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Australian Steel Institute Steel Building Conference

Gold Coast Queensland

15 September 2014

[Check against delivery]

Introduction

Thank you Matt [Stedman] for that introduction. It’s great to be with you this morning and I thank Don McDonald and the Australian Steel Institute members for inviting me to speak to you today. I see many of your industry heads and advisers in the room today. I have either met them on the road, at industry events or they have come to see me in my office in Canberra to explain the industry’s challenges and offer solutions.  The issues of free market, subsidisation, anti-dumping, countervailing, circumvention and free trade agreements have been spoken about at length with my office, Minister Macfarlane’s office, Minister Robb’s office and the Prime Minister’s office. Over the past six months you have exercised a great deal of patience, and I thank you for that, to help this government look at what it needs to do to get this country moving again and help create an environment for business to thrive and investors to once again see value in Australian product. I believe we are on the right track to achieving this.

We currently have a number of policy and legislative changes that are with Cabinet that I believe will achieve this. For example we currently have a solution before Cabinet to address circumvention. A lot of work has been done, I would expect an announcement to be made before Christmas. There is a way forward and I’d like to thank the leaders in the room here for helping us understand the issue and come up with a WTO compliant solution. The Government’s Economic Action Strategy is also helping build a strong and prosperous economy for a safe and secure Australia by creating the conditions in which businesses can prosper. The key elements of our plan to improve the competitiveness of Australian businesses are clear: lower tax, less red tape, better infrastructure, freer trade, higher participation and stronger productivity.

Labor’s carbon tax, which the Opposition still supports and wants to bring back, was in effect a reverse tariff.  It made our exports more expensive. It gave imports an advantage over locally made goods because locally produced goods attracted the carbon tax but imports did not. It was a tax whose creators actually boasted of the jobs it would destroy as prices went up and up. The aluminium industry was forecast to shrink by 60 per cent; the iron and steel industry was forecast to shrink by 20 per cent; and gross national income per person was forecast to be $4,000 a year less by 2050 because of the carbon tax. The carbon tax was a $9 billion a year hit on the Australian economy and scrapping it will save the average Australian household $550 a year.  As well, the government was absolutely committed to abolishing the Mining Tax, a tax that has raised next to nothing yet has robbed an important industry of confidence while harming our country’s reputation.

And, from July 1, 2015, the company tax rate will be reduced by 1.5 percentage points to 28.5 per cent. Businesses will no longer be required to administer the former government’s paid parental leave scheme, saving an estimated $48 million. National businesses will be allowed to operate under one workers' compensation scheme right around our nation rather than have to operate in up to eight. As you can see, we are not sitting on our hands, we are getting on with the job to help Australian business to once again thrive.

Today’s theme

The theme of this year’s conference, Steel Building Confidence, couldn’t be more apt. Significant transformation is occurring in the Australian economy, marked by a manufacturing industry in transition. International competition has never been fiercer, made all the more difficult by price volatility for many of our key exports. It’s why building confidence in the overall Australian economy is so important and a key priority for the Australian Government. It’s essential for investment growth. It’s essential for business success. And it is essential for creating Australian jobs.

Outlook for the steel industry

The steel industry is a vital part of Australian manufacturing and the Government values its contribution to the economy. Steel continues to be a major component in our infrastructure, buildings, machines, tools, appliances and many other products. The steel industry generates jobs, investment and countless other benefits to many areas of the economy. The Government is acutely aware of the challenges the industry has faced since the start of the global financial crisis.

We’ve seen pressures come from:

  • a high Australian dollar;
  • low international steel prices due to global overcapacity high costs of raw material, and
  • subdued domestic demand for steel in some sectors.

Australia has always been a small steel producer by world standards. Our nation produced about 0.3 per cent of world steel in 2013. However, Australian-made steel has a strong reputation for being safe, durable, reliable and corrosive resistant. That stands the industry in good stead in a highly competitive global environment, but there’s no room for complacency. It was great to hear both BlueScope Steel and Arrium announce positive cash earnings for 2014 in their Australian steel divisions. I note that both companies’ steel sales projections for the year ahead are looking promising, particularly in the domestic infrastructure and residential construction markets. These are encouraging signs amidst a difficult economic environment.

Restructure and innovation

The positive news comes on the back of tough decisions within your industry to turn things around. I’m told many of you have implemented strategies to restructure your businesses and improve your balance sheets. I know this has been a difficult time, but tough decisions to adapt and meet new consumer demands assist the long-term sustainability of the sector. As you know, Australia is a world leader in innovating steel products and processes. Bluescope’s next generation ZINCALUME steel is an example of our steel industry investing in tomorrow’s products. Its durability opens up more possibilities for its use to meet the changing demands of our built environment. This initiative represents a long-term commitment to research and development and the manufacture of high-end quality products in Australia. It is a great example of industry pursuing innovation to meet consumer demands.

Research hub for Australian Steel Manufacturing

The Government is facilitating research and development efforts in a range of industries, including the steel industry. Earlier this month, my colleague, Industry Minister Ian Macfarlane, launched the Australian Research Council’s Research Hub for Australian Steel Manufacturing. The hub is based at the University of Wollongong. The hub will develop cutting-edge process and product innovations that will enable our steel industry to improve its global competitiveness. This is a collaborative venture, with funding contributions from the ARC, four Australian universities and a number of industry partners. More than $24 million of cash and in-kind contributions has been committed to the hub. It is a great example of industry, researchers and government working together to deliver benefits to industry and Australia.

 It is imperative that we creating an enabling business environment. The Government recognises the competitive pressures industry faces and we are committed to helping ease these pressures. Our job is to create an enabling environment for businesses to thrive. We will continue to work with industry to get the economic settings right to encourage more investment and jobs growth. Our tools for achieving this include less regulation, fewer taxes and targeted training support to help boost workforce productivity. Red Tape is a burden that benefits but a few. The Government has committed to cutting red tape by $1 billion per year to reduce the regulatory burden on the Australian community. Unfortunately, red tape has added to the competitiveness pressures faced in the Australian steel industry in recent years. Excessive regulation and the paperwork that goes with it are costly to business and a waste of valuable time. That is the last thing our manufacturing sector needs.

The Government is committed to ensuring a viable, competitive and successful steel manufacturing industry in Australia. We have taken immediate and decisive action to reduce the red tape burden and lift industry productivity and competitiveness. This will help stimulate all forms of activity in the manufacturing sector, including in the steel industry. As I said, a priority for the government was the abolition of the carbon and mining taxes. We have abolished the carbon tax. This is great news for Australian manufacturing and great news for the steel industry. Abolition of the carbon tax should put downward pressure on power bills and other costs of doing business. It will help the manufacturing sector regain its competitive edge, retain jobs and get on with creating quality products. The mining tax has also been abolished. This will provide investment certainty for Australian businesses developing resource projects and promote a positive business environment. It is disappointing that the Senate cross bench demanded that the spending keep occurring from a tax that raised so little and cost so much. The removal of the carbon and mining taxes will take a cost burden off Australian businesses, including the cost of regulatory compliance, making it easier for them to compete with overseas competitors.

Government’s role

We are also making it easier for businesses to deal with the Government and access advice. The Government is investing $92.4 million in a new streamlined Single Business Service Delivery initiative. This will make information, advice and support simpler to find, understand and access. Under the new service, eligible businesses will be linked to specific government assistance programmes. The Entrepreneurs’ Infrastructure Programme is an example. It will help improve the capabilities of small and medium firms to become more self-reliant, competitive and growth focused.  It will provide them with business management skills, including global supply chain engagement services. The $484.2 million Entrepreneurs’ Infrastructure Programme is being delivered in stages. Funding is currently available for Business Evaluations, Business Growth Grants and Research Connections. The Manufacturing Transition Programme is also being delivered under the new Single Business Service. The $50 million competitive grants programme will help manufacturing firms make the transition to high-value activities to build scale and capability in new or growing markets. Applications for Round 1 opened on September 1 and will close on the 24th of next month. The $476 million Industry Skills Fund will also support the effort to help businesses diversify and improve their competiveness. The fund, which will start on 1 January 2015, will provide up to 200,000 training places and support services over four years, helping industry develop innovative training solutions.

Anti-dumping measures

Now, I want to turn back to anti-dumping issues. I’m aware a number of our steel companies have launched antidumping claims with the Australian Anti-Dumping Commission, of course I cannot comment on those matters before the commission. However let me say that the Government is firmly committed to an effective Australian antidumping system to help keep our economy strong. If there are instances of alleged dumping, it is important that cases are lodged with the commission so it can investigate. The Government is considering a package of reforms to strengthen Australia’s anti-dumping system, streamline investigations and provide greater certainty to businesses. I want there to be no false illusions, any reforms taken will be consistent with our international trade obligations, including our obligations to the World Trade Organization.

Your industry leaders have also led the charge on the issue of non-conforming building products. As you will know, some two-thirds of all steel sales in Australia are destined for construction projects. It is therefore absolutely essential that these products meet an acceptable level of quality and compliance. The states and territories have responsibility for the performance standards of products used in building work across Australia. However, this is an issue of interest nationally, that’s why I raised the matter at the Building Ministers' Forum in May this year. All the ministers agreed the issue needed to be tackled.

Our discussion centred on the current conformance framework for building products. I’m currently looking into the issue from a federal perspective. I will hold a roundtable with key stakeholders before the end of the year to investigate this issue further. I also welcome initiatives by industry to encourage compliance with quality standards. The recent release of the Australasian Procurement and Construction Council’s procurement guide was a step in the right direction. The new guide, which I had the pleasure of launching earlier this month, will help builders and contractors buy products that are fully compliant and fit for purpose. It’s great to see Australian steel conformity assessment schemes such as the Australasian Certification Authority for Reinforcing and Structural Steels and ShedSafe included in the guide. The guide will go a long way in helping builders and contractors buy and use products that are fully compliant and fit for purpose.

Conclusion

To conclude, I want to stress the Government’s commitment to a viable, competitive and successful manufacturing industry. We recognise the challenges facing the industry and applaud the steel industry’s response of tough operational adjustments. The Government’s action to reduce red tape and abolish the carbon tax will also help your industry by placing downward pressure on business costs. I’m sure everyone here looks forward to a more competitive Australian steel industry in the years ahead. I surely do. I commit to maintain my office open door and accessibility policy for your industry as dialogue is critical. I hope you enjoy the rest of the conference.

Media contacts: Mr Baldwin's office 02 6277 4200