Senate debates

Wednesday, 26 March 2014


Export Market Development Grants Amendment Bill 2014; Second Reading

9:24 am

Photo of Simon BirminghamSimon Birmingham (SA, Liberal Party, Parliamentary Secretary to the Minister for the Environment) Share this | Hansard source

I thank Senators Wong and Xenophon for their contributions to the debate on this legislation. The Export Market Development Grants scheme has had a very long and important history in Australia. Our government is very committed to ensuring that it plays a key role in the future in opening Australia further to the world and in supporting our exporters and industries to continue to grow their businesses and the wealth and opportunities for all Australians. The EMDG scheme has been in place since 1974-75, with first grants paid in 1975-76. So it has a very long history. Over the last 14 years, the EMDG scheme has helped support SME exports worth more than $60 billion. On average, those exporters have employed some 97,000 employees each year. So it has a proud history; it is a history of creating exports and, in doing that, creating jobs. For every one dollar of cost to the taxpayer, estimates indicate a benefit is received to the nation of some $5.38. It is a significant benefit in return.

Our government is committed to boosting funding for the EMDG scheme—a $50 million boost over four years, starting in 2013-14. This is the longest sustained increase in funding for the scheme in the last 10 years. The long-term nature and certainty of that funding is important because it provides confidence to businesses who want to invest in export marketing in knowing that grants will be available to them. We are proud of those changes as well as other changes that are being pursued which will increase the number of grants able to be received by an applicant from seven to eight. We believe that allowing experienced exporters to claim an additional grant will assist many of the previously successful EMDG recipients to further develop their existing markets, re-enter markets that are now commercially viable again due to reductions in the exchange rate, and diversify into new markets. The overwhelming majority of these mature, successful exporters export to multiple markets, often spanning both the developed markets like the US and Europe and the fast-growing markets like China and South-East Asia. Based on the profile of previous years' applicants, it is estimated that 138 additional exporters will be able to claim each year as a result of this change.

We also supporting changes that reduce the minimum expenses threshold required to be incurred by an applicant from $20,000 to $15,000 per annum. Reducing the minimum expenses threshold reduces the amount of money that small exporters need to spend on their export marketing before they can claim an EMDG. This is particularly important for small specialised services companies and early-stage high-tech companies who are often born globals, with their primary markets being international rather than domestic, and are seeking to sell intellectual property or develop their first market. Through the reduction in the minimum expenses threshold, approximately 143 additional exporters are projected to be able to claim each year.

Further, the government supports changes that reduce the current $5,000 deduction from the applicant's provisional grant amount to $2,500. We recognise that, in the current difficult international trading conditions where exporters have faced several years of pressure on their marketing budget from higher exchange rates and weaker international markets, the ability to have even a modest increase in marketing funds is expected to be very welcome. Research into the EMDG scheme shows that increasing grants increases the export marketing expenditure by more than the grant amount as exporters contribute their own funds to support these activities. This increase in grant funds is particularly relevant now with many small and medium enterprises increasingly eyeing the potential for increased international sales as exchange rates ease and international markets recover. Almost all grant recipients will receive an extra $2,500 per grant due to this change. The number of grant recipients receiving such a benefit ranges from between 2,600 to more than 4,500 exporters each year. We have a very strong commitment to this scheme and a very strong intention to make sure that it is delivering continued growth and benefit to exporters into the future.

Senator Xenophon raised some particular concerns about this legislation, which introduces a fit and proper person test for EMDG consultants. They are people who assist exporters with the preparation and lodgement of their grant application. As Senator Xenophon highlighted in some of his remarks, fit and proper person tests are quite common in Commonwealth legislation. They apply across a range of different roles or activities that people undertake where they interact with the Commonwealth or receive certain responsibilities, powers or funding from the Commonwealth and, of course, are designed to protect the integrity and public perception of the management of programs by the Commonwealth.

EMDG applicants—that is, the exporters applying for the grant—have had fit and proper person provisions in place for more than a decade. These provisions have been widely recognised and the benefits of them have been widely acknowledged. It is not something new or unusual in this case to have a fit and proper person test in place in relation to the operation of the EMDG scheme. It is just that, until now, that has only applied to the applicants. This legislation seeks to extend that application so that it also applies to consultants who make application on behalf of particular applicants.

Austrade, which, of course, is the arm of government that administers the EMDG scheme, has developed significant experience in administering the fit and proper person provisions that apply to EMDG applicants. So I am a little bit surprised at some of Senator Xenophon's concerns in that regard. Given the longstanding history Austrade has in applying these provisions to EMDG applicants, there is no great leap in terms of applying them to the consultants who act on behalf of those applicants as well. Austrade advise that EMDG consultants have not raised any concerns about Austrade's management of the current fit and proper person provisions that apply to applicants. So in relation to some of Senator Xenophon specific concerns about how this will be administered, certainly the history of Austrade's activities demonstrates that, where they have administered these types of provisions in relation to applicants to date, neither applicants nor consultants have raised any particular concerns.

It is important to understand, in terms of why this action is being undertaken, that EMDG consultants do overwhelmingly work on a success fee basis. Our understanding is that, essentially, EMDG consultants in general receive a 10 per cent commission on grants obtained for their clients. Around 60 per cent of applicants work through a consultant. So we do have very significant uptake of consultants in this regard as people pursue grants under the scheme. Around 60 per cent of the time they are using consultants who do receive a significant financial benefit at the end of it. Consultants do have considerable financial interest in the process and they can of course potentially benefit from any unprotected overclaiming of grants. So it is important to ensure the integrity is there, not just in the applicants themselves but in those acting on behalf of the applicants.

The total amount payable to EMDG grant recipients under the scheme is capped. Therefore, any grant that is paid on the basis of false information reduces the amount available to other honest applicants. So it is important to understand that the integrity of this scheme is vital not just for government probity reasons but because maintaining that integrity can stretch the dollars as far as possible. The amounts spent on monitoring and investigating claims reduces the overall amount available, which again is a good reason for ensuring that we have standards of the highest order for the people participating in the scheme in the first instance to minimise the need to investigate, monitor or undertake actions that are simply in the nature of a rectification. Prevention is of course better than the cure in this regard.

It is not feasible for Austrade to fully verify every single application. So on that basis a degree of trust is required in this process, and much of that trust is therefore vested in the consultants who are presenting those applications to Austrade. It is also important that the public perceive the scheme to be operating in an honest and proper manner and that public funds are provided only to fit and proper recipients. That would be something all in this chamber would accept; this is simply a case of how that is achieved. The public perception of EMDG consultants reflects significantly on the scheme as a whole and the government's management of the scheme. Therefore, to ensure we continue to maintain high public support for a scheme that delivers significant benefit it is appropriate that, just as applicants are required to be fit and proper people to receive a grant, the consultants acting on their behalf should meet a similar standard.

Such a provision in the act will also provide a further incentive for consultants not to make false claims and an incidental incentive for applicants not to use consultants with a poor record for financial probity. The proposed provision would assist in protecting taxpayers' funds from fraudulent or excessive claims, ensure the proper operation of the scheme and, importantly, ensure public confidence in the scheme.

Senator Wong asked questions in relation to whether there where rights to administrative appeal. It is important to note that the Austrade CEO making a finding under these amendments that a consultant is not a fit and proper person is significant and appropriate, and therefore such a finding will be subject to the normal rules of administrative law and natural justice. Consultants will have access to merits review by the Administrative Appeals Tribunal. In addition, consultants will be entitled to judicial review under the Administrative Decisions (Judicial Review) Act 1977 as well as potential proceedings under common law.

The proposed fit and proper person provisions are very similar to provisions in the EMDG amendment bill 2013, which, due to the calling of the election, was not passed. The fit and proper person provisions in the 2013 bill were considered in quite some detail by the Foreign Affairs, Defence and Trade Legislation Committee. I note that, at the committee's hearing on 7 June 2013, the Export Consultants Group, which represents the majority of EMDG consultants in Australia, indicated its support for a fit and proper person test for EMDG consultants broadly in line with the test for EMDG clients or applicants that has been in existence since 2004. So those who speak on behalf of the industry in relation to this matter and those who speak on behalf of the broad majority of consultants did indicate last year their support for provisions along these lines.

The Foreign Affairs, Defence and Trade Legislation Committee supported the passage of the 2013 bill, which enjoyed bipartisan support from the then government and the then opposition for the inclusion of these provisions. They were, of course, at the time also considered by the Parliamentary Joint Committee on Human Rights, which found that the proposed fit and proper person provisions raised no concerns in terms of the right of people to do their business with the government.

Austrade provided the Export Consultants Group with the proposed operational details of the fit and proper person test in November last year. This was building upon a significant period of consultation conducted in relation to the earlier 2013 bill, including those two reviews by the parliamentary committees. So there has been an extensive range of consultation with those involved in acting as consultants to EMDG applicants, and that has yielded positive responses from those who support these changes and support a reasonable level of standards for their industry. Austrade has indicated that it is open to further consultation if need be. It will of course continue to work with consultants on the detail of the test to be applied, which will be contained in a ministerial instrument under the act.

The government obviously urges support for this bill, especially the fit and proper person provisions but also the provisions which increase the eligibility of SME exporters for a grant. The current difficult international trading conditions and the ability to qualify for a grant or an increased grant make a significant difference to many hundreds of small exporters. The EMDG scheme is a reimbursement scheme. Exporters need to spend money on marketing to qualify for a grant for reimbursement of up to 50 per cent of that marketing expenditure. Delaying this bill will prevent those exporters from having the opportunity to increase their budget this year and to seek partial reimbursement from 1 July this year. We do commend the bill to the house. We appreciate Senator Xenophon's concerns in relation to unnecessary red tape but do not believe that, in this instance, that is the case. I look forward to, if possible, assisting the senator with any questions in the committee stage.

Question agreed to.

Bill read a second time.


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