Ms TIERNEY (Western Victoria) — From the outset I will just clarify a few matters. We are talking about the automotive industry today.
That includes the major manufacturers but also the component suppliers. Some other automotive areas are not being dealt with today because they do not fall within the description of what is considered to be the vehicle industry, either by the Liberal Party or the Labor Party. For many years there has been a bipartisan understanding and definition of what comprises the vehicle industry. If Mr Ondarchie is now saying that the Baillieu government is prepared to sit down and talk about a proper definition that is a little bit broader, we are happy to do so. But for him to come in here and say that we do not know what we are talking about when we talk about the vehicle industry, he must have absolute nuts in his head.
The vehicle industry has been a forerunner in terms of training. It has been an industry that has dealt with training since 1989 and award restructuring. Labor sat down with all the manufacturers and component suppliers and came up with a vehicle industry certificate.
It delivered training to vehicle industry workers regardless of whether they came from Greece, Italy or Vietnam. We made sure that there was contextual training and that it was linked to wage increases. So do not play this Johnny-come-lately and talk about the automotive centre of excellence and about what has happened since 2010. For goodness sake; it has been going on since 1989. Every comment that Mr Ondarchie made today just demonstrates he knows absolutely zilch about the vehicle industry in this state.
I turn to the motion before us today put forward by the shadow minister for manufacturing, Adem Somyurek. In supporting this motion I make the following observations in relation to the political non-support that the federal opposition has provided in terms of the vehicle industry, as well as what this state government needs to do in terms of supporting the vehicle industry.
Let us start by looking at what the federal Liberal opposition has been saying. The federal shadow Treasurer, Joe Hockey, said that he is going to wipe out all car industry assistance. There is no grey matter here. There is an absolute hostility threading through the comments made by those in the Liberal Party in Canberra. We have also seen the federal Leader of the Opposition, Tony Abbott waltzing through car plants and component suppliers, one after the other, with his fluoro vest on, walking around expressing sympathy with the struggles of blue-collar workers. But of course once the camera shots are complete, the backslapping stops and he returns to his anti-automotive and anti-worker stance.
We have also seen the hostile stance of the shadow Minister for Industry, Innovation and Science, the notorious Sophie Mirabella, in her opposition to the federal government’s $500 million assistance package to the vehicle industry.
Joe Hockey has gone around telling federal Liberal members that he will do everything within his power to uphold the federal Liberal Party’s policy to cut the $500 million assistance package because, he says, it is all about damaging his so-called ‘savings plan’. This is a clear demonstration that the federal Liberal opposition desires to just slash and burn this industry which is so vital to our country and state.
It is no surprise to hear that there is a serious debate going on within the Liberal Party in respect of support for the manufacturing industry, and in particular the vehicle manufacturing industry.
It is played out on the radio, in the print media and on TV. Recently it hit the front page of the Geelong Advertiser thanks to the former Premier of this state, Jeff Kennett, who said that there should no longer be any industry assistance whatsoever provided to Ford or Alcoa. I can report to the house that that went down an enormous treat in Geelong. It was like going back to the future.
On behalf of vehicle workers in Geelong I thank Jeff Kennett for making the jobs issue in Geelong much more clear-cut. I am sure Geelong voters will keep his comments in their minds when they walk up to the ballot box. I call on the Liberal Party to face up to its responsibility to blue-collar workers and join with us to help save thousands of blue-collar jobs. I call upon the state government to join with us to promote a clear vision for the future of an industry that every other country in this world wants, demands and supports.
Mr Ondarchie — Tell your federal colleagues. That is all you have to do!
Ms TIERNEY– I can think of one federal colleague straight away — Bill Shorten. Bill Shorten, the federal Minister for Employment and Workplace Relations, has made a commitment that there would be no roll back on industry assistance whatsoever, so that is easily put to bed.
Today’s motion is about having a debate in this house so we can draw a line in the sand in terms of what the different political parties are doing and saying in relation to this important industry. This state government has almost calcified in a policy sense on how it can add stimulus to an industry that is suffering. When it comes to this industry this state government, as I have said in previous contributions, has no ideas and, after what I heard in the last contribution, no understanding of the vehicle industry. It has no policy and it certainly has no vision for Victoria in a general sense. It is tragic that we are now in a situation where we have to highlight that this government is just not interested in jobs.
It does not have a clear idea about this industry and therefore does not know how to provide assistance to it.
It is really important today for those on the other side to actually stand up and show that they support this industry. They need to stand up and stand strong today, because it could never be so important, given the comments that have been made on page 2 of the Age this morning. Today is an opportune time to remind ourselves of the importance of the industry we are talking about.
We at least need to have an appreciation of the vehicle industry’s contribution to our economy and the competitive complexities it faces in this most difficult environment — for example, members of this government need to be aware of some strong and salient points. Firstly, the auto industry’s export value in 2009-10 was $3.6 billion. That is second to the commodity sector. The auto industry is the largest contributor to manufacturing research and development.
The auto industry in Australia employs 50 000 people directly and several hundred thousand people indirectly. The total auto industry annual turnover exceeds $160 billion. It is a source of significant tax revenue — in excess of $7 billion — and it is the largest manufacturing industry in Australia. It strongly influences the rate of growth and the growth of employment and innovation, and it turns Australian commodities such as steel and aluminium into high value-added exports and products.
The vehicle industry does all of that whilst being discriminated against by a whole range of international factors. Political opposition to the Victorian automotive industry primarily comes from the ill informed. For example, is it fair to argue that industry assistance should cease when the plans installed by governments of all persuasions are derailed by factors totally out of the control of our local industry? The answer, obviously, is ‘no’, but the zealots continue to press the case for industry annihilation. We cannot operate on an equal playing field and remain the most open market in the world. We just have to look at the extent to which other countries protect their industries and block our entry to their markets. I will give some examples in relation to passenger motor vehicles.
In India the tariff is 60 per cent; in Korea, 8 per cent; in Malaysia, 30 per cent; in China, 25 per cent; in Russia, 30 per cent, plus 18 per cent value-added tax; and in Brazil it is 35 per cent.
We have a free trade agreement with Thailand that is anything but fair. It has exposed our local industry to one of the fiercest competitors in the region, which automatically increased the non-tariff barriers to its economy almost before the Australian negotiators made it up to the negotiating table. It is true to say that the tariffs facing Australian car manufacturers in the Thai market are falling, but, due to the use of excise taxes that increase with engine size, Australian car makers have achieved no real improvement in access to that market. Thai car makers, on the other hand, have significantly improved access to the Australian market, and the figures are frightening. Around 17 per cent of cars sold in Australia are made in Thailand, while 12 per cent of cars sold in Australia are made in Australia.
Despite this non-balance of trade, Thailand, like many other countries, continues to use non-tariff barriers as a weapon to exclude competition from its market. For example, depending on the size of a vehicle and the type of fuel it uses, the non-tariff protection in that market can be as high as 40 to 50 per cent.
There is no such thing as free trade, there is no level playing field and here are some examples. Let me start with China. On 1 September 2009 China reduced its tariff on imported auto components by 10 per cent to comply with World Trade Organisation accession agreements, but it has made a mandatory policy that overseas auto makers either acquire 40 per cent of their components from the domestic market or pay more than double — that is 25 per cent — the usual tariff of 10 per cent on components procured from overseas.
China has introduced policies that have refined what can be considered a CBU, which is a completely built-up import, to bring them under the umbrella of the already prohibitive tariff policies. China also introduced a new vehicle consumption tax system in August 2008, which means that vehicles are taxed from 1 per cent to 40 per cent, depending on engine size.
Let us go to Brazil. Brazil has one of the fastest emerging auto industries in the world, and it too has substantial measures in place to protect its local industry. It has introduced a tax on flex-fuel vehicles of up to 13 per cent for up to 2-litre engines, 20 per cent for vehicles with engines larger than 2 litres and 25 per cent for non-flex-fuel vehicles. Its direct trade barriers are 35 per cent for cars, and for trucks it ranges between 14 per cent and 35 per cent. Auto parts also get a guernsey, ranging from 1 per cent to 19.5 per cent — and within that range most fall between 14 per cent and 19.5 per cent.
Local manufacturers with plants in Brazil fall under the Brazilian automotive program and are able to import at reduced tariff rates: 24.5 per cent for passenger cars and 22.5 per cent for commercial vehicles. The Brazilian automotive program requires established vehicle manufacturers to source 60 per cent of all parts locally, whereas newly established manufacturers are required to source 50 per cent locally during the first three years of production and 60 per cent thereafter. Without going into detail, Brazil has assistance over and above what I have outlined. That is provided at the state and federal levels, as well as at a local government level.
Then when you look at other countries — for example, Germany — Volkswagen has received the equivalent of US$14 million in financial incentives dedicated to infrastructure and fiscal incentives worth between US$83 million and US$155 million.
Renault has received a capital contribution of up to US$300 million in interest-free loans, local tax exemptions, the donation of a 2.5 million-square-metre site, the provision of all necessary infrastructure and utilities at the site and a 25 per cent price reduction on electricity for the project. Mercedes-Benz has received land, grants, tax breaks and extensive infrastructure development, including the construction of access roads and rail links to the plant and the development of facilities and sanitation, with lower water costs for a 10-year period. General Motors received a waiver of state sales tax for 15 years and financial incentives of around US$67 million to prepare the factory site.
Mr Ramsay interjected.
Ms TIERNEY — I think Mr Ramsay just said, ‘Move to Thailand’. That is very unfortunate. I will relay that to his constituents who work for Ford in Geelong. General Motors also received an $118 million loan at an interest rate of 6 per cent.
Russia had custom duties on imported new cars increased to 30 per cent in January 2009. Duty on used cars was increased to 35 per cent. A value-added tax of 18 per cent is also applicable to imported vehicles. A customs clearance fee was also levied on imports for goods of a certain value. Russia, Belarus and Kazakhstan have introduced common customs tariffs, which started in January 2010, and tariffs in the non-Russian states have been raised in line with Russia.
Then of course we come to Malaysia, a country which has introduced new policies aimed at attracting investment, promoting high-impact segments, encouraging exports of value-added and green products and fending off increasing competition from Thailand. It has put in an 18-point plan of measures, which include things like the introduction of a mechanism to prohibit the import of used parts and components, effective from last year; the prohibition of used commercial vehicles, effective January 2016; mandatory testing of vehicles that are 15 years old or older; and tax exemptions on the value of increased exports of vehicles, parts and components. The current rates of excise duty for completely built-up and completely knocked-down vehicles, which are based on engine capacity, will be maintained at 75 to 105 per cent, with other similarly high measures for other products. The complete removal of the approved permit system applied to imported vehicles has been pushed back from the original date of 2010 to 2020, signalling that protectionist measures remain in place.
If we then move to co-investment, which is common around the world, I will briefly give some examples. Let us start with Malaysia. Proton has delivered 20 hybrid electric and electric cars to the Malaysian government under an initiative that saw it receive a $78.9 million government grant that was matched by the company.
In the United States of America in December 2007 the Energy Independence and Security Act of 2007 authorised up to US$25 billion in grants and low-interest loans to auto manufacturers and component suppliers to subsidise the costs of re-equipping, expanding or establishing a manufacturing facility in the United States to produce certain qualifying advanced-technology vehicles or qualifying components and for engineering integration of qualifying vehicles and qualifying components performed in the United States.
In essence the legislation that went through Congress in December 2007 intended to provide economic assistance to auto makers and help them comply with increased corporate average fuel-economy standards and implement fleet modernisation plans.
Under federal tax law there are also individual tax incentives that are available to buy hybrid electric vehicles on an auto maker-by-auto maker basis. Each hybrid auto maker’s offerings are assigned specific tax credit by the Internal Revenue Service. Consumers can claim the credit until that auto maker has sold 60 000 hybrid electric vehicles of any kind. Once that quota of 60 000 has been reached, the credit to the auto maker’s models begins to decrease by 50 per cent a quarter until the credit is phased out. Some states are also putting in place local tax credits for hybrid purchases, and many private companies have also been incentivising their employees’ purchase of vehicles with contributions.
We have also seen an initiative in the US of setting up EZs (empowerment zones). The US has set them up in distressed communities by using public funds and tax incentives as catalysts for private investment. Businesses located within the empowerment zones are eligible to take advantage of federal tax incentives to hire residents and expand or improve their business. Toyota benefited from EZ business incentives when it invested in a new truck plant in San Antonio, Texas. Investment incentives are also offered to vehicle manufacturers on a state-by-state basis to attract auto manufacturers.
Mr Ramsay — On a point of order, Acting President, I have listened for some time now to Ms Tierney’s contribution, and we have done a little round-the-world trip in relation to subsidies and tariffs in just about every country in the entire world bar the countries that do not produce automobiles.
The point of order is that the motion talks about co-investment in the Victorian automobile industry — not Russia, not Korea, not Thailand and not the US. This is about Victoria, and I have not heard the word ‘Victoria’ in the last 30 minutes of Ms Tierney’s contribution.
The ACTING PRESIDENT (Mr Eideh) — Order! I believe Ms Tierney wanted to make comparisons, and it is relevant to the motion. There is no point of order.
Ms TIERNEY — I was taking the house through a range of incentives that governments all over the world have put in place. I have included the US because we know how badly that country has been affected by the GFC (global financial crisis), yet even with the difficulties faced by that country with the GFC it saw fit to stand by and make sure that the vehicle industry in that country survived. It did not throw it out with the bathwater, which is exactly what Mr Ramsay’s colleagues in Canberra want to do to this great industry.
Great Britain has also had enormous economic difficulties, and it has a conservative government, but instead of wanting to throw out the vehicle industry it has brought in a number of measures. As we know, on 1 February last year it brought in a range of austerity measures for the whole of the UK economy; however, the Technical Strategy Board has come away unscathed from the UK government’s measures to reduce its costs and will continue to provide seed funding and support new automotive-related technologies, including alternative powertrains — that is, engines, for those who do not understand what a powertrain is. Funding can also come from the UK Carbon Trust for some projects.
The UK government’s budget deficit in recent times and its need to make significant cost savings have resulted in it being increasingly resistant to requests for support from the automotive industry. Several senior government figures there have said that companies cannot rely on similar support to what they had seen during the crisis; instead the government is looking to promote indirect support to improve business — —
Mr Ramsay interjected.
The ACTING PRESIDENT (Ms Crozier) — Order! Mr Ramsay is to confine his comments and let Ms Tierney continue. Ms Tierney is to continue and stick to the motion.
Ms TIERNEY– I have simply touched the surface of what the world’s economies are doing today, outlining the competitive difficulties that the industry faces.
It is not uncommon to assist industry, whether it be primary or secondary industry.
Federal Senator Kim Carr said that President Obama’s auto package is costing about $264 per person, while Australia’s support amounts to less than the price of a ticket to the footy per person. We see a similar approach being taken by the government in Germany and we see a good approach being taken by the conservative government in England, yet in this country the Liberal Party in Canberra has been saying it is going to walk away from the $500 million worth of assistance for the vehicle industry. It has not understood the fundamentals — that is, that the future of manufacturing in this country depends on our ability to ensure that we make technologically advanced componentry and technologically advanced products, which the automotive industry produces. All thinking people would have to concur with this.
Today is the day for this government to state in this house that it has a huge commitment in every sense to vehicle manufacturing, including the components sector. Today is the day to stop saying it is all too hard. Today is the day you do not say when you do not just give up on an industry and say, ‘It is in decline and all too hard, so let’s just let it slide’. Our communities want leadership. If that means we need to fight to keep vehicle manufacturing and the components sector, then let us do it. This industry is simply too important. It represents thousands of jobs and a massive injection of money into the economy. We on this side of the house want to know where government members opposite stand, how they are going to get their colleagues in Canberra to stand up for vehicle manufacturing and the vehicle components sector and how they are going to guarantee that they will deliver on this.
The motion before the house today calls upon the state government to support the practical fundamentals of business.
It calls on the government to join with us and make it plain to the world that manufacturing matters in this state. It calls on the Baillieu government to repudiate the negative, narrow views expressed by the federal opposition and to express its strongest support for jobs and co-investment within the vehicle industry as a means to achieve that.
I concur with Mr Somyurek that the government can start today by changing its purchasing plan and making sure that all government cars are Australian made. I commend this motion to the house.