Australians are being fleeced, but manufacturing & productivity will fix it

Chamber: Senate on 24/03/2023
Item: BILLS – National Reconstruction Fund Corporation Bill 2023 – Second Reading

Senator RENNICK (Queensland) (12:19): First of all, I’d just like to defend my good friend and colleague here Senator Scarr against those outrageous slurs by the prior speaker, who seemed to think that he was calling people who work in manufacturing rent seekers. That was completely outrageous, and it’s typical of what we have come to expect from the other side, who deal in feelings and fear rather than facts.

For a Queensland Labor senator to come in here and say that she supports manufacturing in the regions is an outrageous statement, because it was the Queensland Labor party who sold the Port of Brisbane and sold Queensland Rail. Queensland Rail was built by Joh Bjelke-Petersen, who opened up the Bowen Basin which actually built the railway lines that provided the freight, provided the royalties and provided the demurrage charges at the ports. That recurring revenue, built by the National Party in the 1970s and 1980s, provided the money to fund schools and hospitals—hospitals like a maternity ward in my home town of Chinchilla that had four maternity nurses in the seventies and eighties, when I grew up there. Under a Labor government, we don’t have a maternity ward there in Chinchilla or Biloela or many other towns, including Gladstone. And you know why? Because the Queensland Labor government has driven Queensland broke. And you know how they did it? They flogged off all of our infrastructure built by the Liberal-National government of the seventies and eighties that provided the revenue to pay for the recurring expenses and provided jobs in the regions. It wasn’t just the Bowen Basin that was opened up. There was the Weipa bauxite deposits. There was value-add going on at Gladstone that created jobs there. We built lots of dams—the mighty Burdekin dam up north and the mighty Wivenhoe Dam. That paid for things like the Captain Cook express in Brisbane to provide valuable infrastructure.

But it wasn’t just the Queensland state Labor government that destroyed manufacturing in that state and this country; it was the federal Labor government—in particular, the Hawke-Keating government and their reckless neoliberal policies of the eighties, particularly when Paul Keating opened up our capital markets to the world in the 1980s. In 1985 we had $8 billion in foreign debt. The banks had borrowed $8 billion in foreign debt. By 2008 we had $800 billion. The banks had borrowed $800 billion in foreign debt. Nearly all of that money went into inflating house prices in Sydney or Melbourne so that the average house price in Australia had risen from four times earnings to approximately, depending on which city you lived in, between 10 and 12 times earnings.

The reason why that matters and why capital controls matter is that you need to dictate how money that is borrowed is invested. The banks were allowed to pump so much money into residential housing, and all that did was inflate the price of housing. It didn’t add to productivity. It increased demand, but it didn’t increase supply. So now we’ve got this situation in Australia where we’re drowning in debt because we’ve overinvested in consumption—and, yes, houses are important, but a house is the same house whether it’s valued at half a million dollars or $5 million. Because Paul Keating went on this reckless neoliberal ideological spend, we have allowed the foreign banks to drown us in debt, not to mention withholding taxes, which I’ll come to in a minute.

Not only that but we then had the Button plan, which rationalised and did a lot of things that made it very difficult for Australian industry, particularly the car industry, to compete in international markets. Now, no-one is for a minute suggesting that we didn’t need to reform the industry. But we didn’t need to actually destroy the entire car industry. I’m not going to say either party is blameless in any of this, but, when the Labor Party come in here and say that we shut down car manufacturing, that’s not true. Nissan and Ford shut down under the Rudd-Gillard government—during those years. So we need to get that into context.

Not only that but other policies—things like superannuation. When Senator Scarr talks about rent seekers, he is talking about industries like superannuation that didn’t exist 30 years ago. We have got tens and tens of thousands of financial engineers in this country that do nothing but shuffle paper and pocket fees. They do not create one asset. I well remember Bob Hawke going out there and saying how compulsory superannuation was going to build infrastructure in this country. That was a completely outrageous lie. Superannuation does not build infrastructure; it buys infrastructure. That is a very significant difference.

These superannuation funds sit there every week. They don’t have to do a thing. They get 12 per cent—soon to be 12 per cent—of the entire workforce’s wage, and they don’t have to do anything. This is money for jam. They just pay over the market for existing infrastructure assets, and if they have too much money—which they do now—they don’t actually invest here in Australia. They’ve gone and parked $1 trillion of superannuation offshore. One of the Queensland public super funds is the biggest shareholder in Heathrow Airport in London. Why have we got Australian superannuation funds investing in offshore infrastructure instead of building new infrastructure here? If we want to get manufacturing back on its feet in this country, we need to go back to the past and look at the way it was done in the past.

Let me say this: infrastructure is a monopoly. I believe in the private sector, but I don’t believe in free markets, and I speak with a great deal of authority when I say that. No greater person than Robert Menzies, the founder of the Liberal Party, actually said, in the last paragraph of the ‘Forgotten people’ speech, ‘We should not go back to the old and selfish notions of laissez faire.’ That’s very important. I am on this side of the chamber because I believe in capitalism, and that is people risking their own capital. I don’t care whether you’re a teacher, a nurse, a doctor, a lawyer, an engineer, a bricklayer, a mechanic or a carpenter; if you get out of bed every day and put your nose to the grindstone, you are a capitalist in my book. You are the one risking capital. That’s how markets work. They have to rely on the risk/reward paradigm. That is why, when it comes to monopolistic infrastructure, I believe that governments should build and own it, and that is why I’m against this fund.

This fund is going to channel $15 billion to—as my good friend and colleague Senator Scarr rightly says—the rent-seeking parasites. The fact of the matter is that small businesses, like window manufacturers up in Cairns, won’t know how to go through all the applications and the paperwork and jump all the hurdles to get the hand-out. This is the thing: guys who work in manufacturing, the guys who are on the tools, can’t stand the paperwork. What you will have is the professional class of rent-seeking elites, who know how to work the system—a lot of them will be ex-staffers and lobbyists, who do nothing but grease the wheels, sucking money out of the system. By the way, I don’t disagree with Senator Whish-Wilson; I never agreed with a lot of the slush funds we set up, either. Either you own it and you build it, operate it and are accountable for it, or you let the market deal with it, provided that the people who participate in the market are risking their own capital. That is why I hate superannuation. You’ve got a whole industry out there gambling with other people’s money, and that’s not right. I should add that most corporations, large corporations especially, aren’t capitalists either; they’re socialists. The executives who run those corporations get paid millions of dollars, and when they drive those companies into the ground—or, God forbid, sell an asset off to a foreigner—they collect their billions of dollars in bonuses. They don’t care about jobs here in Australia.

I’m not going to sit here and whinge for the whole 15 minutes. I know I’ve done a fair bit of whingeing already, so I will move forward on how we get manufacturing back in this country. If we want to rebuild manufacturing in this country, first and foremost we need cheap and efficient base-load energy. I notice that Senator Green didn’t once mention the coal workers or the gas workers. What stinks about this so-called reconstruction fund is that the coalmines, the gas mines and the pipelines to pump gas around the country—these are things that give us a natural advantage in this country—are excluded from this fund. If we’re really serious about getting manufacturing back on its feet in this country, we need cheap, reliable energy. There’s 400 million tonnes of coal out there near my home town of Chinchilla, sitting on the ground, which is owned by the people of Queensland. It is free, except for the cost of production, and it is very cheap to produce. It is right at the ground level. The power station is known as a mine-mouth power station—the coalmine is right next to the power station. The power station sits next to the southern interconnector, which sends electricity to New South Wales and Victoria. It is the cheapest energy in Australia, as per the Finkel report in 2017.

We could put up a couple of turbines there. We could put up a nuclear power station to the north of Chinchilla, just outside of Chinchilla in Barakula State Forest, the biggest state forest in the Southern Hemisphere. We can get cheap and reliable base-load energy—coal, gas and nuclear energy. We have got a competitive advantage in that worldwide, and we need that competitive advantage because we can’t compete with countries like China on wages because we have a higher standard of living. We should never sacrifice a higher standard of living, but if we want to be competitive we have to produce.

The next thing we need to do is to start rewarding those people who actually produce goods and services in this country. We have got an obscene tax structure in this country called payroll tax that actually taxes the employer to employ people. I suggest we bring back a stamp duty on share trading, and the money raised from share trading can be used to fund the abolition of payroll tax in this country. It is absolutely absurd that we tax people to employ people. We have six different payroll taxes in this country—six different threshold levels. For anyone trying to do payroll tax in this country, it’s a compliance nightmare, but not only that; it adds to the cost of business. We’ve got this absurdity in this country where we charge stamp duty on real assets, like houses and businesses and farmland, but we don’t charge stamp duty on paper assets. Now, 40 to 50 per cent of the Australian stock market is traded by high-frequency foreign traders who come in and scalp the market. We’re rewarding that sort of rubbish, where we have the day traders and the speculators, by not having stamp duty on share trading. We’ve got to stop rewarding speculators and start rewarding the producers.

Let me tell you this. Freedom comes from prosperity. Freedom is the child of affluence, and prosperity comes from productivity, and it’s the producers, the workers in this country, that have made this country great. It is the workers in this country who have built this country. They bled for this country, and they are the ones that should be rewarded.

Last but not least, we need to fix up our withholding tax structure in this country. I was attacked by none other than the Treasurer when I was a Senate candidate because I made the bold assertion that we should raise withholding taxes on offshore profits. What we’ve got in this country is a company tax rate of 30c and, depending on the tax treaty, withholding tax rates of between 0c and 15c. That gives multinationals who use foreign capital a tax advantage over domestic capital. That’s because, effectively, if you make $100 here and you’re a multinational, you can set up a marketing hub like BHP, Rio, Chevron and plenty of others did and you can pay all your profits—what are called above-line profits—offshore.

Take General Motors. When we were all complaining about how General Motors was broke, did anyone ever ask the question: how much in interest royalties and rent did General Motors pay offshore back to Detroit? Do you know how much it was? It was enough to make sure they never made a profit in this country, because if they made a profit here they would pay 30c on the dollar for every dollar of profit. But they shipped those profits offshore. With our withholding tax rates, there is no withholding tax rate on profits sent back to Detroit. I doubt the money went back to Detroit; it would have sat in a tax haven. I’m glad to say a few years ago the Taxation Office picked up Chevron for messing around with transfer pricing. Chevron in the US tried to charge an interest rate of nine per cent to its local subsidiary here, when the real market interest rate was two per cent.

What we have to do if we want to fix up our competitive nature and our manufacturing industry is to make sure that we raise withholding taxes and lower onshore tax rates—as well as income tax, because we should never lower company tax before we lower income tax. We’ve got to make it more competitive, to encourage companies to retain their earnings on shore here in Australia, because retained earnings is equity and equity is title. As a sovereign country we must maintain title of our assets, because we owe that to our children. That is why I ran for politics—to make sure our children get the same opportunities our forefathers gave to us. We cannot do that without a manufacturing industry, but we cannot do that when we have all these middlemen keeping the profits in their back pocket.