Interview with Ross Greenwood on Sky News, Business Weekend

Ross Greenwood
$15 billion National Reconstruction Fund; supply chains; labour shortages; energy prices

EDWARD BOYD: This week, the Federal Government introduced legislation for the $15 billion National Reconstruction Fund, which was an election commitment designed to kickstart investment in areas like medical science, low emissions technologies, defence, artificial intelligence and quantum computing. Ross Greenwood caught up with Industry and Science Minister Ed Husic and started by asking him where the $15 billion will come from.

ED HUSIC, MINISTER FOR INDUSTRY AND SCIENCE: We're using that fund. There will be loans, equities, guarantees, similar with the Clean Energy Financing Corporation. It comes off budget with the expectation that the money will be returned to the Commonwealth by way of a return generated by the investment in that business.

ROSS GREENWOOD: Okay, so just explain to me, if I was a business in those areas wanting to get a contribution, to get a kickstart at work, say, would it be a handout, would it be a loan, would it be some sort of an equity deal? And what will I be doing with government? How does the government get its money back?

ED HUSIC: If I can just very quickly take a step back. I mean, we have made this election commitment to be able to provide this form of capital. Having seen what's happened through the course of the pandemic when we had supply chain issues, huge pressure on business, we want to rebuild capability onshore. We set aside the 15 billion to invest in the industry capability across a range of key priority areas that some of which you already mentioned. 
And what we want to do, based on the successful model of the Clean Energy Financing Corporation, is that when businesses have an idea to grow their business, do something different, create jobs, they approach the National Reconstruction Fund with a business plan just as if they were seeking investment elsewhere - saying that if we can get that investment support, we'll deliver a rate of return and will also, in these priority areas where they're applying, be able to do XYZ.
So, they have to have a business plan, they have to be able to show how they're likely to deliver a rate of return. That rate of return also helps replenish the fund too, so it can keep being ongoing and it's going to be driven by an investment mandate. An independent board will make the calls. There won't be colour-coded spreadsheets of electorate-based or political-based decisions. This is about national interest and building the economy.

ROSS GREENWOOD: Okay, I sort of get that, but I'm still struggling with whether this is debt that the government is putting into these businesses, whether it's equity or whether it's some sort of quasi halfway sort of thing. Could I sort of have a business, yeah say I've got a business - can the government technically have a 20 per cent or 30 per cent share of that and then have an influence over the decisions I make inside that business?

ED HUSIC: So, the investment mandate that we'll be consulting on in the coming months, we're going to have a reference group made up of industry and investment figures who will talk broadly with the business community about the shape of how some of this will work out -

ROSS GREENWOOD: So, but what does this say about existing industry that's right now struggling to survive with labour shortages, rising input costs and especially rising energy prices?

ED HUSIC: I think a number of things there need to be covered off as well. I think from our point of view, we want to have strong industry capability onshore. We want people who've got ideas that can be backed that they don't feel like the only way they get that capital support is going offshore. 
We recognise at a time where interest rates are going up, particularly after the Delta wave and what we've had to deal with here as a new government, with that increasing cost of capital, we don't want businesses to be squeezed at a time where they've got an idea to be able to grow and create jobs. So, we do need to do that.
There are some other things as well and I've been focused as a new Industry Minister on the - we've got big ambitions as a new government, but I've been concerned about the lead in our saddle bags that exist around supply chains, skills and the cost of energy. We've been attending to some of them. 
I think the supply chain issue’s still serious, but not as bad as they have been. Skills, we've had work done in terms of investing in skills and also freeing up people movements so that skilled labour can come in and meet the need of business and I think that's really important. And I've had those discussions with people that have concerns about this, like, for example, the unions. And I emphasise we cannot have businesses confronted with skill shortages when they've got to get the job done, they need the people there to help them get it done. Very important.
And on energy, we're working through those issues Ross. As a Cabinet, we're thinking through the range of options that are available to us to be able to bring down energy costs. As an Industry Minister, I'm very conscious of the fact that half of gas demand domestically in this country is taken up by industrial users. 
They need to get access to gas, and particularly if they're in the chemicals and plastic sectors where they need it as feedstock and they don't have alternatives for that injection as part of their production process, we need to get those costs down. 
And that's why I've been a little bit poignant, I might say, in times past on this issue, and I'll continue to be because I'm happy for the gas companies to make a profit to cover their cost of production. But the prices that they've been doing right now, they have been expecting that we'll have - let them make unfettered profits, extraordinary profits, and put impact on other parts of the economy. 
It's not acceptable, mate. We just cannot sit here and sit idly by and watch that happen and put pressure on manufacturers in the way it has.

ROSS GREENWOOD: But as Industry Minister, does Australia have to now make its choices about whether, long term, we can have successful chemicals, plastics, fertilisers or brick making industries that rely on energy? Or whether, alternatively, we continue to maximise the revenue that we get from oil and gas companies that have already invested tens or even hundreds of billions of dollars in our economy and generate returns of tens or even hundreds of billions of dollars’ worth of export income?

ED HUSIC: Sure, and they've made those investments calculating at certain points in time where, for instance, gas prices would be and there are some companies that made a calculation about what breakeven would be when gas prices were way, way, way lower. There is absolutely no doubt in my mind that they can cover their cost of production and make a reasonable rate of return, but not when we had predictions of gas prices heading close to $70 a gigajoule. That is an extraordinary profit that they are asking for. 
They can cover their investments, they can make a reasonable rate of return, they can cover their cost of production with gas prices way lower. And we've got to get the balance right. People elect governments to make calls, to get the balance right when markets behave in ways that are causing pressure elsewhere.
I mean, you had another government do that in the media landscape Ross. I mean, we had interventions made in the bargaining space when it was evident that there were big players that were exerting their market power in a way that we're putting pressure on media outlets. I take exactly the same view here where the ACCC has identified in gas markets. 
You've got three companies basically having strong influence over - they control roughly 90 per cent of 2P reserves in this country. You just can't have a situation where market imbalance leads to behaviours that put pressure on the rest of the economy. And frankly, if I may end on this point, the Australian public expects access to an Australian resource at a reasonable price - and have a reasonable expectation to meet the needs of businesses and households and I think we are acting lockstep in with the expectation of the Australian public around that.