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Wednesday, 7 October 2020
Page: 6790

Mr TEHAN (WannonMinister for Education) (09:42): I move:

That this bill be now read a second time.

Every Australian has been affected by COVID-19—some, tragically, more so than others. The OECD tells us that we are in the midst of the biggest global downturn since the Great Depression. We have weathered the storm better than most countries, and that has not been an accident. Economically, we have shown great resilience, aided by our quick introduction of programs like JobKeeper and our record levels of economic support. During this period, our export sector has been a source of strength, consistent with our long history of being an open, trading nation.

Exports makes an important contribution to the Australian economy. Thirty years ago, Australian exporters represented 12 per cent of Australia's GDP. By 2018-19, that share had nearly doubled to over 22 per cent, contributing $419 billion of Australia's $1.9 trillion economy. The Liberal-National government has implemented an ambitious trade agenda, resulting in more than 53,000 (including 46,000 SMEs) goods-exporting businesses in 2017-18, up 18.5 per cent since 2013-14, and more jobs, with one in five Australians employed in trade related employment. Australian household incomes are estimated to be an average of around $8,500 higher as a result of opening up new markets through trade.

However, the number of Australian businesses that export—either goods or services—is relatively small. According to the Australian Bureau of Statistics, around two per cent of the 2.2 million businesses in Australia are goods exporters. Australian small and medium enterprises (SMEs) account for only 14 per cent of exporters, in contrast to the G7 average of 25 per cent. However, exporters contribute more than nonexporters to jobs and productivity, on average employing more staff, paying higher wages and achieving higher labour productivity compared to nonexporters. This is because Australian exporters compete with companies around the world and are driven to be innovative and use the most modern technology and management practices.

Cutting red tape and growing jobs through increasing exports is more important now than ever. The Morrison government wants to assist SME exporters to recover from the effects of COVID-19 and grow the number of SME exporters by providing better targeted direct financial assistance in a more simplified and streamlined way. This will help grow and diversify Australia's export markets, while also improving government service delivery and reducing regulatory imposts on business. We want to ensure taxpayer funding is used in the most effective and efficient way possible, with the greatest impact.

The Export Market Development Grants (EMDG) scheme is the key government financial assistance program to help aspiring and current exporters increase their marketing and promotional activity in international markets. Since it started in 1975, the EMDG scheme has supported over 50,000 SME exporters to enter and grow export markets for their goods, services, intellectual property and know-how. Last year alone, over 4,000 SMEs accessed the scheme, employing almost 69,000 Australians and generating exports worth $3.7 billion.

On 10 September 2020, the government released the independent Review of financial assistance to SME exporters. The review was undertaken by Anna Fisher, a wine exporter and past EMDG recipient. Ms Fisher was asked to examine the most effective and efficient way to deliver financial assistance to Australian SME exporters to encourage additional export development and promotion activities. Specifically, the review considered whether EMDG in its current form was the most effective and efficient way to generate additional export activity among the SME cohort.

The review undertook broad consultations to seek the views of exporters aspiring, new and established; individuals; industry associations; EMDG consultants; and other interested parties. The review found that the financial assistance provided by the EMDG scheme is valued by SME exporters. The scheme helps offset the high cost of export promotion, accelerates internationalisation and encourages exporters to diversify. However, the review also found that the EMDG administration needed to be streamlined, simplified and better targeted.

The review found that the financial assistance provided by the EMDG scheme is valued by SME exporters. The scheme helps offset the high cost of export promotion, accelerates internationalisation and encourages exporters to diversify. However, the review also found EMDG's administration needed to be streamlined, simplified and better targeted.

The review made 10 recommendations, all accepted in-principle by the government, including:

The government should continue to provide financial assistance to SMEs to encourage them to enter and grow export markets.

The principles underpinning the EMDG scheme were valued by exporters and should be retained in a simplified scheme.

An SME should be 'export-ready' before it receives financial assistance.

The program be re-targeted toward exporters with a turnover of less than $20 million with support aligned to the stages of an SME's export journey:

SMEs that are export-ready and will be doing business overseas for the first time; and

Exporters who are either expanding in their current markets or entering new markets.

That the way financial assistance is provided to SME exporters should be simplified by removing complexity, streamlining and providing more certainty.

This bill, theExport Market Development Grants Legislation Amendment Bill 2020, implements the review's recommendations.

The review noted simplification could be achieved by amending the Export Market Development Grants Act 1997 to provide a legislative framework that incorporates the key EMDG principles, with operational detail provided under the rules—a disallowable instrument—and with administrative details in the guidelines.

The review found the principles of the EMDG scheme remained relevant and valued by exporters. Those core EMDG principles are retained in this bill which:

Will continue to provide financial support for eligible Australian exporters who produce substantially Australian products, whether they be goods or services.

Does not prioritise particular industries or export markets.

Ensures a wide range of expenditure is eligible, reflecting that businesses approach markets in different ways.

Continues to focus assistance on promotional activities.

Provides access for SMEs to multi-year entitlements, reflecting the time it takes to build a presence in the market.

Ensures SMEs have 'skin in the game'—they will be provided with a proportion of their eligible expenditure.

Continues to provide for regular evaluation of the program. The review found that the current EMDG scheme, which reimburses exporters, provides no certainty about the level of government support prior to exporters' expenditure on promotional activities. Currently some exporters wait up to two years to receive reimbursements, with the level of funding unknown until after completion of their promotional activities. This is unacceptable.

This bill will create up-front certainty for exporters about the level of government support. The bill changes EMDG from a reimbursement scheme to one which will see eligible SMEs entering up-front grant agreements that provide them with funding certainty over multiple years.

The review also recommended that EMDG recipients be export-ready to ensure the greatest impact and obtain the most value from the government's support. The bill removes the export performance test and the requirement that recipients have a prospect of success. This is replaced with the requirement that recipients be either ready to export or have already exported their products. It is not the business of the Australian government to be picking winners.

The review found that the government should continue to fund export focused industry bodies or alliances formed on behalf of members and that support should be expanded to include facilitating education and training of members to help them become export ready. The bill expands eligible activities to include training, to implement this recommendation.

The review also found that the EMDG scheme administration was too complex. We need to cut red tape and make it easier for SME exporters to apply. Accordingly, this bill modernises and streamlines the administration of EMDG. Currently the bulk of EMDG's administrative requirements are contained within the act. While the bill contains EMDG's core principles, it removes the detailed requirements on administrative matters, such as how to apply for grants and what information will need to be provided to support the application. These matters will be managed through administrative guidelines. The bill also removes the separate approval process for industry bodies and requirements about when expenses are incurred. Like any grant program, funding will now be agreed for activities prior to expenditure.

Like the previous act, the bill also contains rule-making powers for the minister to establish the operational details for the program through the rules, a disallowable instrument. The rules will set the under-$20 million turnover threshold for eligible SMEs and the tiers of EMDG support for SMEs new-to-export and expanding exporters, as recommended by the review. While the bill establishes the EMDG as being for Australian exporters and for products that are substantially Australian, it is the rules that will elaborate on matters like the definition of eligible products and eligible expenses and deal with technical details such as the effect of foreign investment in an SME and disqualifying convictions for eligible persons.

The world moves at a faster pace than when the EMDG scheme started in 1975, and the new legislative structure will also allow the government to respond more quickly to rapidly changing markets and business practices and to unforeseen disruptions like COVID-19.

In streamlining EMDG administration, the bill focuses on the relationship, created through a grant agreement, between the Commonwealth and the EMDG recipient. The bill therefore removes the ability to compel third parties to provide information in support of the applicant. It also removes provisions related to other third parties, such as associates and consultants.

Mirroring Commonwealth grant agreements, the bill allows adjustments to be made to grant agreements should the amount appropriated for the EMDG program be reduced.

Reforming EMDG will result in systems and administrative changes. To meet the cost of these reforms, the bill temporarily lifts the cap on EMDG administration expenses from five percent to 7.5 percent for financial year 2020-21 and to seven percent for financial year 2021-22, before returning to its previous cap of five percent for administration costs.

In implementing the review's recommendations, the government is confident that this bill will create a framework for a reoriented EMDG program that is simplified and streamlined to deliver financial assistance to SME exporters in the most effective and efficient way and in a way which will have the greatest impact. These reforms will both assist current SME exporters to recover from the effects of COVID-19 and grow the number of SME exporters, contributing to Australia's economic recovery and future economic growth and prosperity. I commend the bill.

Debate adjourned.