House debates

Monday, 9 December 2013


Tax Laws Amendment (Research and Development) Bill 2013; Second Reading

6:53 pm

Photo of Andrew LeighAndrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | | Hansard source

I rise to speak on the Tax Laws Amendment (Research and Development) Bill 2013, to outline to the House the opposition's view on this important piece of legislation. When it was suggested by the Labor Party that we might be able to identify a targeted saving from restricting the research and development tax credit by excluding companies with a turnover of more than $20 billion, those opposite cried foul. This, they said, was another outrageous attack on business. They swore black and blue, with the member for Indi leading the charge as she held the industry portfolio, that this was bad policy and would not be supported by the coalition. That was back in February. Now here we are in December with the coalition putting forward this very same savings measure. But there is a key difference here, between now and February—

Photo of Michael McCormackMichael McCormack (Riverina, National Party, Parliamentary Secretary to the Minister for Finance) Share this | | Hansard source

The budget position!

Photo of Andrew LeighAndrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | | Hansard source

I will take that interjection from the member at the table who is referring to the budget position. What the member misses, of course, is that, thanks to Peter Costello, the old spiders-in-the-closet trick has been foreclosed. The pre-election fiscal outlook was designed to ensure that no party could do as the coalition has attempted to do and suggest that the state of the books upon taking office was different from what was reflected in the pre-election fiscal outlook. So let us not have the faux outrage. If there are any spiders in the closet, they are there because the Treasurer has taken up a redback breeding program. Those redbacks are things like the $17 billion of tax breaks to mining billionaires and large polluters, and the $9 billion to the Reserve Bank, which is being given to the Reserve Bank, let's face it, in the hope of garnering greater dividends subsequently. But the pre-election fiscal outlook has foreclosed that, and when MYEFO is brought down—which may or may not be before Christmas; we are yet to find out—it will be very clearly a statement of how the budget has changed under the coalition. MYEFO is not a statement about the economy that the coalition inherited; it is a statement about how the coalition has changed the fiscal outlook since then.

The bill before the House tonight contains within it a saving, restricting the R&D tax credit by excluding companies with a turnover of over $20 billion. The precise details of those companies is of course not a matter of public record due to taxpayer confidentiality, but if one looks at IBISWorld data it seems to suggest that there are around a dozen companies, principally in the sectors of finance and mining.

But when Labor introduced this savings measure, it was designed to fund the Australian Jobs Act, which had come out of the job summit and which ensured that manufacturing had a sustainable future in this country, because if there is one party which has consistently stood up for the interests of manufacturing it is the Labor Party. I give credit to so many of my colleagues on this: Senator Kim Carr; the member for Wakefield, Nick Champion; and the member for Throsby, Stephen Jones—assiduous campaigners, along with the then minister for industry, Greg Combet, in advocating for a strong manufacturing sector in this country.

What the coalition has done is to take the savings measure but jettison the Australian Jobs Act, and that is why this side of the House will not be supporting the change to the research and development tax credit because that change does not go to fund targeted assistance to the manufacturing sector—things like manufacturing precincts, which I am sure many of my colleagues in this debate will speak about. It goes instead to provide a tax cut to mining billionaires.

This is not consistent with basic Australian values—values of egalitarianism, mateship and a fair go—and the demand, I think, that if we in the House are to take scarce taxpayer dollars and use them on tax expenditures then they should be targeted towards those who need them most. With manufacturing enterprises in some cases struggling against the headwinds of the high Australian dollar, we believe that that is an appropriate use of public finances. We do not, however, believe that it is an appropriate use of taxpayers dollars to scrap the mining tax, a tax projected by the Treasurer's own forward estimates—and it will be interesting to see when his mid-year outlook is brought out whether this has changed—to raise somewhere in the order of $4 billion. That is $4 billion dollars that will be given back to mining magnates. This is the sort of program that is being funded by taking away the research and development tax credit for the largest companies in Australia.

Labor would have supported this savings measure—it is a difficult savings measure and one that is not an easy decision to come to in government—had it been that the resources would have gone towards the cause of supporting Australian jobs. But when the coalition are instead using that money to back in a paid parental leave scheme that gives $15,000 to a minimum-wage worker and $75,000 to a billionaire who has a baby we do not think that is fair. We do not think that that is a fair use of taxpayers' dollars. We do not believe that a baby born to a billionaire is somehow worth five times as much as a baby born to somebody who is on the minimum wage.

We believe that the Australian social safety net—targeted assistance that has provided the most to those who need the most—is an appropriate way of ensuring taxpayers' dollars are spent. Ours is the most tightly targeted social safety net in the OECD, as Peter Whiteford has outlined. The measures being brought forward by the coalition are going to change that significantly.

It is a rare coalition government that does not just cut taxes for the rich and cut benefits for the poor, but indeed raises benefits for the most affluent Australians. We do not believe that is a good use of taxpayer funds and that is why we will not be supporting this savings measure.

Had Sophie Mirabella been in this chamber it would have been my pleasure to go through piece by piece her faux outrage back in February when the then Gillard government announced this savings measure. This is a complete backflip by the coalition, a backflip that walks back from their strong statements before the election that they did not want to find a targeted savings measure on the research and development tax credit. Now we see that they want to bank the saving but spend it on a tax cut for mining billionaires. Labor does not believe that is fair and that is why we will not be supporting the measure.

7:02 pm

Photo of Paul FletcherPaul Fletcher (Bradfield, Liberal Party, Parliamentary Secretary to the Minister for Communications) Share this | | Hansard source

I am very pleased to speak on the Tax Laws Amendment (Research and Development) Bill 2013, and to follow the member for Fraser. I was expecting a thoughtful policy discussion from the member for Fraser but unfortunately we got some warmed over class warfare rhetoric, which is particularly disappointing.

The whole question of tax incentives for research and development spending, which is dealt with in this bill, is a very important area. The question of innovation policy is of critical importance to our national competitiveness and to our prosperity. Tax measures are a vital policy lever in stimulating the kind of behaviour from the private sector that is so important.

The stated purpose of this bill is to better target the expenditures that are made in underpinning research and development spending by the private sector. In particular, this bill amends the Income Tax Assessment Act so as to direct the research and development tax incentives to companies with aggregated assessable income of less than $20 billion. It does this by denying the incentive to companies that have an assessable income of $20 billion or more in an income year.

In the brief time available to me this evening I want to make three points. Firstly, that innovation is key to our national economic performance. Secondly, that this bill seeks to align innovation tax concessions where they will have the most impact. Thirdly, that there is more to do on innovation.

Let me turn to the first proposition: that innovation is key to our national economic performance. If we are to continue to improve our living standards, create new business opportunities and remain globally competitive then we must have an innovative economy. This is essential to creating jobs, improving productivity and improving competitiveness.

If we look around the world there are many examples of successful innovation. We can look at the powerhouse IT companies of silicon valley. We can look at the many impressive developments in Israel, described in a recent book as the start-up nation. We can look at the 10,000 PhD qualified engineers graduating in China each year. We can look at the great pharmaceutical companies of Europe and the United States. We can look at the consumer electronics companies of Japan and South Korea. There are many shining examples of successful innovation around the world, and it is no surprise that innovation policy will always be a focus for government. Nor is this a new thing. It is some 50 years since then UK Prime Minister Harold Wilson talked about the white heat of technological innovation. So this has always been an area of acute interest to governments and policy makers. We all know that there are policy settings that can encourage innovation and there are policy settings that, if we get them wrong, can hold back the amount of activity occurring in Australia at each stage of the innovation process.

As we consider the particular tax measure before us this evening it is wise to recognise that the evidence shows that the returns on innovation are greater than ever. Look, for example, at the take-up rate of new products, which are much faster than they used to be. According to a 2012 article in the MIT Technology Review, it took 30 years before electricity reached a 10 per cent penetration of the consumer market in the United States. The mobile phone took 12 years and the tablet computer took less than three years. At the same time we have a world that is more affluent than it used to be, so the global rewards for developing a new vaccine, a new genetically modified crop or a new IT application are greater than they ever have been. The returns on innovation are high. Conversely, the penalty for not being an innovative nation is more serious than ever.

The other important factor in this policy mix is the very close linkage between innovation and productivity. It is innovation that drives productivity improvement, and it is productivity improvement that drives prosperity. The US economist Robert Solow won the Nobel Prize in Economics for his finding that technology was more important than either capital or labour in driving productivity growth. He observed that in the US per capita income quadrupled from 1869 to 1953 and he studied the factors that drove this quadrupling of income. Only 15 per cent of that growth was due to more inputs—that is to say, more labour or more capital being put into the national economic machine. The rest of that very impressive growth in prosperity came from technological innovation.

The prize for having an economy that delivers innovation is very high and, therefore, the imperative for getting policy in this area right is compelling. We can all agree that makes sense. What is less easy to agree on is what exactly ought those policies be, and where should the tax measures that this bill is dealing with fit in to that overall matrix. It is tempting to think of Australian researchers doing world-leading pure research and to think of Australian institutions and companies taking that research and turning it into commercially useful technology that is protected by patent, by copyright or other intellectual property rights and to think of Australian companies taking that technology and selling around the world products and services that embody that technology. And we have some examples of that end-to-end value chain, and I will talk in a moment about one of those companies, Cochlear, which is a world leader in hearing aids.

But the reality is much more complex than this simple vision. It is neither feasible nor desirable to suggest that basic research that is done in Australia may only be commercialised by Australian companies. Innovation, as we know, occurs in many different settings—in universities, in research institutes, in for-profit companies and in other places as well. Indeed, Australia's Chief Scientist recently highlighted a very interesting phenomenon: on the one hand, Australia compares well to other countries based on the number of researchers per head of population in higher education. But we have a noticeably lower number employed in business enterprises.

Where does tax expenditure on innovation fit into the overall picture of government policy in this area. If you take the numbers that were announced in the lead-up to the 2012-13 years, the Commonwealth government at that time announced that total spending was going to be $8.9 billion. Of this, $1.8 billion was the industry research and development tax measures, so the measures that we are debating this evening form an important part of the overall mix of innovation policy. Some of the other major line items included $950 million for the National Health and Medical Research Council, $737 million for the CSIRO and a range of other programs. But the key point is that the research and development tax incentives make up a very big part of the overall policy picture when it comes to the policy settings in Australia to encourage innovation and the kinds of activities that we hope will lead to these economy-wide benefits that I have spoken about.

I mentioned earlier the hearing implant company Cochlear, which is a shining example of this process at work. Most recently, Cochlear has had sales of around $800 million, with some 85 per cent of that from outside Australia. They sell cochlear implants that use unique Australian developed technology. Very importantly, thanks to the company's success, it now reinvests substantial private money—over $100 million a year—into ongoing research and development. This is an example of the virtuous circle that can arise if we manage to catalyse the kind of research that leads to commercialisation that leads to commercial success and now is producing substantial money that is being ploughed back into R&D in particular companies.

As many have observed, we have some success stories in Australia—Cochlear, ResMed, CSL and others. But we would like to see many more. When we look around the world, we see examples of countries that have achieved more success in generating innovation and in generating a high-tech sector than we have achieved in Australia.

Let me turn next to the specific measures in the bill before us this evening. The measures in the bill align innovation tax concessions where they will have the most impact by limiting the R&D tax incentive to companies with an aggregated income of less than $20 billion. The rationale for this is to target the access to that incentive to small- and medium-sized entities, which, it is expected, are likely to be more responsive to government incentives in their research and development spending than larger organisations might be.

In the time remaining, I want to make a third and final point, and that is that there is more to do when it comes to innovation policy. This bill is one particular measure designed to achieve greater outcomes for the taxpayer's dollar. But there is more that can be done. Commentators in the area of innovation policy point to a range of policy levers. One of the challenges in this area is that those policy levers extend across many different portfolios. For example, immigration is an important policy lever and the success of the US high-tech sector—the success of Silicon Valley and the many other areas around the US where innovation has prospered—is linked in significant measure to talented people coming into that country from many other countries to complete their education and often to do higher education and then to stay and to contribute to the high-tech sectors in that country. Immigration policy in Australia also acknowledges the desirability of bringing talented people into the country. So immigration is an important lever when it comes to innovation policy.

One of the other questions that arises and has engendered a lot of debate in Australia is the question of how best to tap into the very large pool of superannuation capital, now exceeding $1.6 trillion, to increase investment in start-up technology companies. Let me hasten to add that I certainly do not advocate any simplistic notion of some kind of quota. But the generalised question of whether there is scope to draw on that pool of capital, and to offer attractive investment opportunities to those investment managers to give them opportunities to access innovative companies, is a very good question and a question we do need, in my view, to think about seriously.

Yet another factor that is consistently raised by start-up companies and companies in the early stages of their development in Australia is the question of stock options and the fact that it is more difficult under the tax system in Australia to offer stock options as an incentive to employees than it is in the US. In the US, as is well known, it is very common to offer people stock options as an incentive to join a start-up company. The rationale for doing so is that it is difficult to offer significant remuneration in cash but people who join a company at an early stage and contribute to its development have the capacity, if things go well, to share in the wealth that is created if that company meets the highest expectations. Of course there is significant risk there, but the structure of this kind of remuneration arrangement is designed to give people the chance to share in the upside, should it come off, and it has clearly been the case that that has been a significant factor in the growth and success of the high-tech sector in the United States. It is certainly not for me to comment on tax policy. I simply make the point that this is an important policy lever that bears on innovation policy, just as the research and development tax incentives that are the subject of today's bill bear on innovation policy.

I want to make one final point. On this side of the House we recognise the absolutely critical and central role of the private sector in innovation and the commercialisation of innovation. Unlike the previous government we do not think you can regulate your way to greatness in innovation policy or in any other area.

Let me conclude by noting that the measures in this bill are important as part of the overall range of measures designed to stimulate innovation and to stimulate research and development. To that extent they deserve support, but they form part of a broader, complex and important policy picture.

7:17 pm

Photo of Pat ConroyPat Conroy (Charlton, Australian Labor Party) Share this | | Hansard source

I move the second reading amendment circulated in the name of the member for Fraser:

That all the 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 is of the opinion that:

(1) The Government has broken an election promise and back flipped on its previous pledge to oppose this measure; and

(2) The Government's decision to not continue with the Australian Jobs Act, which was intended to be funded by revenue from this tax measure, is deplorable. This demonstrates the Government's lack of commitment to supporting Australian employment."

Photo of Craig KellyCraig Kelly (Hughes, Liberal Party) Share this | | Hansard source

Is the amendment seconded?

Photo of Kate EllisKate Ellis (Adelaide, Australian Labor Party, Shadow Minister for Education) Share this | | Hansard source

I second the amendment.

Photo of Pat ConroyPat Conroy (Charlton, Australian Labor Party) Share this | | Hansard source

I enjoyed the member for Bradfield's very well considered contribution. Unfortunately, he missed one vital point—which is that you can talk about better targeting of innovation funding but then you actually have to get away from the cut to what you are going to use the money for. He was very silent on that, because that is the giant hole in the argument from the coalition. This is an important savings measure that will better target innovation support, but only if the money is returned to supporting industry and innovation policies, which is exactly what the last Labor government intended when they announced this measure.

The Tax Laws Amendment (Research And Development) Bill 2013 in effect demonstrates the hypocrisy of the coalition. Denying the R&D tax incentive to the largest firms in this country represents another broken promise of the new coalition government.

These changes were introduced to better target support for innovation as part of a way for paying for the $1 billion for Australian jobs announced by the previous, Labor government around February this year. Those opposite are opposed to the Aussie jobs plan, yet they pay lip service to support for existing and new industries. They criticise this savings measure, yet they are taking it and not committing to the new innovation agenda.

As I said, this bill represents a broken promise. The coalition went to the last election stating that they would reverse the government's decision to make this change to the R&D tax incentive. A couple of quotes illustrate this case. The then coalition industry spokesperson, Sophie Mirabella, said the following:

Julia Gillard said this was about jobs and innovation but this policy announcement is destroying confidence in a tax incentive that makes industry responsible for its own innovation.

She went on to say:

We know that large multinational companies won't be hit by the R&D tax cut. It is Aussie companies that will be struck by the cut, perversely the opposite of Labor's claim to be creating Aussie jobs.

The now Treasurer, the member for North Sydney, said:

More recently the government—

the previous government—

announced with no warning it was funding its Orwellian Plan for Australian Jobs package by cutting the R&D tax break for large companies, reaping $1 billion over four years. The government has become immensely unpredictable on tax policy, despite the charade of consultation.

So on the one hand we had empty, hollow criticism from those opposite before the election, but now they are happy to take the saving. What is worse is that they will not even put the money back into supporting innovation in this country. Yet again, it is the coalition saying one thing before the election and doing the exact opposite after the election. The Australian people are quickly realising that this is not the government they voted for.

As I said, this savings measure is about better targeting innovation assistance. International experience and studies have shown that companies that have over $20 billion in domestic turnover, large companies, are able to self-fund their innovation activities. But that is not a reason to pull the funding back from them and just return it to consolidated revenue; you need to use the funding to better target innovation policy.

The member for Bradfield earlier identified innovation policies and the growth of clusters and other things in other countries—whether in Israel, Silicon Valley or Europe. That is what this funding was going to do, through the plan for Australian jobs. This Aussie jobs plan was the result of extensive consultation, primarily through the Prime Minister's Taskforce on Manufacturing. This was a tripartite body, not stacked with stooges of any political party. It was very representative. It had good industry leaders, such as Ian Thomas from Boeing, Phil Butler from Textor Technologies, Rebecca Dee-Bradbury from Kraft Foods, Mike Devereaux from General Motors Holden and Innes Willox from AiG. It had some very notable, world respected innovation leaders in people like Professor Goran Roos and Professor Roy Green, and it had some very good union leadership in Dave Oliver, Paul Bastian and Paul Howes.

This tripartite task force came up with an agenda to revitalise manufacturing in Australia, an agenda to boost innovation and an agenda to look at what is happening around the world and take it and implement it in Australia to help business innovate and grow. We had to fund it, and we funded it through this responsible savings measure. The $1 billion plan that this savings measure was to fund covered three important points. First off was backing Australian firms to win more work here and abroad through improving Australian industry participation plans, making sure that large projects in this country—projects worth over $500 million—gave Aussie companies a fair shot, gave them a chance at the start of the process to tender for the massive amount of work. It gave them a fair go by ensuring that they did not issue the tender specifications in overseas standards, which would have excluded Australian companies from the get-go. This also included strengthening antidumping reforms to ensure that goods were not dumped in this country at below market prices. So, that was the first aspect of the plan that this savings measure was to fund.

The second important measure was supporting Australian industry to increase exports and win business abroad, and this was through the $500 million precincts initiative. Precincts, or clusters, have been proven overseas to be a great way of growing industry. There are strong economies of agglomeration and clustering, and we were trying to implement this and look at overseas examples as a way forward. The precincts initiative would have funded up to 12 precincts around the country. The first two announced were manufacturing in south-east Melbourne and food headquartered in the western suburbs of Melbourne. They were two great examples of bringing together industry both large and small, academia, the great research organisations that are in this country and workers to ensure that learning by doing, economies of agglomeration, and cumulative and circular causation were all happening so that these industries would get off the ground.

It was a great initiative. We had well over 50 applications for precinct funding. Unfortunately this has all fallen into a void now, with a new government. I am certainly calling on the new minister, the member for Groom, to honour this policy, because it is not just Labor's policy. It is a policy industry called for. It is a policy industry championed—whether it was big industry, through Boeing; SMEs, through Textor Technologies; or academia, through Professor Goren Roos. They are all saying that this is the direction Australia needs to head in. I am glad the member for Bradfield identified overseas examples of exactly where this clustering is occurring. So, that was the second arm of the plan for Australian jobs that this tax measure was going to fund.

The third arm was helping Australian small and medium businesses to grow, principally through venture capital. The previous speaker talked about needing to boost start-ups, and one way of boosting start-ups is through improving venture capital arrangements in this country. So, the Aussie jobs plan had a series of initiatives to support venture capital in this country—most importantly, another round of the innovation investment fund, worth $350 million, which would leverage another $350 million in private sector funding for a $700 million venture capital fund that would help grow Aussie SMEs and make them the large Australian companies of the future. This is so important if we are to grow Australian employment.

Unfortunately, this is all in jeopardy now with the new government. They are happy to take the billion dollars in funding but not fund the very sensible, rational initiatives that accompanied it. Unfortunately this is symptomatic of a government that does not respect industry policy, does not respect supporting innovation and really pays only lip service to supporting the growth of new industries and support for established industries. We have seen this in the attempted abolition of $15 billion of innovation and industry policies under the Clean Energy Future package. This included the $10 billion Clean Energy Finance Corporation, the $3 billion ARENA institution and the $1.2 billion clean technology programs. All these programs were aimed at funding and supporting innovation, complementing the R&D tax incentive. In fact, the CEFC, as we heard from the chairwoman, Jillian Broadbent, recently, would actually make money for the government while supporting late-stage commercialisation of new technologies—something so vital if we are to compete in the 21st century. The countries that develop and commercialise the new technologies to decarbonise the world are the countries that will prosper in the 21st century. This is why Labor put together $15 billion worth of industry policy, supported by the R&D tax incentive, and all this is under attack by the new coalition government, who, if the answer by the Minister for Agriculture in question time is representative, wants us to return to being a country built on the sheep's back. That is important; agriculture has a vital role. But, as an aside, I had the brief picture that we were in the 1950s here, when the only two things we exported were wheat and wool, and maybe in a good year iron ore and coal. That is not what Australia is, and it is not what Australia should be in the future. That is why Labor's reforms in the last government were very important.

Another aspect of the R&D incentive debate is the importance of industries that really drive innovation, that really lift more than their share in R&D and drive how that flows on to the rest of the economy. A great example of that is the automotive industry in this country. This is an industry that makes up around five per cent of manufacturing employment, about one per cent of total national employment, yet it does 25 per cent of R&D in the manufacturing industry and around 10 per cent of R&D in the national economy as a whole. And this is another industry under attack by the coalition government. This is a coalition government that has already announced that $500 million is being ripped out of funding before 2015. Depending on what day of the week it was, they were going to take away the entire $1.5 billion after 2015—sometimes it was $2 billion, sometimes it was $1 billion; it really depended on what side of the bed the Prime Minister, the then member for Indi or the member for Groom got up on. This is another example of them ripping away support for the industry and innovation policy agenda. It is not just about corporations; it is about workers. The automotive industry employs 50,000 people directly and another 200,000 people indirectly. They do an awfully large amount of training in the manufacturing sector, and I guarantee you that, if you go to other parts of the manufacturing sector, you will meet a fitter and turner, a welder or a production engineer who probably started at GM, Ford or Toyota.

These are just three examples of the government's lack of respect for innovation. It should not come as a surprise, because one of the first acts the Howard government undertook when it first came into power in 1996 was to slash the R&D tax break from 150 per cent to 125 per cent. So I would submit that this government has form in ripping away support for innovation policy.

I return to the main purpose of this bill, which is to restrict the R&D tax incentive to companies with less than $20 billion in domestic turnover. This was a hard decision, and it is a hard act because it means reducing support for innovation for around 15 to 20 companies in this country. I would submit, and I think the data and the advice from Treasury and the Department of Industry is, that they will generally be able to self-fund that important work. But the most important thing is that money be returned to supporting innovation in the industry policy because we need to grow the industries of the future. That is vital.

Unfortunately, the failure of the coalition to honour this great opportunity demonstrates their hypocrisy. It is another broken promise. They caterwauled, they screamed and they complained when the Labor government took a sensible but hard funding savings decision before the election, and now they just try and slip it quietly through in the dead of night. They try and get it through, grab the $1 billion to fund God knows what—it could be their preposterous Paid Parental Leave scheme that rewards high-income earners at the expense of low- and medium-income working Australians in my electorate.

This is an important bill. It is an important savings measure. I would urge the new government to reconsider their decision and to support the $1 billion plan for Australian jobs because it is a plan built on what industry wants, what industry thinks will work, what international experience says will work. That is why it is so vital that we implement this particular initiative. I commend the bill to the House.

7:32 pm

Photo of Graham PerrettGraham Perrett (Moreton, Australian Labor Party) Share this | | Hansard source

Mr Deputy Speaker Vasta, I always appreciate appearing before you. I look forward to going back to your electorate in the lead-up to Christmas. Thank you for your kind permission to let me go there the other day.

I rise to speak on the Tax Laws Amendment (Research and Development) Bill 2013. I commend the member for Charlton for his contribution, particularly for his comments about the automotive industry. Surely the result in the electorate of Indi was a comment on the mandate of the then opposition in terms of their policy for the automotive industry. I thought throwing out the shadow minister for industry, the only shadow minister to be thrown out, was a strong statement from the Australian people about the coalition's policy on the automotive industry. I am not going to focus on the automotive industry, but I would as a Queenslander—and with the member for Moncrieff in the chamber—point out the other great innovative industry which is based in Queensland, which is the medical industry. Businesses such as Cook Medical in my electorate are doing great things, as are so many other innovative businesses in the medical area.

Returning to the legislation before us, the Gillard Labor government's A plan for Australian jobs was a response to the report Smarter manufacturing for a smarter Australia. It recognised how things have changed. Chapter 6 of A plan for Australian jobs set out the Gillard government's proposals to help small and medium enterprises to grow and create new jobs. It included the proposal to target SMEs for additional research and development support. It looked at other jurisdictions to show that the R&D spending of small firms is actually more responsive to R&D tax incentives than that of larger firms. Consequently, it stated that very large companies, those with an annual Australian turnover of $20 billion or more—not many companies, obviously—would no longer be entitled to the non-refundable 40 per cent R&D tax offset. As the member for Moncrieff knows, we are the party of small business, so we did what we could to ensure we could support them in terms of having as much innovation as possible.

But, looking at those on the other side of the chamber, obviously this bill represents another broken promise from the coalition government. What they said before the election is different from what they are doing after the election. This measure was previously announced on 17 February by the Labor government, with revenue to fund a targeted jobs package, the Australian Jobs Act. The coalition, back then, before the election, made it very clear in opposition that they were against the changes to the research and development tax incentive. You can look through the Hansard. You can see their speeches. They were very clear. But now, suddenly, in government, the coalition has changed its tune. It is, yet again, an example of the Australian people not getting the government that they voted for and not getting the government that they read the brochures on. Suddenly, after the election, they find it is a different government. It is a doppelganger. It looks a little similar but acts a little bit differently. Australians are quickly realising that this is a pattern of behaviour: start as you intend to finish.

The former, Labor government implemented this plan to assist industries to create more jobs because we cannot go down the low wages route. We cannot compete with Asia and the low wages route. We tried that in 2004 under the Howard government and we saw that the low wages route—such as the $2 jobs at Curtain Call—is not the way forward. We saw a higher skills approach of innovation and selling quality services and quality products around the world. The billion dollar plan was implemented to promote jobs and to promote productivity, which has been steadily on the increase over the last six years. In the quarter when we came to office, productivity was at zero. When you need to do things to improve Australian productivity, what do you do? You invest in high-tech jobs and the tools of the 21st century, like the National Broadband Network. The jobs plan provides assistance for Australian companies to achieve more local work and to increase exports and new business overseas, and supports the growth of SMEs.

During Labor's term in government there were significant achievements, with a focus on employment beyond the resources boom. That is why we have been one of the few lucky countries in the world, with 22 years of uninterrupted growth. It has involved some tough decisions, both by Labor governments and by coalition governments. I should point out that the Howard and Costello government did make a contribution in that time as well.

I am proud to say that as a government we doubled our investment in school education and upgraded facilities at every school. There is still more work to be done in that area. Investing in staff is going to be a big part of that future education story. It was Labor that delivered the skills and training required for the jobs of the future through our $3 billion jobs and skills package. An additional 150,000 students are now attending university, particularly—as I am sure the Nationals would know—people from rural and remote areas, people from the poorer parts of Australia and people from some of the other problem areas, such as Indigenous students, who were under-represented in the past.

Since my election to this place on 24 November 2007, I know that we have been a party that is focused on providing jobs for this nation. Australia benefited from Labor's focus on bringing government, businesses and unions together around the same table rather than on continuing the politics of division. That is what those opposite practise. We are about getting people to the table to talk, to come up with the best way forward and the best way to provide jobs for the future—not about having an 'us and them' mentality. That is the way to build Australia's future—by working together, collaboratively, not by going down those old class lines that some members opposite cling to.

Supporting Australian jobs was our top priority through the global financial crisis, with more than 950,000 jobs created between 2007 and 2013. Look at what happened around the world in that period: 28 million people were added to unemployment queues. That is a cost to society and a cost to families, and decreases the chances of coming out of the austerity budgets that we have seen implemented throughout the world. Those opposite have some fun during question time, but the reality is that our nation is still given a AAA credit rating by all three ratings agencies. That is an albatross that not many treasurers get to have hung around their neck, but it is one that most treasurers around the world would gladly embrace.

Nearly one million Australians work in manufacturing. Our economies have transformed through some tough policies of the Hawke and Keating governments. Lowering tariffs brought challenges, particularly for the Labor faithful. But those tough decisions of the Hawke and Keating governments also set us up for the future. There are pressures on manufacturing. The most significant that any sensible economist would see would be the high Australian dollar and increasing international competition, which puts pressure on Australian jobs—more so than any price on pollution, which might influence some power bills that some businesses get.

It creates innovation when businesses understand that the world will always be carbon constrained, that the markets of the future will always operate in a carbon constrained world. I can see that it will not be that long before there are barriers put up if products are not green. Under our price on pollution, Australian businesses got the inside running. The political agenda of those opposite does not recognise that. Obviously, they are not as worried about the future. They are not as worried about Gold Coast beaches becoming shark nets as the beaches move further and further inland. But most sensible people are worried.

The coalition were not supportive of the jobs package, but they have now decided to implement our plan. We have seen the benefits of this package. Our focus as the Labor Party is always on making sure people have the dignity of a job. Job Services Australia has found work for around 1.5 million Australians since it commenced in 2009. We are also proud of our work in Disability Employment Services, which has resulted in a 46 per cent increase in the number of disabled people being helped into a job. Some of the services in my electorate talk about how, when people with disabilities obtain a job, they can be some of the best employees because they are often particularly focused on the job that they have rather than on things that can be distractions for other employees.

Our job plan included an investment in skills and training, including through TAFEs. Sadly, Liberal state governments do not have a proud record when it comes to TAFEs. In my home state of Queensland, we see a commitment to close down 40 per cent of TAFE campuses. I have three TAFE campuses in my electorate and some of them are already in the crosshairs. They are going to be stripped of their assets, and TAFE campuses are going to be opened up for use by private, for-profit providers. The education minister announced a 40 per cent reduction in the number of Queensland TAFE campuses. TAFE has a number of unique responsibilities, providing libraries, student counselling services and other support services that private suppliers just do not provide. I have seen this.

The Labor government's commitment was to give every senior high school student in Australia access to a trades training centre. This would have given them access to industry standard equipment and vocational education, offering a quality pathway into a trade or vocation and helping to address national skills shortages in traditional trades and emerging industries. Obviously, there is much more work to be done.

In my electorate in Queensland, sadly, unemployment has been a growing issue, not just because of the 14,000 or so public servants sacked by the Newman government; unemployment continues to rise. I have a big swathe of manufacturing through my electorate, including things like Cook Medical and major companies that service the mining industry. Those major companies have been under threat as those industries move from construction to production.

Since the implementation of the research and development tax incentives, thousands more firms are investing in themselves than was the case before. With Labor's plan we saw increased investment in clean technologies. I am particularly concerned about the direct action policy of those opposite because, under Labor, most of the low-hanging fruit when it comes to responding to climate change has already been picked. Most industries have already done their bit to change behaviours. Most industries that can have put solar panels on their roofs, have changed their light bulbs and have changed their production techniques. They have made investments in clean technologies. But this homeless waif of a policy called direct action, which no-one will own, is not going to deliver the savings that we need to meet the targets.

On the weekend, the Minister for the Environment was able to misrepresent the data that came out about decreased emissions. He bundled together the sections of the Australian economy that do not have a carbon price and said that emissions in industries such as the farming sector had increased. When you open up new mines the methane emissions increase. He bundled all those kinds of things together and said, 'You can see Labor's policy has not worked,' whereas, in reality, if he had looked at the bits of industry that had had a price put on carbon, he would have found that their innovation was plain to see and that their emissions had gone down significantly.

The growth of clean energy investment drives increases in jobs, investment and trade—particularly in the jobs for the future: the jobs for my children and grandchildren. Clean energy industries deliver both economic and environmental benefits, and their growth is driven by the fact that they are more efficient, more profitable and more sustainable enterprises.

The bill before the House today is a clear example of this government's being unable to clearly outline to the Australian public its true intentions. Again, this is not the government that they said, before the election, they were going to be. Before the election those on the other side of the chamber said one thing; now they are doing another. First they told us they would honour the Better Schools Plan agreements, but they did—not a back-flip; that would put them back in the same spot—a volte-face.

The Treasurer stated that the government at the time had become 'unpredictable on tax policy', but the government is now adopting the publically-accepted policy announced by the Labor government. This government is not what the Australian people voted for.

7:47 pm

Photo of Tony ZappiaTony Zappia (Makin, Australian Labor Party, Shadow Parliamentary Secretary for Manufacturing) Share this | | Hansard source

The Tax Laws Amendment (Research and Development) Bill 2013 effectively limits the research and development tax incentive to companies who have an aggregated assessable income of less than $20 billion. I understand that that will affect some 15 to 20 firms around the country. It is estimated to save the Australian government somewhere around $1.1 billion over the next four years. I also understand that this is legislation that is similar to legislation that was proposed by the previous Labor government—with some major differences. The differences are why we have taken the position not to support this legislation. The proposition from the previous government was tied to a whole host of job-creating initiatives that would have been directly funded as a result of the savings made. Ultimately, it is about creating a stronger economy and jobs in this country. This legislation does not do that. It simply makes the cuts, and I assume the funds go into general revenue. I will talk about that a little bit later.

To highlight how much government members support this legislation, I noticed that there was only one speaker in support of it from the coalition benches. I heard the speech from the member for Bradfield, because he was the only one who dared to come into the chamber to support this legislation. I think I could have been excused for believing that he was arguing a case against this legislation by supporting the importance of research and development to the nation. If you support it as strongly as he did—I thought he did a good job in arguing the case for the importance of research and development—then why would you cut the tax breaks that go to someone or some company that invests money in research and development? If time permits I might come back to some of the points that were made in that contribution, because I thought that he made a very good case for the importance of research and development to our nation.

I just want to go back to what Labor tied its proposition to, because there were some very important elements of our proposition that have been thrown out the window with the government's proposal. The previous Labor government set up a new Australian Industry Participation Authority, which was intended to help businesses to build their capabilities and connections to win work on major projects. The authority was set up under legislation, and it had a purpose. The purpose was to assist Australian business.

There were other aspects of the proposal. By legislating the Australian industry participation arrangements, major projects worth $500 million or more were required to implement Australian industry participation plans that gave local industries opportunities to win work on a commercial basis. That is absolutely critical, because quite often we see local businesses missing out when major contracts are put into place. Others come in from outside, but the locals do not always share in the money that is invested in those projects.

Under the previous government's proposal there was also a requirement for projects that were worth $2 billion or more, and that applied for concessions under the Enhanced Project By-law Scheme, to embed Australian Industry Opportunity officers within their global supply offices. Again, that was a mechanism to help businesses with the projects that they were trying to engage in.

Reforms to the anti-dumping system, with the appointment of an Anti-Dumping Commissioner, were quite deliberately targeted at protecting Australian industries and businesses from unfair overseas competition. In fact, we debated some changes to that proposition in this place only last week.

With the savings that would have been made, we were prepared to invest in some $500 million around the country to establish 10 industry-innovation precincts. These, in turn, would have driven business innovation and growth in areas that would have given Australian businesses a competitive advantage.

One of those proposals was for the region I represent in South Australia, on the northern side of Adelaide. I suspect there was a proposal and submission made to establish a manufacturing hub in the region. I am aware of a similar hub, the Defence Teaming Centre, in the northern region. I am also aware of the benefits that those kinds of hubs bring to the region. You get businesses working together and supporting one another. I can well recall a local business that was into manufacturing and needed a way of doing something smarter and better. The owner turned to someone in the precinct who ran a different sort of business and asked for their support and advice. Together they came up with the solution they needed. That is the kind of support that leads to innovation, and it happens when you have a precinct of businesses supporting each other.

The issue of industry innovation was also part of creating an industry-innovation network to allow businesses around Australia, including regional areas, to take part in precinct activities—to gain access to knowledge, to support one another and to create partnerships that, in turn, would enable them to prosper. There was a host of additional matters that the funding would have been used for, and I will quickly skim through some of those. There was intended to be a new, $350 million round of the Innovation and Investment Fund to stimulate private investment in innovative Australian start-up companies. We made changes to the venture capital tax arrangements to improve clarity and certainty for investors and to encourage participation by 'angel' syndicates. There were growth opportunities and a leadership development initiative to provide focused support for small- and medium-sized enterprises with a high growth potential. Furthermore, there was the extension of the successful Enterprise Connect program for SMEs to more manufacturing firms and new sectors—such as professional services, information and communication technologies and transport and logistics—thus improving the productivity of those businesses and enabling those sectors to grow.

These are just some of the things that the previous proposition included and which are now not part of this proposal, so all of those benefits are likely to be lost. I notice that, while the coalition supported the antidumping measures and changes to the R&D incentive targeting, they did not support all of the measures included in the plan for Australian jobs. That is particularly concerning. If you say to a business, 'We're going to take something from you,' at least you would be expected to say, 'But in return we will give you something back'. The opposition also did not support the Australian Jobs bill 2013, which legislated the Australian industry participation arrangements.

I return to the issue of innovation. The member for Bradfield made a terrific case for why you should not support this legislation. He was absolutely right when he said that innovation is the key to our international competitiveness, to our productivity gains and to efficiencies in business operations right across the country. It really does not matter who funds or drives the innovation because, ultimately, the benefits will flow through to the rest of the economy. So, whether it is a small company or a big company, if it invests in innovation, why should it be treated any differently from any other company in terms of its tax treatment? It should not. The benefits flow right through to the rest of society. Only last week in this place we debated the issue of research and development spending for primary industries and how important it was to the primary industry sector of this country. It is not only important but also was noted in the last decade that research and development across primary industries has been falling. We need to encourage research and development expenditure, not discourage it by taking away the tax incentives that come with it.

Under the previous government there was a proposal to provide quarterly tax incentives for funds that had been spent on research and development. I do not see that the quarterly tax incentive proposition is included in this legislation. If you want to encourage investment in research and development, you provide those kinds of incentives. If a company is spending money on research and development, just like it pays its quarterly tax through its BAS statements, I am sure it would like to do the opposite and get the credits for money it has spent. I believe that is an appropriate thing to do, and it is something this bill has left out.

This bill is simply about saving money for the government. The reason they need to save money is that they are finding they cannot balance their budget. If they do not balance their budget—and they promised before the election that they would get the budget back in the black—they have failed in their commitment to the Australian people. You can only blame the previous government for your failings for so long; the Australian people will not continue to believe the rhetoric that it is all the previous government's fault when the current government have been in office for a substantial period of time. This government have now been in office for three months, and, as each week ticks by, they become more and more responsible for the outcome of their budget and for the delivery of the budget surplus that they promised. They cannot continue to blame previous governments when they have, in fact, taken over management of the system and the economy and are in direct control of what funds they have. They are simply trying to balance their budget on the back of a proposition that affects industries and will diminish the number of dollars that are spent on research and development in this country. That can only be bad for the future of our nation.

Debate interrupted.