Chris Bowen (Prospect, Australian Labor Party) Share this | Hansard source

Assisting private enterprise and promoting exports are core responsibilities of government and core responsibilities with regard to which this government has failed abysmally. A good export performance is vital to our economy. There are, of course, significant spillover effects for wider society and the economy, which means that it is appropriate for the government to promote exports. In fact, it is more than appropriate; it is vital. I will come back to those spillover effects a little later.

In a nation like Australia it is important that our exports come from a diversified range of sources. Personally, I regard this government’s worst economic failure, among many, as being its complete failure with regard to exports, and manufactured exports in particular. Two weeks ago we saw the release of the March trade figures, which my honourable friend the member for Werriwa referred to, and we saw our monthly trade deficit increase from $1 billion to $1.5 billion. This is not what concerns me most. We do see from time to time monthly fluctuations. We see occasional blips as the deficit figures go up and down as particularly expensive imports come in from time to time. But what worries me and the Labor Party more is that this was the 48th trade deficit in a row. Not in 20 years have we seen a run of trade deficits which has lasted this long.

Twenty years ago Paul Keating warned Australia that we were in danger of becoming a banana republic unless we turned things around. But there is one very big difference between that trade crisis and this one. In 1986 the world economy took a turn which was not in Australia’s best interests. Demand for commodities, the staple of the Australian economy, was low. Of course, that is not the case today. We see the massive growth of China, we see Australia riding the Chinese wave and the massive increase in demand for our commodity exports, led primarily by the 10 per cent per annum growth in the Chinese economy. If we had the terms of trade now that we had in 1986, our current account deficit would now be 13 per cent of gross domestic product. Even with the best terms of trade in 50 years, this government delivers a trade performance which sees us with a current account deficit which fluctuates between six per cent and seven per cent of gross domestic product.

Even with the best international world conditions since the end of World War II, this government delivers the biggest trade deficit in our history, and of course this translates into Australia’s record foreign debt. This government has effectively transferred public debt to private sector debt and seen it balloon out in the process. When the Howard government came to power, promising to reduce foreign debt and driving debt trucks around Parliament House, foreign debt then stood at $180 billion. It is now $450 billion or half a trillion—that is, more than 50 per cent of gross domestic product.

The government have had a lazy approach to trade. They have been riding the coalminer’s back, they have been riding the wave of Chinese growth and they have done nothing to encourage manufactured exports. The results are there for all to see. In 1983 Australia’s elaborately transformed manufactured exports stood at $2.6 billion. By 1996 they had increased to $18 billion. By 2005 the growth rate had dropped off dramatically and it had reached only $26 billion. Indeed, in 2001 and 2002 we saw the only decline in elaborately transformed manufactured exports in the last 23 years. It actually went down over a 12-month period.

Of course, there is no doubt that global economic conditions play a role in this and that Australia, from time to time, gets bounced around as the world economy grows and then falls off. But this government has dropped the ball. It has failed to encourage research and development and has let other countries get past us—other countries with comparable bases when it comes to their economy. They have overtaken us in the field of elaborately transformed manufactured exports and high-tech exports. These are countries like Ireland and Finland, for example. In fact, Australia is one of the very few countries in the world that have a traditional commodity base that are still running a trade deficit. As world demand for commodities has increased, most economies that are similar to Australia’s have gone into trade surplus. Countries like Finland and Canada have gone into trade surplus. I think South Africa is in fact the only other country with a similar economic profile to ours which is running a trade deficit.

The honourable member for Cowper talked about the workplace relations changes and how they helped exports. What this government is doing is going down the low road. It is competing with countries like China and India by reducing our wages. What it should be doing is going down the high road and competing with countries like Ireland, Finland and Canada by encouraging manufactured exports, by encouraging the high-tech sector and by encouraging research and development. But it has gone down the low road. It is driving down wages instead of driving up innovation. They are driving down conditions instead of driving up our ability to compete in the international field.

This is a remarkable story of neglect which makes this bill, the Export Market Development Grants Legislation Amendment Bill 2006, even more important. I mentioned before that there are spill-over effects from exports. When a business begins exporting, it benefits the wider economy as well as that particular business. When a business begins exporting, there is evidence that it improves its productivity. This government’s record on productivity has been appalling, and that is what makes this bill even more important. Businesses which decide to export are no longer just competing with businesses within their own catchment but competing with every other business in the world in that field. Research by the Centre for International Economics indicates that 70 per cent of respondents believe that exporting has made their operations more efficient. A bigger market means more economies of scale and, by definition, a more efficient operation. An exposure to export markets encourages businesses to be more innovative. The Australian Bureau of Statistics longitudinal study in 1997 and 1998 found that nearly half of all exporters planned to introduce a new good or service, compared to just 15 per cent of non-exporters.

The honourable member for Cowper referred to the fact that only five per cent of Australian businesses export. I was surprised to hear a member from that side of the House making that point. I would have thought that point would come from a member of this side of the House. Just five per cent of Australian businesses are exporting, and this government and the honourable members opposite come in here and crow that their export performance has been excellent.

As I alluded to earlier, anything which encourages more innovation in the Australian economy is something which will improve our economic performance and help us compete with those economies which have embarked on deliberate national strategies to improve their levels of elaborately transformed manufactures. It is something that this government has not done but it is something that governments in Ireland, Finland, Canada and Switzerland have done. This government has dropped the ball and has been riding the coalminer’s back. Governments in the past rode the sheep’s back; this government has been riding the coalminer’s back. Again I find myself in agreement on at least one point with the honourable member for Cowper. Exporting is good for employees. This makes sense. A successful, innovative exporting company is very likely to be in a position to pay more to attract good employees. Again, the Australian Bureau of Statistics found that exporters paid each full-time employee an average of $46,000 in 1997, while non-exporters paid an average of just $28,600.

All of these points go to the importance of the export market development grants bill. Of course, the Export Market Development Grants Scheme was introduced by the Whitlam government in 1974 and it has been retained by each successive government. I note, however, that this government when they came to office promised to abolish this scheme—but the furore from the exporting community was so great that they had to renege on that promise and they kept the export market development scheme in place, despite the fact that they had gone to the election with it as a potential saving and that, in their projected budget papers, they had indicated it would be abolished.

I was saying before the Main Committee suspended that the government have a shameful record when it comes to exports. They had the highest terms of trade in 50 years and yet they delivered the highest deficit in 50 years. They have been lazily riding the wave of Chinese growth and leaving this country exposed. If the world demand for commodities starts to fall off, we will be shamefully exposed to that downturn and we will leave ourselves open to an economic downturn in our own nation because the world will turn away from our commodities.

This development grants scheme, as I said before the break, was introduced by the Whitlam government in 1974 and has been retained by each successive government. This government was going to abolish it but, under pressure, decided not to. This bill extends the scheme to 2010, with a mandatory report to the Minister for Trade on the efficacy of the scheme due in 2010. This is a sensible outcome. There is no evidence at this stage that replacing this scheme with any possible alternative would produce better results than we have seen thus far. However, I for one remain open-minded about the possibility of converting to a tax deduction scheme or something similar, providing that the safeguards are there to assist small start-up businesses that are not yet paying taxes because they do not yet make a profit.

I do have some reservations about a couple of the changes proposed in this bill, most significantly the proposed amendment to say that recipients of export market development grants no longer need to show success in promoting exports to receive future grants. I think that is a retrograde step. There needs to be some form of accountability, and I think the taxpayers would expect that a company which has been receiving export market development grants but which has not generated further exports should therefore not continue to receive further grants. There is no reflection on them that they have not been able to achieve that—I am sure we would all agree that they have tried their best—but it has not worked out and therefore the taxpayers’ money should be diverted to somebody else.

The scheme, by its nature, supports small and medium sized enterprises to develop export markets, and this is appropriate. Small businesses do not necessarily have the skills or the capacity to identify and pursue export markets, although their products may be of very high quality and can, without question, compete on their own merits overseas. Shaw and Hughes found that 35 per cent of Australian businesses regard themselves as feasible exporters but have no plans to export, and we need to get that figure down. The size of that figure informs the argument that we need to be reviewing our export assistance to small businesses and assessing whether there are better ways of assisting them. The Centre for International Economics notes that procuring of finance for small business to develop export markets is difficult, and this is unsurprising, as lenders often take a very cautious approach. This was the finding of the government’s 2001 report on the review of export credit and insurance services.

The evidence indicates that the EMDG Scheme plays a positive role in overcoming these hurdles for small businesses to export. In a survey conducted to inform the efficacy of the scheme, indications were that the EMDG funds represented nearly 20 per cent of export promotion funding for recipients and that they were the second most important source of external funding. So there is no doubt that this scheme plays an important role, but I stress that I think it is sensible that the scheme be reviewed in 2010 to see whether there is a better way of doing things.

The receipt of EMDG funding assists small firms to fund their export-chasing activities. For each dollar of the EMDG funding received, the Centre for International Economics found that recipients facing tight financing constraints are likely to spend an extra dollar on export promotion, so the bang for the buck from this scheme is quite high. Even for those firms facing extreme financing constraints, the additional expenditure would be in the order of $1.30 to $1.90 for each dollar from the grant.

In conclusion, this scheme does good work. I look forward to seeing the results of the 2010 review of the scheme, which will assess whether there are better and more efficient ways of encouraging export activities. Hopefully those results will be reported to a Labor minister for trade—perhaps a minister for trade of the ilk and the achievement of the honourable member for Fraser, who has joined us in the chamber. He is one of the better ministers for trade that this nation has had in the past. Hopefully that minister for trade will be somebody who has a real interest in making a contribution to diversifying Australia’s trade exports, not someone who simply wants to ride the coalminer’s back and the Chinese wave, as the current minister and this lazy coalition government have done.

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