Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Hansard source

I will. You are right, Mr Acting Deputy President—I should ignore Senator McGauran, as the National Party has had to do for some time. At the heart of the issue is our slump in manufactured exports. From double-digit growth in the 1990s, it has almost halved. We are now in an absolute decline in terms of manufacturing exports. As a result, since the year 2000 Australia has shed over 115,000 manufacturing jobs. That is 10 per cent of the manufacturing workforce that has gone in the last six years.

I know that some shrug and take the view that manufacturing decline is inevitable—we just cannot compete with China and India, and that is the end of the matter. That is not a view that the Labor Party holds. At a recent CEDA seminar held in Melbourne entitled ‘Can, or Should, Australian Manufacturers Compete against China and India’, the example of Berri Ltd was given. Berri has been exporting packaged juices to India since the late 1990s. That is a value-adding of a primary industry manufacture—in this case, juices. It holds some five per cent of the Indian market and is experiencing growth of 30 per cent a year. There are some significant opportunities to sell higher-value-added goods such as clean, safe and high-quality food products into India and China and also to open up markets in other sectors.

If you look at the two countries, India and China are experiencing rapid growth and rapid ‘middle-classing’. The demand for products and services is rapidly rising with that increase in disposable income. Australia needs to redouble its efforts to re-engineer existing processes and develop new products to fit the demands of these two emerging economic superpowers—and they will be economic superpowers, there is no doubt about that.

Labor recognises that the world economy is changing, and we must change with it. Less than 50 years ago, agriculture, manufacturing and services contributed almost equally to global GDP. Now services account for over two-thirds of wealth generated in the global economy, yet Australia’s service exports are just four per cent of our gross domestic product. That is the third-lowest in the OECD and just one-third of the OECD average. So we do have some very great opportunities to position ourselves with India and China in a vast array of service industries, for example: biotechnology; medical research; the environment, information and communication technologies; financial, professional and technical services; education; and health care.

Now to Labor’s strategy in the light of these challenges for the next 20 years. First, we need to recognise that, as Asia lifts its game, we need to match and even exceed it. We must understand and invest in our strengths. We must know in which way the trade winds are blowing, and focus accordingly. Industry by industry, businesses, workers and government need to work together to offset Asia’s low-cost advantage and open new markets. Labor believes that we need to lift our productivity. This is central to our economic challenge. That is the only way to improve our competitiveness, turn around our trade performance and secure our prosperity for the future.

There are eight pillars attached to this strategy that I would like to comment briefly on tonight. Firstly, it is built on the foundation of budget discipline. Before I go on to this, let me comment briefly on workplace relations, which has occupied considerable attention not just here but also in the Australian community over the last six months. Labor does not oppose changes to workplace relations but we do oppose most of the government’s changes. They are the wrong changes.

We know from Senate estimates, where I sought answers to questions, that Treasury has only carried out limited analysis on the claims that these workplace relations changes will lift employment and grow the economy. That is the constant mantra of the current Liberal government. But Treasury’s own limited analysis did not support the government’s central contention and the proposition that the changes will lift productivity. There is ample independent evidence that questions whether they will deliver higher productivity. This includes a damning critique from the government’s own favoured expert, labour market economist Professor Mark Wooden. When the budget is delivered in May, which is not so far away, Labor will be presenting alternative proposals for genuine productivity and workplace reform. There will be a blueprint speech by our leader, Kim Beazley, as there has been on a number of issues over the last few months.

Labor knows that, first and foremost, business needs a stable macroeconomic environment to flourish. All policy options must be measured against the overriding objective of keeping the budget in balance, on average, over the course of the economic cycle. How does that translate to the upcoming 2006-07 budget? We are enjoying strong budget surpluses. The prediction in the government’s Mid-Year Economic and Fiscal Outlook that revenues will exceed expenditure by over $42 billion over the forward estimates period is more likely than not to be revised up at budget time. In other words, fiscal policy has tightened since the mid-year economic forecast, which explains recent comments by the Reserve Bank governor suggesting that fresh tax cuts would not necessarily trigger an interest rate response.

Labor is very aware that a significant proportion—some analysts say as much as half of the likely surplus—would arise from a temporary surge in tax revenues, in particular corporate tax revenue, off the back of the recent and continuing record commodity prices. There is ample scope to outline and begin funding a major tax reform package but there is a strong case against using any of the temporary windfall to fund recurrent spending or permanent tax cuts. So Labor argues that you could quarantine the temporary surplus in the Future Fund or it could be applied to some non-recurrent investment where such investment eases capacity constraints, infrastructure and inflationary pressures. This year’s budget should be about striking the right balance between setting in train some meaningful tax reform and investing in the productivity and export potential of the economy.

Labor’s view in terms of constraints and fiscal discipline is that there are eight pillars for growth. The first is reform of the tax system so it offers real incentive, is competitive and simpler. We could increase our workforce capacity and productivity by investing in skills and education, rather than importing both skilled and unskilled labour from overseas, which this government is becoming more and more reliant on. We could remove export bottlenecks by showing national leadership on infrastructure—again, I must say that we share some concerns with the National Party. I acknowledge that the National Party have at least referred to the problem but not done much about it. Infrastructure is a very important issue for Australia.

We could get the regulatory burden off the back of business by adopting new, simpler, flexible and competitive regulatory models. I have been doing some policy work—and this will be announced too—in respect of regulation of the financial sector. If you asked anyone in the finance sector: ‘Is there less red tape and regulation applying to your sector today compared with 10 years ago?’ they would laugh at you. There are significant and onerous new red tape requirements on the finance sector that are very significant indeed.

Another pillar is removing road blocks to developing and commercialising new products and services, accepting that only cooperative federalism as distinct from dictated centralism, which we are seeing from this government, can deliver real reform and deal with state governments of all persuasions in good faith. Another is raising workforce participation by strengthening incentives for people to move from welfare into work. Another is fostering a domestic savings culture and reducing our reliance on foreign savings. I referred earlier to the fact that we are now more dependent than ever on foreign savings to fund our current account. I have no philosophical objection to importing capital. It is a necessity when our household savings have been negative over the last three to four years.

There is much more I want to say, but time is limited. I will be making some further economic comments about Labor’s agenda for economic growth—fiscal discipline, budgetary discipline and dealing with the issues of savings, the current account deficit and the national debt, which are important economic issues. I will have a lot more to say about that in future contributions.