Motions - Commonwealth Procurement


Senator IAN MACDONALD (Queensland) (16:44): We have heard another typical Labor speech—do not worry about the cost; do not worry about the budget blow-out. It is populism, an appeal to the lowest common denominator in the country. It is always useful in these sorts of debates to look at some of the facts. It is a bit like foreign land ownership—everyone was saying how outrageous it was, but when we got the results we found that the amount of foreign land ownership in Australia is a very, very small percentage of the total and most of that is owned by United Kingdom investors.

To get back to the facts, which Senator Carr would do well to understand, Australian suppliers got approximately 94 per cent of all Commonwealth procurement contracts in 2015-16. I will repeat that for Senator Carr's benefit: 94 per cent of all Commonwealth procurement contracts in 2015-16 were awarded to suppliers in Australia. Ninety-four per cent is not a bad number, but, if you had listened to Senator Carr and believed him, you would think that figure had been grossly inflated. But I repeat: 94 per cent of all Commonwealth procurement contracts in 2015-16 were awarded to suppliers in Australia.

Senator Carr would also have benefited if he had understood some of the facts about the Army's service dress jacket. Approximately 70 per cent by value of the service dress uniform ensemble is manufactured in Australia, and it includes these items: the slouch hat, by Akubra, is made in south Kempsey; the chinstraps and puggarees are made by Mountcastle in Yeronga in Queensland; the Sam Brownes are made by Larosa Leathergoods in Thomastown, Victoria; the socks are made by Humphrey Law in Heathmont and Wilderness Wear in Preston in Victoria; and the ADF parade boots are made by R.M. Williams in Salisbury, South Australia. Again, if anyone had listened to Senator Carr they would have thought most of the cost of that uniform was going to China. But I repeat: 70 per cent by value of the service dress uniform ensemble is manufactured in Australia.

In addition to that, I alert Senator Carr to the fact—as I am advised—that no tenderer offered a complete, made-in-Australia supply solution when the tender was conducted in 2014 for the manufacture of Navy, Army and Air Force non-combat clothing. That included the service dress jacket. When that tender was called in May 2014, no tenderer offered a complete, made-in-Australia supply solution. Again, for all the bluff and bluster that we heard from Senator Carr, no tenderer could deliver a complete made-in-Australia article.

The tenderer that was selected had a price that resulted in a saving of about 18 per cent over other prices at that time, and my advice is that Australian Defence Apparel, who won the tender, estimated that manufacturing the service dress uniform in Australia would be triple the cost. Hence my comment at the beginning of my presentation that Senator Carr's speech was typical of Labor—do not worry about the money; do not worry where the money is coming from. Just spend, spend, spend, and when you do not have it just borrow, borrow, borrow from overseas lenders, so we end up paying $45 million a week in interest to foreign lenders. It is always useful in these debates to have a bit of fact. At the risk of repeating myself, I will again emphasise those two figures: 94 per cent of all Commonwealth procurement contracts were awarded to suppliers in Australia; and, regarding the service dress uniform, which Senator Carr mentioned often, some 70 per cent by value is made in Australia.

Commonwealth procurement rules require that potential suppliers be treated equitably based on their commercial, legal, technical and financial abilities and that they not be discriminated against due to their size, degree of foreign affiliation, ownership location or origin of their goods and services. This is an important principle that our exporting businesses also rely on when supplying goods and services to overseas markets. Senator Carr was indicating, if not saying it directly, that the government is doing this to hurt Australian manufactures just for the fun of it—let's do this just for the fun of it. But there is a reason for this—that is, Australia needs to trade to exist. I always say, in relation to primary products, that without good trading abilities what we produce in Australia far exceeds what we can consume in this tiny country. Most of the sugar we produce in Australia is sold overseas, most of the wheat and grain crops we produce in Australia are sold overseas, most of our beef production is sold overseas—and so it goes on. We have to trade, and we expect other countries to have similar rules when looking at buying Australian products. We do not want other countries to say, 'Well, we could buy these goods or services from Australia at this very competitive price, but what we will do is subsidise some inefficient production in our own country and support our own industry.' That is why we enter into these free trade agreements. That is why we are members of the World Trade Organization.

Sure, dumping goes on, but we are trying to address those particular issues of dumping, and the coalition government has made it much easier to bring a case for dumping. Whilst I acknowledge that some countries still embark upon that, most of the countries we deal with and with whom we have free trade agreements abide by the same rules that we do. That is why you have these Commonwealth procurement debates and these rules that I am talking about where potential suppliers have to be treated:

… equitably based on their commercial, legal, technical and financial abilities and not be discriminated against due to their size, degree of foreign affiliation or ownership, location, or the origin of their goods and services.

These rules are in our various export agreements, and they ensure that Australian suppliers are not disadvantaged when tendering for procurement in countries with which we have such agreements in place. So the rules that we apply to Australian suppliers and manufacturers and to government purchases are the same as those that apply in other countries with whom we have these trade agreements. Any proposals to take into account the secondary economic benefits of local preferencing would require officials to consider many uncertain variables in each procurement evaluation, and this would demand very specific expertise and impose significant time and compliance costs for the country. Preferencing or providing weighting to a supplier based on their location would be contrary to the national treatment and nondiscrimination requirements in all of Australia's international agreements.

But there are exemptions. Our international trade agreements do provide a number of exemptions that enable the government to engage directly with Australian industry as long as the principal of achieving value for money is met. The exemptions include procurements relating to property or accommodation, motor vehicles, suppliers that primarily exist to provide services to persons with a disability, suppliers that are small to medium enterprises with at least 50 per cent Indigenous ownership and agreements that relate to essential security in Australia. So there are some exemptions contained in our trade agreements, and they are exemptions that we can use in Australia. There are also exemptions that other countries with whom we trade can apply in their own circumstances.

The whole purpose of free trade is to ensure that Australian exporters, be they of services, goods or primary production, have a fair go at markets overseas and are not stymied by other countries doing what Senator Carr would like Australia to do in certain circumstances. We would come out second best. If we start that sort of trade war with our much bigger neighbours we would lose out, because, I repeat, Australia has to export. We have to trade to continue to exist as the productive and wealthy nation that we are.

The results of modelling of the three new North Asian free trade agreements the coalition government has entered into recently show that they will be worth $24.4 billion in total additional income to Australia between 2016 and 2035, and they will result in an annual boost to the economy of $2.4 billion after 20 years of operation. Australia's exports of goods and services to these North Asian countries—China, Japan and Korea—are forecast to be 11 per cent higher by 2035 as a result of these free trade agreements. That is wealth for the nation. We can export our goods, our services, our expertise and our brains and make money for Australia. We have been doing that for a long while, and that is why we are the fortunate country. We are one of the wealthiest countries in the world. We have one of the best standards of living in the world. Why? It is because we have gained that wealth through trade and through exports.

The modelling that has been done in relation to those free trade agreements confirms the overwhelming benefits of freer trade for the Australian economy. Real wages will be 0.5 per cent higher by 2035, and the terms of trade will be 1.3 per cent higher by the same year. Increased exports and cheaper imports will allow Australian businesses to hire more workers. The annual net jobs increase will be about 8,000 this year, and it will peak at 15,000 in 2020.

In addition, consumers are benefiting under the Australia-Japan free trade agreement, with Toyota's executive director of sales and marketing saying that the Australian dollar prices of Toyotas would fall from the start of 2015, with the cheapest cars falling in price by about $800 and the most expensive cars falling by about $7,500. That means Australians can buy cheaper cars, which means they have got more money to spend on their kids or on education or on holidays, and it contributes to the wealth of this nation and to our standard of living.

The Australian economy grew by five per cent in the June quarter to be 3.3 per cent higher through the year. Net exports contributed the lion's share of that growth through the year—2.2 per cent out of the 3.3 per cent growth. That is what trade has done to our economy, to our way of life and to our wealth as a nation. For 25 years there has been uninterrupted annual economic expansion. The only OECD countries able to claim that sort of annual economic expansion are Australia and, would you believe, Poland. So we have done pretty well. Australia's continuing growth success is all the more extraordinary when considering the challenging external environment, including slowdowns in global trade, investment and economic growth across the world.

I repeat: trade is essential for Australia. We produce much more than we can ever consume ourselves. So we have to make sure that the people with whom we are trading do not put unnatural impediments in our way. If we want them to play the game and do the fair thing then we have to have the same rules in our own economy—hence, the issue that Senator Carr mainly spoke about, the service dress uniform.

I want to conclude by again emphasising that, of Commonwealth government procurement in 2015-16, 94 per cent of those contracts were awarded to suppliers in Australia and, of the value of that service uniform that Senator Carr spent so long talking about, 70 per cent consisted of articles made in Australia. When we have these debates it is easy to get on Facebook and it is easy to be someone like Bob Katter who can get up and say anything to scare people about these sorts of things. But, if you actually look at the facts, you will see that trade is essential for us. We do pretty well out of it, and it has led to that remarkable 3.3 per cent growth that no other countries apart from Poland can claim over the last 25 years. So it is a good news story. These procurement rules are not something only coalition governments have abided by; they are rules that have been applied by all governments for decades. I hope that providing some facts to the debate may assist senators as they consider these issues.

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