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Plastics and Chemicals Industries Association National Conference

The Langham Hotel at Southbank in Melbourne

18 September 2014

Good morning, and thanks very much for your introduction.

I am delighted to be able to represent the Minister for Industry, Ian Macfarlane, at your conference today.

Competing interests have kept him away, but as you know he has always been ready and willing to sit down and listen to the concerns of the industry.

I know that this morning you want to hear more about the Australian Government’s vision for manufacturing and in particular our strategies to drive growth and productivity. Over the past 12 months, much has changed. Australia now has a Government that is focused on the economy and ensuring that Australian industry is globally competitive. The Australian Government has been working hard to deliver on its commitments, with a view to the long term interests of the country.

We are determined to build a strong and prosperous economy. To that end we have delivered by getting rid of the carbon tax and the mining tax. And we have started work on a $50 billion roads and infrastructure programme. We are boosting exports and jobs with Free Trade Agreements with two of our major trading partners and we are reducing government debt and getting the budget back under control. More than ever the Industry portfolio is central to the government’s agenda; with influence over some of the most crucial economic driving forces.

The portfolio is aimed at building and reinforcing the connections between key economic drivers; industry, science and research institutions. And it’s about ensuring that industry has access to a skilled and efficient workforce to help build a strong, sustainable and internationally competitive industry sector. The plastics and chemicals industry is an essential part of the manufacturing economy; in fact, it is in the box seat. Your Industry Strategic Roadmap confirms this.

I was interested to read in the roadmap that the sector supplies inputs to 109 of Australia’s 111 industries. And I guess that those inputs run right across the board from raw materials to cleaning agents to packaging materials.

So it’s hardly surprising that the ABS classifies plastics and chemicals industries in the 3rd largest manufacturing category which contributed $18 billion dollars in industry value add in 2013-14. It’s a sizeable employer too, with jobs for around 52,000 people.

Before I talk about the Australian Government’s agenda, let me provide a little background. The Australian economy is doing well; in fact, the financial year 2013-14 represented the 23rd consecutive year of economic growth in Australia. In the June quarter 2014, Australia’s GDP was $396.5 billion and grew by 3.1 per cent in through-the-year terms. The most significant industry contributions to GDP over the last year came from: mining (10.4 per cent), financial and insurance services (8.2 per cent) and construction (7.6 per cent). As a sector, manufacturing continues to be a major contributor to Australia’s prosperity, to the tune of over $100 billion each year and employing just under a million Australians.

However, manufacturers face significant challenges, including the small domestic market, intense international competition, low productivity and a high Australian dollar. Structural change in the economy has meant manufacturing employment has declined in recent years, while services jobs have grown by around 1.7 million.

The Australian Government’s new direction for industry policy is focused on new jobs, new investments and making Australian industry more competitive. Industry policy is about building on our nation’s successes. It’s about providing the right framework to encourage the next wave of entrepreneurship and investment in the industries of the future. The Budget spelled out the Government’s new approach by restructuring the programmes delivered to industry. No longer will industry policy delivery rely on an overlapping plethora of small grants and entitlements. Government handouts won’t make Australia’s industry sectors internationally competitive.

Our new Industry structure is about ensuring that those manufacturers who are already accessing global supply chains, or are selling high value products maintain their competitiveness in these times of intense international competition. We also want to create right environment in which even more businesses can reach into those markets. The Government’s new Entrepreneurs’ Infrastructure Programme, delivered by a Single Business Service, rolls a jumble of programmes into one. The Government is investing $484.2 million in the new programme and it will bring research and business together to develop and commercialise our new ideas.

The Entrepreneurs’ Infrastructure Programme will also equip small to medium enterprises with the management and business skills to lead change and expansion. It is just one element of the forthcoming Australian Government’s National Industry Investment and Competitiveness Agenda. The agenda is being finalised by the Prime Minister, the Minister for Industry, the Treasurer and the Minister for Trade and Investment. The agenda will focus on our strengths, create jobs and exploit our competitive advantages with initiatives that promote national competitiveness and productivity.

These include:

  • Economy-wide measures to boost the competitiveness of Australian manufacturing and lower the costs of doing business, like reducing the costs of energy and regulation;
  • Options to encourage innovation, support for research and development and commercialising good ideas;
  • Options to accelerate the development of productivity enhancing infrastructure;
  • Options to encourage the growth of small to medium businesses; and
  • Economy-wide incentive mechanisms to boost investment in Australia.

The agenda will be about building up those industry sectors in which Australia enjoys competitive advantages:

  • food and agribusiness;
  • mining equipment;
  • technology and services;
  • medical technologies and pharmaceuticals;
  • oil and gas; and
  • advanced manufacturing.
     

I imagine that represents a good deal of plastics and chemical business! It will be about supporting Australian firms to change the way they do and run their businesses. And it will be about helping them to better integrate into global supply chains and to compete on the value of their products and not on price alone. A major challenge for Australian industry is to move from traditional manufacturing to knowledge intensive or specialised manufacturing sectors in order to gain competitive advantage. A number of manufacturers are already thinking right outside the square and applying manufacturing skills learned in one area of business in a completely different field.

The $50 million Manufacturing Transition Programme started taking applications this month for the first round of support for firms wanting to move to higher value-add and knowledge intensive activities. The programme will help firms to build capability and improve their ability to compete in international growth areas, creating high skill jobs for Australian workers. At the same time it will improve their profitability and sustainability. Under our new streamlined way of doing business with business, you can get more information from the Single Business Service on www.business.gov.au

Applications for the first round close on 24 October. We realise too, that the impending closure of automotive manufacturing will cause some stress, particularly in those communities immediately nearby. The $155 million Growth Fund has been designed to help affected industry and regions to adjust. This is a strategic, targeted and integrated response to the closure of an industry. We realise that some companies in the plastics and chemicals sector will feel the effects.

The fund has five components:

  • A $20 million Automotive Diversification Programme to help capable automotive supply chain firms to find new markets.
  • A $60 million Next Generation Manufacturing Investment Programme to accelerate private sector investment in high value manufacturing sectors in Victoria and South Australia;
  • A $30 million Regional Infrastructure Programme supporting non-manufacturing investment in regions affected by the closure;
  • A $30 million Skills and Training Programme to prepare automotive workers for new jobs, while they are still employed.
  • A $15 million Automotive Industry Structural Adjustment to operate until 30 June 2018 and provide employment support to help redundant automotive workers find new jobs.

Many Growth Fund elements are open to all states where automotive supply chain firms are located, but the Next Generation Manufacturing Investment and Regional Infrastructure programmes are exclusively for South Australia and Victoria where 85 per cent of jobs will be affected. Reviews of the two affected economies released in April found key advanced manufacturing; food and agriculture; health and biomedical; oil and gas; and mining equipment technology and services were where future growth would occur. We have also created two funds jointly with the Victorian Government and Ford Australia to respond to Ford Australia’s closure of manufacturing in Victoria in 2016. To date the Geelong Region Innovation and Investment Fund and the Melbourne’s North Innovation and Investment Fund, have funded 20 projects. Applications for a second round of the Geelong fund are being assessed. Additionally, Alcoa of Australia Limited is providing a $10 million assistance package to help with adjustment in the Geelong region to the closure at the end of the year of its Port Henry smelter and rolling mill. Part of this includes $5 million for the Geelong fund for support to employees, businesses and the Geelong community. These two regional programmes are important to stimulating additional business capacity and employment.

Already some firms in the plastics and chemicals sector are creating new jobs and developing new processes using the funds. In Geelong, Carbon Revolution accessed $5 million towards a $23.8 million project to establish a commercial scale production facility for its revolutionary one-piece carbon fibre wheels. It shows how a highly motivated group of engineers, scientists and industrialists can work together to develop world leading technology that will supply parts to the global automotive industry, and create up to 108 full-time jobs.

Another Geelong company, Accensi Pty Ltd is accessing $1.6 million to develop a new $20.2 million agricultural chemical manufacturing plant in Lara for its specialised crop protection products. The plant is expected to create up to 36 full-time jobs close to Australia’s south-eastern farming districts, one of its main markets. In Melbourne’s north Premier Extrusion has received support to install new equipment. This will allow Premier, which has been operating for 25 years, to develop technologically advanced foamed polyethylene products for new markets, creating six new jobs. That leads me to the Cooperative Research Centre for Polymers.

This CRC has been developing and converting good ideas into commercial realities since 1992. It’s turned Australian advanced polymer technologies into an accessible competitive advantage for Australian manufacturers. In all, the CRC has licensed 17 licensed technologies. One world class outcome is a new high performance degradable plastic called Plantic HP1 developed by a CRC spin-off, Plantic Technologies. It’s based on non-genetically modified corn starch and is a completely biodegradable alternative to conventional plastics derived from crude oil. The CRC is an excellent example of how industry can work with researchers to develop new products and innovative solutions to problems – it counts five companies, 11 universities, CSIRO and ANSTO among its 23 participants. I talked earlier about governments creating the economic environment to encourage private sector investment and jobs growth.

Easing the red tape burden is one way the Australian Government can create a more favourable economic climate and encourage new investment. We are progressing well with our agenda to cut $1 billion in red and green tape imposts each year. Engaging businesses to identify areas for future reform is essential. I want to acknowledge the active contribution that PACIA has made to our considerations. The nature of the risks associated with some of your products has meant that chemicals and plastics have been subject to complex regulations. These have no doubt evolved and expanded over time. Recently COAG included industrial chemicals on its manufacturing deregulation agenda. The government is working through the processes supporting Australian chemicals deregulation.

Some of the reform opportunities include:

  • The Department of Health’s on-going review of the National Industrial Chemicals Notification and Assessment Scheme looking at improving risk assessment processes for industrial chemicals.
  • The Department of the Environment’s review of environmental chemicals management aiming to develop a coordinated national approach to managing environmental risks. The Australia Pesticides and Veterinary Medicines Authority’s recent significant changes to the way they do business.
  • Safe Work Australia taking the lead on developing a nationally consistent framework for regulating the safety and security of explosives.
  • The Standing Committee on Chemicals’ examination of broader reform options for the chemicals regulatory framework for COAG. Acknowledging that there are significant changes in motion, the Standing Committee on Chemicals is considering whether there are any structural or operational changes that could be implemented across the framework.

I know that PACIA is keenly watching developments in the Eastern Australian gas market. The development of Queensland’s liquefied natural gas export industry has brought thousands of much needed jobs and economic stimulus to regional areas and will earn the nation billions of dollars in export revenue. It has provided opportunities for some of your members to service the industry with water treatment chemicals and plastics used in the industry.  However, as PACIA and its members are well aware, it has also brought significant changes to the gas market. Rising gas production costs, links to international gas markets and limited upstream competition in some regions have all contributed to a tight market and rising wholesale gas prices.

As a result, new challenges are emerging during this transition period and the government is aware that some gas users are finding it difficult to adapt to a changing gas market. Other challenges like high exchange rates, low or stagnating productivity and competition from low cost imports are compounding the effect of rising gas prices.  I think most market participants would agree that there are no quick fixes to the current gas market issues. Promoting the development of new gas supplies, increased transparency on gas prices, improved market signals and a trusted and consistent regulatory environment are the key areas for governments to ensure better market outcomes.

However, the Government does not see a case for direct market intervention. This would heap further uncertainty into an already uncertain environment and would deter rather than encourage the new investment needed to develop additional gas supplies. In this context, the Australian Government welcomes PACIA’s constructive pro market and pro competition stance on these issues. You will be aware that the Australian Government has been consulting widely with stakeholders, including PACIA, in developing its response to these challenges. This follows the constructive engagement by PACIA and its members as part of the Eastern Australian Domestic Gas Market Study, jointly released by the Department of Industry and the Bureau of Resource and Energy Economics in January. The Australian Government’s Energy White Paper will address gas supply and market issues.

The Energy White Paper will set out a coherent and integrated approach to energy policy to reduce cost pressures on households and businesses, to improve Australia’s international competitiveness and grow our export base and economic prosperity. The Energy Green Paper, which is the precursor to the Energy White Paper, will be released for public consultation shortly. The Green Paper will examine policy approaches to ensure that the competitive advantage that Australia’s energy resources provide to businesses and households, is fully realised. The Productivity Commission’s announcement of a research project examining policy issues in the gas exploration, production and transmission sectors is a part of this approach. Its findings will contribute to ongoing market reform. Before I leave the topic of Australia’s gas market, I am aware of recent media coverage of a gas pipeline proposed to link the Northern Territory to the eastern gas market.

As the Minister for Industry, Ian Macfarlane, has stated, the Government supports the concept of a commercial pipeline.  The Government will work with the relevant state and territory governments and pipeline proponents to facilitate the development of a pipeline. I would stress that a pipeline connection is not in itself the quick fix for the gas market. It must be seen as part of an evolving process of removing un-needed regulation, increasing transparency and liquidity in the gas market and providing new gas supply options.

I want to start to wrap up this morning by talking about Australian Government action to ensure that we have the capabilities to manage the transformation of industry.
 

We want a population that is not only skilled but is also scientifically, technically and mathematically literate. We need to ensure our schools are focused on the so-called STEM subjects, science, technology, engineering and mathematics. It’s not about making everyone a scientist, a technologist, an engineer or a mathematician. Rather, it’s about ensuring that people recognise the benefits of having vibrant STEM disciplines and readily engaging the practitioners from those areas. We fulfilled an election commitment to maintaining funding for the Primary Connections: Linking Science with Literacy and the Science by Doing programmes with $5 million being allocated in the 2014–15 Budget. The Australian Government will also ensure STEM subjects get more attention during teacher training. In addition, we are determined to ensure that Australia’s workforce has the skills that employers need. Having a skilled workforce means that workers are more likely to be receptive to change and to seek and adopt new and better ways of working.

The structural change in the economy I mentioned earlier means that employment in higher skilled jobs has grown at about twice the rate of lower skilled jobs over the past 10 years. Around 32 per cent of the workforce have vocational qualifications and 25 per cent hold a Bachelor degree or higher. Around 56 per cent of Australians work in jobs that need a post-school qualification for entry. But the vocational education and training sector has also been bound by excessive red-tape and complaints that it lacks responsiveness to industry needs. The COAG Industry and Skills Council laid out six objectives for VET reform in April and we are making real progress towards meeting them. Last week, the Prime Minister and Minister Ian Macfarlane announced several initiatives as part of the government’s VET reform agenda. They’re just round one of the significant changes to skills and training sector.

What we want to achieve is:

  • A VET system that is more responsive to the needs of industry,
  • Improved completion rates for Australian Apprentices,
  • More autonomy for high performing providers; and
  • To try a different approach to funding training.

Our reforms will elevate the trades to the centre of Australia’s economy and harness the adaptability and creativity of our workers. As the end user of the VET system, it is only right that industry is closely involved at all stages of the training process from design to execution. The Minister has established an industry based VET Advisory Board to advise him directly. He told a national VET conference last week he will also be working with the states and territories over coming months on a full review of framework and content of training packages and accredited courses, to make sure they better support the delivery of skills that will help VET graduates to get a job. He announced that, in a major initiative to cut red tape, high performing training providers with an excellent track record will be invited to apply to be able to change the scope of their registration. This will mean, for example, they will be able to offer new courses, without applying to the Australian Skills Quality Authority for approval. In addition the government is about to release a discussion paper that will seek comment on the best way to develop and maintain training packages. We intend to move to a more contestable model at the end of the current contract with Industry Skills Councils next year. We are aware that there are many different ways this could be done and want to hear your views, so we would welcome any input.

Friends, I am intensely proud that I started my working life as a fitter and toolmaker and I am proud of the qualification I achieved. It was an enormously rewarding doorway to an even more rewarding career. The Australian Government wants more people to view a trade like that, and to realise that a trade qualification is on a par with a university degree. We know that both sets of skilled workers will be essential to our future productivity. We are moving to put an end to the extremely poor completion rates among apprentices, around only a half of those who commence trade training continue right to the end. Part of the package of initiatives announced early last week was a new $200 million a year Australian Apprenticeship Support Network to replace the existing apprenticeship centre model from 1 July next year. It will give people interested in an apprenticeship access to entry-level screening for matching to an occupation or potential employer. The network will offer individual case management follow-up and mentoring services for those at risk of not completing the apprenticeship arrangement. It will shift apprenticeship services away from paper-pushing to establish outcomes-focused services. Services will be smarter and outcome-driven and make it easier for employers to recruit, train and retain apprentices and trainees.

To further assist Australian industry to access training and support services to build the skills of its workforce, we are establishing the $476 million Industry Skills Fund. It too is aligned with other measures to promote national competitiveness and productivity complementing the National Industry Investment and Competitiveness Agenda. The Industry Skills Fund will target SMEs, including micro businesses, because they are so well-placed to respond to niche market opportunities in both domestic and international markets. Further testament to our intention to engage industry in the VET sector was the release in July of a discussion paper detailing various aspects of the fund asking for input to the programme design. My department is reviewing almost 300 responses and the input from around 500 participants in webinars as it prepares to launch the programme on 1 January. We are also trialling two pilot programmes to extend opportunities for young Australians to acquire skills.

Small businesses in regional areas where youth unemployment is high will be able to access wholly funded government training under the $38 million Training for Employment Scholarship programme. This will be tailored to meet the training and skills needs of the particular young person in that particular job.  The decision about the type of training required, and the provider best able to deliver that training, will be made by the employer. And young people in regional areas who may have become disengaged from education and employment will be assisted under the new Youth Employment Pathways programme. This programme will help them to identify a career path and return to school, start vocational education and training or move into the workforce.

In conclusion, the Australian Government has a fresh and straightforward message for business. We will work with you to help you to adapt to the new global economy. But the impetus must come from industry. We are not in the business of spoon feeding anyone. With its huge customer base, in 109 of Australia’s 111 business sectors, the plastics and chemicals industry must also seek opportunities to build productivity and explore areas of competitive advantage.

It’s going to take hard work but I’d recommend to you that you:

  • Look to the opportunities that will arise through the National Industry Investment and Competitiveness Agenda, and
  • Explore how you can benefit from skilling or upskilling your workforce.

Thanks for having me here today.

Media contact: Mr Macfarlane's office 02 6277 7070