Australian Industry Participation Plan - Private Member's Business (19/09/2011)

03 January 2013

Landing-Manufacturing.jpgAustralia is going through unprecedented economic change. This change is driven by our place in the world and the demand for our natural resources. Despite what some say, our economic outlook is one of fundamental strength and resilience. The economic transformation of Asia is bringing tremendous benefits to this region. Our economy is strong. Our mining and resources sector is strong and revenue is flowing from this to both state and federal governments. Our terms of trade are high and the high Australian dollar means that everything from petrol, TVs, T-shirts and overseas holidays are cheaper than they have ever been before.

But the sustained high Australian dollar is driving structural change in our economy. Different sectors and regions within the Australian economy are growing at different speeds. It is clear that the manufacturing sector is struggling, and there are many examples in my region and the region of my colleague who joins me in the chamber, the member for Cunningham. In our area of Illawarra this is very prevalent.

I believe that manufacturing matters. Manufacturing is critical not only to our economy but to the sort of country that we want to live in. This is because a country that makes stuff knows stuff. Manufacturing and the engineering trades create the ecosystems of knowledge that are critical to being a clever country, and you can measure it. While manufacturing makes up only about 8.3 per cent of all employment and about 8.6 per cent of gross domestic product, it contributes to more than 25 per cent of all business investment in research and development. Put simply, the manufacturing sector is boxing well above its weight when it comes to investing in our future know-how and technological capacity.

Imove thatthis House:

(1) notes that:

(a) Australia needs a diverse economy to prosper now and into the future;

(b) Australia has a strong innovation framework, and some of the best research and development and skilled workers in the world, but industry and government support is needed to turn that capacity into goods manufactured in Australia;

(c) the Australian Government has an agenda for nation building, innovation and improving the productive performance of business and industry, but that more can be done in this area;

(d) the Australian Manufacturing industry should continue to be assisted by government to ensure that the mining boom does not crowd-out every other area of the economy; and

(e) the Government has already made a substantial contribution to the development of this agenda;

(2) reaffirms its belief in a modern, cohesive and comprehensive industry policy for Australian manufacturing which links these elements of the Australian economy;

(3) supports policies to spread the benefits of the mining boom to local manufacturers and the development of a skilled workforce by;

(a) ensuring that the mining industry invests in apprenticeships and training to ensure Australia continues to renew and develop a high-skilled workforce; and

(b) requiring:

(i) all new major resource projects have an Australian Industry Participation Plan (AIPP) which provides details of the Australian manufactured materials and services to be used on all major resource developments; and

(ii) open and transparent tendering arrangements which permit Australian industry to compete on an equal basis with international companies for sub-contracts associated with major resource projects;

(4) supports policies that require Australian Government infrastructure and defence industry projects to produce and publish an AIPP detailing Australian manufactured materials and services; and

(5) in the interests of accountability and transparency, insists that all AIPPs be published and regularly updated as projects progress.

Seconded: Sharon Bird MP (Cunningham)

The government is implementing many reforms to deal with the pressure that is now being faced by the manufacturing sector in a changing economy. We are investing in skills in record amounts. We have a record investment of over $36 billion in infrastructure projects around the country to support our economy. We are building important new infrastructure like the National Broadband Network, and we are pushing for better taxation on the mining sector and for improved research and development tax incentives for manufacturing and other industries. We have created over 130,000 new training places and we are investing heavily in skills and training measures. These are all important measures to keep our economy strong, but many of them have been opposed by those opposite.

We believe that there is an important role for government. It is not just a matter of letting the market rip. We believe that we need a policy mix to create a diverse economy. A broad range of programs are already in place to support our manufacturing industries and include the Australian Industry Participation measures, which are encouraging full, fair and reasonable opportunities for the manufacturing industry in many major projects; a range of investment and co-investment vehicles through our Clean Energy Future initiatives; and programs such as Enterprise Connect which are providing assistance to small and medium sized enterprises and encouraging innovation and investment in new technology and projects. These programs are targeted at enhancing productivity through innovation across the economy because we recognise that the Australian economy needs to be self-sustaining beyond the resources boom. In June this year, the Minister for Defence Materiel strengthened our program to reduce the threshold for mandatory AICPs from $50 million to $20 million, and put new conditions for tender, which exclude any company that has failed to meet their Australian industry participation plan obligations. A number of these measures have already been put in place but the motion before the House today quite simply calls for more action. It calls for policies which will spread the benefits of the mining boom to local manufacturers and the development of a skilled workforce by ensuring that the mining industry invests in apprenticeships and training. It calls for policies to ensure that all new major resource projects have an Australian Industry Participation Plan which provides details of the Australian manufactured materials and services to be used in all those major projects and policies, which would require open and transparent tendering arrangements which permit Australian industry to compete on an equal basis with international companies for subcontracts associated with major resource projects.

I am moving this motion before the House because, from conversations I have had with many manufacturers in my electorate, I can see that we are playing on a far from even playing field. According to the Australian Steel Institute, out of a $400 billion investment over the next five to 10 years, Australian steel is currently getting only around a 10 per cent share of the market. And this is at a time when our steel fabrication sector is running below capacity and many firms are laying off staff.

I have heard too many examples lately of mining and resource companies effectively locking Australian companies out of being able to tender for major projects. Companies like Chevron, Fortescue Metals, Pacific Sino and Rio Tinto are making billions from developing Australia's natural resources, and Australian manufactured products, particular Australian steel, are not getting a fair shake in those contracts. I will cite a number of examples. One example that has been brought to my attention is of the Chevron project at Barrow Islanda large LNG project. The Gorgon LNG project on Barrow Island is Australia's largest ever project but, unfortunately, the LNG plant has been designed in London to use Japanese standards and Asian steel and will be fabricated completely in Asian yards and then transported to the site.

A second example which has been brought to my attention involves Rio Tinto in the iron ore expansion in the Pilbara. The specifications for that project clearly say that all steel plate will be welded and that the welded sections and floor plate to be used will be of Chinese standard and specificationseffectively precluding Australian companies from bidding in those projects.

Another example is of the Fortescue Metals Group. Earlier this year Fortescue Metals Group announced it had struck a deal to buy 260 40-tonne iron ore rail cars from China's CNR Corp as part of Twiggy Forrest's $US8.4 billion Pilbara expansion ambitions. Another example involves CITIC Pacific Mining's Sino Iron Ore project at Cape Prestonprobably the most extreme example I have seen. In that project all the steel that is used was imported from Shanghai steel yards. That is around 100,000 tonnes of steel that could have been supplied locally but which was imported for this project. Not only thatand to illustrate the problems facing Australian manufacturingCITIC Pacific imported entirely ready-made concrete footpaths from China. Concrete is a simple commodity and this work could, and I say should, have been done locally.

These examples show clearly that Australian manufacturing industries like steel, engineering and concrete are effectively being excluded from the benefits of these major resource projects. And this is occurring at a time when the manufacturing sector, as I have said, is shedding jobs. It is clear that greater transparency and accountability is required in the contracts being awarded in this sector, and the motion that I have put before the House calls for exactly that. We need transparency and accountability at a federal level, but there is clearly more that state governments can and should be doing. There is clearly a role for national leadership in this regard, and I will be seeking a coordinated approachand I ask for a bipartisan approachto be progressed through COAG as a matter of priority. The government will work to ensure that manufacturing will continue to be a source of well-paid, high-skill jobs for Australian workers, but this will not happen by accident. The best way that we can spread the benefits of the mining boom is to ensure that Australian manufacturing industries get greater accessat least on an equal basisto the over $400 billion worth of investment that is going into our mining sector over the next 4 years.

While I am at it, I believe that greater access to a number of the infrastructure projects of a number of governments, at state and federal level, would greatly benefit local manufacturing industries, because if the purpose of many of these projects is to stimulate employment and local jobs then one of the most direct and effective ways that this can be done is to ensure that local manufacturers and local workers such as those who are employed in electorates like mine and the electorate of the member for Cunningham can get access to fulfilling, high-paying, good, skilled jobs for now and well into the future. I commend the motion to the House.

Private Member's Business, Monday, 19 September 2011