Greg Hunt

Federal Member for Flinders | Minister for Health

Speeches

Address to the 12th Annual Resource Industry Conference and Trade Expo

Wednesday, 17 August 2016

Port Pirie, South Australia

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Introduction

I am delighted to be here today at South Australia’s premier resource industry conference.

The Industry, Innovation and Science portfolio is fundamentally about providing people, businesses and communities with the best chance to ensure job security and to create jobs.

Both of which are key concerns for people in the Upper Spencer Gulf.

If you think about the three pillars of the portfolio it is about creating the jobs of today, the jobs of tomorrow and the jobs of the future.

However right now there are many communities such as those in the Spencer Gulf who have genuine anxiety about existing jobs.

This is something which is close to my heart.

Bluescope and Arrium

Bluescope Steel is the largest employer in my electorate of Flinders.

Its Long Island plant is only a few kilometres from my office.

I visited again only 2 days ago.

Twice in the last 5 years there has been a real risk that Bluescope’s Western Port facility would close.

I have felt and seen the anxiety this created in my local community.

I say this because it is the same fear being felt in relation to Arrium right here in the Gulf.

It was real for the families directly affected, other local businesses and more broadly in the community.

However, in the last few years Bluescope has transformed itself and turned around its steel operation.

This year it has just announced earnings before interest and tax of $570 million.

It is a tribute to the workers, the management and the partnership they have created.

More broadly it says that Australian manufacturing, and steel in particular, can be profitable if it is competitive.

I cannot pretend this is easy.

But Bluescope’s experience shows that businesses can transform and build a sustainable future for the people they employ and the communities which host them.

In that respect, my first action in this portfolio was to help secure the loan for Arrium.

Industry policies effectively linked to science and innovation drivers are vital to Australia’s future.

My portfolio is focused on ensuring that the right connections are made between science, industry and innovation to drive Australia’s future economic growth and prosperity.

The Portfolio

The Industry, Innovation and Science portfolio is then about job security and job creation.

Together, the portfolio’s three pillars—industry, innovation and science—are about ensuring Australians have well-paying jobs today, tomorrow and into the future.

Last week I spoke about the Government’s commitment to science at the Australian Academy of Science. 

Tomorrow I will be outlining the vision and plan for further innovation—which creates more successful businesses that hire more people and pay better wages—at the AFR Summit in Sydney. 

And I am delighted to speak with you today about industry policy, which is about providing the best possible environment for private enterprise to grow and flourish.

At the outset, I would like to emphasise that industry policy is not about choosing between the so-called ‘old’ and ‘new’ industries.

What we have to do is nurture globally competitive firms in all sectors of our economy. 

Whether it’s the resources sector which represents 9 per cent of our GDP and is responsible for over half of Australia’s merchandise exports.

Or the manufacturing sector which employs about 900,000 people and accounts for over a quarter of business expenditure on research and development.

Whether it’s the agricultural sector, which employs some 300,000 Australians and is looking to capitalise on Asia’s growing demand for high-value food.

All of these sectors bring opportunities for long-term sustainable jobs.

But we have to develop new and innovative ways of working to make these a reality.

At the Government level this means a new wave of microeconomic reform to complement our macroeconomic tasks.

At the level of the firm this means a partnership between management and employees to foster continuous improvement.

South Australia: Challenges and Opportunities

The people of the Upper Spencer Gulf know this better than most.

I know you are proud of your strong industrial heritage but also know that there are both challenges and opportunities.

Therefore we need to address the barriers to new investment.   

One of those key barriers for investment in South Australia is the cost of electricity.

This is something I have warned of and acted on for over 6 years. 

Our opponents deliberately and as an act of conscious policy want to dramatically increase electricity prices.

By contrast we delivered the largest drop in electricity prices in Australian history.

The supply and cost of electricity in South Australia in particular is front and centre at the moment.

What is happening in South Australia can be explained by four main factors.

A cold snap in Victoria and South Australia leading to an increase in demand for electricity and gas, a spike in gas prices, an outage related to an upgrade to the interconnector between
Victoria and South Australia, and issues with integrating increased intermittent renewable energy.

I believe deeply in the need to reduce our emissions and integrate greater renewables growth.

Some States however have wilfully ignored the need to plan to do this and pretended that it is cost and impact free.

The impacts, of a failure to plan at a State level, are very real—higher prices and a residual concern with supply reliability.

That’s why my colleague Josh Frydenberg has convened a special meeting of COAG Energy Ministers later this week.

I’ll come to the other challenges we face and our plan to address them shortly, but first I think it is important to remind ourselves of our economic success as a nation.

1.         Achievements
 
1.1      Australia’s economic achievements and reasons for success
 
Often, as a nation, we fail to acknowledge our strengths and achievements.

Australia’s economic record is one of achievement.

We are now in our 26th year without experiencing a recession.

There is no other developed country that currently matches this. None.

In that time we have weathered the Asian financial crisis, the dot com bust and the global financial crisis.

Since 1992, our economy has more than doubled in size and GDP per capita has risen by almost 60 per cent.

We have performed better than both the leading advanced economies and other resource intensive economies.

We may be ‘the lucky country’ but good fortune doesn’t account for our success.

Success has come from capitalising on our strengths and seizing new opportunities.

And this has only been possible because successive governments have created a positive business environment in which private enterprise has been able to flourish.

This is Government policy coupled with private sector initiative.

1.2 Government policy

Our businesses have benefited from far-reaching economic reforms in recent decades.

These include:

• reducing corporate tax rates

• new free trade agreements to increase our markets and reduce tariffs

• reducing business red tape, and

• using migration to boost the workforce and creating more flexible labour markets.

Today, Australia’s business environment compares favourably to other countries as measured by the World Bank and OECD—we’re ranked 13th out of 189 countries for ease of doing business.

However, we can do better. 

I have already written to all of my State and Territory counterparts offering to work together; to reduce the red tape associated with approval processes.

We are an attractive investment destination and I should mention in particular that South Australia has an excellent reputation as a destination for resource investment.

The role of good policy should, however, not be underestimated.

Deregulation and business simplification, reduction in tariffs, growing embrace of Asia, migration-augmented labour supply, and strong and stable institutions have all underpinned Australia’s success.

But on this we should never be complacent.

Bad policies can undo much of the good work.

That’s why we opposed the carbon tax.

It was specifically designed to drive up energy costs while failing to have any significant impact on emissions.

1.3 Private sector initiative: Australia and South Australia

While governments have helped set the right conditions, it has ultimately been the vision and drive of private enterprise that has generated prosperity.

Businesses have adapted to new technologies, expanded into new markets, connected to global opportunities, and become more attuned to customer needs.

Our success has been largely underpinned by our ability to seize new opportunity, arising from the creation of a positive business environment by successive governments and the drive of private enterprise.

Central to this has been our people.

Australia may have a relatively small population, but we are world leaders in many areas.

Our firms have led the world in blood plasma, the Cochlear implant and cervical cancer vaccine, but there are many more examples.

The drive of private enterprise has involved pursuing comparative advantage in sectors of traditional strength such as mining, agriculture and some niche pockets in manufacturing, including unprecedented levels of mining investment recently.

South Australia in particular has shown that innovation can boost business productivity and help communities to transition.

Here in Port Pirie, Nyrstar is investing $500 million to redevelop the 125-year-old lead smelter into a modern, multi-metals recovery and e-waste processing facility.

The upgraded facility is expected to have an operating life in excess of 30 years and will deliver environmental benefits through reduced emissions.

It’s a good illustration of how this region can transition into a major hub in advanced manufacturing and cleantech.

Another great example of local innovation is the expansion of Sundrop Farms’ arid horticulture operation near Port Augusta.

The $150 million construction will open later this year and will be the first commercial scale, high-tech greenhouse facility of its kind in the world.

The company has secured a 10-year contract with Coles for its truss tomatoes which will be grown in greenhouses that integrate renewable energy and desalination.

It’s this type of ambition and ingenuity that serves this region well, and it’s the same mentality that has underpinned Australia’s economic success.

While Australia has a unique record over the last 25 years we have to be honest about the economic challenges we also face.

It’s to these challenges that I now turn.

2.         Challenges

2.1       Global economic challenges

Global growth has been below pre-GFC levels for some time, and ongoing uncertainty in the global outlook will continue to affect Australia’s economic trajectory.

Australia’s terms of trade appear to have stabilised at a level roughly 35 per cent below their peak in late 2011.

Years of declines have imposed a drag on domestic income, but this downward pressure is likely to ease, with most forecasts suggesting terms of trade will be fairly stable for the next two to three years.

Growth among Australia’s major trading partners remains slightly below its long-term average, with Chinese growth declining in 2016, particularly in the commodity-hungry industrial sector.

The EU and US have recorded above-trend economic growth in recent quarters, supported by accommodative monetary policy and modest improvements in business investment.

Improving trade competitiveness and falls in the Australian dollar are helping to sustain Australia’s trade performance and pivot the economy towards new drivers of growth.

However, greater global integration does expose us to more competitive pressures as communication flows are instantaneous and trade in services is no longer constrained by geography.

Income growth in advanced economies is also relatively flat and if this continues our living standards will be eroded.

Research by the McKinsey Global Institute has highlighted that from 1993 to 2005, 98 per cent of households in the developed world saw increases in real wages.

However since then almost two-thirds of households in developed countries have experienced flat or declining real wages.

So much of the Western political landscape can be explained in this one snapshot.

Without hope there is anger.

And that anger often proposes the lifting of the drawbridge: precisely the wrong solution to the problem at hand. 

These challenges make it even more important then that Australia has a strong and stable base for growth.

We need new markets and the push for further FTAs is vital.

However while we are focused on opening new markets, we are equally committed to ensuring Australian businesses can compete on a level playing field.

We must have a rules based environment.

That’s why the Anti-Dumping Commission is important.

It provides a mechanism which can help ensure the playing field is level and allows Australian businesses to compete on merit.

This brings me to our domestic challenges.

2.2      Domestic economic challenges

At the macroeconomic level we face both fiscal and tax competitiveness challenges.

The UK is moving towards a 15 per cent corporate tax rate.

We must be able to compete or otherwise rational capital will look elsewhere.

Similarly, on the fiscal front, we are moving back to surplus through a clear plan.

I have to say this path is being pushed despite the absolute resistance of the alternative Government of Australia.  Labor built in legislated spending growth and then opposed the vast bulk of attempts to live within our means.

But we will get there.

We also need a new round of microeconomic reform.  

That is why we seek to and I believe will re-establish the Australian Building and Construction Commission.

This is simply about ensuring that we have the rule of law on our worksites and can pursue up to a 30 per cent cost reduction in our major construction projects.

Similarly we need to encourage investment through ensuring that we are both innovative and seen to be competitive.  

2.3       The situation in South Australia

South Australia has itself been adversely affected by global conditions and changes to our industries and markets.

The Whyalla steelworks is under pressure from low international steel prices, global overcapacity and the need to be truly competitive.

South Australia’s only coal-fired power stations at Port Augusta – running on coal from Leigh Creek – have closed, the first major move away from coal fired power in Australia.

And the last of South Australia’s car makers will shut their doors in 2017.

Historically, these types of sectors supported business development and jobs growth.

I should note that the Australian Government gave over $300 million to each of the three big car firms from 2011 to 2015. 

Despite that, all three companies chose to leave because they did not think they could manufacture competitively here.

The lesson could not be clearer: to survive and prosper, a business must be genuinely competitive in its own right.

Our fundamental task is to provide the conditions in which Australian workers are able to contribute to competitive businesses.

That’s why innovation in 100 year old firms such as Dulux is so important.

This is a firm that has invested in research which has led to more durable paints.

And in the process, has created more manufacturing jobs, more construction jobs and tripled its share price in the last six years.
 
It’s why we want to help existing businesses to adapt as well as encourage new ones to prosper not only in South Australia but across the entire country.

I turn now to what the Australian Government is doing to achieve this goal.
 
3.         Actions

3.1       Creating the right business environment: Continuous Economic Reform

The Government can best help Australian businesses realise their potential by creating a business environment that is conducive to growth.

What it can do is ensure the underlying settings in areas like business tax and finance, labour, infrastructure and skills, make it easier for businesses to thrive.

It’s about putting in place the right incentives and removing unnecessary barriers; not holding the proverbial stop sign up at every fork in the road.

3.1.1 Reducing the tax burden on industry

The Government is committed to reducing the tax burden on industry because this will encourage more investment and more job creation.

Our Enterprise Tax Plan will progressively reduce the company tax rate over 10 years to 25 per cent and we’re providing additional tax incentives for small businesses.

We are also working to reform inefficient taxes and red tape that hinder businesses and cost the country $176 billion a year.

Our efforts have already reduced the regulatory burden by $4.8 billion since 2013 and a further $15.7 billion from repeal of the carbon tax.

And we’re determined to get our public sector finances under control so that we're not leaving a debt which is going to lead to higher taxes down the track.

3.1.2    National Innovation and Science Agenda

I alluded earlier to the fact that industry, innovation and science should not be thought of as siloed policy areas but rather are the key ingredients of job creation.

This is nowhere more apparent than in the Prime Minister’s National Innovation and Science Agenda which sees innovation and science as important drivers of business success.

Businesses that innovate generally perform better than those that don’t.

They make more sales, they generate more profit and they employ more people.

The Government is investing $1.1 billion over four years in the Agenda and one of my portfolio priorities is to continue to implement its measures.

An example of this is a $3 million grant I approved only yesterday for the Future Oyster Co-operative Research Centre. The CRC’s work will help accelerate disease resistant breeding for
oysters in South Australia, New South Wales and Tasmania. This comes at a time when oyster production in these states is being severely impacted by aquatic diseases.

Another example is the $19 million Business Research and Innovation Initiative that will encourage small and medium businesses to solve difficult policy and service delivery challenges.

I am pleased to announce the launch today of applications for the five challenges in the pilot program.

These are in the areas of biosecurity, use of intelligence, policy design, child protection, and water markets.

Eligible businesses can apply for grants to develop ideas addressing these challenges that the Government may then buy and use to improve its services.

As well as driving innovation in Australian businesses, this will change the nature of Government procurement through sourcing the most innovative solutions possible.

3.1.3    Free Trade Agreements

I should emphasise that the National Innovation and Science Agenda builds on key measures we have already put in place to support industry growth.

One of these is about opening up new markets for Australia’s products and services through concluding free trade agreements with China, Japan and Korea.

These provide unprecedented access for our firms to the world’s largest and most dynamic markets.

This will help firms in the region to build partnerships so they can better target local and international opportunities.

China, Japan and Korea already purchase more than two-thirds of our resources and energy exports, and these agreements will further enhance our competitiveness.

Our next task is to deliver agreements with Indonesia, India, the Gulf Co-operation Council as well as Europe.

One intriguing possibility is an early agreement with the UK.
 
3.2       Supporting businesses in transition: sectoral reform

While national reform is critical, each sector has its own strengths and needs.

It’s up to businesses to respond to change and seize new opportunities.

But the Government has an important role to play in supporting businesses to transition.
 
3.2.1    Steel

Here in South Australia, the steel industry is under sustained pressure from low international steel prices impacted by global overcapacity.

As Bluescope shows, we also need to be competitive.

The Australian Government recognises these challenges and is working with the steel industry to ensure it stays globally competitive.

As the car sector shows, government grants will not help a business to survive in the long run if it is not competitive.

We are simply beyond that moment in history where public grants should replace private debt, for the simple reason that it rarely works.

We can however use strategic loans to assist in critical sectoral transitions.

In my first week as the new Minister, we therefore delivered our election pledge of a $49.2 million loan to Arrium to purchase equipment for its iron ore operations near Whyalla.

This builds on our ongoing support for Australia’s steel industry including:

• bringing forward a project to upgrade 1200 kilometers of rail line between Adelaide and Tarcoola, substantially boosting demand for quality steel produced at Whyalla;
 
• providing $1.1 million to support retrenched workers at Arrium and associated supply chain businesses to find new employment opportunities; and
 
• strengthening Australia’s anti-dumping system to give the Government the ability to respond to unfair trade.  I stress though that this is about unfair trade only. 

The situation in Whyalla is similar to what was happening in my own electorate of Flinders a few years ago.

It gives me both hope and a model as I visit the Arrium plant in Whyalla this afternoon.

3.2.2      Manufacturing

I would also like to note the joint programs with Victoria and South Australia to ease the transition for workers and businesses that are affected by the shutdown of auto manufacturing.

The $90 million Next Generation Manufacturing Investment Programme is the key component of the $155 million Growth Fund we established.

It supports businesses investing in capital projects to establish or expand high-value manufacturing operations in South Australia and Victoria.

The Government has also ensured a positive future for manufacturing by committing to a continuous naval shipbuilding program at an investment of over $89 billion, which includes the construction of 12 new submarines.

The scale of defence construction is unprecedented and Australia’s advanced manufacturing sector will be vital to providing the goods, services and skills required.

We do this for strategic reasons but it also creates huge industry capability here in South Australia and across Australia more generally.

3.3 Regional Jobs and Investment Package

Just as the Government has a role to play in supporting businesses to transition, so it has a role in supporting regional communities to seize new opportunities.

That’s why the Australian Government has earmarked $20 million for the Upper Spencer Gulf as part of a $200 million Regional Jobs and Investment Package.

The package will create local jobs and growth, and help diversify the Upper Spencer Gulf as well as eight other regional economies across Australia.

The Government recognises local communities are best placed to determine what is needed in their area to promote growth.

The Department of Infrastructure and Regional Development will begin engaging with regions in coming weeks.

We’re also helping local businesses to improve their productivity and competitiveness through the Government’s Entrepreneurs’ Programme.

This includes a grants initiative called Accelerating Commercialisation which helps Australian businesses to commercialise their smart ideas.

I am pleased to announce today that 20 businesses across Australia will be offered $11.3 million in grants to help them break into new and international markets.

This will support projects in key industries including food and agribusiness, mining, advanced manufacturing and medical technologies.

For example, Seels Technology, based close to Adelaide’s CBD, has been granted $1 million to develop a substitute for stone aggregates to be used in concrete mixes.

This unique technology provides a lighter, stronger and more flexible concrete product.

Taken together, we are seeking to transform our tax and fiscal landscapes at a national level.

And at a sectoral level it is time for a new round of microeconomic reform to allow us to create long term competitive jobs.

Conclusion

Governments can help create the conditions for private enterprises to flourish.

But the private sector creates the real long-term jobs which underpin our prosperity and the future of Australian families.

As we stand at an economic crossroad, we must not lose sight of what has served us so well to date.

We need to make sure our industries remain globally competitive and we can’t do this by raising the drawbridge and walling ourselves off from the rest of the world.

It’s a competitive world out there, but exposure to that competition has helped us become stronger in the past and it will continue to be that way in the future.

But we must face the world with open eyes, not turn our backs.

Ultimately, if we give the Australian people the chance through competitive settings, they can be the best in the world.

Thank you.

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