HANSARD EXTRACT
| Employment
Committee Report |
| 7 December 2006 |
Mr HAYES
(Werriwa)
(11.10
a.m.)—I
join my colleague the member for
Gorton
in speaking to this important report from the Standing Committee on
Employment, Workplace Relations and Workforce Participation entitled
Shifting gears: Employment in the automotive components
manufacturing industry. It is important because the report was
brought down without dissent. Clearly a lot of time and effort was
put into addressing the present position of the industry—the
industry collectively as well as various enterprises within it.
The picture that is painted in the report Shifting gears is
one of significant global developments affecting our automotive
industry and developments occurring which are having a profound
effect on the domestic supply chain. The global automotive industry
at the moment is going through a huge and profound change. It is
moving to restructure significantly to respond to competition; to
address the rise of new markets, principally markets based around
India and China; and to address production costs by moving closer to
markets. Globally we have a position of overproduction—certainly
overproduction of certain classes of automotive vehicles. Hence the
move to restructure into smaller, more efficient vehicles and
vehicles which are more in demand in the rising markets of
developing countries.
It is far too easy to say this is simply a global problem that the
industry finds itself in and it is one that the government has got
to dig it out of. I, for one, do not accept that rationale. We have
seen over the last number of years a number of significant closures
in the supply chain of our domestic automotive industry—one only two
weeks ago. Clearly our motor vehicle manufacturers are changing how
they access components. They are certainly going more and more
offshore. The proportion of Australian components in Australian
manufactured vehicles has dropped considerably over the last five
years and it is a trend that does not appear to be changing.
When we look at this industry a couple of features stand out. It
really now can been categorised as a just-in-time industry. Whether
it is the fasteners, the transmissions or the power steering, when
they are outsourced, it is within the domestic context a
just-in-time industry. The motor vehicle manufacturers do not carry
inordinate stocks. They run their manufacturing schedules around the
provision of parts. They are so carefully choreographed that
component manufacturers effectively have to meet the just-in-time
demands that apply in this industry.
Another thing that is clearly the case in this industry—and not just
in automotive parts manufacturing; it could probably be seen almost
as a microcosm of manufacturing generally at the moment—is the rise
in competition from imports, particularly imports as a consequence
of cheap labour in developing countries. Quite frankly, that is
having a dramatic impact on the Australian automotive industry,
having regard to the way it seeks to outsource the supply of various
areas of componentry.
It is a little easy, I suppose, to have regard to this, despite the
fact that the Australian government over many years has, through the
Automotive Competitiveness and Investment Scheme, contributed to the
adjustment costs of industry, particularly with the withdrawal of
tariffs. That assistance does not seem to have percolated right
through the supply chain and, as a consequence, many within that
supply chain still suffer in terms of adjustment costs in meeting
the demands of Australian motor vehicle manufacturers.
One of the matters that really stands out in this industry is that,
despite the fact that on one hand we see a contraction, on the other
we are still seeing skills shortages. Numerous organisations
appeared before us and expressed concern about how difficult it was
to fill vacancies, particularly in relation to the skilled ranks.
For people who have not studied this review closely, that would seem
to be a contradiction in terms. On one hand the industry is
suffering because of overseas competition and because local
manufacturers are going offshore for parts and componentry, yet on
the other, within the component sector itself, they are still
struggling to fill vacancies. This is occurring while we are seeing
much-publicised redundancies. We saw the Ajax Fasteners case during
the week before last and the downturn in the motor vehicle industry
in
South Australia—a lot of people, unfortunately, have been retrenched
there—yet we are still struggling to fill vacancies in various
sectors of the industry.
That gave rise to one of our recommendations, recommendation 10,
which, among other things, calls on the government to commission a
national study on the post-redundancy outcomes for workers in the
automotive industry which takes into account employment, educational
and social outcomes for those individuals accessing a formal labour
market adjustment program. It is a little trite to think that, just
because there are workers who are displaced in one location, they
can easily fill the needs of another location. Realistically, we
must start to plan, or at least look at and identify where these
issues are emerging so that we can do something about it.
I would also like briefly to draw attention to recommendation 11,
which recommends that the Australian government develop a general
labour adjustment program for the automotive components industry
that focuses on the provision of training and employment support
strategies to assist employees while they are still employed;
targeted training to upskill displaced workers; and addressing the
concerns of the wider community about the impact on regions where
the automotive components industry is a major employer. That is
something that we consider to be overdue. As I said earlier, we are
concerned that the assistance that has been provided by way of an
adjustment program to automobile manufacturers has not necessarily
made its way down to all the various support industries within the
automotive componentry manufacturing area. That is something that we
should be taking on board. It is difficult when we have this
contradiction of, on the one hand, a skills shortage and, on the
other hand, redundancies throughout the automotive industry on the
scale that we saw during the period that we participated in this
inquiry.
One of the things that we have addressed is research and
development. The reason I want to draw attention to this is
recommendation 12, which says:
The Committee recommends that the Australian Government review R&D
assistance available to automotive component manufacturers to assess
whether it is commensurate with incentives offered internationally.
During the recent House of Representatives Standing Committee on
Science and Innovation inquiry into commercialising innovation, one
of the things that we found when we looked at the level of research
and development that has taken place in this country was that,
whilst we may provide financial incentives or tax incentives for
Australian based companies to undertake R&D within this country, we
do not make the same provision for overseas based companies.
As was the case with the science and technology committee, I think
it is fair to say all members of the employment, workplace relations
and workforce participation committee came to the view that
undertaking R&D is a little bit like education. Certainly, we should
look at attracting R&D into this country, because if we can do that
there is probably a greater likelihood that we will get the
downstream benefits of manufacturing itself. We are supportive of
what the science and technology committee recommended, and we are
strongly of the view that the government should consider reviewing
the tax incentives that are available for companies that undertake
R&D in this country. We also feel that the government should make
those tax incentives available for overseas based companies,
provided the R&D work is actually conducted in
Australia. We think that that would further stimulate skills in this
industry. It would certainly provide a much-needed skill base of
available personnel and would build a very substantial link between
R&D and manufacture generally.
In closing, my own personal observation is that many people in the
industry will have to face up to the reality that there does have to
be diversification. I would raise just as an example of that—only
because this occurs in my own electorate—Broens Industries. This
organisation started 25 years ago, ostensibly as a toolmaking shop,
but has now targeted the higher end of the manufacturing industry in
precision engineering, special purpose manufacture of machinery
parts and automotive application. Currently, this shop, which is in
Ingleburn, exports to 17 countries. It includes among its customers
companies such as Mercedes-Benz, Ford, General Motors, Boeing and
Airbus. The company employs 150 people. It put on 27 apprentices.
This company invests 30 per cent of its annual turnover each year in
process development in new products. When I look at it, this company
is actually doing it right. It is committing to it. It is backing
itself for the future and, as a consequence, it is now supplying a
substantial proportion of the Australian domestic market with power
steering. This is a company, as I say, that started off 25 years ago
as a toolmaking shop.
I think that this is the way that people in the manufacturing
industry are going to have to go. I was very heartened when I heard
the first contribution of the new Leader of the Opposition the other
day in the MPI, when he outlined his view about Australia not being
the quarry of Asia and certainly not being the beach for Japan, but
being able to not only meet and compete but actually attack the
manufacturing market, particularly at the high-tech level. We do
support the retention of higher skills within this industry, and
that should be
Australia’s niche. The higher end of this market is something that I
think we can work to attract. I commend the report. (Time
expired)
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