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Thursday, 12 November 2015
Page: 8518


Senator KETTER (Queensland) (17:26): I rise to contribute to this debate on employment and job losses. When it comes to creating the jobs of the future, this government is asleep at the wheel. It has done absolutely nothing to address the challenges of the future, and in respect of those industries which provide well paying jobs and which are strategic for our economy this government is committing an act of economic vandalism. We have the scandalous situation in the automotive industry where the government has basically jawboned international automotive companies into leaving our shores, and with them goes that very strategically important capacity to assemble motor vehicles in Australia. It is a disgraceful situation which has huge ramifications for our economy and for jobs in the future.

The Australian automotive industry was not as heavily subsidised by government as some of our major competitors. There was a FactCheck done by Phillip Toner, Honorary Senior Research Fellow at the Department of Political Economy at the University of Sydney, and Remy Davison, the John Monnet Chair in Politics and Economics at Monash University, in July 2013. They looked at whether or not the Australian automotive industry was heavily subsidised and costing taxpayers extraordinary amounts of money. When the research was done to look at the level of subsidies provided to the industry in comparison with other countries, we found that Australia had a very modest level of government subsidies compared to other developed countries. In particular they compared Australia with Germany and the USA, and whereas Australia had an estimated government funding per capita of US $18, the German figure was US $90 per capita and the American figure was US $96 per capita in subsidies for the automotive industry.

Yes, the number of vehicles produced in each of those three countries was quite substantially different. But even when one looks at the estimated government funding per vehicle produced at that time, Australia was between those two countries in terms of estimated funding per vehicle. Australia had an estimated US$1,966 of government funding per vehicle; Germany was below us at US$1,303 per vehicle; whereas the Americans were funding each vehicle to the tune of US$2,908. So we know that countries provide subsidies and support for strategic industries to ensure that these capacities are there for the future. It is so important to do so.

In the American example that I mentioned, the article I am referring to looked at the fact that the Bush and Obama administrations allocated US$80 billion to direct assistance under their Automotive Industry Financing Program. The program included rescuing automotive firms and financing operations such as General Motors Acceptance Corporation, which involved debt guarantees and Treasury notes that recouped almost US$51 billion of the US$80 billion allocated to the program.

A New York Times investigation found that Chrysler had received at least US$1.4 billion since 2007 from 14 grants in three states, General Motors had received US$1.77 billion from 208 grants and Ford had been awarded more than US$1.58 billion from 119 grants. This has been the subject of review by credible economists. By international standards, it has been demonstrated that annual assistance to the Australian automotive industry has been relatively modest in raw dollar and per capita terms. That is important. We know that some of these industries do require support from time to time, and other countries also recognise that there is a need to do this in order to ensure that we have the types of jobs that we want to hand on to our children.

Australia's future prosperity, I would argue, is at risk. We have a government that will destroy the economy. Not only does it demonstrate its lack of vision through its small-minded efforts to tax the poor; the very Prime Minister that claims that he is committed to innovation seems to have overlooked the fact that we are sliding backwards at an accelerating rate. Didn't anyone ever tell the government, even quietly, that all of our competitors in the world have their shoulders to the wheel, speeding ahead with the skilling up of their populations, enhancing their science and research capability and working with their businesses and industries to speed up innovation to ensure that they remain globally competitive and that their workers remain gainfully employed?

Instead of a government that is committed to the future long-term prosperity of our nation, we have one that has done nothing to restore the $3 billion it has cut from science, research and innovation—the lifeline to a prosperous future for Australia. The government has cut the R&D tax incentive and axed programs such as Commercialisation Australia, Enterprise Connect, innovation precincts and the Innovation Investment Fund, all of which were building the innovative Australia that Mr Turnbull merely talks about. The government has cut $80 million from the Cooperative Research Centre program—a key program to promote collaboration between business and scientific research. The government has cut $115 million from CSIRO, a public agency with a proven track record in innovative research—and we are still waiting to see what the government will do with our universities, which, under Labor, would have received a 100 per cent increase in their funding by 2017.

Apart from this total attrition in our basic science and innovation capabilities, we have a government that seems to have buried its head in the sand about the looming economic disaster that is going to hit us when the final car manufacturer downs tools in 2017. Australian manufacturing is in crisis, and our government offers no answers other than budget cuts and its so-called free market ideology. The loss of the car industry is a disaster of epic proportions. The Prime Minister must be aware of the impacts of this shutdown. First, we are anticipating a massive loss of jobs that goes far beyond the industry itself. Modelling by the University of Adelaide estimates that there will be a loss of 200,000 jobs across the supply chain. This will rip $29 billion out of the economy, equivalent to two per cent of the nation's GDP.

Modelling undertaken by the National Institute of Economic and Industry Research indicates that the effects of this shutdown will be felt in every state and region in Australia. When you look at my own home state of Queensland, the projected loss of jobs there is 30,090. In Victoria there is a higher projected loss of 98,480. In South Australia the projected loss of jobs is 23,903. Each state and region of the Commonwealth will be affected. Surprisingly, according to the modelling, Queensland and New South Wales will be even harder hit than South Australia, with each of these states losing more than 30,000 jobs through the flow-on effects from the end of car manufacturing.

It is well known that the car industry is a major driver of technological innovation and creates opportunities in other industries right across the economy. The report prepared by the NIEIR also warns of a potential further loss of jobs and output from the erosion of trade skills and industrial capacity. It states:

Additional production losses can be expected due to the undermining of the economics of complex manufacturing in Australia.

It goes on to say:

The motor vehicle industry is the main conduit for the introduction into Australia of advanced technology and the training of labour in the necessary skills.

If an advanced technological nation like Australia is to remain a country where households and communities are sustained by high-wage, high-skill jobs, we do not have the choice about whether to have a manufacturing sector. Our choice is to determine what manufacturing activities we are good at and to put in place the right policies to see them flourish here in Australia.

The argument by our free market ideologues on the other side of the chamber—that we cannot compete with overseas manufacturers because of our high wages—is frankly nonsense. We only have to look at high-wage economies like Germany to see that manufacturing can thrive in a highly innovative economy, and the foundation of its competitiveness is a highly skilled workforce that drives technological innovation and excellence. Competition in the advanced technology products of the world is no longer solely based on price. We can compete if our manufactured products offer better value for money and present the quality and appeal that consumers in Australia and in other countries demand.

The UK automotive industry brings us an important lesson from history. It was expected to collapse and disappear at the end of the 1980s. But, instead, new investment was found, and areas of competitive advantage, such as engine production, were targeted. As a result, the UK has retained and improved its global reputation for engine production, and both sides of politics over there support co-investment in the auto industry.

It is well established that significant manufacturing industries like the car industry, with all of their linkages to research, technology, design, safety and environmental impacts, are a major driver of innovation for the entire economy. Australia cannot afford to lose all of the skills that these industries bring to our economy by turning its back on the whole industry. Australia has great engineering and design skills to build on. Even Holden and Ford intend to retain design centres in Australia to continue to capitalise on these skills. But, apart from the car manufacturers themselves, we have a great supply chain of component makers, after-market manufacturers, and in the service departments of retailers.

Mr Turnbull has only to read the interim report of the Senate Economics References Committee inquiry into the future of the auto industry to find plenty of ideas to go forward with. The interim report describes how vital innovation will be to Australia's future. The report states that the Productivity Commission has noted that innovation and 'diffusion of new and better production methods, and the introduction of new goods and services, are the core drivers of productivity growth—getting more, and more highly valued, outputs from any level of inputs'. The OECD has stated that the 'capability to innovate and to bring innovation successfully to market will be a crucial determinant of the global competitiveness of nations over the coming decade'. It noted that innovative activity is 'the main driver of economic progress and wellbeing'. In the United States, half of the economic growth in the last 50 years can be attributed to scientific innovation, despite a decline in mining productivity. In 2007, the Productivity Commission found that around 65 per cent of economic growth per capita from 1964-65 to 2004-05 could be ascribed to improvements in the country's use of capital and labour, made possible by innovation.

With its highly educated population and world-class research facilities, Australia has the capacity to become a leading innovation nation. But the challenge remains on developing the right policies that we need to unleash that innovation. Evidence presented to the Economic References Committee emphasised that Australia's innovation capacity is limited by structural and cultural barriers. This reality is reflected in statistics that reveal that only 1.5 per cent of Australian companies developed 'new-to-the-world innovations' in 2011, compared to figures of 10 to 40 per cent for businesses in other OECD countries. As of 2008, an estimated 98 per cent of new technologies were sourced from outside Australia. At the same time, Australia remains a low-level performer in both business and government expenditure in research and development.

I have as yet seen no coherent policy or statement by our current government on how they propose to repair this problem. One opportunity Mr Turnbull could look at is how to adapt the Automotive Transformation Scheme, the ATS, to ensure that there is a future for the industry. So far the government has stepped away from its intention to cut $900 million from the ATS—and that is a great relief. The Economics References Committee interim report calls for redefining the ATS as a broader, advanced manufacturing, engineering and design program and calls for the current level of ATS funding to be maintained through to 2021, including reallocating any unspent funds from phase 1, ending in 2016, to phase 2. This arrangement would preserve skills and capabilities and mitigate the loss of jobs by encouraging diversification in the supply chains of the car industry.

Beyond this urgent measure to retain advanced manufacturing skills capability in Australia, we still face the difficulty created by the dismantling of the national innovation system in the 2014 budget. I have already referred to the long list of important institutions that are being dismantled and strangled by funding cuts, including CSIRO, the CRC Program, and the Innovation Investment Fund.

Australia's future hangs in the balance on this matter. Without innovation and a continuation of advanced manufacturing capability, our future prosperity and that of our children is in doubt. We cannot just live on air and water. We need to be smart, we need to invest in and build our smart institutions, and we need to invest in our children and continue to skill up our adult workforce. Without a substantial and well-considered commitment to innovation, we do not stand a chance of competing in the world in which we live.

As our trade barriers come down with more and more agreements such as ChAFTA and the Trans-Pacific Partnership, we need to get our act together on what is rapidly becoming a borderless world, with very large corporations swallowing national and sub-national businesses. We need our businesses to be agile and innovative and to compete in all those niche markets where our capability is unequalled by our competitors. Most of all, we need to safeguard the jobs of our current and future workforce and ensure that every Australian is able to participate in a rapidly changing global economy.