Kevin Rudd (Griffith, Australian Labor Party, Shadow Minister for Foreign Affairs and Trade and International Security) Share this | Link to this | Hansard source

I rise to speak on the Export Market Development Grants Legislation Amendment Bill 2006. In the context of this debate, I want to place clearly on the parliamentary record Labor’s concerns in relation to Australia’s continuing trade deficit; how that impacts in turn on Australia’s current account deficit; the impact which that has further on Australia’s record foreign debt; why improving Australia’s current account deficit is critical, not marginal, to the future of our economy; the underlying constraints on Australia’s trade performance; the contribution that the Export Market Development Grants program potentially makes to our trading arrangements; and a number of specific areas where this bill could be improved.

The trade figures released by the ABS last week demonstrate the very difficult trading position in which Australia finds itself. Every month, the ABS releases another set of disappointing export figures, and regrettably last week was no exception. The data revealed that Australia recorded yet another trade deficit—this time, a monthly trade deficit of $1.5 billion for March, and this represented a massive $1 billion increase on February. This is Australia’s 48th consecutive monthly trade deficit, meaning that we now have had a continuous trade deficit for the past four years. It is not just the continuum of monthly trade deficits that is the problem; it is the quantum of these deficits as well.

Australia’s trade deficit is the single largest contributing factor to our current account deficit. In 2005, Australia’s current account deficit was a massive $55 billion, which represented six per cent of gross domestic product. Of this $55 billion, some $19 billion is derived from our trade deficit. This is yet another record for the government: the highest annual current account deficit ever. And, in Tuesday’s budget, the Treasurer forecast that Australia’s current account deficit will reach a new record of $62.5 billion in 2006-07. Given that the current account deficit is the deficit on our income to and from Australia, it contributes directly to our foreign debt. With Australia’s trade and current account deficits over the past two years at record levels, Australia’s foreign debt has consequently spiralled to unprecedented levels.

Australia now has a foreign debt of half a trillion dollars. On the day that, two weeks ago, the Treasurer was crowing about ‘debt-free day’, Australians owed the rest of the world half a trillion dollars. This is a number we are not used to hearing or using in the domestic economic debate in this country; it is a number we are going to hear a lot more about in the months and years ahead, up until the next election. That figure represents $24,276 for every single Australian. This half a trillion dollar foreign debt, along with four years of trade deficits and a record current account deficit, is being recorded at a time in the economic cycle when Australia’s external balance should be moving into positive territory.

The bottom line is that Australia has experienced a massive increase in both the demand for and the prices of our resource exports. The price of our largest commodity export, coal, has tripled over the last three years. The price of our next largest commodity export, iron ore, has doubled over the same period. Australia’s terms of trade—that is, the ratio of export prices to import prices—has increased by 34 per cent since December 2001 and is now at the highest level it has been in 30 years, since March 1974. At times in our history when Australia has had similar terms of trade to that which we enjoy today, our trade and current account balances have improved as a result. As Professor Ross Garnaut said last year to the Senate inquiry into Australia’s current account deficit:

There are a couple of features of that big number—or all those big numbers last year and the big number in the March quarter of this year—that make that big number even more unusual. One of those is that it has occurred at a time of historically extremely high current account deficits—prices for our exports relative to our imports. Other periods of peak current account deficits—they have never been quite this high before, but at other times they have got close to it—have usually been times when export prices have been relatively low. But at this time they are unusually high.

So why should we be concerned about Australia’s record current account deficit? The current account deficits that we have experienced in the last 12 months, with some quarterly deficits reaching well above seven per cent of GDP, are starting to get into dangerous territory. Such high external imbalances expose our economy to the vagaries of markets. And when international markets react to bad economic data and conclude that the current account deficit has reached unsustainable levels, interest rates almost inevitably rise. The real risk is that the boom that we have seen in commodity prices, which has kept our export earnings higher than they otherwise would be, will at some stage come to an end. In evidence again to the Senate Economics References Committee investigation into the CAD last year, Professor Ross Garnaut stated:

... I think the outstanding possibility is a retreat of the terms of trade towards more normal levels. This is the way that the boom of the late sixties and early seventies ended. This is the way that the resources boom of the Fraser era ended. This is part of the story of the boom of the late eighties which gave rise to recession. On each occasion, there was a large and fairly sharp fall in the terms of trade. I do not think there is any doubt that, if within a relatively short period we got an adjustment in export prices similar to that which has occurred a number of times in modern Australian history, we would have a very difficult adjustment ...

This is not to say that a rapid decline in the terms of trade is inevitable, but it is a risk—a big risk—that the economy faces. Just last month, in April, we saw what could be the first signs that world commodity prices have peaked. The ANZ Bank reported that coking coal producers accepted price cuts of around 12 per cent. The ANZ also stated:

Commodity prices cannot continue to rise at the stellar pace of recent years, and there are signs that non-rural prices could now be peaking as global growth eases back from unsustainably strong growth rates and as Asian purchasers play hardball in contract negotiations.

Importantly, the 2006-07 budget papers are forecasting a plateauing in Australia’s terms of trade.

What do we do about the rapid deterioration in our current account deficit? Why has Australia’s trade imbalance demonstrably deteriorated under the Howard government? The answer to this is complex, but the key is Australia’s export performance. In the week of the federal budget, let us look at Australia’s recent export performance. Let us also examine the Treasurer’s predictions for exports over the past few years. Since 2001-02, the government has overforecast growth in exports by an average of 5.5 percentage points each year. Each of these predictions has turned out to be a complete and utter joke in terms of the real export performance delivered in each of the years in question.

Let me demonstrate by going to the record. In 2001 the government forecast five per cent export growth when in fact exports fell by 0.8 per cent. In 2002 the government forecast six per cent export growth, then exports in fact fell again by 0.8 per cent. In 2003 the government again forecast export growth of six per cent, while exports grew by barely more than one per cent. In 2004 the government provided a truly heroic forecast of eight per cent export growth, whereas in fact exports grew by 2.5 per cent. In 2005 the government forecast seven per cent export growth, which was followed by an expected two per cent actual growth over the period. In the budget on Tuesday the government forecast again that exports will grow by seven per cent in the year ahead. We are deeply concerned as to whether in fact that figure will be realised in practice. It is important to note that over the past four years exports have averaged growth of just 0.6 per cent per year. This compares to yearly export growth of around eight per cent per year in the 1990s.

Of equal concern over the 10 years that the government has been in office has been the narrowing of our export base. Exports of ETMs—elaborately transformed manufactures—and services have declined as a proportion of GDP for the past five years. Let us take ETMs as an example. The Australian Industry Group succinctly summarised Australia’s manufactured export performance over the last five years in its 2006 Manufacturing futures: achieving global fitness publication when it reported:

... the total value of manufactured exports in money terms remains around $2 billion below the peak of November 2001, when manufactured exports totalled over $70 billion.

Indeed, Australia has lost a fifth of its global market share of manufactured exports since 2001. Tuesday’s budget once again reveals that Australia will be placing all its export eggs into one basket—that is, a resources boom driven by Chinese demand. The budget papers effectively haul up the flag of defeat and retreat when it comes to our overall performance on manufacturing exports.

Despite the clamour of warnings and advice to the government on exports, the government, regrettably, is still not listening. Core Australian export sectors are being neglected by the government while it focuses all of its attention, it seems, on the minerals boom. The budget papers state of Australia’s manufacturing sector:

Exports of elaborately transformed manufactures are forecast to grow moderately over the next two years, but are expected to continue to be hindered by a relatively high exchange rate and the increasing competitiveness of the manufacturing sectors in developing countries, such as China.

The story is no better when it comes to services exports. Again, the budget papers state:

Service exports are forecast to improve modestly in 2006-07, after two years of little growth. Competition appears to have intensified in the global tourism industry, with factors such as increasing price competition in the short-haul airline market out of major Asian hubs reported to have adversely affected Australia’s travel service exports. This may continue to constrain travel export growth in the near term.

These are references from the government’s own budget papers. These are not statements simply by the Australian Labor Party seeking to advance a partisan argument. The Reserve Bank has also provided commentary on this question.

A division having been called in the House of Representatives—

The Reserve Bank has also entered this debate. Referring to the commodity price boom, the bank said in its latest statement on monetary policy:

Australia’s export performance over recent years has been disappointing, considering the favourable international conditions.

…       …            …

Australian incomes have been substantially boosted by these developments, but almost all of the gain has come from higher export prices rather than from increased volumes. The volume of coal exports has been broadly unchanged over the past three years. Growth has been limited by capacity constraints in the mining sector, some infrastructure bottlenecks, and the long lead times required for large mining projects to come on line.

In addition, Felicity Emmett and Kieran Davies of ABN AMRO said of the billion-dollar blow-out in March’s trade balance:

Excluding price effects, we calculate that real net exports have remained a drag on growth in the first quarter, subtracting around 0.3 of a percentage point from GDP. This will be the 18th consecutive quarter of subtraction. With export prices up a sharp five per cent, real exports look to have posted a small fall in the quarter such that they have continued to zigzag around a broadly flat trend. This continues to be a source of disappointment for the economy as export volumes have failed to make any meaningful headway, despite strong synchronised world growth.

We should also look at the work of the Senate Economics References Committee, which last year investigated this current account deficit question, in particular the demand for imported goods and household debt. I draw the attention of the House to the committee’s report entitled ‘Consenting adults deficits and household debt’. The committee recommended that the government develop new strategies to promote the exports of ETMs and services to underpin a long-term improvement in Australia’s balance of trade. The committee recommended that the government introduce policies designed to bring about an improvement in the medium- to long-term average of the current account deficit, including improving domestic savings and increasing the diversity and international competitiveness of the export sector.

Unfortunately the government simply does not provide us with any evidence that it has developed a comprehensive, cohesive, consistent export strategy. Let us look at what trade policy this government has adopted to broaden our export horizon. This will be particularly important in upcoming debates around the Doha Round, which currently is under some duress. What the government has established instead is a tangled web of ad hoc bilateral free trade agreements.

However, so far these FTAs have worsened rather than improved Australia’s overall export performance. For example, in the first 12 months of the US FTA, Australia’s trade deficit with the US increased by 52 per cent to $1.5 billion. Over the same period, Australia’s trade balance with Thailand went from a surplus of around $100 million to a deficit of close to $150 million under the FTA with that country. And since Australia’s FTA with Singapore came into effect in mid-2003 our exports to Singapore have been static while imports have doubled, with the trade deficit bilaterally blowing out to half a billion dollars. In negotiating these deals, the Minister for Trade has demonstrated that he is quite happy to sell out the very constituents the National Party is meant to represent. Our trade minister is failing the interests of Australia’s exporters.

The 2006-07 budget contains no new export initiatives—simply a continuation of current programs such as the EMDGs, which we are debating in the legislation before the House, and trade smart. Existing export promotion initiatives have failed dismally to lift the number of Australian exporting firms. Four years ago—and this is a very important point—the trade minister set a target to double the number of Australian exporters, from 25,000 to 50,000, by the year 2006. By contrast, the number of exporters in Australia has actually decreased over the past two years.

Australia desperately needs a new export strategy that rebuilds the skills of our nation—the skills demanded by our export industry—lifts research and development, plans properly for our national infrastructure needs rather than standing passively by while infrastructure bottlenecks impede any increase in export volumes, lifts export promotion and better coordinates federal and state government resources in this area, and rebuilds Australia’s export culture so that exporting becomes a logical extension to simply doing business in Australia. It is clear that Australia needs to be planning for its future prosperity. Addressing its continued trade balance problems with a new export strategy for the country should be front and centre to that planning. Regrettably, it is not.

My fear is that this government in many respects has become a one-trick pony when it comes to trade policy. There is no doubt that the government has focused much, and occasionally all, of its energies on establishing bilateral FTAs while not establishing a broad, comprehensive and multilateral trade policy for Australia’s exporting future. It is for this reason that it is critical that we enhance the schemes that have some capacity for success in promoting Australia’s export interests. That is why we speak today in support of the continuation of the EMDGs under the Export Market Development Grants Amendment Bill 2006.

Since it began operation in 1974, the EMDGs have provided substantial assistance to Australian exporters. From 1997 to 2002 funding for the EMDG scheme was capped at $150 million. In the 2004-05 budget the Australian government announced an additional $30 million for the scheme to be provided for 2005-06 and 2006-07. The latest available information demonstrates that in the 2004-05 financial year, $123.9 million and 3,277 grants were paid to Australian small and medium businesses to assist them with the costs of export marketing and promotion.

According to Austrade, for grants relating to the 2003-04 grant year, the average grant was $37,145, the median grant was $22,643 and 77 per cent of businesses receiving EMDG assistance reported annual income of $5 million or less. Over the past several years there have been a number of reviews conducted to improve the EMDG scheme. As per the requirements of the act, Austrade is required to review the EMDG scheme and make recommendations to the trade minister on whether the scheme should continue beyond the 2005-06 grant year. Austrade for this purpose used the Centre for International Economics, CIE, for the review, and concluded:

... the scheme is effective in increasing the number of SMEs that develop into new exporters, in increasing the number of SMEs that achieve sustainability in export markets, in generating additional exports, and in further developing an export culture in Australia.

…     …         …

Extending the scheme indefinitely would offer greatest certainty to industry. However, a five-year extension, with a review before the end of that period, would ensure accountability and give business, industry, governments and the broader community an opportunity to again review the program’s performance. A five-year extension would balance the need for certainty with the need for accountability and transparency.

The review made 14 recommendations on how the scheme should be improved. These recommendations have now been examined by the Senate Foreign Affairs, Defence and Trade Legislation Committee. The bill before us will therefore change the existing legislation to incorporate these 14 amendments, which would have the effect of (1) continuing the EMDG scheme to the end of the 2010-11 grant year and providing for a review of the scheme with a report to the Minister for Trade by 30 June 2010; (2) increasing the overseas visit allowance from $200 to $300 a day; (3) allowing Austrade to deem certain applicants eligible where they do not technically meet the act’s current principal status requirements; (4) modifying the scheme’s Australian origin rules so that goods coming into their final form in Australia must be made in Australia to be eligible—for other goods to be eligible, Austrade must be satisfied that Australia will derive a significant net benefit from the sale of those goods outside Australia; (5) making applicants’ expenses eligible when they are incurred to increase the return on the disposal of intellectual property and know-how related to a company; (6) separating the claimable expense categories for overseas representatives and marketing consultants and capping expense claims for overseas representatives at $200,000 per claim and for marketing consultants at $50,000 per claim; (7) revising the rule covering changes in business ownership to make it clearer for applicants and easier to administer; (8) allowing Austrade to grant special approval status, including approved body status, for five years rather than three; (9) providing that the eligibility of cash payments made by applicants is limited to $10,000 per claim; (10) ensuring that the scheme’s rules clearly set out Austrade’s power to disregard any unsubstantiated, unreasonable, uncommercial or non bona fides expense claims; (11) removing the export performance test from the EMDG scheme; and (12) ensuring that, as intended, commission payments remain ineligible for the scheme. There are of course a number of other minor amendments to the scheme as well, bringing the total number of amendments to 14.

A division having been called in the House of Representatives—

As I have stated, the opposition will support this bill. The EMDGs potentially play an important role in assisting Australian exporters, and we want to see that this scheme is continually improved and provides real assistance to exporters on the ground to assist them in the task. The Senate Foreign Affairs, Defence and Trade Legislation Committee examined this bill and did, however, make a key recommendation. The committee noted:

... the Government’s intention to conduct a review of the scheme with a report to the Minister for Trade by 30 June 2010. While the Committee supports not just this review; it is concerned that the operation of the scheme, which involves substantial sums of money, is not subject to scrutiny by independent and experienced analysts.

As a consequence, the committee recommended:

... that the Australian Government request the Auditor General to conduct a performance audit of the scheme two years after the proposed legislation comes into effect.

We believe this is a sensible addition to the bill and ask the minister to consider its addition before this bill passes the House and the Senate.

We also note the bill’s attempt to modify the EMDG Scheme’s Australian origin rules to change the test of whether or not products under the scheme are made in Australia, giving the minister discretion, through ministerial guidelines, for determining the definition of ‘Australian origin’; and, further, the bill’s attempt to remove the export performance test for ongoing applicants, thereby removing the performance criteria which applicants must meet to be eligible for multiple grants under the scheme.

The opposition would like to see more detail with regard to the changes to the Australian origin rules, because we do not yet have any information from the government as to what those rules will be changed to. The bill states that responsibility for defining ‘Australian origin’ will now be placed in the hands of the minister, through ministerial guidelines; however, we do not yet know what definition the minister will apply.

We also note that this bill will remove the export performance test for ongoing applicants to the scheme. Labor opposes this move. The export market development grants should be about practically assisting Australian exporters in an attempt to improve our trade balance. The grants should not be turned into a form of unaccountable business welfare. It is critical that the EMDGs are well funded, but they should not be a bottomless bucket of money. Applicants should be subject to appropriate performance criteria after their export market has been established. The EMDG should reward those exporters who are genuinely trying to promote their businesses, not provide an ongoing source of funding for exporters unwilling to put in the hard yards and unwilling to subject themselves to proper testing on the question of whether, after an appropriate number of grants, they have in fact begun to export.

Rectifying our trade problems, our continuing problems with the current account deficit and our continuing problems with a half a trillion dollar foreign debt is critical if we are concerned about securing this country’s long-term economic future. That is the core deficiency in the budget which has just been passed. All three of these deficits are of deep structural concern to the long-term health of the Australian economy. In response to this challenge which faces us for the long term, we can either be passive, as the government has demonstrated itself to be with the response in the budget, or take an active approach. Part of an active approach lies in implementing the new export strategy for Australia, which the opposition outlined last year. Part of an active approach lies also, when it comes to specific programs like the EMDG, in ensuring that proper performance tests are applied to those businesses which successfully obtain grants for export promotion under the scheme. For these reasons, I move:

That all words after “That” be omitted with a view to substituting the following words: “whilst not declining to give the bill a second reading, the House:

(1)

notes the Government’s attempt to modify the Scheme’s Australian origin rules will change the test of whether products under the scheme are made in Australia and give the Minister discretion to determine the definition of “Australian origin”; and

(2)

calls on the Government:

(a)

not to proceed with the provision to remove the export performance test for ongoing applicants as this will remove the performance criteria which applicants must meet to be eligible for multiple grants under the Scheme; and

(b)

to implement the Senate Foreign Affairs, Defence and Trade Legislation Committee recommendation that the government request the Auditor General to conduct a performance audit of the scheme two years after the proposed legislation comes into effect.”

Dick Adams (Lyons, Australian Labor Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Martin Ferguson (Batman, Australian Labor Party, Shadow Minister for Primary Industries, Resources, Forestry and Tourism) Share this | Link to this | Hansard source

I second the amendment and reserve my right to speak.

Kay Elson (Forde, Liberal Party) Share this | Link to this | Hansard source

I am very pleased to rise today in support of the Export Market Development Grants Legislation Amendment Bill 2006. This bill reflects the government’s response to the Jollie report, which resulted from the 2004-05 review of the scheme. I note the extensive community and business consultation that was carried out as part of the review, and I commend businessman Peter Jollie, who led the inquiry. Three hundred and ninety-four public submissions were considered, and there were 70 consultation meetings. The inquiry also considered the results of independent research by the Centre for International Economics.

There was a great deal of support for the continuation of the scheme, but I am not surprised by the high level of support because just about every member of this House would be aware of the many benefits that the Export Market Development Grants Scheme means for their local small to medium businesses. Essentially, the premise for the scheme is very simple. It provides grants to help businesses with the cost of some specific export promotional activities undertaken overseas. It is a program that has stood the test of time and scrutiny, with this latest review being the 17th since the program was first created, in 1974.

This bill will ensure the operations of the scheme for a further five years and provide certainty for exporters who are planning their expansion strategies for the coming years. This bill also makes a number of improvements to the scheme, in line with the review recommendations. This bill will increase the claimable overseas limit allowance to $300 a day, rather than the $200 level it has been set at for the past 15 years. This bill will also streamline the Australian contents rule to make it easier to understand. It caps claimable expenses for overseas representatives and marketing consultants, and it adjusts the scheme to better accommodate emerging export industries and practices.

This bill comes on top of the changes announced in 2003 which were aimed at ensuring the scheme was directly geared to small and medium enterprises by reducing the annual income ceiling and reducing the maximum grant. This was a move generally welcomed by the industry and business organisations because they recognise that the capping of benefits meant that more money would be available for new and smaller exporters. That is what the EMDGS is all about. It is not a subsidy, and it is not about lining the coffers of wealthy businesses. It is a kick-start; it is a helping hand, not a handout.

The very fact that the companies must pay out at least $15,000 a year before being able to claim any grant is evidence that it is about helping those who are prepared to help themselves. I understand that some submissions to the inquiry suggested lowering or removing the $15,000 threshold, but it is a good thing that this was not the final recommendation. As the Australian Chamber of Commerce and Industry said in their response to the Jollie report:

While eliminating, or even substantially reducing, the threshold may assist some potential micro-firm exporters, it would undermine the principle that claimants should demonstrate a worthwhile ... financial contribution to their own export efforts.

I agree, and I believe that one of the greatest strengths of the scheme is its very sound economic foundation, ensuring only legitimate and serious businesses actually receive the grants. There is no doubt that the scheme does exactly what it is intended to do: assist those small businesses and medium enterprises that are beginning to export. In fact, 73 per cent of the EMDGS’s claimant firms had fewer than 20 employees, with 56 per cent having fewer than 10 employees, and 77 per cent of the firms had incomes of less than $5 million per annum. It is clear that most claimants use the scheme to jump-start their export initiatives, with 70 per cent of the claimants being in the program for three years or less and only 13 per cent participating for six years.

To put the economic benefits of the scheme into context, let us look at the 2003-04 financial year. In that year, nearly 4,000 Australian companies received grants, totalling $150 million. Those companies generated exports worth $5.5 billion and employed around 122,000 Australians.

As I said earlier, I have seen first hand the benefits the program has had for many local businesses in my electorate. Over the years some innovative companies have really had a head start on the overseas market through the scheme. Recent recipients of the grants in my electorate include a food milling system manufacturer, a security door and window manufacturer, a fruit and vegetable processing company and several specialised tourism accommodation companies, as well as sporting event service companies. These are solid local companies that contribute to our local community and our local economy. They employ local residents and have great potential to achieve even more. I note that the sector that benefits most from these grants is manufacturing, which accounts for around 40 per cent of all grants. It has been said for many years that we must do more to support our manufacturing industry, and this program does exactly that.

I want to take a few moments to look at our overall export performance. There has been a great deal of negativity in the national press in recent times and many Henny Pennys have been running around, declaring that the sky is falling. The truth of the matter is that our export record has never been so strong. Exports during March this year topped $16.1 billion—the highest figure ever for the month of March—and, in this financial year, we are currently on track to reach record levels of exports. This is on top of last year’s record for Australian trade, which resulted in our highest sales ever of $176.7 billion, which is a 15 per cent increase on the 2004 figure. That does not mean that the government will rest on its laurels. We will continue to push forward with the most ambitious trade agenda in our nation’s history. I commend the trade minister for his ongoing dedication to this task; he is doing a remarkable job.

Many fear the very idea of globalisation, but the trade minister continually proves that we have nothing to fear and everything to gain from opening up to world markets. As the minister said in a recent speech:

It is true that growing economies like China and India will be strong competition for Australian firms, but they will also provide us with immense opportunities.

A combined middle class of between 400 and 800 million is predicted to emerge from China and India over the next two generations.

That is a staggering situation and one that has enormous potential for our Australian exporters—and our government is working hard to develop that potential.

We have already held four rounds of negotiations on a possible free trade agreement with China; we have recently signed a trade and economic framework with India; we are currently in the process of negotiating trade agreements with Malaysia, United Arab Emirates and ASEAN nations; and we are currently carrying out a feasibility study with Japan. The Doha Round of negotiations in the World Trade Organisation is also crucial, with the significant agreement to abolish all agricultural export subsidies by the end of 2013. Australia has been arguing for this for nearly half a century. So there is much that has been achieved and still more to be done. Once again, I congratulate the trade minister on his hard work and achievements to date. I know how committed and dedicated he is to securing the best possible climate for Australian exporters.

To support our exporting efforts, our government is doing more also at home. It is investing $12.7 billion to improve our transport links through AusLink—and I was delighted to see a further $2.3 billion investment in AusLink roads and rail infrastructure announced in the budget. Our aim is to eliminate export bottlenecks and to give our Australian exports every possible chance of advantage. Many aspects of the budget do exactly that, including lifting the diminishing rate for depreciation from 150 per cent to 200 per cent, which represents a saving to Australian businesses of $3.7 billion over the next four years, and reducing compliance costs for small business by $435 million over the next four years. The budget also provides over $150 million over the next five years for the Export Market Development Grants Scheme.

With huge boosts to apprenticeships and traineeships, the Howard government has helped to create a greater number of skilled workers; this will be boosted further through the establishment of our technical colleges. Our economic and industrial relations policies have created a climate of certainty, and exporters can plan for the future and expand with confidence. This is all in stark contrast to the record of Labor when last in office. I will not go into that in detail today, but it is worth noting that they still lack any effective policies that would demonstrate they had learned anything from their last time in office, and there is economic structure behind the few broad brush-strokes ideas that Labor have put forward so far. In fact, their main policy on industrial relations is to wind things back—and the last thing our country needs is to go backwards. Clearly, Labor is not a party fit enough to lead us through the economic challenges that the changing world presents. On the other hand, our government’s record speaks for itself: 1.7 million new jobs over the last 10 years, a 16 per cent rise in real wages, record investments, record exports, the lowest level of industrial disputation on record, record living standards—and the list goes on.

This bill is a further step in a very positive direction. I am pleased that it has extended the Export Market Development Grants Scheme for another five years. This scheme is not extravagant; it is a relatively modest investment, but it certainly produces results. It is just one small part of our trade policy but a very important one, particularly for new and emerging businesses and their future. I am pleased to support this bill and I commend it to the House.

Martin Ferguson (Batman, Australian Labor Party, Shadow Minister for Primary Industries, Resources, Forestry and Tourism) Share this | Link to this | Hansard source

I rise to address some remarks to the proposed changes in the Export Market Development Grants Legislation Amendment Bill 2006 and, as was the case with the previous speaker, the member for Forde, to reflect on Australia’s trade performance. Having listened to the member for Forde, I wonder whether or not she has actually examined the budget papers at all. A close examination of the budget papers proves beyond any doubt that Australia is putting all its export eggs in one basket through our absolute dependency on the resources sector. This week’s budget is riding on the back of the outcome of our success on the resources front. The truth is that we have effectively hung up the white flag with respect to manufacturers and service exports. In that context, the budget papers concede that our record current account deficit of $56.25 billion will blow out to a new record of $62.5 billion through the year ahead—that is, 6.25 per cent of our gross domestic product. We face some huge challenges with respect to our export performance. I can only hope that, as a result of the changes to the Export Market Development Grants Scheme that are currently being debated, we can assist in making some progress on that front.

On that note, as the shadow minister for trade and member for Griffith said, the opposition welcomes the extension of this program under the Export Market Development Grants Legislation Amendment Bill until 2010-11. However, from the opposition’s point of view and from the point of view of many Australians, the Howard government cannot take much, if any, credit for assisting exporters in this country. That is the truth of the matter. They are basically benefiting from the work of the private sector and principally the resources sector. The budget papers clearly point that out to the Australian community. The truth is that the government has no industry or export policy to improve this country’s terms of trade. That is the real challenge for the Australian community at the moment. This woeful record is underlined by the fact that for the past five years export growth has failed to come even near the government’s projections. That is why we as a parliament have to seriously start to debate the need for a new and a real export strategy.

That export strategy has to include some of the following elements. Firstly, we have to start rebuilding the skills of this nation. I am talking about the skills demanded by Australian industry to lift Australian exports, not just in the manufacturing and service sectors but also in the resources sector. We are at a point now where we are starting to lose investment because we do not have the skilled labour to facilitate that investment. I can think of a range of projects potentially coming on stream all around Australia—be they in infrastructure or resource development—over the next three to five years which are going to present a huge challenge to Australia’s capacity to bring forward this capital investment.

On the infrastructure front I acknowledge, for example, the announcements this week on the Hume Highway. That is a goat track. I drove it again recently from Melbourne to Canberra. The 120 kilometres from Albury to Gundagai is an absolute disgrace. It is a deathtrap. It is unsafe. But where are we going to get the labour to actually do that work? I was in South Australia yesterday talking with the South Australian government about the proposed expansion of Olympic Dam, a project worth $5.5 billion. They have not found the edge of that open-cut mine yet. Just think about the workers that are going to be required for that development. We do not have them at the moment. If you go to Western Australia and up to the North West Shelf, you can see the work under construction. There are a whole variety of other mining operations proposed. Go to Queensland and see the proposed duplication of the Gateway Bridge and the new tunnel through Brisbane. All around Australia there are projects ready to come on stream for a variety of reasons. The real challenge for us is this: where are we going to get the skilled labour?

It is abysmal that we now have a government saying that the solution is to bring in apprentices from overseas. The northern suburbs of Melbourne, where I am from, still have high youth unemployment. We are turning away kids because there are insufficient TAFE places in Australia. We have to invest in the training of Australians. I simply say to my local community that I want to give the kids a leg up by training Australians rather than bringing in apprentices from overseas. That is also central to our export strategy.

I will now talk about lifting research and development. We have to do more on the research and development front because that is the key to innovation and creating export opportunities. I do not think that the government is really thinking through such a strategy.

We want to talk about infrastructure—but also plan it. We have to make the right decisions. For example, in this budget there is additional money to upgrade the Brisbane to Melbourne rail freight corridor. Perhaps we should have done an assessment first. Was that corridor as big a priority as Darwin to Alice Springs for our immediate economic requirements? We need to actually sit down with a plan, make projects and prioritise them based on our economic needs rather than our political needs.

So, yes, spend infrastructure money but spend it on the right projects: the projects that really stack up in growing the size of Australia’s economic cake. That also requires cooperation at the state, territory and Commonwealth government levels. All levels of government and all political parties have to stop playing games with project selection and actually work together towards the development of a national plan that means we select the projects through cooperation and coordination to get the outcomes, in association with the private sector.

I also think we have lost our export culture in Australia. We had a decade in the eighties and nineties when export was the order of the day. Industry by industry—be it food manufacturing, the resource sector or advanced manufacturing—it was the requirement of government to pursue an export culture and change the culture of industry to be more efficient and productive. Where in the Treasurer’s speech on Tuesday evening was the word ‘productivity’? That is what drives our competitive position. That is what drives our capacity to create jobs and training opportunities in Australia to earn export dollars. To maintain our export capacity, we have to be efficient and productive. The word ‘productive’ does not even enter into the mind of the Treasurer. I say that that is a sad reflection on him because he is riding on the back of all the hard work in the eighties and nineties that I talked about: the foundations of the economic benefits that we are now receiving—because that is where the tax cuts on Tuesday evening came from. All the changes of the past are just about running out of steam. Unless we pull up our socks and think about the export strategy issues that I raised today, we are going to have problems.

China at the moment has a resources boom. When will the bubble burst? We as a nation have to think about how we ensure the bubble does not burst and how we ensure that we are not dependent on the resource sector and growth in China but have a broader view of life and a broader view of the global challenges that confront Australia, because the truth is that we are a small player in the world. That is why there is always greater pressure on us to do better on training and infrastructure issues and improve our productivity.

I raise these serious issues because I am worried about what this week’s budget papers revealed. They revealed the continuing blow-out of our current account deficit of $56.25 billion, potentially increasing to $62.5 billion. That is on the back of promises by the Howard government that we are actually going to do better. That is what they have told us for years about exports. I go back to the fact that, since 2001-02, the government—and the budget papers show it—have over-forecast growth in exports by an average of 5.5 per cent each year. That is their forecast of potential growth. Whether the Minister for Trade and the Treasurer like it or not, each of these predictions has become a complete joke. We have not achieved those predictions.

Let us take the example of 2001: the government forecast five per cent export growth when, in fact, exports fell by 0.8 per cent. In 2002—we can just pick the dates out of the air—the government forecast six per cent export growth, when exports in fact fell again by 0.8 per cent. I can tell you about 2003 and 2004, but let us go to 2005. The government forecast seven per cent export growth; actual growth was two per cent.

During all of this period we were told that something was going to occur, and it has not occurred. This is a real challenge to us, because, unless we try to work out where we are going on the export front, we are just going to run up debt and ride on the back of the resources boom. In the end, you have to start to scratch your head and worry about where we are going as a nation economically, because we have seen resource booms in the past. As a Queenslander, Mr Deputy Speaker Somlyay, you have seen resource booms in the past and you have seen them blow out. So a lot of hard work has to be done to make sure that we come out of this resource boom well positioned for the future, because no-one knows how long it will go or how this rollercoaster will play out.

I think this is particularly important, not only from Australia’s point of view—and I am shadow minister for resources—but also with regard to another part of my responsibilities. That is my policy area of tourism, which is exceptionally important to Australia in export opportunities and in training opportunities. We have to seriously work out how we can increase apprenticeship and training opportunities in the tourism industry so that we can deliver a quality service for the potential growth of a market such as China. And what about Japan? Obviously we are doing well out of New Zealand at the moment. But it is not just about numbers; it is about high yield and a quality product—real challenges to the tourism industry in a very tough global market.

I say that because tourism export revenues have stagnated since 2001. We now hope that the strategy put together by Tourism Australia to promote increased recognition of Australia internationally through the advertising campaign works out and that in 12 months we will be able to start making a hard-headed assessment of whether or not we have succeeded. I wish the advertising campaign well; we have to make progress on this front, because we have stagnated in our performance since 2001. So it comes back to the need for an export vision to go hand in hand with the Export Market Development Grants Scheme proposals.

As we all know, this scheme was originally established in the 1970s. It was established for one reason: to foster an export culture in Australia at a time when Australian firms were largely protected by tariffs. We decided to confront the barriers. But, if we are going to confront the barriers, we also have to give people a hand in developing an export culture and chasing international opportunities, and there is clearly a role for government in working in partnership with the private sector. If we go back to that time, the record will show that there were very few incentives to assist Australian industry to seek export markets; hence the scheme. The key role, therefore, is for a program such as this to assist in growing our economy with benefits across society generally. I hope that we see benefits not only in metropolitan areas but also in regional Australia. A lot of regional Australia is struggling when it comes to economic prosperity at the moment, other than the major resource towns and communities around Australia.

The scheme is also about assisting labour markets through higher wages, efficiency and productivity. The benefits, as we all appreciate, are felt through microeconomic reform, economies of scale, competition, innovation and learning. In combination with the liberalisation of the Australian economy through reduced tariffs, the scheme helps to assist companies to look beyond the domestic market to sell their products.

By the late 1980s the grants scheme had become the main funding support for export promotion. In the 1990s the program was increased and changed to cater for small to medium firms—which is exceptionally important, because they are the engine room of potential jobs growth in Australia. This recognised the fact that these firms had the most to gain from government support to enter new markets abroad. They needed a push and a prod but also some assistance.

Subsequent research has confirmed the benefits of the program, in particular to small firms. I refer to the fact that the Centre for International Economics found that the scheme’s best return came from firms—and this is interesting—of less than $15 million in annual income, so it really is important to these firms. The report found that the greater the financial constraints of the firms, the greater the proportional return, with the scheme inducing up to 60 per cent in additional exports. For each dollar in grants, these firms facing tighter financial conditions were likely to spend one dollar or more towards export promotion. So they are intimately involved in making the decisions to spend a few dollars to chase export opportunities. It is not one without the other—as it should be. The report concluded:

The scheme is effective in increasing the number of small to medium enterprises that develop into new exporters, increasing the number of small to medium enterprises that achieve sustainability in export markets, in generating additional exports and in further developing an export culture in Australia.

The opposition, therefore, supports the continuation of this program, which it believes has been successful for Australian business. However, I point out that one aim of the bill is to broaden the eligibility criteria under which the grants are provided, incorporating businesses that, until now, have been excluded from applying.

The opposition have moved a second reading amendment opposing two features. This includes the attempt to modify the scheme’s approach testing whether or not the products are made in Australia. In addition to the obvious issues that arise with this issue, there is the question of discretion over grants programs, which the opposition have concerns about in terms of accountability and proper scrutiny. We also do not support the bill’s attempt to remove the export performance test; we think people have to be judged on performance. We believe the attempt to remove the criteria on which grants are based represents a challenge to government. It has been argued that up until now the performance criteria have helped the government to ascertain the benefits of the program. How are we going to assess these benefits in the future? I would be interested in the government’s response to these questions and the minister’s response to the debate.

The opposition has also called on the government to adopt recommendation 1 of the Senate Foreign Affairs, Trade and Defence Legislation Committee, which is:

… the Australian government requests the Auditor-General to conduct a performance audit of the scheme two years after the proposed legislation …

That is about all of us making sure the scheme performs and, if there are any difficulties, actually doing something to improve it.

I also want to raise a particular issue concerning the tourism sector, because it is one of our top export sectors; it will obviously have benefits for the whole Australian community. For the first time ever, Tourism Research Australia has quantified indirect benefits of the tourism industry to the economy. In 2003-04, tourism directly contributed $31 billion to gross domestic product. At the same time, it indirectly contributed more than $26 billion to GDP. In the same year, 407 of the 3,205 grant recipients were from the tourism sector. Tourism is also an industry that can benefit substantially from this scheme, as more than 90 per cent of the operators are small businesses. This means we have to think about the needs of this particular industry.

While all industries rely on marketing promotion, with respect to the tourism industry we also have to accept that it is dependent on visitor awareness of their destination. Moreover, while other exporters generally market their own products, the marketing of specific regional destinations can be of benefit to more than one exporter, so you have to think outside the square. Under the scheme, grants can be provided to approved bodies, including peak industry associations. The opposition expresses some disappointment that the government did not consider allowing the extension of approved bodies to recognise regional associations, which are central to tourism in Australia.

I believe there is a strong argument that the tourism industry is distinct from other industries, and that it could gain from a change with respect to recognising regional bodies. If regional associations could receive grants for export promotion, then it is not one tourism operator that potentially benefits from marketing of the region but all operators within the region. We are trying to encourage these key tourism regions to work together, think regionally and cooperate in marketing their regions. Therefore, disbursing the funding to sole operators when marketing costs are so high may not have the broad impact on overseas markets needed to attract tourists. To put it another way, tourists are more likely to come for several attractions in a country or region, not just one attraction—and that is about promoting tourism regionally.

In conclusion, obviously the opposition supports the thrust of the changes. We have moved a second reading amendment raising some specific problems; also, from my shadow responsibilities point of view, I have raised an issue related to regional thinking concerning the tourism industry, which I have asked the government to take on board and think about in terms of where we might go with this act as potentially amended as a result of this debate. Obviously exports are too important to Australia to be treated lightly. We have a major challenge and I can only hope that the act as potentially amended actually assists us in improving our performance in a very challenging and competitive tough global environment. I commend the bill to the House including the second reading amendment moved by the member for Griffith.

Michael Johnson (Ryan, Liberal Party) Share this | Link to this | Hansard source

I am very pleased to speak in the parliament today on the Export Market Development Grants Legislation Amendment Bill 2006. It is a bill which I wholeheartedly support and which I am pleased to hear the federal Labor opposition is also going to support. That said, I am quite surprised that their support seems to come with much qualification and with very little enthusiasm. Indeed, having previously heard the shadow spokesman for foreign affairs and then the shadow minister for resources speak, I am terribly disappointed that they could not support this bill with greater enthusiasm and greater willingness. They have completely misrepresented the true position on exports and on debt. In terms of debt, what they are talking about is private sector debt. There is no government debt. They keep trying to mislead the Australian public—

Gavan O'Connor (Corio, Australian Labor Party, Shadow Minister for Agriculture and Fisheries) Share this | Link to this | Hansard source

What did the Treasurer say about that?

Alex Somlyay (Fairfax, Liberal Party) Share this | Link to this | Hansard source

Order! The member for Batman was heard in silence.

Michael Johnson (Ryan, Liberal Party) Share this | Link to this | Hansard source

There is no government debt owed by the Commonwealth government of this country, and to continue to go into the community and try to merge the two issues is most disingenuous. I will certainly be letting the constituents of my electorate know—as I am sure my friend and colleague here the member for Canning will let his constituents know—that the federal government owes not a single dollar to any external source at all. The debt that is in this country is private sector debt generated by the private sector, and taxpayers of Australia do not owe money as taxpayers of the country. I just want to make that very clear at the outset. The shadow foreign minister talks about a half a trillion dollar debt. I did not hear him talk about the national economy of this country becoming a $1 trillion economy. You cannot have it both ways. You are talking about a half a trillion dollar debt but you do not talk about the GDP becoming a $1 trillion GDP. Let us get some facts on the table at the very outset.

As the member for Ryan—the electorate I have the great privilege to represent in my fifth year in the national parliament—I warmly support this bill. It is a bill that is important. It is a bill that could be quite easily forgotten in the hurly-burly of a very exceptional budget delivered by the Treasurer on Tuesday evening. It could easily be forgotten in the accolades and the applause that have come from almost every sector of the Australian community about the budget. That budget was one of the most significant budgets that has been delivered in this parliament—a budget, I might add, that includes fundamental reform which brings immediate tax cuts to millions of Australians across the nation. And importantly and relevantly in the context of this bill, it is a budget that does its bit to promote business, which is what this particular export market development grants bill is all about.

This bill is important because it is about economic activity. It is about jobs. It is an important bill because it is about creating wealth for this country and making the wealth pie larger and the job pie even bigger, and all that of course goes significantly to making the national economy much more prosperous. This government can be very proud of the achievements and policies that have been in place in the last decade that now see record levels of people in jobs and record levels of economic activity.

This scheme is one of the Howard government’s most successful initiatives. Since I was elected in 2001, I have had the opportunity of speaking on the Export Market Development Grants Scheme on two separate occasions, in 2003 and 2004. As my Liberal colleague the member for Forde alluded to, the growth of our export sector has been very strong in recent years. We can highlight many success stories. We should pay tribute to the entrepreneurship, innovation, skill, creativity, professionalism, adaptability, flexibility and sheer determination of Australian business operators across the country.

We can even be more encouraged that growth and involvement in the small business sector are going to increase. Small and medium sized businesses will continue to have many opportunities to grow. Small businesses in this country number some 1.2 million. They represent over 30 per cent of Australia’s GDP. I for one will continue to very strongly promote small business activity in this country. Over 96 per cent of all businesses in this country are small businesses. It is very important that members of the government continue to remind the electorate and the broader community of this very fact. Some 35 per cent of small businesses operate in regional Australia. I touch on small businesses because many small and medium sized businesses are in a position where they may be able to export to the world. The Export Market Development Grants Scheme allows them to seize the moment.

This bill is the result of a review into the scheme conducted by Austrade. The review was commissioned by the Deputy Prime Minister and Minister for Trade in 2004 as required by the sunset clause of the EMDG Act 1997. The review took into account 394 public submissions as well as meetings with business, industry associations and other relevant stakeholders. It recommended the extension of the program to the 2010-11 financial year as well as making other recommendations to improve the efficiency and effectiveness of the program. All but one of the changes contained in this amendment bill were recommendations by the Austrade review. I will come to some of the key amendments in a moment.

At the outset of my presentation, I want to stress the success stories of the export market generally and some of the success stories in the Ryan electorate specifically. The year 2005 was a bumper year for Australian exports. Australia’s 30,000 exporters across the nation achieved a record sales total of some $176.7 billion, having engaged in business in over 200 countries. This represents a 15 per cent increase on 2004 sales figures. This record growth looks set to continue, as the Deputy Prime Minister continues to set a good example to the country with the policies of the government. As he announced recently, in March 2006 exports reached their highest ever levels, topping $16.1 billion.

The reasons for the growth are quite apparent. The achievement of this sort of growth and success does not come through sheer good luck; it comes because of the economic climate and the opportunities that the economic environment provides. Of course, all that stems from the policy framework that the government of the day sets in place. This government can hold its head high and be very proud of the economic environment that it has put in place, in which Australian businesses can flourish and go about what they do best—engage in business. I want to refer to the words of a former US President in the past century who said that the business of government is to get out of the way and to let businesses engage in business. That is a very good slogan, which we on this side of the chamber subscribe to very strongly. We are not about making business; businesses are about making business.

Let me continue to talk about the scheme for a moment. The Export Market Development Grants Scheme has become one of the key drivers of export growth in the last few years. The scheme was introduced by the Howard government in 1997 and, as I have said, will go into the 2010-11 financial year. It is the principal financial assistance program for aspiring and developing exporters. Changes in 2003 saw the grants program’s focus shift to small and medium sized businesses. In the 2004-05 financial year, the scheme paid out a total of 3,277 grants—some of those coming to the great electorate of Ryan, which I represent in the parliament. Of these 3,277 grants, 77 per cent went to small businesses with annual incomes of $5 million or less. Those who continue to question the logic of the government’s emphasis on trade and on the Export Market Development Grants Scheme should perhaps reconsider their doubts, because this is a meaningful scheme. It really makes a difference.

Exports currently account for 20 per cent of the total value of the goods and services produced by Australian business. I should put on the record again that one in five Australian jobs depends on exports, and that figure rises to one in four in regional areas. Over the decade of the Howard government it is estimated that some 1.7 million new jobs have been created through increases in Australian exports. Australia’s 30,000-plus exporting firms pay their employees on average some $17,400 more than non-exporting companies. That statistic speaks for the importance of the place of exporters in the Australian economy. All Australians know and appreciate the very significant and important place of exports in our country and how they can represent new opportunities for job creation and for furthering our national economic prosperity.

We live in a globalised world. We have global companies. Our global economy and our global companies are intertwined. Our big firms must trade with the world. They must deliver services to the world. In return, the companies of other nations want to do business in our part of the world. Trade is eminently more powerful and more meaningful than short-term aid in the context of helping developing countries, and this government can also hold its head high for its part in pushing a conclusion of the Doha Round. If anybody thinks we can remain an isolated nation and an isolated economy—that we can just bury our heads in the sand, not trade with the world, not have foreigners come to this country and engage in work—they are kidding themselves in a very big way.

In my electorate recently I had the great pleasure and opportunity of assisting a local Brisbane company by the name of AHI Jensen with its successful bid in tendering for a $25 million project in the very large Chinese city of Chongqing. This company was successful against global competitors in winning this contract for $25 million to provide landscaping. It will now work in the very prestigious Nanshan botanical gardens arboretum project promoting Australian craftsmanship and ingenuity in a very practical sense to the residents of Chongqing. I had the good fortune to play a small part in promoting that business opportunity for that company located in the western suburbs of Brisbane, which is where my federal electorate is.

As the Australian economy enters its 15th straight year of economic growth, Australia’s strong and vibrant export sector is only going to increase in prominence. I am very proud that the export growth in this country continues to touch the people of the Ryan electorate. Since my election to the parliament in 2001, 129 export market development grants have been paid to Ryan based businesses. These grants total assistance of almost $4½ million. In 2005 alone export market development grants were made to businesses in Ryan that exported products and services as diverse as legal expertise, tourism activities, music, biotechnology, book publishing and horse supplements. Some of the bigger grants so far in the 2005-06 financial year have included $70,000 to a company called Blue Ribbon Seed and Pulse Exporters Pty Ltd, who export grain seed. Nanochem Pty Ltd, based at the University of Queensland in the St Lucia suburb in the Ryan electorate, received $70,000 to aid in the export of biotechnology services and technical knowledge. A company by the name of Bikestyle Pty Ltd, which conducts cycling tours, benefited to the tune of $61,248. They are some examples of success stories in the Ryan electorate.

I commend them very warmly. I commend all the other recipients of this scheme and the financial assistance that goes with it. This is a leg-up. It is a way of rewarding initiative. It is way of rewarding and acknowledging entrepreneurship. Those business constituents in the Ryan electorate are fine examples to the rest of the business community in Ryan because they are very much leading the way in providing jobs for their fellow residents in the Ryan electorate.

I will finish my presentation in the parliament today with some comments about the key points of the amendment bill. This continues the Export Market Development Grants Scheme past 2005-06 to 2010-11, with a report to the Minister for Trade by 30 June 2010. It increases the overseas visits allowance from $200 to $300 per day. Another key amendment is that it allows Austrade to deem certain applicants eligible when they do not technically meet the act’s current principal status requirements. This provides Austrade with the flexibility to give grants to companies that either are involved in emerging export sectors, even if they do not meet the act’s technical requirements, or have business structures in place for pragmatic or market reasons which previously would have excluded them, but that would otherwise comply with the general nature of the scheme.

An important amendment is that the bill modifies the scheme’s Australian origin rules so that, firstly, goods coming into their final form in Australia must be made in Australia to be eligible and, secondly, for other goods to be eligible Austrade must be satisfied that Australia will derive a significant net benefit from the sale of those goods outside Australia. The definition of ‘made in Australia’ is set out in ministerial guidelines and takes into account factors such as whether the product is mined, grown, raised or substantially transformed in Australia. The ministerial guidelines will also set out the definition of ‘significant net benefit’ and take into account issues such as job creation, the location of R&D activities, and value added and/or economic benefits to Australia. This amendment represents an effective widening of the grants eligibility criteria and also adds flexibility.

The fifth key point that I want to draw to the attention of the Ryan electorate is that the amendment bill makes applicants’ expenses eligible when they are incurred to increase the return on the disposal of intellectual property and know-how to a related company. The previous ineligibility of those expenses had effectively excluded those companies exporting intellectual property from receiving assistance under the EMDG Scheme. This removes that exclusion, in recognition of the growing market of trade in intellectual property. Some of the companies in the Ryan electorate will derive much benefit from this amendment.

The sixth point is that the bill separates claimable expense categories for overseas representatives and marketing consultants. It caps expense claims for overseas representatives at $200,000 per claim and for marketing consultants at $50,000 per claim. A final point that I want to draw to the attention of the Ryan electorate business community is that the bill removes the export performance test from the EMDG Scheme. This will mean that applicants will no longer have to show evidence of sales made to receive a third export market development grant.

I want to draw this important bill to the attention of the Ryan constituency. As I touched on earlier, this bill is about assisting business. It is about assisting the business community to tap into the opportunities that the world provides to men and women in business across this country. This is a result of good policies in this country which allow Australian businesses to position themselves financially to seize the opportunities. I commend all those in business in the Ryan electorate for their initiative. They go out of their way to seize opportunities to partner with other Australian companies and to seek partnerships internationally. They do a fine job. I am delighted to help any of them that come to my office. Many of them have been guests of the Ryan small business networking breakfasts that I hold in the Ryan electorate, where they have an opportunity to mingle, to network and to derive benefit from the experiences of other local businesses that have been very successful and very profitable in tapping into the global marketplace.

I think it is very important that we in the parliament do not forget in this week of budget success that this bill should be drawn to the attention of our business constituents. I am delighted that the opposition will support this bill—though, as I touched on earlier, it seems with much regret and little enthusiasm. But they also realise the importance of this bill. I am very pleased that they will support the bill.

This bill extends the successful scheme brought in by the government. By supporting Australia’s burgeoning exporters in this way, the Howard government will ensure that the export sector continues to grow and drive Australia’s economic prosperity, not only in the years to come but also for decades to come. I am very proud to be part of this Howard government in its 10th year in office. I am very proud of this initiative. It is a fine example of policy at work, which the opposition needs to learn a lesson from. I warmly commend the Export Market Development Grants Legislation Amendment Bill 2006 to the parliament.

Gavan O'Connor (Corio, Australian Labor Party, Shadow Minister for Agriculture and Fisheries) Share this | Link to this | Hansard source

I do not know where the honourable member for Ryan got the impression that we on this side of the House were not supporters of the Export Market Development Grants Scheme. It was a Labor scheme. I am absolutely delighted that the member for Ryan and those members opposite are such strong supporters of a Labor scheme. This is one scheme that has really stood the test of time. That proves it is a good scheme and good policy. Listening to the economic analysis of the honourable member for Ryan today and the criticisms that he levelled against the opposition in this area of economic policy reminded me of former Labor Prime Minister Paul Keating’s statement. When the member for Ryan lays into the opposition with criticisms of our export performance—which was far superior to yours—it is like getting mauled by a dead sheep. I am quite happy to match Labor’s performance in the export field and our predictions about what we want to do with those of government members any day.

Michael Johnson (Ryan, Liberal Party) Share this | Link to this | Hansard source

Mr Johnson interjecting

Gavan O'Connor (Corio, Australian Labor Party, Shadow Minister for Agriculture and Fisheries) Share this | Link to this | Hansard source

The member for Ryan can go on mauling me, but he won’t injure me. As I said, it is like getting mauled by a dead sheep. The problem that the honourable member for Ryan has is that Australia is awash with Liberal debt—a half a billion dollars of Liberal debt. I am willing to concede on this occasion to the honourable member for Ryan that I do not know anything about economic analysis, and nobody in the opposition knows anything about economic analysis, so I will defer to the honourable member for Ryan’s heroes. His heroes are in the parliament as we speak today. I refer to the Prime Minister and the Treasurer, who are feeding off the great economy that Labor left them.

How could a Treasurer of Australia, having been left four years of four per cent growth by Labor, and facing the best terms of trade Australia has ever had, engineer an economy to grow at only 2.75 per cent last year, and only 3.5 per cent this year? He is a whacko Treasurer for doing that, isn’t he?

Michael Johnson (Ryan, Liberal Party) Share this | Link to this | Hansard source

He can’t control the rain!

Gavan O'Connor (Corio, Australian Labor Party, Shadow Minister for Agriculture and Fisheries) Share this | Link to this | Hansard source

—Oh! Now we have a very incisive piece of economic analysis—now we are blaming the weather for Australia’s poor export performance. It has to be laid fairly and squarely at the feet of your ministers and your Treasurer. I want to quote the heroes of the member for Ryan, because we on this side of the House know nothing about exports or export performance! This is what Treasurer Costello had to say in an interview on 20 September 1995:

Australia has high foreign debt and because Australia has a current account problem, that puts premium on Australian borrowings, that flows through and every Australian pays for the consequences.

Hear, hear! Everybody in the parliament knows what a ‘genius’ this particular Treasurer is. We support that. But he is not the only ‘genius’ on the Liberal side. I will tell you what the current Prime Minister had to say at the launch of a debt truck. It was a measly little old truck back in 1995. Now we have the B-double or triple-double or whatever the terminology is—we have now got the Liberal debt road train. This is what the current Prime Minister said:

If it weren’t for the level of foreign debt, interest rates in this country would be much lower, and every Australian today who owes money on his or her home is paying a higher interest rate than would otherwise be the case because of the size of our foreign debt.

I am quite happy to take the Prime Minister at his word. He has a good record on the never, ever GST! He has a good record on ‘children overboard’! He has a good record on the weapons of mass destruction!

Don Randall (Canning, Liberal Party) Share this | Link to this | Hansard source

Mr Deputy Speaker, I would like to ask the member for Corio if he would take a question from me.

Alex Somlyay (Fairfax, Liberal Party) Share this | Link to this | Hansard source

Will the member for Corio take a question?

Gavan O'Connor (Corio, Australian Labor Party, Shadow Minister for Agriculture and Fisheries) Share this | Link to this | Hansard source

I am quite happy to take a question from the economic imbeciles on the opposite side.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

Order! The member for Canning will ask his question.

Don Randall (Canning, Liberal Party) Share this | Link to this | Hansard source

I consider the reflection on me as a badge of honour coming from that member.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

I ask the member for Corio to withdraw that comment.

Gavan O'Connor (Corio, Australian Labor Party, Shadow Minister for Agriculture and Fisheries) Share this | Link to this | Hansard source

I withdraw that comment.

Don Randall (Canning, Liberal Party) Share this | Link to this | Hansard source

Mr Deputy Speaker, as the member for Corio has referred to the level of interest rates, I would ask him: what was the level of interest rates when the party he represents left government in 1996?

Gavan O'Connor (Corio, Australian Labor Party, Shadow Minister for Agriculture and Fisheries) Share this | Link to this | Hansard source

I would most certainly like to answer the honourable member’s question, but I preface my answer by giving you the level of Liberal interest rates: they rose to 18 per cent under the Prime Minister. I think the Prime Minister actually cited in the parliament yesterday business interest rates of some 18 per cent. I would note in answering the member’s question that, when the Prime Minister was Treasurer of this country, he engineered interest rates of around 11 per cent. As we know, the inflation rate underpins interest rates—that was 11 per cent as well. At that time the Australian economy was going backwards, was in negative growth, so I am quite happy to say that Liberal interest rates, engineered by the Prime Minister, were 18 per cent. If he is an economic genius and if Labor engineered interest rates of around 18 per cent then we must be geniuses too. I can only draw that conclusion. But let us get back to the Prime Minister.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

Order! I ask the member for Corio to get back to the bill.

Michael Johnson (Ryan, Liberal Party) Share this | Link to this | Hansard source

Mr Johnson interjecting

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

And I ask members on my right to remain silent.

Gavan O'Connor (Corio, Australian Labor Party, Shadow Minister for Agriculture and Fisheries) Share this | Link to this | Hansard source

The honourable member for Ryan launched into this debate with criticisms of the opposition on foreign debt. As we know, exporting performance is very important to controlling those levels of foreign debt. I am merely making the point that the country is awash with Liberal debt. That is the simple point I am making. The Prime Minister said on 20 September 1995:

I can promise you that we will follow policies which will, over a period of time—

like 10 years—

bring down the foreign debt.

Well! Unfortunately, the foreign debt is 2½ times what it was when Labor exited the treasury bench. So I am wondering whether this is another non-core promise that the Prime Minister made—a bit like the never, ever GST, the ‘children overboard’, the weapons of mass destruction and all of those fine promises that have been broken.

We on this side of the House always like deferring to the Treasurer on economic analysis! Honourable members who are new in this place probably do not remember the original debt truck, but they will remember the B-double truck, the road train, that is the Liberal debt truck. I remember the original truck quite well. I was impressed by the now Treasurer’s economic analysis at the time, being the ‘genius’ that he was. He said that, if you combine the net foreign debt with the government debt and you divide it per head of population in Australia, you come up with a figure of the debt for every man, woman and child in Australia. I have done that calculation today: it is $25,000. Every man, woman and child now has a Liberal debt of $25,000. Anybody who stands up in this place defending that sort of record really ought to go back and study their Costello economics. Study your Costello economics, have a look at your Prime Minister’s performance when he was Treasurer and then ask yourselves where you have been, because that is the question we are asking you: where has this government been on the issue of Australia’s export performance?

The EMDG Scheme was a Labor initiative designed to assist companies to earn export dollars for Australia and to change the culture of Australian industry to get them oriented to export. We were extremely successful. Every particular study that has been done here indicates that a dollar put into the EMDG yields anything from $10 to $15 in net benefit to the Australian economy. That is money well spent. I am pleased that members of the coalition support a good Labor initiative.

Having said that, I think it is time that we really did take stock of our export performance. My shadow ministerial portfolio is in agriculture and fisheries. They are major contributors to Australia’s great exporting effort. I come from an electorate which is a major regional centre and also a major exporter. So I have a very intimate interest in all matters of economic infrastructure and policy relating to export performance.

I need to say this honestly to the House: I do not mean to offer any criticism to any member of the government but, quite frankly, members opposite—it hurts me to say this!—you have got a dud as trade minister. I say this in all genuineness, because leadership is very important in this particular area. There would not be a member of the House that would say that the current incumbent in this portfolio holds a candle to Peter Cook or Bob McMullan, two of the great trade ministers of Australia. Anybody who can go into a set of negotiations on trade with the Americans and get so comprehensively creamed and then drop a major rural industry, the sugar industry, off the table in the negotiations really does not deserve to be in that particular portfolio.

All of us here understand the importance of Australia’s export performance to the creation of national income and to the task of keeping interest rates down. We all know that. But we know that it is more significant than that, because the exporting task spawns a whole range of side benefits, such as people-to-people cultural contacts with other nations that feed into the task of securing this nation.

We know that exporters are great wealth generators, in the sense that they create jobs and they spawn an innovative and go-getting culture within their enterprises. These are, as study after study has shown, the major drivers of innovation in our economy. So this scheme is very important to Australia’s future export success, and I am pleased that this government—and I will say it quite honestly to members opposite—has continually supported a great Labor initiative. For that we thank you. We are supporting this particular scheme in the main. We support some 12 of the 14 provisions unequivocally. We believe the scheme ought to be extended. We believe access ought to be there for the small to medium sized exporters particularly, and that is where this scheme is aimed. To be eligible for the Export Market Development Grants Scheme, an applicant must have an income of not more than $30 million in the grant year, must have incurred at least $15,000 of eligible export expenses under the scheme, and a principal status for the export business must be obtained. The criteria are very important. The moneys that are allocated here are very important, and of course we will be supporting the legislation.

But I hold grave fears about the direction of policy, and that was articulated by the member for Batman previously in this debate. He has joined us again in the chamber. He was most articulate in the way that he laid out the important factors that are going to contribute to the growth in our economic performance and to economic growth and wealth creation in this country. But I must say I am a little concerned at the government’s predictive capacities in this export area. I note that in 2001 the government forecast five per cent export growth, when in fact exports fell by 0.8 per cent. The Treasurer who gave that dud prediction should resign. In 2002 the government forecast six per cent export growth. So this great, economic-performing government had ministers in there saying, ‘Australia’s export performance is going to go up.’ But then it stayed down and fell by 0.8 per cent. In 2003 the government again forecast export growth at six per cent, while it grew at one per cent. In 2004 the government forecast eight per cent and it only grew at 2.5 per cent. In 2005 the government forecast seven per cent export growth, which was followed by an expected two per cent actual growth. You would have to be a dud to put your name to that, wouldn’t you?

That is the problem. We have got a dud in the portfolio and we have got a government that now cannot control the net foreign debt, and Australia is awash with Liberal debt. That is not a criterion that I have ever applied to this economic analysis. That is your Treasurer. I am using his analysis. And for every man, woman and child in this country there is now $25,000 of Liberal debt. What an extraordinary burden to bear! I have got to say to the honourable member opposite, the member for Canning, do not do what the honourable member for Ryan did and get up here and try and level the criticism on debt at the opposition when in fact you have got a hopeless trade performance and the country is awash with your debt. I hope you do not do that, because I did make the point that when members opposite get up on this issue and criticise us—I referred to what the former Labor Prime Minister said—it is like getting mauled by a dead sheep.

So do not even enter the zone, because this country is now awash with Liberal debt. We are up to our eyeballs—and higher—with Liberal debt, and it is going higher. The Liberal debt in this country is just going higher and higher. You have no strategy, and your budget tells us you have no strategy, to address the crippling Liberal debt that is now on every Australian household. The burden is this. According to your Treasurer and your Prime Minister, your foreign debt has meant that every Australian household is now shouldering an increased interest rate burden, courtesy of the Liberal and National parties; every man, woman and child in Australia is now carrying $25,000 of Liberal debt.

Kay Elson (Forde, Liberal Party) Share this | Link to this | Hansard source

Mrs Elson interjecting

Gavan O'Connor (Corio, Australian Labor Party, Shadow Minister for Agriculture and Fisheries) Share this | Link to this | Hansard source

That is what your Treasurer said.

Debate (on motion by Mr Neville) adjourned.