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Thursday, 10 October 1985
Page: 1022

Senator PARER(5.58) —Today we are debating the Export Market Development Grants Amendment Bill which forms part of the Government's expenditure reductions in the May mini-Budget. We have reservations about some aspects of the Bill, and we certainly have great misgivings about the Government's performance generally in the vital area of trade; it is an area which the Government itself admits is a cause of some concern. The purpose of the Bill before the Senate is to revise and reduce the costs of the export market development grants scheme. This scheme has operated since 1974. The Minister in his second reading speech summarised the operation of the scheme. He said:

It provides financial incentives in the form of taxable cash grants for eligible expenditure incurred on overseas market research and development such as advertising, overseas representation, the cost of participating in overseas fairs and exhibitions, overseas travel associated with trade promotion, and the cost of bringing agents or buyers to Australia.

Presumably any entertainment of those buyers will not be a recognised business expense. The aim of the scheme is to encourage Australian exporters to develop overseas markets for our goods and services. This is a very laudable aim, yet the scheme is not without its critics, on both operational and philosophical grounds. An Industries Assistance Commission report in 1982 argued, in fact, that the whole scheme should be abolished. More recently, a report of the National Export Marketing Strategy Panel-the Ferris report-raised fundamental questions about the scheme and recommended major changes to the way it operates. The Government has estimated the cost to Australian taxpayers of export incentives over the last decade to be around $1.5 billion. Yet one Labor back bencher admitted on 13 September in the other place:

Despite this enormous assistance from the public purse, Australia's export performance has been poor and our share of the world export market has continued to decline.

Senator Button —That is not an admission that we have to make. It is an admission that you should make too. You were in government for most of that period.

Senator PARER —It is an admission from one of the Minister's own back benchers in the other place. This gloom from the Government's own ranks is certainly borne out by our current relative economic performance. Our inflation rate over the coming year will be twice that of our major trading partners, and, of course, real interest rates are soaring. Clearly, all is not well. Hence a debate which simply focuses on incentive schemes will ignore the broader issues of trade just as reliance on make-work schemes cannot by itself create employment. Australia has always relied for its prosperity on overseas trade. Although we have a relatively small population, our major exports, be they minerals or primary products, represent 80 per cent or more of total production. We do not have the luxury of being able to cover our fixed costs with domestic consumption as is the case in heavily populated countries in the European Economic Community, in Japan and in the United States of America. There was a time when in the manufacturing sector we had a unique ability to produce high value items with small production runs. At one time, for instance, we were the pioneers in X-ray and electro-medical equipment. Not only are these sorts of goods no longer exported but also, in the main, they are no longer produced in Australia. This has been caused by wage demands which have rendered these goods uncompetitive.

Senator Button —It is one of the best export sectors in this country. You ought to wake up to yourself.

Senator PARER —What is that?

Senator Button —Medical technology.

Senator PARER —I can tell the honourable senator that, from experience, we no longer make one X-ray machine in this country. Over a period of 30 years we have gone from being the eighth largest exporter to the twenty-third largest exporter in the world, with manufacturing and services now representing only 8 per cent of total exports. In the manufacturing sector overseas countries have a smorgasbord of support systems for their goods, ranging from high volume domestic support to export-import finance at low interest rates and/or extended credit. Export incentives are provided in the Bill to encourage exporters to penetrate overseas markets and we agree with any attempt to lift our exports. I believe, however, that we should look more closely at the methods used by our more successful competitors to determine whether there are not more effective ways of increasing our exports, particularly of manufactured goods. It should be pointed out, however, that it does not matter what we do if lip service is given only by certain sectors of the trade union movement to the need to convince our customers that supply will not be disrupted by industrial action. Too often a few irresponsible unions see our Achilles heel as being our export industry. By disrupting those exports they are killing our markets and thus the future well-being of their own members and the nation as a whole.

It is fair to say that export incentives have probably not affected one iota the level of sales of our mineral products. The only impediments to exports of our minerals are the plethora of Federal and State government charges, regulations and controls and industrial uncertainty. These artificial direct and indirect costs not only make us less competitive compared with others but also, in the medium to long term, will reduce the level of economically recoverable reserves and thus reduce the life of mines and employment. In times of overseas reduction in demand these costs also force high grading to reduce losses. By the use of regulatory methods we saw, in the days of the Whitlam Government, the development of mineral resources stopped by the quite improper use of export control powers. Penalties such as export duties were imposed and the vestiges of those penalties still remain in a most discriminatory way.

Exporters have been further disadvantaged by the recent tax package, which now denies them the expenses they must incur in offering normal courtesies expected in transacting export contracts. To clinch an export contract can involve putting on functions and arranging visits of prospective buyers to resorts and so on. To those who have not had to carry out such chores it may seem like fun, but it can become very tedious, particularly as more often than not it entails giving up the time one would prefer to spend with one's family at weekends.

Mineral exporters, who in recent years have become the backbone of Australia, have been singled out for special attack in the tax package. The new taxes on employee amenities such as housing and air fares will cost the industry an estimated $45m a year compared with the rubbery estimate of the Minister for Resources and Energy (Senator Gareth Evans) of $23m. These amenities must be provided to attract employees to remote areas. As compared with others, it is impossible for mineral exporters to opt out of these commitments. Compared with these assaults on our great mineral export industries, the removal of export market development grants is minimal. The effect of this Bill will be to remove those grants from the mineral industry.

The Ferris report, which is to be commended and on which the Government relies, states in its summary of recommendations that the Government needs to recognise the benefits to Australia from increased direct investment overseas and to openly encourage such investment. It goes on to say that the Government should ensure that no change is made to current taxation affecting earnings generated by Australian direct investment overseas. What was the response by the Government? The tax package imposed a tax of 49 per cent on those overseas investments as from July 1987.

In many cases investments have been made overseas because of tax incentives in the host countries. Resultant profits are export income to Australia. What is going to happen? I predict that these companies will desert Australia and to them Australia will become a branch office country. That will destroy any chance we had of becoming a head office country in this region of the world.

Any incentive to export is welcome. Incentives alone, however, are not enough. From the few examples given it can be seen that, because of other factors, exporters have a tough task. It is these other factors that must be tackled. Governments must reverse their attitude in looking at successful exporters as prize milking cows and there must be a recognition by the few irresponsible union leaders of the devastation that will come to their fellow Australians if they persist in getting their kicks and measuring their success by the level of disruption they cause in key areas.