George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

Last night the Screen Producers Association of Australia, SPAA, held a reception in the Mural Hall in honour of Emile Sherman, the Australian producer of that wonderful film The King’s Speech. I want to acknowledge the presence in the gallery this afternoon of officers of SPAA, including Mr Tony Ginnane, the president, Geoff Brown, the executive director, and Brian Rosen, SPAA film councillor and a former CEO of the Film Finance Corporation.

As honourable senators would be aware, The King’s Speech won many Oscars, including the Oscar for best picture at the recent Academy Awards, and last night Emile brought the Oscar statuette with him to Parliament House. It became an object of some veneration by members and senators. Emile Sherman joins a long list of Australians who have won international distinction in the film industry, several of whom have gone on to win Oscars. The names Cate Blanchett, Jane Campion, Russell Crowe, Baz Luhrmann and Geoffrey Rush are household names to Australians. Other Australian Oscar winners include Dr George Miller for best animated feature, Dion Beebe for best cinematography, Dean Semler for best cinematography, John Seale for best cinematography, Adam Elliott for best short film and, this year, Kirk Baxter for editing, Dave Elsey for make-up and Shaun Tan for best animated short film.

These Australians are living proof that in cinema Australia punches well above its weight in a fiercely competitive international marketplace. The names I have mentioned also serve to remind us that it is not only the actors and film producers who have taken Australian cinema to its envied place in the world’s esteem. Just as important has been Australian excellence in the technical aspects of film production, what in the industry are commonly called the ‘below-the-line’ aspects of film production, such as cinematography, animation, visual effects, make-up and design. As Emile Sherman pointed out in his remarks last night:

The King’s Speech, despite having an Australian producer, an Australian executive producer and an Australian star in Geoffrey Rush, is a British film. Put simply, if the PDFF had been in place when I was financing The King’s Speech, then I would have been accepting the Oscar for Best Picture for a film that was officially Australian as well as British.

The PDFF to which Mr Sherman referred is the coalition’s policy for a producer-distributor film fund, to which I will return in a moment.

The Australian film industry has always enjoyed the strong support of Australian governments, in particular of coalition governments. In fact it was the Gorton government which first established the Australian film and television school and the Australian Film Development Corporation, which was the forerunner of the Australian Film Commission. This may be seen as giving birth to a renaissance of the Australian film industry in the late 1960s and early 1970s. In 1980 it was the Fraser government which introduced the scheme of tax incentives in division 10BA of the Income Tax Assessment Act, which was the financial mainstay of the industry for the following decade and beyond. In 2007, as minister for the arts in a Howard government, I had the honour to introduce the package of measures developed by my predecessor in the portfolio, Senator Rod Kemp, which were the most important reforms to the film industry since division 10BA and which were warmly received by the industry. These reforms were based in particular on a measure called the film producer offset.

The producer offset was a significant shift in the way the film sector was supported and replaced the previous tax deduction based schemes. It was introduced to stimulate feature film production through a tax offset of 40 per cent on qualifying Australian film production expenditure on eligible projects, set against production company tax liability. The idea was for the producer to assume 40 per cent equity in the project, part of which could then be offered to potential investors. This is a far more flexible system than the old tax rebate scheme and was embraced by the industry as offering a deeper range of incentives and structures to support film sector investment rather than simply relying on investors looking to reduce their tax liability. It placed the industry on a new and surer footing. Films produced in Australia using the offset included Australia, Happy Feet 2 and Tomorrow, When the War Began.

However, the effectiveness of the producer offset as a stimulant to production is under threat. The high Australian dollar makes it more difficult to attract pre-sales and, internationally, there has been a significant tightening in film financing, partly driven by a global decline in DVD sales and television advertising. As a result, new US movie production has declined by some 40 per cent over the last year and there are fears that a similar slowdown is looming here. The Screen Producers Association of Australia has advised me that, while the producer offset has helped shield Australia from the worst of the downturn, its effects have been uneven. Lower budget films have been able to resort to top-up funding from Screen Australia, while support from US studios is still available for major productions from established directors, such as Baz Luhrmann and George Miller. However, mid-range productions—that is, those with budgets of between approximately $7 million and $30 million—have struggled to find backing. These mid-range productions represent an important strategic opportunity for the Australian film industry. Productions using local talent and skills permit high production values without straying into budgetary excess.

The time to act is now, before the slowdown hits and much of our home-grown talent follows the work overseas, never to return. This has happened on occasions in the past in the Australian film industry. At the last federal election the coalition announced its support for a producer-distributor film fund to arrest the decline and create a dynamic environment for the crucial mid-budget productions. The scheme’s centrepiece is the early involvement of distributors in the financing, as well as the distribution, of films. Mid-budget productions in the past with early distributor involvement, including Picnic at Hanging Rock, The Man from Snowy River, Crocodile Dundee 2 and The Year of Living Dangerously, were significantly successful.

The involvement of distributors is unashamedly commercial. The distributor is the link between the filmmaker and the audience and has the expertise in identifying and marketing to the audience. The distributor is also committed to the release of the final product, which is often the point at which a production without an identified distributor can falter.

The other distinctive feature of the scheme—which I should say in passing was developed by my predecessor in the shadow portfolio, Steven Ciobo, the member for Moncrieff—is that it will be a loan fund, not an equity fund. The fund would not make equity investments in films, but instead would make project loans to the producer, matched by an equivalent distribution commitment secured against the proceeds from the film’s distribution. Matching funding would be dollar for dollar, with a minimum loan of $2 million and a maximum of $10 million. The fund and the distributors would share the risks of a film equally and recoup their advances side by side. The film proceeds would be applied according to a schedule, with the fund and the distributors to recoup their advances at the same rate and at the same time once approved marketing and release expenses and 50 per cent of the distributor’s normal distribution fee have been paid. The fund would be paid interest after the balance of the distribution fee has been paid.

The proposed level of the fund is $20 million annually for three years and it would be wound up after seven years. This should provide the time needed for the international film financing market to return to normal. This scheme, operating in tandem with the producer offset and Screen Australia investment, would provide support for $255 million of film production. That is up to 27 new films. It would create about 1,700 permanent jobs in the sector. Most importantly, it would bring producers and distributors together, change consumer expectations of Australian films and increase investor confidence in the industry. It would also break the cycle of direct subsidy dependence in the sector, which has bedevilled it for decades. Further, the true cost would be much less than $20 million per year. The funds are advanced as loans, not equity, so they have priority for repayment. The best estimates are that the ultimate cost, even on a worst case scenario, would be in the order of about $8 million per year, or about 40 per cent of the funds invested. By contrast, the average equity investment in Australian films would realise only 16 per cent of the total invested, or a loss of 84 per cent.

The coalition has already announced its support for the PDFF and took that support to the last election. The government’s stance, I am sorry to say, is at best lukewarm. The signals from the government are that it prefers the traditional Screen Australia model for this crucial sector of the industry—a model that is not commercial in its approach to money or in its approach to audiences. That may give some in the Labor Party a warm inner glow, but surely the point is to support productions that people actually want to see. I must say that another of the problems that have bedevilled the industry in recent years has been the indifference of successive ministers: first, Mr Garrett, whose performance in the portfolio was regarded across the sector as a complete failure, and more recently Mr Crean, who has had responsibility for the sector added on, apparently as an afterthought, to a miscellany of other responsibilities.

According to some estimates, Australian governments have spent almost a billion dollars over the last 40 years nurturing an Australian film industry. Much of that money has been money well spent; much of it has been wasted. And whether it was well spent or wasted has largely been a function of the funding models adopted. I claim that the funding models adopted by coalition governments have been much more successful because they are more commercial than dependency based funding models adopted by Labor governments. Be that as it may, the Australian film industry has now matured to the point that we have some of the best producers, directors, actors and technicians in the world. It would be a tragedy, at a maximum price of $8 million a year, to lose them now.