Steel Industry Protection Bill

Second Reading

Adjourned debate on second reading.

(Continued from 22 June 2016.)

The Hon. R.I. LUCAS (19:46): I rise on behalf of the Liberal members to speak to the second reading of the Steel Industry Protection Bill. In doing so, I reflect the views of all of my Liberal colleagues to say that our thoughts are with the ongoing battle of industry and workers, in particular in Whyalla, but nationally as well—those in the steel industry: an important industry for the future of the nation, in particular, but also an important industry for the future of the state. The bill we are being asked to speak to today is introduced by the Hon. Mr Parnell on behalf of the Greens, similar to bills introduced by other Greens members in other jurisdictions as well.

All governments, whether they have been Liberal or Labor, state or federal, have generally shared the view of trying to respond to the challenges of the steel industry internationally in the best way they see possible, in terms of assisting the industry. In South Australia, the state Labor government has implemented a steel industry participation initiative to ensure that all South Australian government projects include contract conditions specifying that steel must be sourced from mills with Australasian Certification Authority for Reinforcing and Structural Steels (ACRS) third-party certification, and that steelwork must be sourced from steel fabricators independently certified to the recently created National Structural Steelwork Compliance Scheme.

The government, through the steel task force, has provided $4.3 million in funding over four years to assist the South Australian steel fabrication sector to become compliant with Steelwork Compliance Australia's requirements. In doing so, the Liberal opposition is supportive of the initiatives that the Labor government has taken, insofar as they go.

In looking at what the state government has done, and what this bill seeks to do, there are clearly some significant differences, and I guess because we are in opposition we are not privy to the legal advice that the government would have received. On my recollection, many years ago when we were in government, in relation to any decisions that state government sought to take which might or might not be seen to be in conflict with national or international agreements, I suspect the way the state government's response has been structured is based on the legal advice as to how far they are able to go in terms of favouring Australian producers—steel manufacturers—as a result of international agreements.

As I said, being in the opposition we are not privy to the latest legal advice that the government would be privy to, and I am assuming that, whoever speaks—I think the Hon. Mr Ngo speaks on behalf of the government—it is possible that part of his contribution may well include the government's legal advice in relation to this bill and what the state government has done already in terms of trying to assist the steel industry.

The federal government and the member for Sturt, in the various portfolios he has held in the last 24 months, have been prominent in terms of seeking to assist. They have introduced import duties of between 11.7 per cent and 53 per cent on Chinese-made steel products. As they describe it, this antidumping action was designed to ensure that Arrium could compete on an even ground with imported steel. I do not have the exact detail, but they did bring forward a major rail contact to try to provide increased work activity for Arrium and its workers at an earlier stage to assist Arrium in its ongoing battle for financial viability.

Both the federal Liberal government and the state Labor government have sought, in their different ways, given the levers available to them, to do what they can to assist the steel industry and Arrium in particular. In looking at the other state governments, the Liberal government in New South Wales, for example, sought to provide assistance in a different way. They recognise the importance of local steel manufacture there, but they maintain their commitment to trade agreements and being globally competitive. They sought to reduce regulation, business taxes and red tape as it applied to the steel industry located in the state of New South Wales.

The Victorian Labor government introduced an industry participation policy, we are told—back a number of years ago now, this is not a recent initiative, and I will not go to the detail of all of that—but the point that is being made is that it appears that whether it is a Liberal government or a Labor government, whether it is a state government or a federal government, everyone has been seeking to do what they could to try to ensure the ongoing viability of the steel industry in the nation in particular, but from our viewpoint in the state of South Australia.

One of the key issues in relation to the bill that is before the house this evening—and I indicate on behalf of Liberal members that we will support the second reading of the bill—is that we will be moving amendments, which I think have been filed in my name. As I understand it, should the bill get through the second reading this evening, we will delay the committee stage to enable members to have a good look at the amendments that we have crafted, or the party room has approved, for consideration.

Essentially, those amendments are seeking to ensure that, whatever steel is being used in South Australian government projects, the origin of that steel would be disclosed contemporaneously—I think that is the appropriate word, although it is not used within the drafting of the amendments as I have seen them. However, the intention is that there be early advisement of the origin of the steel that is being used in the state government funded projects.

There has been recent controversy—I have not been actively engaged in it, but in a number of the state government funded projects I know that members of my party, Independent members and members of the media, have raised issues as to whether or not the steel being used in the O-Bahn project, for example, and in various other projects, was Australian steel or not.

The question has been raised as to whether the Royal Adelaide Hospital project or the Festival Centre project or the Adelaide Oval project, etc., whether the steel being used was Australian steel or not. Because of the confidentiality of both the approach of the government and also the confidentiality of the contracts which have been entered into between the government and the lead contractors, that information is not made public, or is not always made public, and we are not left in a position of knowing whether or not Australian steel has being used, assuming that there was Australian steel available for the sort of project that was being funded by the government.

I will be interested to see the government's response delivered at the second reading in terms of the compliance of the legislation with international trade agreements and procurement agreements. The other interesting thing is—in terms of the drafting of the bill—I think as the Hon. Mr Parnell, as a man with a legal background will know, there are lots of interesting variations of what we might refer to as publicly funded projects. So, the easiest one is where it is completely public funded and it is on our balance sheet and taxpayers' money clearly has paid for it. I suspect the closest of that in the examples I have given would be the O-Bahn extension.

The Adelaide Oval one is an interesting one in that, for example, the state granted money; the football associations and others—cricket associations—borrowed money. There was a vehicle called the Stadium Management Authority which managed it. It was not what I would call a traditional public sector funded procurement project. So, I think when we get into the committee stage, these are the sorts of issues I am sure the Hon. Mr Parnell, if he has not addressed, will address in terms of how he sees his draft bill applying in that sort of circumstance.

The next level of complication we have, of course, is what we now call the PPP project. Let us take the new Royal Adelaide Hospital project, where at this stage, the vast bulk of the money that has gone into the approximately $2 billion that has been funded for the project, which obviously includes some for steel, is actually all private sector funded, and there is a legal case going on at the moment before the building is handed over to the state. The taxpayers will not start paying for that building until—who knows—2018, 2019, or whenever it is that we start making annual lease payments of approximately $396 million a year for the next 35 years, or whatever it is, for the project.

So, with the money that has been expended on the steel, etc., that is going in there, there is an interesting legal question. Clearly, there is a contract. Technically we do not have to take control of the project: we can write it all off and say, 'Too bad, we're not going to take the hospital.' It is highly unlikely but I guess that is the game the Minister for Health is currently playing with the builders and others through the court system at the moment. Technically, in the end, that is a legal possibility, not a probability but a possibility.

So, the money that has been expended on the steel at the moment is obviously private sector money and it will eventually be paid for, if the contract is concluded and it is handed over, so there is the applicability of the drafting of the legislation to that sort of circumstance. The PPP, of course, has, as the Auditor-General has noted, become a more common procurement device in recent times. We then have the much more complicated and difficult area of the debate about an interconnector.

There is a bucketload of steel that is used in an interconnector, and there is a half a million dollar or a million dollar study going on at the moment about potentially a new interconnector between South Australia and New South Wales, with an estimated price of maybe $500 million-plus for an interconnector, and a lot of steel involved if that interconnector goes ahead. That is a private sector company. It may or may not undertake that particular project. If it does it in the way currently envisaged by the National Electricity Market rules, it would be funded by electricity users in New South Wales and South Australia.

I have seen, however, the state government raise the possibility that maybe the state of New South Wales and the state of South Australia might make payments towards it. There is no commitment, I am not suggesting that, but that particular option has been flagged. If the state governments were to make a contribution towards an interconnector to a private sector company would that comply with the requirement? Certainly, on my advice, the cost differential between Australian steel and steel from overseas which might comply with the state government's requirement of the national Australian standard, would be, potentially, tens of millions of dollars difference.

It is an interesting issue because if in the end it costs more, then the electricity users of South Australia and New South Wales pay the differential of the increased costs through their electricity bills over the next 30 or 40 years, if that is the case. I do not profess to have sought to apply the Hon. Mr Parnell's legislation to each of those procurement options, really because at this stage I am saying I am interested to hear the state government's position and legal advice in relation to it and I will be interested to hear the Hon. Mr Parnell's views in relation to how it might apply.

For those reasons, and for the other reasons that I have ready indicated, the Liberal Party's position is supporting what the state Labor government has done thus far, and what the Federal Liberal government has done thus far, and certainly by way of amendments seeking to put in an additional requirement that we are aware of the origin of the steel that is being used in publicly funded projects, however that might be ultimately defined, which might assist transparency and accountability in the public debate.

Ultimately, the position the party adopted was not to, in essence, enforce, as is envisaged in the legislation, a requirement on state government procurement that Australian steel has to be used in all circumstances irrespective of the cost penalty that that might impose upon the taxpayers of South Australia.

In conclusion, on behalf of Liberal members, I indicate that the Liberal Party supports the second reading, but we do so with the intention of, when next we discuss this in the committee stage, moving the amendments which have been circulated only today or yesterday in my name.

The Hon. K.L. VINCENT (20:03): Just to assist the council, I only wish to indicate that Dignity for Disability supports the bill.

The Hon. J.A. DARLEY (20:03): I want to thank the Hon. Mark Parnell for this bill. I have spoken before about the government's unwillingness to support local South Australian businesses when awarding tenders. I understand that the economic benefits of awarding a tender to a South Australian business is very rarely, if ever, considered when these decisions are made. We have seen this on multiple occasions, but I especially remember the effect that awarding the whole-of-government stationery contract to a large multinational had on South Australian businesses.

We saw local companies having to let people go and face closure because of the government's kneejerk reaction to the actions of a small group of individuals. I understand that prior to winning the tender for the whole-of-government stationery contract the multinational company opened a local distribution centre in South Australia to demonstrate their commitment to assisting with local employment; however, shortly after winning the tender, all local operations were wound up and all stationery is now being shipped from interstate.

There has been no real benefit to the local economy and employment, and it is little wonder that we now have the highest unemployment in the country, given that our own government does not want to support our own businesses. I always find it curious that the government goes to some length to promote our products overseas, and is the first to blow the trumpet if a South Australian company is successful interstate or overseas. However, when it comes to what really matters, that is, supporting the businesses, they are nowhere to be seen.

I appreciate what the Hon. Mark Parnell is trying to do with this bill, but I cannot support it. It is not because I do not agree with the idea, but rather it is because I am concerned about the implications it may have. If this bill is passed, other countries and states may retaliate by refusing to purchase South Australian goods. Instead, I hope this bill is used as an impetus to the government to look at doing things differently, and to have a wider scope of considerations when it comes to awarding tenders.

The Hon. T.T. NGO (20:05): I rise today on behalf of the government to assure the chamber that economic contribution is already central to the major projects managed and awarded by state government agencies. The South Australian government welcomes the Steel Industry Protection Bill, and I also commend the Hon. Mark Parnell for his interest in what is a vital industry for the state.

I understand that the Treasurer, the Hon. Tom Koutsantonis, has been to Whyalla on many occasions recently, and I also understand both the intent of the Save Our Steel campaign and how effective it has been. The government backs a move to strengthen support for the steel industry through government procurement. However, it is of the view that this can be better achieved by leveraging off the already very successful South Australian Industry Participation Policy.

A key objective of this government through its procurement activities is the development of the steel industry and other industries of strategic importance to this state. The government's requirement to use Australian standard steel and steelwork is being incorporated into the Industry Participation Policy. This will continue to apply in conjunction with the Industry Participation Policy's requirement for tenderers to commit to providing economic benefits to the state.

The Treasurer, Tom Koutsantonis, has been pushing for all states and territories, and the commonwealth as well, to adopt these policies. There has been progress and the campaign benefits Whyalla most when there is broad endorsement. I have been told that this approach has been put in place through rigorous advice to ensure that it meets both the objectives and tests on this government under free trade agreements. This makes obtaining that broad endorsement simpler.

The government also has broader objectives to gain market access that benefits trade exposed sectors, such as primary industries and mining in particular, as well as newer markets in services trade. The government has been mindful of their trade access as well: this is why the policy has met the difficult balance needed to succeed.

The time is right to think more broadly than just steel, to leverage further off the Industry Participation Policy and support other government policy objectives, such as Aboriginal economic participation, and also innovation and growth strategies and support for special economic zones in areas such as the northern suburbs and the Upper Spencer Gulf region. This has already been effective under recent changes to the Industry Participation Policy.

I want the Save Our Steel campaign to continue its success, and a major part of this is to ensure the balance between requiring Australian standards and consistency with our broader international obligations under the free trade agreements. I am proud of the leadership the government has taken so far to help Whyalla. I believe the government has made a $50 million grant to improve the productivity and efficiency of whoever the new buyer is.

The government has also made $10 million of interest-free loans to mainly small businesses affected by the administration of Arrium. This will help those small businesses with cash flow problems, and hopefully they will get past this difficult stage. The government is committed to examining the bill between houses and will consider the bill's potential shortcomings once it goes to the other place.

The Hon. M.C. PARNELL (20:10): In summing up the second reading debate, I would like to thank the Hon. Rob Lucas, the Hon. Kelly Vincent, the Hon. John Darley and the Hon. Tung Ngo. I thank the Hon. Kelly Vincent for her brief—

The Hon. K.L. Vincent: Succinct.

The Hon. M.C. PARNELL: —succinct contribution of support. I also acknowledge that the Hon. John Darley has given this some thought. Perhaps when we come back in two weeks' time there might be some aspects of the bill that he is able to support. I will just make a few brief observations about the Liberal Party position. I appreciate that in a spirit of cooperation they are allowing the bill to go through the second reading, and we will debate the detail of the Liberal amendments and any others when we come back in two weeks' time.

The Hon. Rob Lucas did refer to potential legal difficulties, and he made the point that he is not privy to any latest legal advice. I am always willing to provide the Liberal Party with legal advice, and I do not charge. One thing I did notice, and it has occupied me as well, is the idea that there are international trade agreements that people are nervous a bill like this might infringe. I will make one brief point: treaties that Australia signs, by virtue of a very peculiar law we have in South Australia, do not have as much force as people might think.

Members might recall that, I think three times now, I have tried to repeal the Administrative Decisions (Effect of International Instruments) Act, unsuccessfully. Maybe I should be grateful that I have been unsuccessful because that is the bill that says no state ministers or public servants can be held to account for failing to comply with an international treaty, unless of course it has been implemented into domestic legislation. I put that in as an extra point.

Certainly, I think the flavour of this debate is one around governments trying to pretend that they are in favour of free trade whilst at the same time wanting to protect local industries, as the Hon. Rob Lucas and the Hon. Tung Ngo and others have said is also their agenda. The Hon. Rob Lucas referred to the federal Liberal government and the state Labor government being in step in terms of local procurement policies.

It was, in fact, very timely. I do not know if members have caught up with the news today, but the Arrium steelworks at Whyalla has just announced that it is putting an extra shift onto its steel rolling mill, and that will result in the creation of 44 new jobs. According to the steelworks' executive general manager, Mr Theuns Victor, there are a number of factors contributing to the greater demand for steel. These include a strong pipeline of rail work stemming from this year's federal budget, changes in government planning and procurement policies, support from the steelworks' current customer base and a new customer on the order book.

That is great news for the people of Whyalla and for the 44 workers. Maybe they are previous workers who were laid off who will get their jobs back; maybe they will be new workers. Someone might be tempted to think that, clearly, we do not need a bill like the one before us because we have some people re-employed without it, and I think that is the debate we are going to have in two weeks' time about whether we can rely on policies which can change as the wind changes or whether the best protection we can offer workers is the guaranteed local procurement in legislation.

As to the amendments that the Liberal Party has tabled and that we will debate in two weeks' time, I guess the question they pose is whether it will be sufficient to shame governments for poor performance and for not complying with local procurement policies or whether we need to mandate and punish non-performance and non-compliance with local procurement policies. I guess that is at the heart of those amendments, but we will deal with those in two weeks' time.

The Hon. Rob Lucas referred to the potential question about the scope of projects that are caught and, yes, that is tricky because not everything is a straightforward government build, by a government department, paid for with government money. There are more convoluted ways that public infrastructure is provided. I will point out that to the best of my ability I have included definitions of designated public works and the definition of public authority, which includes an ability to use regulations to catch some of these other circumstances. Even if it is not a direct payment out of consolidated revenue by a government department or a minister, we can use regulations to catch other types of projects, and I think that may or may not be the best we can do. I am open to sensible amendments on those grounds.

The Hon. Rob Lucas mentioned that it may well cost more to buy Australian steel, and I guess to a certain extent that is the point, just like it costs more to build submarines in Australia than to buy them off the shelf from somewhere else, but from a public policy point of view people see that there are benefits from doing things locally. I point out that my bill does not include open slather where a local steel producer can charge what they want and the government must buy their steel. There is a 20 per cent price buffer built in, and on my calculations, that should be more than enough to ensure that 90 per cent of steel used in infrastructure projects is Australian steel.

The Hon. John Darley made the point again in relation to international trade agreements that we are entering that area where there is a fear of retaliation by other countries when nations or states try to implement local procurement policies. I guess we will have a bit more of a debate on that when we come back, but it just seems that this area is so full of backdoor methods that countries use. We have even heard the Hon. Tung Ngo refer to antidumping tariffs, so there are other methods which effectively can be seen as protectionist or local procurement policies but they are done through the back door. My bill does it through the front door.

The Hon. Tung Ngo's contribution reinforced that this government supports procurement, but he says that they prefer to leverage their industry participation policies. Again, the question is whether those policies are enough or whether they need to be mandated. I thank members for their contribution. I am pleased that this bill will be read a second time tonight. We have two weeks to consider the Liberal amendments, and I suggest that if other members have amendments they think could prove improve this bill, we could have those tabled in the next two weeks. I look forward on Wednesday week to continuing the debate on this bill.

Bill read a second time.