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Thursday, 18 April 1985
Page: 1345

Mr CONNOLLY(10.01) —Mr Speaker, the Bounty (Injection-moulding Equipment) Amendment Bill extends the bounty on injection-moulding equipment to one company, Battenfeld (Aust) Pty Ltd, which continues to manufacture this equipment in Australia. Injection-moulding machines have been the subject of no fewer than seven reports from the Industries Assistance Commission and the Temporary Assistance Authority over the last 10 years and local production has been receiving relatively high, though gradually reducing, assistance for some years. The chequered history of the Australian manufacture of injection-moulding machines and parts demonstrates beyond doubt that protection over a decade is whether it be by way of tariffs or bounties, as in this case, is no guarantee for the long term viability of any industry in this country. In fact, this industry has continued to decline over the period, despite assistance, from a situation where it had four producers to one where it now has but one.

It is a matter of great concern that the Parliament is being asked once again to endorse a commitment of $2m of taxpayers' funds over four years to support one company to remain a manufacturer of injection-moulding equipment when the domestic market has steadily fallen, from 103 machines produced in 1979-80 to only 30 machines four years later. Despite the failure of Johns Consolidated Ltd, the market share of Battenfeld (Aust) Pty Ltd decreased over those four years by nearly 30 per cent. In fact, just prior to the Johns company going into receivership, Battenfeld estimated that its market share was around 16 per cent but admitted that its tardiness in introducing a new series of machine designs had caused it to lose ground. The company itself, in evidence given before the Industries Assistance Commission inquiry, freely admitted that management decisions have contributed to its decline in market share and consequently in profitability. Yet, after two years in power, this Government which promised so much is unable to give this Parliament precise details as to how its industrial policy will establish viable Australian industries which are able to stand on their own feet and compete on both domestic and foreign markets. In 1983 the Australian Labor Party's policy for the manufacturing industry stated:

. . . we re-affirm our commitment to the task of creating an efficient manufacturing sector, less dependent on all forms of assistance.

We are well aware of the difficulties of developing coherent national industrial policies in a complex environment in which geographical location, the highly regulated labour market, rather complex and often unnecessary levels of governmental interference, and our outmoded systems of transport, communication and other services all add costs to the final product. There is also the difficulty of implementing a national industrial policy when quite often State policies are in direct conflict with the objectives of that national approach. There are in fact six markets rather than one national market, and the situation has improved little since Federation. This is one of a number of issues that government has to date failed to address. Although the Opposition supports the Government's initiative for the removal of State preferences, it notes that New South Wales, for example, the somewhat blemished jewel in Labor's crown, still refuses to co-operate in what is obviously, Australia's best interests.

The Opposition will continue to encourage the Government to reduce all barriers or impediments to trade and commerce caused by State and Federal duplication and major differences in regulations between the States in areas such as commerce, law and transport. However, the Government has failed to implement with the States, the majority of which are the same political colour, a review of Federal-State jurisdiction to facilitate a truly national approach to building a national economy. Many of these domestic impediments to trade and greater efficiency not only restrict access to the limited national market for Australian products but also directly contribute to not being able to take advantage of economies of scale which, in turn, make access to overseas markets so much more difficult. For all these reasons neither tariff nor bounty assistance can be taken in isolation but must be seen against a total environment in which industry is expected to operate and, hopefully, to prosper.

In allowing the passage of the Bounty (Injection-moulding Equipment) Amendment Bill we realise the reality that industry must have adequate warning of a change in government policy. We hope that, over the intervening four years, when this continuing assistance will be available to Battenfeld, it will be able to restructure to the extent that it no longer requires continuing taxpayer support. In the meantime, we hope that the Government will enact through this Parliament comprehensive industrial legislation which will effectively face up to the range of problems which impact on industry.

We have accepted that, as a trading nation, our trade policies and our ability to compete on world markets are closely interwoven with our domestic industry and commerce policies. It is because of this that any effective industry and commerce policies must involve a blend of those policies related to wages and industrial relations, taxation, productivity and manpower, education and training, research and development, our approach to defence support industries and the domestic policies of both the Federal and State governments in relation to purchasing and offsets generally. For an effective industrial policy there is clearly a need to dovetail it with policies in fields such as trade and transport, the labour market and economic management.

The Opposition recognises the undoubted difficulties of introducing reductions in trade barriers in Australia, particularly those which, in effect, support industrial inefficiency, distortion and inequities. The Government must have the political will to move in this direction. If it introduces policies which remove the barriers to competition it will have the support of the Opposition. However, as I have already stated, reduction of trade barriers cannot be seen in isolation but must form part of a total industry package. This is especially relevant for export industries because, as we know, tariffs tax exports. Indeed, the evidence for Australia is that at least 70 per cent, and perhaps as much as 80 per cent, of the tariff is borne by export industries including, of course, exports of manufactured goods which the Government is so keen to promote.

Legislation such as this which we are debating today is a clear example of how it is so easy to continue with a level of government support rather than take the difficult decisions to initiate policies which will encourage companies to be more competitive in their own right. The record of the first two years of this Labor Government will be seen as a saga of lost opportunities in this area. It was elected on a platform of hope. It will be rejected if it fails to address adequately the nation's fundamental economic problems.

But time is running out. It is not in Australia's favour. Some of these problems include escalating wage costs, escalating non-wage labour costs, escalating government charges and costs of regulation, decreasing export opportunities, increased overseas protectionism, increasing unreliability of supply, dumping and aggressive foreign market practices, poor product orientation or performance, discrimination against capital intensity and excessive government expenditure and share of gross domestic product.

In recent days we have seen the Prime Minister (Mr Hawke) trying to restore confidence by talking up the economy. But talk is cheap. It is no substitute for action and on that the Government will be judged. The effect of continuing government failure to address these macroeconomic issues is illustrated by the fact that Australia now has the highest real interest rates of any Organisation for Economic Co-operation and Development country. Australia now has the highest money supply growth in the OECD area. Australia has the fastest sinking currency in the OECD. Australia has the second highest current account deficit of any OECD country and Australia is the only OECD country with full wage indexation since even Italy abandoned that practice. A national and co-ordinated approach is therefore essential if we are to improve the competitive environment for manufacturing industry. The best test of this Labor Government is not what it says it will do but what it has done.

Members of the Labor Party talked of a consensus between management and labour. In reality it was between the Australian Council of Trade Unions and executive government. They talked of restraining cost increases, and yet we have seen average weekly earnings increase at a rate greater than that of inflation, thus making labour intensive industries such as Battenfeld even less competitive and creating greater unemployment in the less skilled areas. We have heard Ministers of this Government prattle on about how industry must improve its competitive position, yet this Government has failed to reduce government sector imposts on business and to appreciate the most fundamental fact of all-that as a nation, Australia is now living well beyond its means. We depend more and more on borrowed capital for consumption and debt servicing rather than for productive investment. Only a more internationally competitive economy can possibly hope to generate the kind of trade surpluses required to service Australia's widening external debt. Currently, even some Latin American countries are doing much better than Australia in generating the trade surpluses required to meet their external debt. The fact is that Australia is likely to have a current account deficit of almost $11 billion in 1984-85, compared with the Budget forecast of only $8 billion. That is a cost that every Australian has to be prepared to bear.

The present devaluation of the Australian dollar does give Australian industry an opportunity to become more competitive. Our competitiveness, in fact, has returned roughly to the level of the 1970s. The Government appears determined to destroy the opportunities presented by devaluation. It has now conceded to the ACTU position that there will be no discounting of full wage indexation for the effects of devaluation. On top of that, the Government will support a productivity increase of 3 per cent. All this comes after a 2.6 per cent wage rise in April and a 2.7 per cent non-wage drift outside the Conciliation and Arbitration Commission in the second half of 1984. The fact is that Australia's inflation rate is still some 25 per cent above those of our major trading partners, and at a time when the very successful Japanese economy is facing a wage demand for 1985-86 of only 4 per cent, Australia is facing increases of at least 7 to 8 per cent. I seek leave of the House to incorporate in Hansard a consumer price table from the Treasury 'Economic Round up' of 22 February 1985.

Mr SPEAKER —Is leave granted?

Mr John Brown —I want to have a look at it first.

Mr CONNOLLY —It is straight out of the record.

Mr SPEAKER —Order! I remind honourable members of the usual arrangement. I think the honourable member for Bradfield knows that there are some restrictions on the type of material that is incorporated in Hansard. It is usual to consult with the Minister so that leave can be given.

Mr John Brown —If it is capable of being incorporated into the Hansard record, we have no objection.

Mr SPEAKER —Is it just a table?


Mr SPEAKER —There is no problem in having that incorporated in Hansard. Leave is granted.

The table read as follows-


Change on previous period

Change on a year earlier

Treasury Economic Round up

December December 22nd February 1985

1983 1984 1983 1984

per cent per cent per cent per cent United States 3.2 4.3 3.8 4.0 Japan 1.9 2.2 1.8 2.6 West Germany 3.3 2.4 2.6 2.0 France 9.6 7.3 9.3 6.7 United Kingdom 4.6 5.0 5.3 4.6 Italy 14.6 11.6 12.4 9.4 Canada 5.9 4.3 4.5 3.8 OECD 5.3 5.3 5.3 4.9 Australia's major OECD trading partners(b) 3.9 3.9 3.6 4.1 Australia 10.1 (c)6.3 (d)8.6 (c)(d)5.1

(a) Not seasonally adjusted.

(b) Comprises the United States, Japan, West Germany, France, the United Kingdom, Italy, Canada and New Zealand. Percentage changes for 1983 and 1984 are weighted by 1983-84 import and export weights.

(c) Excludes the effects of the introduction, from 1 February 1984, of Medicare; including the effect of the introduction of Medicare, the CPI was 4.0 per cent in 1984 and 2.6 per cent higher in the December quarter 1984 than a year earlier.

(d) December quarter.

Mr CONNOLLY —I was glad to see that the Prime Minister conceded last week that 'depreciation initially implies an unavoidable reduction in national income and wealth' and that 'all parties will need to share, in some degree, in the initial process of adjustment'. Again, it was just words because, in the next breath, the Prime Minister then told us that he would insist on a policy which maintains the real income of wage earners. He stated:

The Government sees no compelling reason why these firms or industries should be subsidised by the wage system.

In other words, the Government is still not prepared to give companies, such as Battenfeld a real chance not just to compete but to survive. In over two years, little has been achieved which improves the fundamentals of industry's competitive position in the Australian economy. Depreciation of the Australian dollar has improved the international competitiveness of Australia's export-and import-competing industries. However, by supporting full indexation of wages to the consumer price index, the Government will ensure that the benefits of depreciation for these industries will be frittered away as the price rises brought about by the depreciation enter the cost structure and, hence, the inflation rate. In other words, whilst the Government preaches about the need to improve international competitiveness its actions belie its words. There is no evidence that the Government understands, let alone has even had the courage to face up to, the real problems facing Australian industry.

I recall a most apt quotation from Senator Button, the Minister for Industry, Technology and Commerce, on the World Today program on 28 October 1983. He said:

We have to look at everything which affects the capacity of Australian industry to employ people and to get Australian industry re-established and vigorous and competitive.

If this Bill is an indication of re-establishing vigour and competition, I hate to think how this Government will handle far more pressing decisions which are soon to be made on the political agenda. These include assistance for the textiles, clothing and footwear, heavy commercial vehicles, chemicals and plastics and a host of other industries. Senator Button told us that the Government was going to look at everything which affects the capacity of Australian industry. But despite his pious rhetoric the record is at least patchy. Whilst he has addressed the problems of the motor vehicle and steel industries, the Government has failed to address the wider problems to which I have referred today. In particular, despite the close relationship between the ACTU and this Government, no effort has been made to break down the rigidities in the labour market-a system which for too long has failed utterly to take account of the capacity of an industry or even a firm within an industry to pay. Moreover, this is despite the fact that there is now a considerable body of evidence to suggest that the countries which have the most flexible labour markets have done relatively well with respect to employment growth. For example, a former Secretary-General of the Organisation for Economic Co-operation and Development has pointed out:

With roughly similar investment trends in North America and Europe during the past decade, employment growth in North America was more than ten times as great. Even when aggregate investment was not particularly high, greater labour mobility, more flexible real and relative wages, and perhaps other factors relating to the freedom for entrepreneurial initiatives in small or new enterprises led to the rapid creation of new jobs. In Japan, because of the capacity of the service sector to absorb or shed workers and the wage flexibility provided to larger enterprises by the bonus system, the degree of flexibility has been roughly similar.

In recent days the ACTU has been prepared to acknowledge that under current economic circumstances there is an argument against a wages policy based on so-called comparative wage justice, but not a word have we heard from the Government in this House or elsewhere, in support of this proposition. While much has been made of deregulation in the financial sector, there has been no move from this Government to deregulate the Australian labour market, despite or because of its cosy relationship with the ACTU. Recent years have seen a substantial growth in labour on-costs including workers compensation for which premiums have increased by 152 per cent and claims by 252 per cent since 1979. Since the introduction by a previous Labor government of a 17 1/2 per cent holiday loading, Australia must be the only country in the world which believes it is necessary to subsidise directly the holidays of its work force and in fact pays its workers more to go on leave than to work. Further, when one considers that businesses must pay not only for annual holidays but also for about five and a half days sick leave per employee per year, as well as public holidays and long service leave, people are in effect being paid to work for 52 weeks when in fact they do not work for about eight weeks or two months in every twelve. It is now estimated that the on-costs of employing every unit of labour, depending on the industry, are at least 50 per cent of wage costs and yet in this Bill the Government is asking the Australian taxpayer to subsidise the sole producer, Battenfeld (Australia) Pty Ltd, to the extent of roughly $25,000 for each of the 80 people it employs to produce roughly 30 machines per year for the domestic market, which also imports an additional 180 machines manufactured under very different circumstances.

If this Government were committed to assisting the survival of Australian manufacturing industry and improving job prospects, it would review labour practices, insist that the States amend their unrealistic and anti-business regulations, set about reducing the level of Federal and State governmental charges on business and remove the substantial amount of unnecessary governmental regulation which permeates into virtually every area of commercial endeavour. It is ironic that this legislation should come up at a time when the Government is fumbling with the problem of future wage indexation. The reality is, as ACTU officials constantly point out, that Australia is the only OECD country which still has full wage indexation. The company involved in this legislation is the very type of company which would have benefited from real wage restraint. The fact is that in a centralised wage fixing system manufacturing is loaded with the same costs as service industries. Yet it is manufacturing industry which is fully exposed to the cold winds of international competition. What chance does this give manufacturing? The Government's view is expressed in its submission to the national wage case:

In any economic circumstances marginal firms or industries will experience economic difficulties. This is part of the normal process of growth and re-adjustment within the economy.

It would also recognise that protecting and subsidising industries does not guarantee employment. This is true not only of the injection moulding machines industry but of manufacturing generally. The evidence for Australia is clear: The most highly assisted manufacturing industries have the worst employment record; employment in those industries declined much more than the manufacturing average over the past decade.

It should also be remembered that protecting manufacturing by tariffs and quotas taxes workers in other industries. In fact, protection is the single biggest tax on goods, excluding, of course, the crude oil levy. The consumer tax equivalent of protection has been estimated to be in excess of $10 billion annually. As the present Minister for Foreign Affairs (Mr Hayden) reminded us in his speech to the North-South seminar, this tax is regressive. It is therefore curious to observe those members of the Australian Labor Party, particularly those on the Left, who are so vehemently opposed to expanding the tax base to include more goods on the ground that this would be regressive, at the same time supporting more protection. The Government would also recognise that industries which owe their employment to protection or assistance do so at the expense of employment in other industries. The bounties to be paid under the legislation now before this House could well be used to employ people elsewhere in the Australian economy.

Surely it is time for this Government to face up to the reality that its own statutory authorities, such as Telecom Australia, Australia Post, the Australian National Railways Commission, the Australian National Line and Trans Australia Airlines and, in fact, its entire civil aviation policy, should be not only reviewed but reviewed in such a way as to ensure that the direct and indirect costs to industry for which they are responsible can be effectively reduced. This can be achieved, we believe, only through the Government withdrawing from those areas of commercial service which can be more efficiently managed using the principles of private sector management and in a manner which gives employees of such authorities a financial stake in the success of the venture and the wider community the opportunity to also be shareholders and reap the benefits of a more cost-efficient service.

I must reiterate that the Opposition supports the important initiative that the Government has taken in regard to the deregulation of the financial sector. We also support the Government's decision to initiate a three-year review with the private sector of undue government regulation, but it should be noted that it took our policy at the last election to spur the Government into action in this most important area. I believe, however, that the Government has missed an excellent opportunity in this new Parliament to establish a committee for regulatory review which could commence the task of removing outdated or unnecessary regulations and require government departments to justify to Parliament which regulations are necessary for existing and new legislation. The Opposition has already announced that in government we will establish such a committee as an integral part of our deregulation program.

If the Government does show the courage to follow through with sustainable deregulatory policies, we confidently believe that more good will be done to Australian manufacturing industry than any amount of taxpayer-funded direct or indirect assistance. The Government has made a commitment to industry restructuring but, with the exception of the motor car and steel industries, we still wait in expectation for an acknowledgment from the Government that industry policy is more than just ad hoc, piecemeal assistance to those who claim to be in need.

In contrast, the coalition's policies are designed to address all of these issues to which I have referred. We are determined to provide a more open environment, less influenced by unnecessary governmental regulation, high taxation and excessive government charges. This will encourage Australian entrepreneurs with vision, courage and the spirit of innovation to take the opportunities which this country undoubtedly has in full measure.

The position is now so serious for Australian manufacturing industry that, unless confidence is renewed and governments, both State and Federal, are prepared to work together to create a medium to long term environment in which managers can make investment decisions, we will proceed inexorably to the point where we are, in the context of the Pacific Basin, little more than hewers of wood, drawers of water and a quarry for the world. Need I remind honourable members that manufacturing, which amounted to almost 30 per cent of total output by the end of the 1950s, has now fallen to about 20 per cent.

In past years a measure such as this would have passed through this chamber with barely a murmur. Today we have chosen this Bill to indicate the direction the coalition believes industrial policy should take. As I said earlier, we are not opposing this measure, but the Government should not take our continuing support for granted unless it acts to overcome the problems I have identified.

The Australian people have given the Hawke Government a second mandate to take the necessary decisions which will influence, for good or ill, the future generations of our people. Clearly the Government must act with resolution and it must act decisively. Provided the Government meets its policy commitment to 'get Australian industry re-established and to make it vigorous and competitive'-a promise it made to the Australian people-the Opposition will continue to give its support in these matters.