AUTOMOTIVE INDUSTRY TARIFFS

Mr O'BRIEN (Napier) (12:01): I move:

That this house calls on the federal government to reject the recommendation in the Review of Australia's Automotive Industry Final Report, dated 22 July 2008, that 'The passenger motor vehicles and parts thereof tariffs should be reduced from 10 to 5 per cent on 1 January 2010.'

Since placing this motion on the Notice Paper, the federal government has announced that it is adopting the recommendations of the Bracks committee and, in some instances, going well beyond them in terms of financial commitment. It has also indicated quite clearly that it will be adopting the Bracks recommendation on the reduction in the tariff.

Free trade is a laudable objective, and I think that most of us would be aware that the erection of tariff barriers, by the US in particular, exacerbated the depth and length of the Great Depression. Since World War II, the work of the World Trade Organisation in removing barriers to trade has driven prosperity in the developed world and underpinned developments in what were referred to as the second and third world countries of the globe, such that most of those countries are now designated as developing countries.

In the current context of extreme financial difficulty and the economic contraction that is gripping most countries around the globe, the last thing the international community needs is a reversion to protectionist sentiment. Australia, through its leadership of the Cairns Group of countries, has played a major driving role in encouraging the EU and the US in particular to dismantle their subsidy regimes to permit a greater and freer flow of goods and services.

Australia must continue this particular role, and I applaud the trade minister, Simon Crean, for his unswerving dedication to this role. However—and this is the qualification on which this motion hangs—for far too long Australia's prosecution of the free trade agenda has hung on the assumption that our manufacturing sector is expendable. For several decades, we have sought to access our agricultural goods and raged at the EU, and at the US in particular, and Asian barriers to our foodstuffs.

One of the most notable attacks in the past decade was on Japan for its rice security policy. How the drought has proved the good sense of Japan's stance and the insubstantial foundations of our own. I am a former employee of Elders, and I serve on the Premier's Food Council, so I think I have a fairly good understanding of Australian agriculture. I also have a large number of cousins who farm in the Mid North and WA. In attacking agricultural barriers, we have sought to prove our free trade credentials by progressively exposing our manufacturing sector through reducing tariffs. That is not a wise course of action.

Given our vulnerability as a reliable exporter in certain areas, such as rice and cotton, I now sense a subtle shift increasingly to embrace the services sector as a rationale for hanging our manufacturing sector out to dry. Again, the freeing of the international movement of goods and services is a legitimate area of policy determination, but so is the reasonable protection of a nation's manufacturing base.

Singapore made the conscious decision not to deindustrialise and not to put all its eggs in the services sector basket. Australia really has to make the same conscious decision. At the moment, Australia's manufacturing sector is suffering death by a thousand cuts. Unambiguously, auto manufacturing stands front and centre in Australia's manufacturing sector and is particularly important to our state and to my electorate of Napier. Not only is it the largest employer in the sector but it is also the largest exporter, with the only export that combines our brainpower with our raw resources.

The term used to describe our auto exports is 'enhanced manufactured goods', which I think really sums up the motion: that we are combining the processing of raw resources (which in this case is largely iron ore from Whyalla, where I went to high school) with the best the state has to offer in terms of research and development.

Just on that particular point, the auto sector dominates research and development within Australia (in the private sector) and is only matched by our publicly-funded research institutions, universities and the CSIRO. Australia is amongst only a handful of nations in the world that takes auto manufacturing right from the design stage through to finished product. The contribution of the auto sector to R&D is to the tune of about $600 million per annum, and employed, in the financial year 2005-06, 3,307 researchers, technicians, designers and engineers.

I believe that Holden, in particular, also underpins our other advanced manufacturing activities, particularly in the area of defence. When I drive around my electorate in Elizabeth I am very much aware that at the back, at Edinburgh Park, there is an entire precinct given over to component manufacturers. Across the road, in South Elizabeth, we have engineering firms—Levett Engineering, in particular, which has secured a Lockheed contract to supply for the advanced joint strike fighter project in the US; further out, in Edinburgh Park, we have a burgeoning defence sector. All of these businesses surround General Motors, in large part. Even though they may not have a direct relationship to the work that General Motors do, they benefit by its presence, its training of engineers, technicians, designers and the like. Much of that skill base is transmitted across, particularly into the defence sector and other advanced engineering activities in the north.

So, where are we today? The industry faces enormous challenges. Until six months ago, it was escalating petrol prices and an overvalued dollar. In respect of the latter challenge (an overvalued Australian dollar) Australia has a solid dose of what is described by economists as the Dutch disease—and still does. The Dutch disease explains the malaise that occurred in the Dutch economy following the discovery and exploitation of absolutely enormous hydrocarbon reserves off the Dutch coast. What the exploitation of that particular raw resource did for the Dutch economy was to drive the Dutch currency to such a level that it could no longer export or compete internationally, particularly in its advanced electronics sector.

If I was to give one very illuminating example it would be the virtual disappearance of Philips, as a manufacturer of television sets, from the world stage. That is very much the Dutch disease. Australia now has it. It may evaporate with the driving down of the Australian dollar. However, I think an enormous amount of damage has been done to Australia's manufacturing sector while the dollar was pitched at a very high level.

We have now moved on: petrol prices have dropped considerably and the Australian dollar has come off an all-time low. What has replaced this particular situation is a predicament of domestic and international turmoil as the result of a range of issues, particularly within the US economy. That, in turn, is driving further declines in the domestic and international sales of automobiles. It is placing the futures of General Motors and Ford in a precarious position. Holden have scheduled another 25 days of production shutdowns at the Elizabeth plant which will be spread across the first three months of next year. This means that Holden workers (many of whom are my constituents) will only receive four and a half days pay for each week of work over the first three months of next year. It may well be that, in the final three-quarters of the year, the position is even more difficult for those workers.

I have enormous gratitude for Holden management. It is trying to retain the workforce. It is working on the basis that it will get things right. It has a number of projects in train which it thinks will turn the situation around during the course of next year. Holden has not taken the course of action that Ford in Victoria has taken, where it has reduced its manufacturing capacity by one-quarter. That may not sound a great amount but it is equal to the total production of Mitsubishi.

So, effectively, we have lost another—if you could describe it in such a way—manufacturing operation of the scale of Mitsubishi, due to Ford's decision. The Federation of Automotive Manufacturers, which represents the component manufacturers, indicate that in excess of 7,000 jobs are currently at risk and it desperately wants government action, particularly at the federal level, to kickstart demand. It has put up a series of propositions that the federal government is currently looking at.

Amidst all of this doom and gloom, the Bracks recommendations have inherently substantial proposals at their heart: a better targeted greener $3.4 billion assistance program which will run from 2011 to 2022; $116.3 million to promote structural adjustment; $20 million to help suppliers improve their capacities and global supply chains; $6.3 million for enhanced market access programs; a new Automotive Industry Innovation Council; and $10.5 million expansion of the LPG vehicles scheme. I know that Holden are very keen to incorporate this new LPG technology in their current range of Commodores.

The issue that we are currently grappling with as a nation, and particularly as a state, is that a large amount of that particular assistance is predicated on General Motors and Ford stumping up $3 with which the federal government will match $1. Given the predicament of General Motors, where it may well be unable to fund its operations until the end of December and may file for bankruptcy, I think the odds of General Motors and Ford coming forward with significant amounts of investment money for their Australian operations, to be matched one-third by the federal government, is problematic at best and highly optimistic at worst.

Where are we at? We have a substantial commitment by the federal government which may ultimately never ever get off the ground and the driving down of our tariff rates to the third lowest in the world of 48 nations that manufacture automobiles. Where does that place us? The World Trade Organisation binding tariffs are in the 15 to 40 per cent range. We are driving them down to 5 per cent—well outside of what the WTO is asking and well below the European Union's, which sets them at 10 per cent. Given the context which I have just outlined, I think this decision by the federal government is shocking.

Mr VENNING (Schubert) (12:17): The Liberal Party does not support this motion. I am surprised that the member has moved this. He gave his intention to move this motion some time ago, certainly prior to the federal Labor government announcing its support for the recommendation from the Steve Bracks-led report. A prompt response from our federal colleagues shows support for this report. In speaking to a staff member from the office of Eric Abetz on this matter, we both agreed that this motion was, indeed, embarrassing for state Labor, given that the member is the parliamentary secretary to the Premier, and the Premier is the President of the federal Labor Party, and the federal Labor Party is now supporting the recommendations. I am happy for anybody to refute this, but that is my information.

This motion was initially listed a fortnight ago, and I was ready to get up in the chamber and put these comments on the record, but the motion was adjourned. I am surprised that, today, exactly the same did not occur. In this job things do move on; we do make a stand and things move on. Sometimes you just have to say, 'Well, things have changed; I'm going to let this thing slip off the Notice Paper'; but the member has moved it.

The state and federal Liberal Party is very supportive of the Australian car industry, but we are very fearful that, by the time this package kicks in, industry could be in deep trouble as a result of Labor's bungling. This package fails to address the biggest crisis currently facing the car industry, namely, the credit crisis, its devastating effect on car dealers and the flow-on effect to local manufacturers. In my own electorate last week one of my local dealers—a large dealer—rang up and told me that GMAC finance, which finances most country dealers, has withdrawn its floor finance, and he has been asked to refinance with an ordinary finance company. He cannot get finance anywhere near the level of GMAC finance, Ford Credit, for that matter, or GE—several of them. They are all pulling out of this business; so how do the dealers fund all those cars they have sitting on their lot? It is a serious matter.

The simple fact is that unless the credit bungle is addressed there will be no local car industry. This is on top of Labor further driving down sales with the ill-conceived luxury car tax, which has seen sales in this segment fall by 17 per cent this financial year. It is notable that the only money being delivered this year is to assist sacked workers. How does this help the industry, which is in need of immediate support?

We will examine the full details of the package over the coming days. We have learnt with this government that the devil is always in the detail. This policy is extraordinarily light on detail; for example, there is no detail on how much of the green car fund will be available each year, no detail on the grants process, no detail on the how the structural adjustment scheme will work, no detail on how the innovation council will work, and the list goes on.

It is extraordinary that after almost a year in office the federal government is unable to provide such basic details about its much heralded assistance package. I again speak strongly in favour of our car industry, because a country does need to have a manufacturing sector. We have lost so much in manufacturing in this country. We have very innovative people living in this country; Australians have always been innovative. We have lost almost all of our agricultural machinery manufacturing—almost all gone—and the minister is sitting here. We invented the modern harvester here; we invented the air seeders that are currently used. They were all invented here, and now, not one is manufactured in Australia; it is sad.

Okay; you can say that we cannot compete, that we do not have the economies of scale or the market to be able to tool up and build machines like this. I am happy that the government should support the retention of at least one major car manufacturer, and we know that we have had four or five in the past. If you do not have an Australian industry, then you are totally beholden to exports, and it is a very difficult and risky situation.

I am happy; I have always driven a Holden, and I still do and always will, because I am proud to drive an Australian motor car. I also happen to believe that it is a good motor car of good quality. I am amazed when I see so many Australians buy cars which cost more than a Holden and which are probably not of the same quality. I just cannot understand why Australians have not had a wake-up call—

Mr Kenyon interjecting:

Mr VENNING: I don't know; just go and have a look in the parliamentary car park. I named a former member in this place before, Mr John Quirke. He did the same. I asked him, 'Mr Quirke, what sort of car do you drive?' He was very embarrassed.

The Hon. R.B. Such: He drives a Merc.

Mr VENNING: No; it was a Volvo. Anyway, I am not picking on him; it is a free world.

Mrs Geraghty: What do you drive?

Mr VENNING: I drive a Holden Calais.

The Hon. R.J. McEwen: A Calais?

Mr VENNING: I drive a Calais. I always have.

The Hon. R.J. McEwen: Really struggling!

Mr VENNING: It is not the expensive Calais: it is a cheaper one.

The Hon. R.J. McEwen: A cheap Calais!

Mr VENNING: Rather than treat this frivolously, as the minister seems to be, I urge all those people out there now concerned about our car industry to have a look in their own garage. You have made a decision by choosing the car you drive. I have always supported the Australian car industry. We have several; in fact, I think all the vehicles on our property are Australian, except for my son's four wheel drive. The trouble with farm utes, as the minister would know, is that we do not make a ute in Australia that you can use on farms. They are all Japanese or Japanese derivatives, which are now made in other countries such as Malaysia and Korea.

Mr Kenyon: The one-tonnes.

Mr VENNING: The four-wheel drives, the one-tonnes—there is not one left, and that is sad. My wife drives a Holden ute. It is a nice vehicle, and we are proud of it.

The Hon. R.J. McEwen: You've got the car and she's got the ute!

Mr VENNING: She's got the ute. That is her choice. The minister makes fun, but that is my wife's choice to have the ute. She can have any vehicle she likes but she drives a Holden ute. Do you know why? Their resale is extremely good and she says it is good business to drive around in a ute, and we have a dog, so that is the reason. I plead with people—

Members interjecting:

Mr VENNING: We have a dog. I say to people, rather than feel sorry for our car industry, what have we done about it, as individuals, as Australians? I drive an Australian car because it is another Australian's job. I have done the right thing, but I just cannot believe when people buy makes that cost more—

The Hon. R.J. McEwen: Why are you opposing the motion? Can we get back to the motion or can you just waffle on for another three minutes?

Mr VENNING: I am just saying it is a shame. Anyway, we oppose this motion.

The Hon. R.J. McEwen: Why?

Mr VENNING: Because we are supporting our industry. We oppose the motion.

Mr KENYON (Newland) (12:25): I am happy to support this motion today and, after the contribution of the member for Schubert, I am a little confused, but I am often confused after the member for Schubert has been in here. I want to make a few points on this matter, because it is easy to get caught up in a tariff debate, and often it is not the biggest single issue facing the industry at any one time.

Far be it from me as a young, inexperienced backbencher to give advice to a multinational car company, but I can certainly say that the single greatest reason that General Motors' car sales are dropping in Australia is that they are building cars here that people do not want to buy. If you want to sell a lot of cars, build a car that people want to buy at a price they are prepared to pay. General Motors is not doing that.

My advice to it and other car manufacturers in this country is to start building cars that people want to buy at a price they are prepared to pay. One of the things that really upset me about General Motors Holden in particular, because it is such a capable company, is that it has come in looking for government support for its green car program, through tariffs and industry plans—and it is always about government assistance—but you do not see it exercising its commercial judgment to build cars that people want to buy. It is so frustrating, because it could do it if it wanted to.

When you look at the Monaro, it is a car that was designed from concept through to build in 18 months—an unusually quick time for a motor vehicle to be taken from a concept car. It was shown at a motor show and Holden said, 'Look what our blokes did when they had some time off and they had the workshop to work in.' To have it in full production 18 months later is an incredible feat, but then to come back and say that it cannot put a diesel motor in a Commodore because it would take too long and would involve too much engineering is a load of rubbish. It could source a diesel engine from its subsidiary Fiat, which is on the cutting edge of diesel engines in Europe, and it could put it in a Commodore here, and I bet it could do it in six months if it put its mind to it. The fact that it refuses to do it is incredibly frustrating.

In 1999, Holden launched what it called an e-Commodore, which was a concept car. With the CSIRO it developed a hybrid technology which was equal to the hybrid technology currently in the Prius, but it chose not to build it. In 1999, it could have put the most economical six cylinder car in the world on the road, which was a full-sized family vehicle that people want to buy if they can afford it to buy it and run it. There is a long-term preference over time for people to have the biggest car they can afford to own and run. But did Holden ever seek to bring this into production? No, because it was too hard, according to Holden, even though it developed the technology. Its excuse was, 'It's too hard; we can't do it,' yet it comes back to government time and again seeking government help.

Mitsubishi could have built a 380 with a diesel engine. Ford has a huge range of engines throughout the entire world and could build a diesel but chooses not to do it. In the United States they are licensing Toyota technology to build large cars that are hybrids, but they still choose not to manufacture them in Australia. Personally, I have a preference for small cars—small, fast little hatches, preferably with turbo and four-wheel-drive—but I do not think that is a big market in Australia. The last manufacturer that built a small hatch in Australia was Nissan, and it went out in 1992, I think. The interesting thing about that was that the Pulsar it built here was a higher quality than the Japanese Pulsar.

While I am happy to provide some support to the vehicle manufacturing sector here in Australia through tariffs—and, let us face it, in global terms, 10 per cent is not a big tariff—but, if we are going to do that, we should be expecting more out of our car companies. We should be expecting to build diesels. We should be expecting to build hybrids. We should be expecting to invest incredibly heavily in fuel cell cars. They should be doing this off their own bat.

We have seen the federal government come in helping out with billions of dollars to develop a green car, but we have not seen much enthusiasm, I have to say, from major car builders in Australia to embrace this. We have not seen a lot of enthusiasm to be doing their own research and their own development.

There are companies in Adelaide that are developing fuel cells. There are companies right around the country, the CSIRO and other people, that could all help with the development of hybrid and electronic technology, and we are just not seeing car makers embrace these things as they should be. Instead, they run to government at every opportunity. Car makers around the world have a history of doing this, and they are doing it in the US right now.

The simple fact of the matter is that GMH, Ford, Chrysler and their subsidiaries around the world are not necessarily making cars that people want to buy at a price they are prepared to pay. That is the single greatest weakness of the car industry. We have to be careful, when we are making public policy in this country, that we do not fall into the trap of allowing car companies to get away with that.

Mr O'BRIEN (Napier) (12:31): Quite frankly, I was quite disappointed to hear that the South Australian Liberal Party, particularly the parliamentary party in this house, is refusing to support Holden and the South Australian workforce working at the Elizabeth plant. It is not only the people immediately associated with the Holden operation: it is the component manufacturers in Edinburgh Park and elsewhere in the city that the Liberal Party is effectively turning its back on.

I was very surprised to hear the member for Schubert publicly announce in this parliament that the Liberal Party is at odds with the leaders in the manufacturing sector: the chief executive officers of Holden, Ford, Toyota and myriad major companies that produce components, including Futuris, which is the owner of Elders. What the member for Schubert has basically done is rub the noses of the leaders of those businesses and their workforces—

Members interjecting:

The SPEAKER: Order!

Mr O'BRIEN: The Liberal Party, in this house in particular—and I have to assume that the member for Schubert has cleared this through his party room—is clearly at odds and very much out of touch with what was formerly its natural constituency: large business enterprises. This is very much indicative of the fact that the Liberal Party in this state is becoming increasingly marginalised, does not know where it is going and has absolutely no understanding of the business imperatives that are driving the Australian manufacturing industry.

I have spoken with a large number of senior business people in this state, they support the position taken by the Australian Labor Party in this house today, and I think the position the Liberal Party has taken on this issue is absolutely disgraceful.

Motion carried.