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Monday, 11 October 1999
Page: 9415

Senator QUIRKE (9:06 PM) —A couple of things need to be said about this proposal. Firstly, I guess you could have gone along to John Cleese in Torquay—Basil Fawlty—and said, `Basil, I want you to devise an industry plan for the automotive industry in Australia. It is in a bit of trouble. It has survived so far in many respects through bad management and massive tariffs that, in reality, in the 1960s and 1970s didn't help the industry at all. In fact, for those of us who have had the pleasure of travelling overseas to where there were Australian cars in the 1950s and 1960s we saw virtually no Australian automotive presence at all in the 1970s and 1980s.' On this side of politics we do agree that the tariff needed to be wound back. It was an admission that the industry in Australia was just not coping and needed other policy settings.

I want to come back to Basil now because it seems to me that this measure before the House, unfortunately, is something that he and Polly would have dreamed up. The reason I say that is that, as I understand it, what the measure does is put money into the industry. In terms of investment, as I understand it, it will be $2 billion over the time to the year 2005. If I have that wrong, I am sure the minister will correct me later. We agree with that. We understand there is to be a review and that it will be done on the basis of how effective this particular scheme is. I understand that the need for a review is actually in the legislation. Again, if I am wrong, I am sure the minister will correct me. Where the Basil Fawlty bit comes in is that the review will be conducted months, if not six months, after the whole thing has been crystallised and we have seen tariffs drop from 15 per cent to 10 per cent.

I cannot understand this. I think a review is necessary. I think if you are throwing public money at something you ought to review it. Before you change the tariffs, you ought to review it. Before you put them down or up, it ought to be reviewed. It ought to be reviewed beforehand, not six months afterwards—by then, the damage is done. It may well be the case that the government are confident that this is the back-door way of saying that two years ago they really wanted to wipe out tariffs by a certain time in the future, or to drop them down to, say, five per cent. They did not want to keep them at 15 per cent. In effect, this bill says that to the Senate tonight. It says that we just gave in to public pressure a year or 18 months ago and that what we are going to do now is chuck some money at it and, at the end of it, it is a fait accompli. The tariff is going down in 2005. You can forget about the money and you can forget about the review and all the rest of it.

In reality, the decision was made two years or more ago. What we did then was this: we were not travelling too well in the polls so what we wanted to do was make sure that all the car workers around Australia, particularly a lot in my home state, at least thought they were going to be looked after. I hope they get it right because, if they manage to get this particular bill up and the tariffs go down to 10 per cent, there is an awful lot at stake. We all know here that the Ford, Holden and Mitsubishi companies, and to a lesser extent Toyota, are reliant on some level of tariff support in a heavily traded economy like this. In fact, over the last couple of weeks, we have seen the Australian dollar go up and then down again. Some argument should be made that a 10 per cent tariff at least needs to take into account fluctuations in the Australian currency. In fact, sometimes it is greater than 10 per cent. In recent times we have had years where the currency has fluctuated at more than 20 per cent, and it depends what you are measuring it against.

The key issue here, though, is not only the big automotive manufacturers in this country; it is the whole cluster of small industries that live off them. Indeed, in my home state of South Australia we have Mitsubishi and we have General Motors-Holden's, which employ between them, as I understand it, about 8,000 people. Clustered around those industries is a whole range of other component manufacturers that supply to both car companies and, indeed, supply product over the border into Victoria to the Ford plants. They are the ones who are really vulnerable in this whole exercise. I want to say here tonight that one of the issues I am most concerned about on behalf of those 8,000 workers directly affected in South Australia, and the other thousands of workers in South Australia and in the other states in the component industries, is the reduction of tariffs from 15 per cent to 10 per cent as a fait accompli, as this bill, in its pure form, proposes. I think this is an issue that we really need to look at again.

I think the very large tariffs in the 1960s and 1970s did not do much for this industry at all. Indeed, I suspect that if you went to a member of the Australian public today and said, `We would like you to pay $70,000 or $80,000 for that Commodore,' instead of $30,000, $35,000 or $40,000, you would find that there would be such buyer resistance to it that the pressure to bring down tariffs would be overwhelming. A slow process—in fact I think arguably slower than the one we went through—of dismantling those tariffs was necessary. But we have now reached the point where those tariffs are, by world standards, quite small. When you have an economy where the Australian dollar is traded as much as this one is, you have to have some level of fall back on tariff and industry policy to help this industry because, if you do not and you have zero tariffs and suddenly the Australian dollar were to take a battering, it would have a very big impact.

There is another issue, too: in this country we buy upwards of two-thirds of a million motor vehicles every year. As I understand it, the figure for this year will be a bit lower than last year but, in the last couple of years, records have been set and I understand that somewhere around 650,000 to 700,000 units were purchased in this country. If the industry in Australia collapses, even if one of the big players collapses, the overseas implications of that will be considerable. It will mean that hundreds of millions, if not billions, of dollars worth of motor vehicles sourced and manufactured overseas will come into this country. That will have considerable implications for the trade balance of Australia.

I have also been told that Mitsubishi's fate is probably intertwined with that of the other South Australian car manufacturer, General Motors-Holden's. I have been told that the two of them are in a symbiotic relationship in the sense that they source many of their components from the same small- to medium-sized manufacturers, whose economies of scale are already stretched because of the number of units of local production that are sold here in Australia. If Mitsubishi or General Motors-Holden's were to exit from the market, it probably would lead to the demise of the other one as well. The reason that would happen is that the decision to manufacture here in Australia is based on a competitive environment where small components can be sourced locally, and the economy of scale would be disturbed in such a way that it may see the flight of a considerable part, if not all, of this industry overseas.

South Australia does not have a lot going for it—I think it is a great place to live, but the unemployment rate there is much higher than in other parts of Australia. If this policy is wrong, it needs to be reviewed regularly, and certainly before major changes are put in place. The implications of South Australia minus the car industry are rather terrible to contemplate. They would have an enormous impact in my home state. We are already carrying a large share of the unemployed in this country. No doubt, if the automotive industry were to be hit hard, we would carry an even greater share of that into the future.

I understand that Senator Conroy will be moving some amendments to try to sort out this mess. His amendments will seek to put the horse in front of the cart instead of behind it. He will seek to ensure that the process is reviewed as we go along and in sufficient time to make sure that any further decisions on any further dismantling of tariffs will take place—indeed, that there will be time for that decision to take place—well before 2005. The effect of the amendments means that the review will take place some two years before this proposed reduction in tariffs.

I think that, given the volatile state of the automotive industry in Australia right now and the problems that the Ford plants have experienced over the last few weeks—indeed, buyer resistance is growing by the day and cars may well be cheaper after 1 July next year—we need to tread very softly on this particular matter. We are no longer dealing with tariffs of 60 per cent and 70 per cent and an industry that not only is not very competitive but exports nothing; we are now dealing with an industry that is quite efficient, exports large volumes of product overseas and in many respects helps our trade balance immeasurably. If we are not careful, that will be put at risk.

I think this is something that we really need to go very slowly on, particularly as South Australia has such a narrow industrial base and given that so much of that relies on the automotive industry in that state. Senator Conroy's sensible amendments—and I understand the Democrats are voting for them—are a more prudent way to go than opening the stable door, letting the horse bolt and then trying to whistle it back, which is what the government's policy is all about. I commend to the Senate tonight good old Senator Conroy's amendments. I am sure that before the night is out, particularly if I sit down in the next minute, we may have a chance of seeing them succeed in the Senate tonight. I commend you, Senator Conroy.