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Thursday, 13 April 2000
Page: 16026

Dr WASHER (12:22 PM) —I am very pleased to speak today on the tabling of the first report by the House of Representatives Standing Committee on Industry, Science and Resources into the value adding of Australia's raw materials—a report entitled Of material value? This report represents a prologue to this issue, with the terms of reference directing the committee to evaluate the current state of affairs in this country as well as how we compare on a global level in respect of value adding. We were directed by the Minister for Industry, Science and Resources to look at value adding in Australia, mainly as a response to the common perception that as a nation we miss out on gaining the maximum economic benefit from our vast resource of raw materials.

Value adding is a concept that can be applied to an individual business or on a national level through our GDP. The Department of Agriculture, Fisheries and Forestry submitted that although there is no single definition of what value adding is, it can be seen as any activity that adds to or enhances the value of products to consumers, but it is not solely related to additional processing. As a committee we are interested in national economic advancement so our focus was on the concept of value adding from a broad national perspective, rather than on a micro-economic level.

Australia has always enjoyed an enviable wealth of natural resources that we have successfully produced and exported to the rest of the world. This is mainly because of an accident of geography, but also due to factors like a stable political environment and the fact that we have always had such a small manufacturing base to rely on. This is still true today, but this inquiry recognises that the world is changing and we can no longer bank solely on the sheep's back, so to speak.

There are many more employment opportunities in my state of Western Australia in the processing section of the mining industry where we process bauxite and mineral sands, for example, than there are in actual mining operations. If we do not take advantage of these opportunities then we are only gaining a fraction of the benefit from our natural resources and throwing away potential revenue and real jobs for many Australians.

On a global level, we have recorded a strong performance in exporting unprocessed and processed raw materials, particularly compared with some of the fast growing export orientated economies in East Asia. However, when we compare the total contribution of elaborately transformed manufactures, or ETMs, to Australia's overall export performance, we do have a long way to go.

The inquiry found that the level of value adding varied considerably from commodity to commodity. While we are global leaders in the local processing of bauxite, mined lead and process gold, we lag behind in value adding in many agricultural, fisheries and forestry industries. For example, the Aluminium Council states that Australia is a major player in the upstream sector of bauxite, alumina and aluminium and a significant producer of semifabricated and fabricated products. Iluka Resources claim they are one of the world's major titanium minerals production and processing companies, and their downstream processing operations generate major community economic and employment benefits. At the other end of the pendulum, 80 per cent of Australia's wheat crop is exported in bulk form, despite significant advances over the past decade that have the potential to considerably add to this industry's worth. The other staple on Australia's export agenda, wool, also suffers a similar fate. We are the world's largest producer of wool used for clothing, but less than half is processed within Australia to any greater level.

As a committee we wanted to look at several issues around value adding. For a start, we need to know how industries can be encouraged to increase value adding in their respective fields, while at the same time acknowledging that every industry is different and face their own challenges. What I mean by that is that it may not be commercially sound to pursue value adding for every industry at any cost. This is why the committee believes that any action to encourage further raw materials processing in Australia should be directed to industries that are in the best position to take advantage of value adding. Part of this process includes the removal of obstacles that we have been told exist when dealing with value adding. The main impediments identified during the inquiry included: our business tax system; the environmental regulations placed on business; resource security and land access concerns; some impacts of globalisation; inefficient government regulations; and inadequate access, particularly in rural areas, to efficient infrastructure. Any serious attempt to increase value adding in Australia must address these concerns in order to be successful.

During the next stage inquiry we will look at five different industries to see how they are performing on a value adding level. If they are successful, then we want to know what factors contribute to that success and, if they have little or no additional processing, what barriers have been identified as a cause of this. The Chair of the House of Representatives Industry, Science and Resources Committee, the Hon. Geoff Prosser, announced this week that Australia's aluminium, dairy, grains, magnesium and wine industries have been selected for a series of case studies for value adding. I believe these industries will provide us with a valuable snapshot as to the challenges faced in the area of value adding in Australia, and I look forward to working with the committee to provide positive and constructive outcomes for Australian industry. As the first report states, the inquiry into value adding in Australia is timely in that it offers significant potential for increasing national income and general welfare. We have a real opportunity here to provide the benchmark for Australian industries and exports in the next century. I commend this report to the Main Committee.