Article Categories: Speeches, Infrastructure, The Economy, Workplace Relations, Emissions Trading Scheme
I am a student of Machiavelli.
He lived 500 years ago.
And, the principles he observed back then hold true today – in politics, in business, in organisations.
Well, when Philip wrote to invite me to speak he said I might reflect on the role of government in future infrastructure.
In that vein, I thought when any of you see Kevin Rudd or a State Premier, it may be in your interest to quote Machiavelli who observed, and I quote –
“A successful prince has always planned and completed great projects, which have always kept his subjects in a state of suspense and wonder, and intent on their outcome. And his moves have followed closely upon one another in such a way that he has never allowed time and opportunity for people to plot quietly against them.” End of quote.
I always think of Jeff Kennett when I read that quote.
Jeff very successfully followed that rule to the letter in Melbourne, with a succession of great and sorely needed projects – his downfall was to allow too much time and opportunity between projects in the ‘bush’, which resulted in country people quietly plotting against him.
I am very pleased to have this opportunity to join you this morning.
Dookie College anecdote
As I said, I am very pleased to have this opportunity.
I greatly respect the risks you take, day-in, day-out.
I have some sense of what’s involved.
I built and ran a nationwide database technology company.
I know the feeling of waking at 5.30am in a cold sweat wondering where I would get the salaries for 120 staff – do I increase the sales team?, do I increase or narrow the product line, cut costs, whatever?
Equally, I am always impressed by people who employ others.
I had the great privilege of working for Kerry Packer for a few years. I once asked him what was his greatest source of satisfaction. He shot back “Creating jobs for tens of thousands of people.”
All of you do a great thing for Australia, and for our fellow Australians. And it’s not easy.
You should be very proud of what you do, and what you have done to build our nation.
The last few years have been a time of feverish activity – your industry has been at the centre of it.
Yet, success has come with its own challenges –
• Labour shortages and the related skill shortages,
• The frustrations stemming from differences between State, territory and local government in regard to tendering, prequalifications, procurement, licensing, OH&S, and much more,
• The uncertainty surrounding the lack of forward planning,
• Doubts about the retention of the ABCC,
• Those things working against small and medium sized contractors getting a fair go in many civil construction projects.
• In turn, the impact this is having on the number of civil contractors left in small regional communities, and.
• The impact of the move to an emissions trading scheme.
The last few weeks has seen the world face a huge reality check.
The party is over.
Much world growth had been driven by unsustainable levels of debt.
Billions of dollars lent to those who had little or no prospect of servicing their debt.
I’ve no doubt that this financial meltdown will have a profound impact on our real economy over the next 24 months and beyond.
I’ve been touring major infrastructure players in our resource, mining and infrastructure sectors over recent weeks.
For the first time I can remember, a major topic has been the prospect or otherwise of securing financing for future stages of major ventures.
If these global players are talking this way, the liquidity of tens of thousands of smaller companies across Australia will be particularly problematic.
We have tough times ahead.
For infrastructure investment, the heavy lifting done by the private sector in recent years will need to be supported by significant government efforts, not only with capital injections, but also with co-ordinated national forward planning and harmonisation of many regulatory issues.
As a country we can take some real comfort from the state of our national balance sheet as we head into these turbulent seas.
Over the last 12 years the financial infrastructure within Australia faced a major repair job.
• $96 billion of government debt was paid off.
• That means there is now $8.5 billion every year that is available for spending on infrastructure or other programs that would otherwise have been required to pay interest on the debt.
• The culture of running massive deficits was replaced with a culture of budget surpluses.
• An independent reserve bank was created
• The rules introduced to govern our financial sector through APRA and ASIC are now the envy of others in the western world who failed to do likewise
• Major reform of the indirect tax system gave states a huge growth tax to fund vital infrastructure and other commitments.
Again over the last 12 years our sadly depleted defence infrastructure faced a major overhaul, with real annual growth of 3 per cent throughout that period (47% over 12 years from $10.6bn in 1995-96 to $22bn in 2007-08 ).
Throughout the last 12 years our workforce infrastructure was brought into the 21st century.
On the wharves we had the epic battle to modernise the Australian waterfront.
The result has been a 60% improvement in productivity with average crane rates increasing from 17 movements per hour to world’s best practice of 27 or 28 per hour.
In the workplace we faced political opposition at every turn, yet introduced major flexibility and abolished the job-destroying unfair dismissal laws for small business.
All this resulted in the lowest unemployment rate in 33 years, a youth participation rate ranked second among OECD countries and a real increase in wages, over and above inflation, of nearly 22 per cent.
In the building and construction industries the establishment of the ABCC has had a profound impact. Working days lost per thousand employees due to industrial action plummeted from 37.4 in late 2005 to just 1.7 in mid 2007.
Productivity has increased markedly with projects being delivered on time and within budget, resulting in a staggering 1.5% boost to Australia’s GDP, or over 5 billion in dollar terms each year
This is a far cry from the pre-ABCC days of unbridled union power, when union bosses directed construction schedules, and threatening and intimidatory behaviour was commonplace.
No government in its right mind would wind back such a major reform.
I can assure you that the Coalition will not take a backwards step in opposing any attempt by the Rudd Government to effectively abolish or water down the ABCC.
These reforms mean that Australia faces the difficulties ahead from a position of strength.
The reforms have:
• Injected a large measure of flexibility into our economy
• Paid off all Federal Government debt of $96 billion
• Created a $60 billion Future Fund
• Created $ 21 billion for heath and education infrastructure funds
• Created $38 billion for Auslink I and II
• Created a $20 billion Building Australia Fund
• Created a $10 billion water infrastructure fund, and
Saw total infrastructure spending in Australia, in constant 2007 dollars, rise from $21 billion in 1996 to $56 billion dollars in 2007 – an increase from nearly 3 per cent of GDP to 5.4% of GDP.
This situation compares with the balance sheets of the United States and Europe where net government debt levels are typically around 50 per cent of GDP.
As a country we need to build on these reforms if we are to deal effectively with what lies ahead in the real economy.
Civil construction can be one of the anchors in weathering this storm.
Sensible infrastructure projects steadily coming on stream over the next three years will not only provide critical commercial activity in difficult times, but also provide a springboard to bounce out of the world downturn in due course, off the back of new productivity improving infrastructure.
In this regard, new capital injections by Government and the private sector is a necessary but not sufficient condition, for this to happen.
A major infrastructure impact will require a steady hand at the top of Government to instil confidence and resolve in the community.
We must not see a repeat of the rushed and bungled decision by the Federal Government to impose an unlimited guarantee on bank deposits.
In his rush to look in charge Mr Rudd grossly over-reached, and in the process he has seriously destabilised those many significant institutions denied the guarantee.
The subsequent back peddling is compounding the erosion of confidence.
It is always difficult to unscramble an omelette. We need cool heads at the top.
A major infrastructure impact will also require the removal of regulatory and other impediments that undermine your ability to do the job required.
There is an urgent need for COAG and local government to resolve the mish-mash of approaches to tendering, prequalification, procurement, licensing, OH&S, contract standardisation, and the rest, that characterises disjointed regulation across states, territories and local government.
Consistency, transparency and flexibility (eg. Mutual recognition) must be the benchmarks in any attempts by COAG and local government to address these issues.
To this end, these regulatory matters must get equal billing with project consideration at the forthcoming infrastructure meetings of COAG, and at the Federal Government summit with local government leaders.
A major infrastructure impact will also require co-ordinated and objective forward planning between the Federal, State and Local Governments.
The Rudd Government came to office nearly 12 months ago saying they had a strong plan for Australia’s infrastructure. After 12 months they have not made one decision. No plan is on the table.
The urgency and onus on Infrastructure Australia to deliver an integrated forward plan, which is objectively based, is growing by the day.
Such a plan, and the subsequent political decisions regarding individual projects, will have community and business support if the process is transparent.
This means full disclosure of the results of cost benefit analysis for projects recommended and for those rejected, including al data, assumptions and models used. It also means transparency of PPP contracts.
The Coalition is a strong believer in infrastructure.
It is for this reason that we will take a very hard nosed approach to evaluating the output of Infrastructure Australia, and the subsequent political decisions.
Given the significance of infrastructure projects as part of dealing with the economic difficulties ahead, these hard earned surpluses, gifted to the Rudd Government, must be put to the best possible use.
The infrastructure funds must not end up as a slush fund to bail out incompetent State Labor Governments.
Such planning must also be alert to the financial environment we are heading into.
For example, the returns on some major infrastructure projects, such as ports or housing infrastructure in the Pilbara, will continue to be significant and are likely to be attractive in stimulating private sector investment by superannuation funds.
An eye to unlocking private investment, at a time of severe global liquidity constraints, will be critical.
A major infrastructure impact will also require addressing labour and skill shortages in civil construction.
The ANZSCO code drives skilled migration lists. The failure of this code to reflect the range of skill needs in the civil construction industry is unacceptable. The Coalition will strongly support any push for an urgent review of the ANZSCO code to correct this serious deficiency.
As Minister for Vocational and Further Education last year I was committed to the opening up of skills training by our state systems so that it could be delivered in a way that suited you and your apprentices and trainees, and delivered where and when you wanted it.
In Victoria in the ‘90’s, Jeff Kennett delivered great autonomy to the TAFE’s. The Directors can run their institutions as a business. As such, in Victoria there exists a more effective and decentralised approach to technical education. It can be delivered on site, at nights, in flexible blocks or many other combinations. Profits flowing from industry partnerships are invested back into the TAFE’s that generate such income.
Queensland has also taken steps in the right direction.
Unfortunately, in many other states technical and skills education is still controlled by centralised, union dominated bureaucracy. The needs of industry, and students, are severely compromised.
This is not in anyone’s best interest, except the unions.
Another measure that we introduced was skills vouchers as part of the $2.9 billion allocated to technical training in the 2007/08 Budget. This allocated up to $3,000 for people to train or retrain (depending on their circumstances).
These vouchers could be combined. For example, a group of ten employees could combine their vouchers and have a training professional come out on site and deliver training at a time that suited them and the business.
Flexibility and convenience was the key. The demand was so great we had to uncap the program.
One of the first acts of the Rudd Government was to scrap these vouchers. I believe this was a very bad mistake.
One final issue likely to greatly influence the impact infrastructure can have in the years ahead is the design and timing of the Government’s planned emissions trading scheme.
Without doubt, climate change is best tackled from a position of economic strength.
To this end, an effective emissions trading scheme must be designed to protect our export and import competing industries until the rest of the world has signed up to a course of action.
However, as it stands today, the Rudd Government’s preferred design for an emissions trading scheme would effectively impose billions of dollars of tax on those Australian export and import competing industries which are high users of energy, ahead of any commitment by our major trade competitors to sign up to such a scheme.
This makes no sense.
The proposal for an emissions trading scheme is a structural change of major proportions.
Yet, over recent weeks, I have had over 30 meetings with companies and industry bodies covering concrete, zinc, lime, steel, energy, metal works, paper, waste, dairy and much more. All confirm the Government’s determination to heavily tax the emissions of these export and import competing industries, irrespective of what the rest of the world is doing.
In the past I have been employed commercially as part of investment teams working up development proposals on major resource projects.
For these reasons, I am keenly aware that in a global world, companies have endless options, and they have responsibilities to share holders. Over time, margins are often thin.
We must be extremely careful not to shoot ourselves in the foot, and see industries close and move offshore, or resource projects never materialising.
In both cases, jobs and emissions head overseas.
The Rudd Government must defer the politically inspired start date of 2010 until we have some idea what the rest of the world decides late next year in Copenhagen and what the new US President intends to do.
As well, we must have some feel for the impact of the financial meltdown on Australia’s real economy, and the capacity of Australia’s industry to cope with a new tax.
In this regard, the Government’s much delayed economic modelling of the impact of an emissions trading scheme is expected to be released today.
The revelation that this modelling takes no account of the global financial meltdown beggars belief, and leaves the exercise dead in the water.
After all, it was Kevin Rudd who told us just two and a half weeks ago that the world has changed as we know it in the wake of the biggest financial meltdown since the Great Depression.
It reveals much about the Rudd Government’s ideological rush to implement an emissions trading scheme by an artificial 2010 deadline, come what may.
Again, it has all the hallmarks of the rushed and bungled decision to provide an unlimited guarantee on all bank deposits.
Australia is one of only five countries in the world that will meet its 2010 Kyoto target for emissions reductions.
We got that right. We should be equally level-headed in designing what we do beyond 2012.
For its part, the Coalition is very committed to an effective response to climate change, but we see no point in doing things which have little or no environmental benefit, but which would do a great deal of economic harm.
As a country we should have no intention of exporting emissions and jobs. It does nothing for the environment or our economy.
But this is exactly what will happen if Australia gets too far ahead of the world.
As Professor Garnaut concluded, there is no Australian solution to climate change, there is only a global solution.
The civil construction industry is again at the centre of things at a critical time in our history.
It is my sincere hope that government, at all levels, gives you the opportunity to contribute at your peak.
Thank you for giving me the honour of opening your conference, and best wishes.
Media Contact: Stuart Eaton, 0433 298 620
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