I rise to oppose the National Reconstruction Fund Corporation Bill 2023, because it will do nothing to halt the deindustrialisation of this once proud manufacturing nation—a deindustrialisation that’s been happening at pace before our eyes. Over the past decade we’ve produced fewer manufacturing goods than we did in the previous decade, which is the first time on record that that’s ever happened. We now no longer produce enough steel for our own domestic needs, despite being the world’s largest producer of the main components that go into making steel—coking coal and iron ore.
Later this year, tragically, our last major fertiliser plant, or at least a plant that produces urea, the most important fertiliser used in farming, will shut. Just after Christmas this year, we will effectively be completely reliant on other countries to grow our food. About half of Australian food production requires the use of urea, and we will no longer make it in this nation even though the feedstock for urea is natural gas—and we’ve got heaps of that. We’re the world’s largest exporter of liquefied natural gas, but we will no longer manufacture the important product of urea. Not to mention AdBlue, which most people have become aware of given the crisis we had there about a year ago. You need urea to make AdBlue for the trucking industry.
It’s not a good news story for manufacturing. We really do need radical action to rectify that. I’ll put on record at the start of this contribution that I don’t think the former coalition government took this issue seriously enough and did not take sufficient action to try to turn things around. The main reason for the decline in our manufacturing industry—I’ll put it down to two factors. One is energy prices. We’ve heard that manufacturers are paying more than double for electricity and 50 per cent higher for gas, and those figures are actually from before Ukraine’s crisis. That has killed competitive manufacturing in this country. Given that our labour costs are high, we just simply cannot compete if our energy costs are high too. We have to make a choice. If we want to have dear wages, which I think we all do and it’s a good thing people get paid well in this country, then we have to have cheap power prices. If we have dear wages and dear power prices, we’ll end up with no jobs. That’s what has been happening in the manufacturing industry, with 300,000 manufacturing jobs lost over the past few decades—a pace that has been increasing.
The other big factor in this decline is the complete free ride we have given to the Chinese Communist Party on their entry into the World Trade Organization. When they entered the World Trade Organization just over 20 years ago, in 2001, they made commitments to the world that they would become more transparent in their subsidies, they would remove massive energy subsidies from their industries. They have done nothing. They’ve actually doubled down on those over the last two decades, and yet we sit back and seemingly take no action against this complete abuse of the international trading system. And so there’s no surprise, or should be no surprise, when they steal our jobs.
Why do we now import 50 per cent of our steel needs? That wasn’t the case 20 years ago. We had steel plants; we had enough steel plants to produce enough steel for Australia. Now we only have two steel mills left and we import around half of our steel needs from overseas, mainly from China. Why does that happen? How can China compete against us? We send them the coking coal and the iron ore from here, all the way through to China. They turn that into steel—it’s not a particularly labour intensive process—and we import it back from them. Why can they do that? Because they massively subsidise their own energy industry. On some measures, put forward by unions in the United States, the energy subsidies for Chinese steel manufacturing approach 60 and 70 per cent of their production costs subsidised by the Chinese government. Why do we not take action against this? Why do we sit back and let this happen? We should be taking more action against that, and I’ll have more to say about that towards the end of my contribution.
I do want to go to this bill, though. I’d be keen to support things that would help our problem around declining manufacturing, but this bill won’t do that at all because there is smoke-and-mirrors financial trickery by the government going on in this bill. The headline here is that this will be a $15 billion National Reconstruction Fund. The minister says it’s going to build a fertiliser plant, apparently. It’s going to do all these things, make all these promises. But let’s look into the actual numbers and the detail. This is what it’s cost us in industry policy and manufacturing policy for decades. There is far too much focus on headline BS, if I can say that. There is absolute rubbish in headlines that sound good—$15 billion here; $1½ billion there—but when you look into detail it doesn’t add up to much at all.
This fund won’t actually be direct grants to build a urea plant or anything like that, it will simply be a loan facility or an equity injection. They’ll take investments into manufacturing through this $15 billion fund. And obviously, like anybody making an investment, you expect a return on that investment. You expect the return of the capital with interest, as the government will do from this fund. So, it’s not a free kick for the manufacturing industry.
Let’s look at what the actual benefit will be from $15 billion of loans or equity. Currently, the 10-year government bond rate is 3.3 per cent. It’s fallen a little bit in the last couple of months, but it is 3.3 per cent. Even if the government only required that return—and typically in other funds they’ve required a little bit more to have some adjustment for risk, but, let’s be fair, and I’ll be very generous to the government and say that they’ll lend out at roughly the 10-year bond rate of 3.3 per cent—that would mean that the interest on $15 billion that the manufacturing industry would have to pay would be $484 million a year.
How much would that save them? Well, they could go to the market, of course, and borrow money. The BBB interest rate, which roughly would be what a lot of manufacturing companies would be rated around, is currently 6½ per cent, so their interest bill on $15 billion would be just shy of a billion dollars—$984 million. So it’s $484 million if the government lends them money and $984 million if they borrowed from the market. That’s $500 million a year. For an industry that invests, the manufacturing industry, despite our de-industrialisation, it actually needs investment of capital expenditure of $10 billion a year, so this is not a big saving. It’s not going to do much; $500 million is not going to do much. In fact, it’s actually less than the $1½ billion the former coalition government put aside that this government has scrapped to replace this amount.
We’ve got to drop this rubbish, as I say, this industry policy by media release, where we think we put out a media release and it’s going to make a difference because the number looks big on that. It’s a perverse episode of Utopia here where people go, ‘Let’s just put a big figure on a whiteboard, and that will solve all the issues.’ It’s not going to do that. It is not going to rekindle an era of industrialisation in this nation based on those very clear figures alone.
We have to get serious if we want to rebuild manufacturing in this country, so I don’t want to support a lame attempt to distract from the real issues that face Australian manufacturers. I think doing so would give false hope to the manufacturing industry. It would also mean that the bureaucrats here, and the government more broadly, would just put their pens down and say: ‘It’s all done. We’ve passed a reconstruction fund. Our work here is done, and we don’t have to actually tackle the real issues that face Australian manufacturing, fix those and, through that, actually make sure that we rekindle investment.’
We did have a serious look at this in the Nationals party a few years ago during the COVID crisis. Do you remember we were going to make things again after COVID? Do you remember all that? We didn’t want to be reliant on China and all that stuff, and we were going to make things. We thought, ‘Let’s have a serious attempt at making a contributions debate of becoming a manufacturing country again.’ So, we produced a nine-point plan from the Nationals party to do this. We spoke to lots of people in the industry, so we didn’t have any particular sacred cows around trade policy or energy policy. We just wanted the best for Australian manufacturers. The Nationals party ticked off on this, saying that if we’re serious we need to take action against China for its illegal trade policy actions. These are not just the actions they’ve taken against Australian exporters in the last few years post-COVID. As I mentioned, these are the massive energy subsidies. They get away with blue murder through trade policy and we take no action. We can, under WTO rules, institute a proper inquiry into Chinese energy subsidies to their manufacturing industries, and, if that study came back that those subsidies were against WTO rules, which most certainly they would be, then we could take what is called countervailing action against them and protect our own industries.
Why don’t we do that? Why don’t we stand up for Australian jobs and put an end to the abuse that China has engaged in on manufacturing for the last couple of decades? It’s obviously not just affecting our nation; those jobs are stolen from all over the Western world. We now have a situation where almost the entire renewable energy supply chain is controlled by China. We’re constantly told we’ve got to transition to these new energy types, but all our solar panels, our wind turbines and the rare earths that go into so many renewable energy technologies, like batteries through lithium processing, are all made and come through China, again thanks to these subsidies. We have to take action against this. As I say, in the Nationals party we were putting aside possibly decades of perceived wisdom about free trade, but it’s not free trade when another nation does not abide by the rules, which China has not been doing.
We also need to recognise that a rekindling, a reindustrialisation, of Australia is not going to come through government investment. As I went through the figures before, the $15 billion here doesn’t mean $15 billion; it’s a few hundred million. It’s not enough. As I said, about $10 billion a year is invested in manufacturing today, and that’s in a climate where our manufacturing is declining. We need more than $10 billion a year,. We probably need to double that if we’re serious about regrowing Australian manufacturing. It’s just not going to come from Canberra. We do not have $10 billion a year to put into manufacturing.
