Wednesday, 26 March 2014
Export Market Development Grants Amendment Bill 2014; Second Reading
by leave—I move:
I also table a statement of reasons justifying the need for this bill to be considered during these sittings and seek leave to have this statement incorporated in Hansard.
The reasons read as follows—
EXPORT MARKET DEVELOPMENT GRANTS AMENDMENT BILL
Purpose of the Bill
The bill implements the Government's Election commitment to provide additional funding for the EMDG scheme.
Amendments to the Export Market Development Grants Act 1997 will align scheme parameters with the increased funding by increasing the number of grants payable from 7 to 8 and reducing the minimum expenses threshold amount from $20,000 to $15,000, set the amount of scheme administration funds via Ministerial determination, and make minor policy and technical amendments to improve the scheme administration arrangements.
Reasons for Urgency
The bill implements an election commitment to provide additional funding for the EMDG scheme. The measures must be in place to enable the amendment to operate for the 2013-14 grant year.
Two legislative instruments must be made immediately following the passage of the Bill, namely a 'not fit and proper person' instrument for EMDG consultants and an 'administration expenses' threshold instrument. The 'administration expenses' instrument, must be in place by 1 June 2014 following the passage of this bill.
Question agreed to.
I thank Senator Xenophon for his courtesy. I just want to place on record the Labor opposition's attitude to this bill. The chamber may or may not be aware that this is legislation that was first enacted a very long time ago in 1974 and established what has become a well-regarded and successful scheme to support Australian small- and medium-sized businesses exporting to the rest of the world. It is obviously a scheme predicated on Labor's strong view that Australia's current and future prosperity requires a strong trading sector, and it is our strong view that it is important that small- and medium-sized businesses in this country are assisted and facilitated in their capacity to export to the rest of the world. As I said, it was a 1974 initiative of the Whitlam government which established the original grants scheme, which demonstrates Labor's longstanding view of the importance of trade and our longstanding view of the importance of supporting our SMEs in their ability to export to the rest of the world.
We do support the passage of this bill. Some of the amendments contained in it are amendments which were, in fact, proposed by the former Labor government. Our support for this bill does also reflect the economic circumstances of the time. We are in a period of economic transition, as others have noted. We are in a period where our export industries will continue to grow in their importance to our economy. It is critical we continue to open up export opportunities, both for new and for existing export businesses, as part of this transition.
The bill before the chamber does a number of things. It aligns the EMDG scheme rules to a revised level of scheme funding. It also implements some technical changes and some simplification changes. These include a reduction in the minimum expenses threshold required to be incurred by an applicant from $20,000 to $15,000, a change to the current deduction for the provisional grant amount from $5,000 to $2,500. The bill prevents the payment of grants to applicants engaging an EMDG consultant who is assessed to be not a fit and proper person—I will come back to that shortly—and increases the number of grants able to be received by an applicant from seven to eight.
In relation to the fit and proper person provisions, we note that these provisions largely adopt the provisions previously put forward by the Labor government in the lapsed amendment bill. We note that Senator Xenophon has put forward an amendment to this chamber. I have not had the opportunity to have a discussion with him about the rationale for that, but I do indicate at this point in the debate that Labor is not inclined to support Senator Xenophon's amendment. We think it is not unreasonable for there to be a fit and proper person test, although I am happy to listen to what he has to say on this. My understanding is that there are accompanying guidelines to the fit and proper person test which would enable consultants to understand what the test means for their conduct, and I also understand—and the minister can perhaps confirm this—that any decision of the Austrade CEO in relation to the fit and proper person test would be subject to administrative review.
Although Labor does support the bill, there are some aspects of the reform proposed by the government with which we are disappointed, and I want to come to the broader context of this legislation, to which I referred in my opening statement. We have long recognised on this side of the chamber that Australia's future prosperity will be underpinned by engagement with our region. It is not a new proposition for the Labor Party. Last night I watched something on YouTube which is being tweeted in response to the very modern announcement by the Prime Minister about the return of knights and dames to Australia. He describes it as adding a grace note to our community. I think it is a retrograde note. There was a very good—
An opposition senator: Dame Penny!
I would never want to be known as that, and I place on record that that is not something I would ever aspire to. I am a person who was born in Malaysia. I have experienced what it is to live in a society where some of the vestiges of imperial hierarchies remain, and I think it is an absolutely retrograde step for this country to be returning to those sorts of outdated notions. But I will leave that to one side.
What I was trying to comment on was the fact that I watched with interest one of the YouTube clips which was tweeted. It had former Prime Minister Keating talking about the cultural cringe of the then opposition and their yearning for the mother country, which is, in many ways, demonstrated by the return of knights and dames. One of the things that Prime Minister Keating spoke about in that speech, but also more generally, was the engagement with Asia. I recall, as a much younger person in Australia, how important that was to public debate and also to our sense of self and our identity. Labor has been talking about opening up to our region and engagement with our region for a very long time. Of course, most recently in government, Labor commissioned the Australia and the Asian century white paper, which was an extraordinarily important contribution to public debate. It laid a framework not just for domestic economic policy but also for how we should think about wide-ranging matters from foreign policy to our education system and our sense of identity. It is a great pity that this government, in an act of petty partisanship, has sought to remove the white paper from government websites. It is also not wanting to talk about it. It demonstrates that it puts tribalism and partisanship ahead of national interests. It always has and always will. That is the hallmark of this government.
It is such an important aspect of who we are now and such an important part of Australia's future to understand that engagement with our region is critical to our economic prosperity but also critical to our ongoing security and identity. A confident Australia in its region—confident in its openness, confident in engaging with not only our immediate region but also the broader region—is the path to a secure, strong Australia and a prosperous Australia in the decades to come.
One of the aspects of the bill that Labor introduced in government, in the last parliament, was to include the realignment of this grant scheme to those priorities. In realigning this scheme to support small business exporting to emerging markets and to our region, it is disappointing that the Abbott government has walked away from these changes. I would have thought that, regardless of partisan views, there is real merit in leveraging public investment, which is supported in export market development grants, to further our strategic objective as a nation to more deeply engage with our region.
There was a capacity to ensure that these taxpayers' dollars were allocated in a way that leveraged that objective, which Labor believes is critical to Australia's current and future prosperity. The Abbott government's failure to embrace Australia in the Asian century and all that this implies says much about its lack of understanding of the tremendous opportunities that present themselves to this nation and about how important it is for us to fully engage and to ensure that this understanding is very much present not only in our public debate but also in all areas of our policy development and implementation.
I could talk at great length about the approach on trade agreements, but we have indicated support for passage of this legislation, so I will leave that debate for another time and simply indicate that the opposition supports passage of the bill.
I will confine my remarks on the Export Market Development Grants Amendment Bill 2014 to the fit-and-proper-persons test because I have been contacted by a number of good people in this industry who advocate for and prepare export market development grants applications and they cannot see the benefit of such a test. They cannot see that it will be dealt with equitably. They are concerned that it is simply too vague, and they worry about its effectiveness. They worry about it being abused and that it will be a retrograde step.
I want to outline that briefly in the course of this contribution, and I have a number of questions to ask the government in relation to this. If the government is about reducing red tape, I cannot see the underlying rationale for this particular test in relation to fit and proper persons. Of course, we expect that anyone dealing with export grants does so with probity and ethics, and there are a number of other sanctions under criminal law that will provide protection to the scheme for those seeking grants. But I cannot see the benefit of what is being proposed here, and I am worried that it will be abused in the way that it has been set out.
I broadly support what is proposed in this bill, apart from the fit-and-proper-persons test. I am concerned that the small exporters, those that are emerging as exporters, will be disadvantaged by what is being proposed. Clause 3.6 of the Export Market Development Grants (Associate and Fit and Proper Person) Guidelines 2004 requires that Austrade, when making a determination as to who is not fit and proper:
… have regard to any matter, not mentioned in section 3.2, 3.3, 3.4 or 3.5, that it considers relevant to the personal, commercial, financial or professional character, status or reputation of the person or associate.
My question to the government is: how on earth will you develop it, how on earth will that be dealt with and what are the criteria in respect of that? There are some regulations I am seeking to disallow, which I am concerned are simply too vague and imprecise and will cause a lot of concern amongst those who have to work on very small margins in this industry when advocating for those seeking a grant.
What has been put to me by those who work in the industry is that this is quite different from other areas where a fit-and-proper-person test is appropriately required. If you are a customs agent, for instance, you have a certain amount of trust placed in you for the clearance of material goods coming into this country, and it is important that you pass a fit-and-proper-persons test so that you are not allowing narcotics or other prohibited substances or goods into the country. If you are a tax agent, you get certain privileges from the tax office with respect to the late lodgement of returns and the like. There is an element of trust placed in you by the tax office by virtue of your being a tax agent, so I can understand the need for a fit-and-proper-person test with respect to that. But in relation to an export grants scheme, where these people act as agents, prepare applications and submit the applications, there does not seem to be any privileges attached as there is for a tax agent or a customs agent.
The explanatory memorandum to the Export Market Development Grants Amendment Bill 2004—this bill—states that consultants must be excluded for 'behaviour considered inconsistent with accepted community standards'. What does that mean? It may appear on the surface to be reasonable; it has the potential to become unreasonable when applied to the ministerial determination that will accompany the legislation.
Procedural fairness may not be achieved if what constitutes unacceptable action is not sufficiently defined or if external review provisions are manifestly inadequate. The requirement that administrators observe natural justice is protected at a federal level. In relation to that we need to refer to the Administrative Decisions Review Act, but it is my view that the necessary safeguards for that to be achieved are not present in this legislation. Where are the safeguards?
The coalition says it is about reducing red tape and making it easier for businesses to get on with their legitimate work but there are many landmines—so many pitfalls—in this particular test, which is something that the previous government put up. I am surprised that this government is embracing what I think is a bad element of this legislation. How do you determine behaviour considered 'inconsistent with accepted community standards'? Where is the procedural fairness?
My fear is that somebody may be subject to a capricious action under the scheme: 'We don't think you're a fit and proper person; we will therefore make that ruling.' That person could end up losing their livelihood for the next two or three years pending a judicial review. We know what it costs to run a judicial review. Access to justice in this country is a sad joke. When you consider how much money it costs to bring an application in the Federal Court, to retain a solicitor and to obtain counsel to argue the case, you could be looking, at the very least, at tens of thousands of dollars for a simple judicial review application. And that will take a considerable period of time. If there is an appeal to the Federal Court it would cost tens of thousands of dollars more.
The concern is that these export grant agents are not making a killing. They are making a pretty modest living and some of them are eking out a living—particularly in relation to the small exporters that they advocate for. So, I do not understand why the government would embrace this test when there appears to be a vagueness that accompanies it and where there appears to be a potential of abuse of power in relation to its use.
In the explanatory memorandum to the bill in respect of the 'consultants not fit and proper persons' provisions it is stated that this will 'provide the CEO of Austrade a mechanism to deal responsively to the variety and diversity of yet unknown circumstances and behaviours that may arise'. What on earth does that mean? What does it mean to talk about the 'yet unknown and circumstances and behaviours that may arise'? It seams incredibly vague and dangerous to me to be putting that in a piece of legislation or in a legislative instrument.
These undefined obligations may place Austrade in an untenable position. Our system of justice puts the onus on the accuser to establish its case. Under the ministerial determination, however, once an allegation has been made Austrade are obliged to accept the allegation as material and allow the litigation to run its course. The defendant must be presumed guilty until proven innocent. How is that fair in terms of procedural fairness? How is that fair in terms of natural justice? How is that fair to these agents who act for small exporters—the future of this economy when you consider the importance of encouraging small exporters to become medium and bigger exporters and the enormous benefit exports have to our nation?
Those are, in essence, my concerns. My understanding is that under the 'fit and proper person' provisions of this bill once any allegation of impropriety is made against an agent, in the press or otherwise, Austrade must apply to 'fit and proper person' provisions. In the case of a consultant the effect on their livelihood and on their clients would be dramatic. If an applicant has a grant payment denied or delayed this is bad enough; a consultant, on the other hand, may lose everything. For instance, if a start-up company successfully launches a new patented lure for catching large game fish such as marlin, then demonstrates the attributes of the lure and shows that it qualifies for support under the export grant scheme, it would budget accordingly. If an allegation is made that the agent is in some way not a fit and proper person—any allegation can be made—that company can be held up in terms of their grant.
That is the sort of thing that I am concerned about. There are other examples that I could give. For instance, what happens with an EMDG application if someone is charged with something unrelated to fraud or dishonesty—if they are charged with an assault, for instance? Does that mean that they would be held over, under the 'fit and proper person' test? I think that is unfair. You are punishing a person two or three times as a result of that.
There are other examples that have been put to me. I do not want to raise those examples for fear of identifying any of the people that have come forward to me to express their genuine concerns. My appeal to the government is to put this on hold with respect to the 'fit and proper persons' test. I think it has been ill-considered. If you look at the fine details of the test as it is intended to apply and the circumstances in which it is intended to apply and the whole background of what these agents do, compared to what a customs agent or a tax agent does—in fact they would be better referred to as 'consultants' rather than 'agents'—then you would find that it is very dangerous.
To rely on insufficiently defined administrative powers will cause enormous damage to this sector, particularly to small and medium exporters. I think the cost of consultants will go up. Fewer consultants will want to be involved in this and a lot of consultants will say, 'That's hanging over our head—that we can lose our livelihood overnight with an allegation that cannot be sufficiently dealt with or will have to go through the courts.' That is dangerous as well. I would like to hear from the government in relation to why it is proceeding with this ill-considered part of the legislation in terms of the fit and proper person test, which is so ill-defined and so open to administrative abuse.
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.