Local, Independant and Effective

Hansard Transcript, June 5, Bruck Textiles - Textile, Clothing, Footwear Amendment Bill

Posted June 05, 2014

 

CATHY McGOWAN (Indi) (10:19): I thank the member for Swan for his comments. The Textile, Clothing and Footwear Investment and Innovation Programs Amendment Bill 2014 will amend the Textile, Clothing and Footwear Investment and Innovation Programs Act 1999 to provide for the closure of the Clothing and Household Textiles Building Innovation Capability Scheme, the BIC scheme, and the Textile, Clothing and Footwear Small Business Program, which is known as the TCF Small Business Program, on 30 June 2014. I will not be supporting this bill. Let me explain why.

 

By proceeding with early termination the government has identified savings of $25 million from the 2015-16 funding allocation of the BIC scheme and the TCF Small Business Program, but at what cost? Government support has been provided to the textile, clothing and footwear manufacturing industry from many years. The TCF Small Business Program, which is aimed at small business, and the BIC scheme, which is aimed at medium to large businesses, were created to help the TCF manufacturing industry transition to a lower input tariff regime. Today I want to specifically speak about the impact of the early closure of the BIC scheme on Wangaratta and the electorate of Indi and in particular about the government's loss of trust to business.

As members of this House would know, TCF tariffs have been lowered in stages over many years. The tariff on clothing is now at 10 per cent and will fall to five per cent from 1 January 2015. The tariff on textiles and footwear is already five per cent and there are no plans for further reduction. Changes to tariff have had a major impact on the TCF industry in Australia, much of which takes place in rural and regional communities. I would like to take this opportunity to congratulate the industry on the tremendous job it has done in managing this change. I know it has not been without pain. Staff, owners and communities have all put their shoulders to the wheel.

The BIC scheme is aimed at fostering the development of a sustainable and internationally competitive clothing and household textile manufacturing and design industry in Australia. It does this by providing grants available on an entitlement basis for research and development, including innovative product design activities, innovative process improvements, market research and some industrial property rights expenditure. Grant payments are made in arrears for eligible activities conducted in the previous financial year. This is a significant point: grants are made in arrears. So businesses have already spent the money they claim for.

This proposal before the House today would close the TCF small business program and BIC scheme on 30 June 2014. The BIC scheme provides grant payment in arrears for eligible activities conducted in the previous financial year. Registrants can be assumed to have already spent substantial funds in 2013-14 in the expectation that much of this will be reimbursed in 2014 and 2015. It is very concerning that this will not be the case. Early termination is poor policy. It is retrospective. It sets a very bad precedent. Business acted in good faith. It sets a precedent that government policy cannot be relied on.

In Wangaratta, Bruck Textiles Technology, BTT, is a major employer and currently employs 200-plus employees. The R&D BIC scheme grant of an expected $500,000 to $700,000 supports between 15 and 17 jobs in the research and development program. I am told that this program underpins the core business of Australian Weaving Mills and its relocation to Wangaratta. The CEO of Bruck said to me:

We have already expended several millions of dollars in consolidating three businesses and co-locating all manufacturing activities in one plant in Wangaratta to take advantage of the scale economies and overhead recovery that this allowed. Obviously this makes good business sense, but it is a costly exercise and the only reason we went ahead was because the payback period became achievable by factoring in our expected returns from the BIC scheme. Of course, we have to undertake the necessary investment in innovative product development and process refinement to benefit from the scheme. But we were fully committed to doing so, confident in the knowledge that the BIC scheme would help us to position our overall business to be economically sustainable beyond the originally scheduled termination date for the scheme. But without its support it completely undermines the significant investment expenditure we had planned for our company.

He continued:

As it is, we have not received the full expected benefits from the scheme. In earlier years grant entitlements were modulated. Given that there was no modulation this year, which would suggest that the government did not pay out as much in grants as had been allocated for that year, on one hand it could be argued that companies have been short changed in earlier years and, on the other, that government has already made savings. Either way, the proposed early termination undermines the original intention even further.

Early closure will have an extremely deleterious impact on the industry overall and certainly in the case in Wangaratta it puts into serious doubt the ability of Bruck to maintain their intended level of manufacturing activity in Wangaratta. This is because, firstly it extends the payback period on the investment Bruck have already incurred—and this is something they can ill afford. Secondly, it will make future investment in innovation a more risky proposition for them.

The CEO of Bruck went on to say:

This one year window of support, which factors heavily in the business plan we are implementing, will make all the difference in our ability to maintain a sound manufacturing base in Australia!

The proposal before the House would close the TCF small business program and BIC scheme on 30 June 2014. It seems to me that the amendment before the House goes against everything that the coalition stands for, which is a serious claim to make.

Where is the support that we have been told the coalition offers for successful and innovative business? Bruck textiles is a world leader in textile and fabric research and innovation. Bruck produces quality product for some of Australia's best known brands and, importantly, the defence forces. Where are the moves from the coalition to improve business confidence? Bruck textiles reformed their business in response to this program, and they tell me that it will make a significant difference to their confidence levels in the future. Where is the coalition commitment to remove red tape? This policy will increase the compliance and administrative burden for Bruck and other textile businesses. Where is the support for sustainable regional communities? Bruck employs 200 people in Wangaratta, a community of 17,300 people. It will have a significant impact.

Cutting this program saves $25 million. I understand the issue of the budget debt and deficit, but in the scheme of a multibillion dollar budget, which is before the House currently, $25 million is chicken feed or, should I say, just an off-cut. However, it is not an off-cut for Bruck Textiles. It is at least $500,000 and 15 jobs. On the issue of cost, the government talks about savings and that every dollar counts in these difficult financial times. How much has it cost the taxpayer to put forward this amendment bill? How much has it cost the taxpayer to hold this debate in parliament today? How much will it cost the taxpayer when this bill is fought out in the Senate? How much will it cost in loss of businesses confidence in the textiles manufacturing industry? How much will it cost the government to provide welfare payments for the people who lose their jobs as a result of the abolition of this funding? How much will it cost my community as strong and viable businesses feel the pain when the government changes programs on a whim? And who can calculate the cost of the loss of trust in government on a community?

To me, the cost of this amendment is high, too high.

 

The Australian economy is changing. Manufacturing is no longer the strong industry that it once was. Brucks is not an old, struggling manufacturing business; it is a viable business. It now relies on this small amount of funding because it made the decision to restructure in the knowledge that it would be eligible for it. It is one year away from completing this process.

I call on the government to reconsider this amendment bill. I call on the government to provide clear signals to the textiles manufacturing industry: do not change your mind mid-sentence. Tell the textile industry, 'We will honour our commitments under this policy. We will see it through to the end and there will be no more funding cuts.' I understand why the government no longer wants to provide funding to manufacturing industry, but I urge the government to work closely with manufacturing industries right across Australia and transition them out with trust, with confidence and with the best will of the country in mind. I call on the coalition: do not pull the rug out from under this scheme, as this bill will do. I believe this legislation is flawed and I will not be supporting it.