.

Senator KIM CARR: I am aware of that. Dr Green, you were quite recently a Commonwealth official. I would have thought your contacts with the Commonwealth industry department would still be quite strong.

Dr Green : Indeed.

Senator KIM CARR: Is there not an opportunity to have informal consultations about these types of issues?

Dr Green : Informal consultations occur, but they are not at liberty and nor do we press them to disclose the specific registrations under the ATS.

Senator KIM CARR: Sure. There is no doubt that there is a great deal of market intelligence in the industry, and I would be surprised that officers at the state department do not have a dialogue with officers at the Commonwealth level about new investment proposals. I would be very surprised if that does not occur. My question is: do you think there could be a stronger level of coordination between Commonwealth and state officers on this issue of investment attraction?

Dr Green : We are already discussing specific programs, like the Next Generation Manufacturing Investment Program, the Geelong Region Innovation and Investment Fund and the Melbourne's North Innovation and Investment Fund. There is an extensive dialogue around the Automotive Diversification Program and a range of other programs that are in this space, as well as informal dialogue.

Senator KIM CARR: Let me put it to you more specifically. I know that the Victorian government has written to the federal minister for industry with a proposal for the Victorian government to invest an additional $18 million into the Geelong and North Melbourne regional innovation and investment funds—that is on page 13 of your submission, so it is not top secret—and to seek renewal of investment and support from the Commonwealth. But, as I also understand it, the Commonwealth rejected that offer. Is that correct?

Mr Meek : At this stage they have responded, saying that they would not support the extension of that program.

Senator KIM CARR: When you say 'at this stage', you did get a letter of rejection. That would be a fair description?

Mr Meek : Yes, that is.

Senator KIM CARR: And you are expecting 'at this stage' to mean that at some other stage there will be a different position?

Mr Meek : No, I think at this stage we have a letter stating they would not proceed.

Senator KIM CARR: Yes, that is right. In fact, isn't it the case that the Commonwealth is seeking to close those funds once the remaining funding is allocated?

Mr Meek : The content of that letter states that they do not want to proceed at this point in time.

Senator KIM CARR: When did the Victorian government write to Minister Macfarlane and when did you receive the advice that your offer had been rejected?

Dr Green : I would have to get back to you with the specific dates, but the minister wrote before Christmas—

Senator KIM CARR: This is the new minister?

Dr Green : Minister D'Ambrosio, the new minister, yes.

Senator KIM CARR: The government has been in office for just over 100 days, so it would not be too hard to work out that there has been a quick response to this proposition. Would that be right?

Dr Green : I am not sure that I understand your question.

Senator KIM CARR: It didn't take them long to tell you to bugger off. Would that be a fair summary of the situation?

Dr Green : Those are your words, Senator.

Senator KIM CARR: Yes, I know. It is most unparliamentary, but it is a fact. Within 100 days, a simple proposition, where the Victorian government is actually offering to invest additional money in industry investment, is being rejected. That is a fact, is it not?

Dr Green : We have a letter from the federal minister, as Mr Meek has explained.

Senator KIM CARR: How much funding were you seeking from the Commonwealth?

Mr Meek : Sorry, in relation to—

Senator KIM CARR: That particular project for Geelong and North Melbourne.

Mr Meek : The commitment so far from the Victorian government has obviously been for around $10.5 billion to what is known as MNIF, the Melbourne's North Innovation and Investment Fund, and $7.5 million under the Geelong Region Innovation and Investment Fund.

Senator KIM CARR: How much were you seeking from the Commonwealth?

Mr Meek : There was no request for a specific amount. It was a continuation.

Senator KIM CARR: These funds have been working for some years now. I was associated with them when I was minister, and they produce extraordinary results—thousands and thousands of jobs. In terms of investment, all the evaluations I have seen suggest that they work. Were you given any reason why the Commonwealth would not assist with this particular measure?

Mr Meek : That is a matter for the Commonwealth to respond to

Senator KIM CARR: The matter for you is: were you given any reason?

Mr Meek : No.

Senator KIM CARR: Thank you. Are you able to assist with the actions you are taking with individual companies to make them aware of what opportunities are available to them?

Mr Meek : Yes, I can, and I probably addressed some of that.

Senator KIM CARR: It is no secret that I have had a keen interest in this area for a long time, and I have always been surprised by the number of companies that tell me they did not know that support was available for this or that. What steps are you taking as the Victorian government to make companies aware of what is available to assist them?

Mr Meek : Through my division, we have engaged with all the major supply chain companies and have had discussions with them. As I alluded to, we have offered a series of events that talk them through opportunities. Specifically, we have invited them to attend group sessions on opportunities in a variety of sectors, where we have had sector specialists come to present and tell them about the broader opportunity around that. As I mentioned, we have also had broader, large-scale events that they have attended. We have also worked with some of those companies in what is called a broad case management approach to what they are doing.

What I will say is that some of the broad intelligence is that the business development capacity in the supply chain has somewhat diminished over the years because of the nature of a domestic industry that does not require that skill set. That is a piece of intelligence that has become quite apparent.

Senator KIM CARR: Can you contact the 150 firms that you mentioned? Do you have direct dealings with 150 firms you have identified that operate in this state?

Mr Meek : Sorry, could you repeat the question?

Senator KIM CARR: Are you able to identify the 150 firms individually and do you have a relationship with those 150 firms?

Mr Meek : Yes.

Senator KIM CARR: You can, therefore, tell the committee that they are aware of what opportunities are available.

Mr Meek : They are aware. Whether they take action—

Senator KIM CARR: Yes, that is a different question, I agree entirely.

Mr Meek : is a different question. So the answer is: yes, they are aware of opportunities.

Senator KIM CARR: I turn to page 9 of your submission, where you have been very helpful in talking about the automotive sector survey, which indicates:

Some businesses are experiencing difficulties in accessing finance …

This is a problem we are noticing in a range of manufacturing areas, but I would think in this industry it would be particularly pronounced. What is the nature of your findings in that regard? Is this a problem with the banks, for instance, or are there other sources of commercial financial support?

Mr Meek : I will respond in broad terms because I do not want to talk about specific companies or their sensitivities.

Senator KIM CARR: No, I do not want individual businesses.

Mr Meek : The intelligence through the engagement we have had with those companies is that some of them do have issues in accessing finance from institutions—banking and/or other, because it could also be private equity. That is really a matter for the individual company on the status of their own financial affairs that would make it viable for them to access those funds, but the reality, as we have highlighted in this report, is that some of them are having issues in obtaining support.

Senator KIM CARR: Would you say that there is a general view in the finance industry that manufacturing is more risky than other sectors?

Mr Meek : That would be a matter for the banking industry to respond to.

Senator KIM CARR: No, that goes to your capacities. In your experience, is it the view that manufacturing is more risky? The department of industry surely has an assessment as to whether or not that claim is right or wrong. It is no good telling me to ask the banks; we know what the answer is there. What is your judgement?

Mr Meek : The intelligence would suggest that there is possibly a higher proportion in manufacturing that are challenged to get finance, but there will be specific circumstances behind that.

Senator KIM CARR: What do you reckon governments can do about that?

Dr Green : Let me have a go at this, and my colleagues can chime in. As you are aware, there are a number of programs to support investment in manufacturing. One of the things that we can do, and it is being done through the programs we have mentioned, is to provide government assistance with grant funding that matches the investment by the company or has some other ratio of investment by the company. There are a number of Commonwealth programs in that area in manufacturing. There are a number of joint programs we have, such as the Melbourne's north and Geelong funds we have already mentioned, and the state government has a number of programs. So one of the things that we can do is to put our own money on the table to add to the money that the private sector can bring to the table.

Senator KIM CARR: That is one of the great rationales for a grants program. You would be aware of the Commonwealth climate change funding that is available through the finance corporation that was set up by the Labor government, and there has been discussion about the establishment of a manufacturing finance corporation. Have you done any work in that sort of area? I know that this state has a long legacy here, but there have been finance programs in previous regimes to assist manufacturing or other development industries.

Mr Meek : There has been no work done in the last 12 months around this space.

Senator KIM CARR: Is that the sort of thing you think might need to be done?

Mr Meek : That is obviously something that may be considered at the Premier's jobs and investment panel to support the growth of employment in this state.

Senator KIM CARR: Dr Green, are you familiar with the work that is done in the climate change area in terms of financial support?

Dr Green : I am broadly aware of it, yes.

Senator KIM CARR: Do you think any of those types of programs would be applicable to manufacturing?

Dr Green : I am not going to give you my personal opinion on these matters.

Senator KIM CARR: Fair enough.

Senator MUIR: Thank you for being here. Most areas I was going to raise have been covered already, but I am curious. With the ever-changing face of the automotive industry at the moment and the skills set potentially being lost, skills which are very hard to pick up again, is the Victorian government looking at any programs to encourage youth to get into employment in the automotive sector?

Mr Meek : The government has a priority around employing disadvantaged youth, not necessarily specifically in relation to the automotive industry; it is a much broader agenda. We also have workforce development centres. The Victorian government has commissioned $30 million for three workforce development centres to assist affected workers in the transition out of the automotive industry. Those centres may be able to direct some skills into that space.

Senator MUIR: That is what my curiosity was about, because a lot of skills may be lost in manufacturing, but there are other areas that those skills may be able to transition over to, keeping it attractive rather than it being your typical course where you have to do a few years of training. It might be your entry level jobs where you can get a kick-start in manufacturing and so on. The question really was: is the government aiming to maintain those skills for years to come, even in the face of the changing automotive sector?

Mr Meek : My response would be that we are looking at a broader approach to keeping skills, not specifically to the automotive sector, but, under the six priority sectors that have been highlighted by this current government, manufacturing capability cuts across a number of them, and automotive has been a primary driver of manufacturing skills in the state for some time.

Senator RICE: I understand from Senator Carr's questions that the submissions under the ATS are confidential, but can you tell us how many submissions have been put in by Victorian automotive industries under the ATS?

Mr Meek : No, I cannot.

Senator RICE: You have no sense of how many of the 150 component manufacturers may have been interested in accessing that scheme?

Mr Meek : No.

Senator RICE: That is a bit of a problem. Do you know how much has been allocated to Victorian companies under the ATS?

Mr Meek : No, I cannot tell you that.

Dr Green : To clarify, part of the ATS legislation is that the amount of money and the companies to which it goes are confidential.

Senator RICE: But the Victorian government does not get any reporting back from the federal government as to the overall quantum? Even without having to reveal confidential information, you would think it might be useful information for the Victorian government to know. Do you agree it would be useful for the Victorian government to know that?

Dr Green : The ATS legislation has some strong confidentiality arrangements around the registrations and benefits that are paid under the ATS.

Senator RICE: In the programs that you are setting up to try and transition, do you agree that it would be valuable information for you to have, to know where things are currently sitting with those 150 manufacturers?

Dr Green : It may be valuable, but the current arrangements do not provide for that information to be provided.

Senator RICE: I understand that. I am not criticising you, but that information is not available. Looking at the future, currently we have 150 component manufacturers and 25,000 people employed directly. Post-2017, how many people does the Victorian government expect to continue to be employed in the automotive industries?

Mr Meek : We have obviously referred in our submission to the Productivity Commission report, which shows 24,150 people exiting by 2016-17 and another 13,500 over the next three years—and that is obviously indirect and direct, as we referred to with Senator Carr. That is the current modelling that suggests where those numbers lie.

Senator RICE: The 25,000 are direct?

Mr Meek : Yes.

Senator RICE: How many direct jobs in automotive do you expect there to be post-2017?

Dr Green : The discussions that we have with companies about their intentions are highly sensitive, including for their own futures and their own workers. We do make judgements about the state of their preparedness to diversify and the likely consequences for the companies. But I would like to stress that our assessments of that are highly sensitive. We do not want to prejudice the future of any individual companies or the workers who work for them. So I would like to keep in confidence our judgement about the likely number of direct employees who would be affected by the closures.

Senator KIM CARR: I agree with that, Senator Rice. When we asked the question in Canberra, we were told it would be advice to the minister.

Senator RICE: In terms of maintaining jobs post-2017 in automotive, as opposed to broader manufacturing and other transitional programs you have got, what would you like to see happen between now and then in order to maximise the number of jobs to be maintained?

Mr Meek : Obviously there will not be jobs going in the automotive industry. We have quite a robust after-market automotive sector, from which you will have a presentation later today. We also have a specific skill set around research and development and engineering that has a global reputation. As I alluded to today, one of the key themes of Automotive Week is to make sure we are using that. You will see in our submission some examples of where those R&D and engineering skills have informed the development of cars for international markets. They will need to continue to be developed under the broader theme of professional business services to that global supply chain.

Senator RICE: What do you think the federal and state governments could or should be doing between now and then to maximise that occurring?

Mr Meek : Our second recommendation in the submission alludes to the ATS broadening its view about how those funds are used to make sure the supply chain gets adequate funding. Currently the ATS focuses on the manufacturing of vehicles domestically here, using metrics around the volume of vehicles, componentry, tooling or services. There is an opportunity to broaden that support so that the automotive industry will retain and possibly play a more pivotal role in the global supply chain.

Senator RICE: The media coverage today after the announcement that the $900 million is not going to be withdrawn is still saying that, under the current rules, about $800 million of that would actually end up not being spent, that only about $100 million would end up being spent.

Senator KIM CARR: I know that is the spin the government is putting out, but it just cannot be right.

Senator RICE: Is there anything specific in terms of the changes to the rules to enable more of that money to support the industry?

Mr Meek : I will encapsulate our two recommendations given that the announcement around the $900 million has occurred. We have asked specifically that a broader approach be taken to the use of funds under the ATS and structural adjustment programs. The third recommendation is that there is ongoing consultation with vehicle manufacturers and the broader supply chain about the utilisation of the funds.

Senator EDWARDS: I have been trying to find out where the $100 million that was only expected to be spent—

Senator KIM CARR: It was in an ABC report.

Senator EDWARDS: I know where the report is but nobody can tell me—

Senator KIM CARR: That is government backgrounding.

Senator EDWARDS: Well, I am not sure. Anyway, with the programs that are underway, would you envisage that more than $100 million will be spent in Victoria over this transition period?

Mr Meek : Again, that will be a matter for the Commonwealth in terms of utilisation of the ATS under its current structure.

Senator KIM CARR: In the forward estimates in 2014-15 there is $300 million in the scheme, in 2015-16 there is $300 million, in 2016-17 there is $300 million and in 2017-18 there is $216 million. The government is suggesting it should end in 2017, but there is actually money after 2017, so that assumption is in itself wrong. And then it goes to $133 million and then to $50 million in 2020. The program actually continues beyond 2017, so that first assumption is dead wrong. You cannot say we are going to have the current legislation and ignore the fact of what the profile is on funding. Secondly, given that there is that amount of money, and a substantial proportion of the component manufacturers are here, it must be more than $100 million that is going to be spent in that period of time.

Senator EDWARDS: Even I agree with you!

Senator KIM CARR: The claim just does not make any sense.

Senator EDWARDS: It does not make any sense to me either.

Senator KIM CARR: It might be good spin on someone's part—they think they have outsmarted the Senate—but it does not work in fact.

Senator EDWARDS: I would like to find them!

Senator KIM CARR: We are looking forward to finding them all, aren't we?

Senator EDWARDS: Yes.

Senator RICE: In terms of support from the federal and Victorian governments, are you looking at specific support to help the industry, in whatever form it takes, to transition to low-emission vehicles and support for low-emission vehicles and support for electric vehicles?

Mr Meek : New energy technologies is one of the sectors that is highlighted in the $200 million Future Industries Fund. That may look to provide some form of support to those areas. It is worth noting that sales of electric vehicles in Australia to date have been just over 100. That excludes hybrid vehicles. The question is: is there the critical mass for the manufacturing of that type of vehicle in Australia?

Senator RICE: You have got the issue of the vehicles but also components in the global supply chain. Is there anything more you think the federal government should be doing to support manufacturers of components or electric vehicles?

Mr Meek : I will speak for what the Victorian government is doing, and that is that $200 million fund where it will be looked at under new energy technology.

Senator RICE: So you are not willing to say there is more that you feel it would be useful for the federal government to be doing?

Mr Meek : I do not think that is for me to comment on.

Senator EDWARDS: I am still trying to get my head around $100 million being spent in the country over the next three years. Anyway, I am sorry that I did not hear most of your testimony.

Senator KIM CARR: You talk in your submission about spillover benefits for the defence industries as a result of, in effect, automotive manufacturing capacity moving between sectors. Do you think there are any other sectors that might be able to advance as a result of the automotive industry capacities?

Mr Meek : Certainly the evidence suggests that there are some. Again, I will allude to the six industry sectors. Certainly in food and fibre there is some opportunity in terms of spillover. There is opportunity in defence, aerospace and commercial aviation—if I could bundle those together. Modular construction is one area where we have seen impacts already.

Senator KIM CARR: What are you talking about there?

Mr Meek : Modular construction is where components are manufactured off site and brought into a construction zone for the assembly of a building.

Senator KIM CARR: For what—houses?

Mr Meek : A combination of houses and commercial buildings.

Senator KIM CARR: Do you think there is a significant opportunity there?

Mr Meek : We see a degree of interest in it. What it takes is manufacturing skills. Referring to Senator Muir's question about retaining a skills set, people from the automotive industry in that space have started, at a lower level, transitioning to construction.

Senator KIM CARR: I was recently at Ararat, where there is a major automotive plant that makes harnesses for trailers. Is there not more work that can be done in regard to trailers, buses, trucks and off-farm vehicles? Is there not a whole series of other industries there where component manufacturers might be able to look for future business opportunities?

Mr Meek : Certainly businesses can look in those areas. I think the balance that needs to be taken into consideration is the volume—we are coming from a high-volume component business. Relating that to the defence industry, it is a low-volume very precise business, so that volume will not continue to exist. Diversity among a series of sectors will add more benefit. Medical technology, medical devices and defence construction will potentially be able to support some of these companies as they transition.

Senator KIM CARR: As we saw this morning, DCI are moving into medical devices and other areas of tooling—for workbenches and the like. There are a number of other products—that is true—but I am thinking in particular of direct automotive areas which are underdeveloped because we have historically concentrated on the passenger motor vehicle. Are there any other things we can do in automotive industries that are not directly passenger motor vehicle industries—motorcycles, trucks, buses and off-farm vehicles—and are you having any conversations to facilitate those types of developments with Victorian based component manufacturers?

Mr Meek : A Victorian company, MTM, has diversified into the manufacturing of an off-road farm vehicle, an Australian designed vehicle that is now being built for the agriculture, mining and defence sectors. They are in the early phases of doing low volume to produce a vehicle that would be suited for that. That is an example of a company that has taken some steps to do that. The Victorian government has tried to support that. At the international mining resources conference we displayed those vehicles to give them exposure.

Senator KIM CARR: Senator Rice raised some questions about electrification. Could you have a look at this and tell me whether, in your judgement, there is anything to prohibit new entrants or new business plans in electrification or gaseous fuels, as detailed in the automotive road map, that cannot be accommodated within the ATS at the moment, if necessary involving a national interest test?

Mr Meek : Sorry, I am not sure what the question is.

Senator KIM CARR: Ministerial discretion—are you aware of that provision? I am sure you are.

Mr Meek : Yes.

Senator KIM CARR: Is there anything within the ATS at the moment that would prohibit—

Mr Meek : The volume requirement would probably be the biggest issue.

Senator KIM CARR: But the national interest test would get you over that if the government chooses to provide transitional arrangements to allow companies to develop the volume.

Mr Meek : So my second response would be that the commercial volume in terms of demand would be the next one.

Senator KIM CARR: Yes, I have got to make a quid out of it. They will not do it unless they make a quid out of it—that is my point. Can you have a look at that and see if there is anything in the scheme that needs amendments, regulatory changes, to allow for new entrants?

Mr Meek : Yes.

CHAIR: Thank you, gentlemen. You can take that on notice. Thank you very much for coming along to give your testimony.