Dissenting Report - Coalition Senators
1.1Coalition Senators do not support the passage of this Bill through Parliament.
1.2Coalition Senators believe the Bill is riddled with ministerial discretion and will also allow the Minister to appoint board members who do not have the required, relevant expertise.
1.3Coalition Senators believe this Bill will create a corporation which will have a contributory impact on inflation.
1.4Coalition Senators believe the Bill does not have appropriate accountability and transparency measures.
1.5Coalition Senators do not support the Government’s decision to exclude grants as a form of financial support to industry under the National Reconstruction Fund.
1.6Coalition Senators believe the change in national priorities as designated by the government means this Bill will create investment uncertainty.
1.7Coalition Senators believe Minister Husic is wrong and has wilfully politicised national security in the hope of securing support for a flawed Bill.
1.8Coalition Senators are concerned that the legislative drafting process excluded key stakeholders from relevant sectors.
1.9Coalition Senators do not support the inordinate amount of ministerial discretion allowed for under this Bill.
1.10The Minister will have the ability to appoint the board and chair by written instrument.
1.11The Minister will have the ability to set the investment mandate by non-disallowable instrument.
1.12The Minister will have the ability to set priority areas by a disallowable instrument.
1.13Coalition Senators believe this to be an unacceptably high level of ministerial discretion, especially given the funding allocated under the Act.
1.14Stakeholders also echoed these concerns, from a broad spectrum of political views.
1.15The Australian Council of Trade Unions (ACTU) stated in their submission that:
Firstly, this places almost complete control in the hands of the Minister of the day as to the purpose and objectives of the NRFC. This is a significant risk. A future Government hostile to the goals of the NRF, could easily treat it as a slush fund, or redirect its purpose and investment into unhelpful areas. If the NRFC is created by Parliament, its fundamental purpose should only be altered by Parliament.[1]
1.16The Australian Chamber of Commerce and Industry (ACCI) stated that:
The public needs to have confidence that the money is being utilised purely in the taxpayers' interests and there can be no question that it's being used for other purposes.[2]
1.17The Minister for Industry and Science has previously shown a willingness to politicise his selections of various government-appointed positions.
1.18The Minister previously appointed a Union official to the National Robotics Strategy Advisory Committee, a highly technical field, where that official’s expertise was not well-credentialled.[3]
1.19Coalition Senators do not believe that the Minister should have the ability to simply appoint members to the board or appoint the chair, a view held across the parliament by many members.
1.20ACCI echoed these concerns in their testimony:
In seeking to ensure the integrity of the fund, there are some useful things that might be done. First, the minister should not have the authority to directly appoint board members, but only to approve board appointments that have gone through a formal recruitment process. A formal recruitment process would build confidence that the board is appropriately skilled. There is no reason that there needs to be a provision that allows for formal recruitment processes to be bypassed.[4]
1.21Coalition Senators are concerned that the Minister would have discretion to politicise appointments to a board overseeing a $15 billion fund.
1.22Furthermore, the Bill allows the Minister to appoint board members who have little to no relevant expertise.
1.23As outlined by ACCI, the Minister would be able to appoint board members with expertise in industrial relations.
1.24In their evidence ACCI stated:
At present, the legislation lists 'industrial relations' as a relevant skill, but, of course, this raises the prospect of trade unionists with non-investment interests being appointed to the board. We note that the ACTU has recommended that the fund legislate a top priority that includes creating 'unionised jobs'. We know that the ACTU wants to force businesses to meet a long list of conditions, such as union-approved work agreements before they get access to the fund. In ACCI's view, it's critical that a fund charged with disbursing $15 billion be run by people focused on investment rather than other topics.[5]
1.25This is highly inappropriate for an investment corporation in the manufacturing sector.
1.26Coalition Senators are also concerned that the Government could change priority areas based on political whim, a concerned shared by the ACTU.
1.27The ACTU stated that:
…we say the bill needs a clear purpose, the government's stated purpose, in the objects of the act; otherwise, the direction of the corporation is effectively left in the hands of the minister of the day. We think if parliament is passing this law, it should be up to parliament to agree to change the direction of it.[6]
1.28Coalition Senators do not support the Minister having discretion to pick and choose priority areas of the Australian economy as they see fit.
1.29Such clauses as outlined in the Bill could allow the Minister to create new priority areas to provide funding in order to address a political issue of the day.
1.30Coalition Senators believe this is an inappropriate amount of ministerial discretion.
1.31Additionally, the Minister’s ability to set the investment mandate by non-disallowable instrument is places an extraordinarily dubious provision in the Bill.
1.32Such provisions purposefully circumvent the scrutiny of a democratically elected Parliament.
1.33Coalition Senators believe this Bill will have a contributory impact on inflation.
1.34Coalition Senators are concerned that the legislation intends to borrow $5 billion of the $15 billion upfront, increasing the interest bill for Australians.
1.35This off-budget funding of $15 billion, in conjunction with other off-budget policies, will increase government spending and drive-up inflationary pressures.
1.36This, coupled with the increase in borrowing costs over the past 15 months, results in hard working Australian taxpayers having to fund much higher interest bills over the next four years and over the decade.
1.37With the market predicting further interest rate rises on the horizon, the Albanese Government must reconsider these excessive off-budget funds.
1.38In regard to off-budget spending and its impact on inflation, the International Monetary Fund has warned the government that “a proliferation of such vehicles should be avoided.”[7]
1.39Coalition Senators are concerned that the legislation intends to borrow $5 billion of the $15 billion upfront, increasing the interest bill for Australians.
1.40The Minister’s own Department admitted at Senate Estimates that they had done no modelling on the inflationary impact of the National Reconstruction Fund.[8]
1.41Again, at the Senate Economics Legislation Committee’s Inquiry into the National Reconstruction Fund Corporation Bill 2022 [Provisions] hearing, the Department of Industry, Science and Resources again admitted that they had still not modelled the inflationary impact of the Bill.[9]
1.42The Minister has no analysis or foundation from which to dispute concerns relating to the inflationary impact of this Bill.
1.43Coalition Senators believe that this Bill therefore poses an unacceptable level of risk in terms of inflationary pressures.
1.44The Department of Industry, Science and Resources have done no modelling to suggest otherwise.
1.45Australians are currently suffering through a cost-of-living crisis and the government should not recklessly provide billions of dollars of funding to off-budget projects in a high inflationary environment.
1.46Coalition Senators do not believe that the transparency and accountability regime outlined in the Bill is sufficient.
1.47Coalition Senators are concerned that a $15 billion fund would be proposed with so few checks and balances.
1.48The legislation proposes a five-yearly independent review of the operation of the Act.
1.49Coalition Senators believe that the financial impact of this Bill warrants far more accountability and transparency measures than a five-yearly independent review.
1.50Furthermore, provisions in the Bill allow the Corporation to keep investments anonymous as stated by Research Australia during hearings.
1.51Research Australia stated that:
There's no apparent reason the default position should be that the identities of the recipients of the NRF's investments are kept secret, rather than the other way round. This is why Research Australia has proposed that clause 82 of the bill should require the quarterly investment reports to identify recipients of financial accommodation by name and to specify the priority area to which the financial accommodation relates.[10]
1.52Coalition Senators believe this an unacceptable circumvention of transparency.
1.53Coalition Senators do not agree with the Bill’s intention to preclude grants as a form of funding to the manufacturing industry.
1.54Stakeholders have also expressed concerns about the Government’s decision to exclude grants.
1.55The Australian Banking Association (ABA) stated in their submission that:
Although the ABA notes the Fund is not proposed to provide grants, the Government should consider the provision of grants as a possible alternative to supporting economic and industry development without crowding out traditional private sector investors.[11]
1.56The ABA also noted in their submission that “banks already invest in many of the priority areas proposed to be targeted by the Fund”. They continued that:
Government is encouraged to focus on infant, or prospective infant industries that may grow into strong contributors to the economy that may require up-front government support, rather than some of the identified priority areas that already benefit from traditional private sector investment.[12]
1.57Coalition Senators are concerned that the Government would seek to purposefully exclude grant funding which may help small to medium sized enterprises innovate.
1.58Grants are able to provide smaller and medium sized enterprises with the capacity to become investment ready.
1.59In their testimony, the Australian Industry Group (AIG) noted that the ‘Cuts to the Modern Manufacturing Initiative and the Entrepreneurs Program in 2022 deprived the NRF of two main pipelines for preparing innovative SMEs to be investment ready.’[13]
1.60Coalition Senators are concerned that the Government would refuse to make available a form of assistance which would greatly help, and has previously supported, Australian innovation across the manufacturing sectors of the economy.
1.61Coalition Senators remain committed to the priority areas of the economy that the previous government outlined.
1.62Shifting national priorities creates investment uncertainty.
1.63Investment uncertainty leads to companies relocating where they do business and that creates job losses, removing potential stimulus from Australia’s GDP.
1.64Coalition Senators do not agree with the Government’s decision to change the priority areas of the Australian economy.
1.65At Senate Estimates, when pressed to provide information as to how the priority areas the Government has designated for the National Reconstruction Fund were decided, Assistant Minister Ayres named the ‘COVID-19: Recovery and Resilience Report’ by the Commonwealth Scientific and Industrial Research Organisation (CSIRO).[14]
1.66The priority areas do no match what was listed in the report which was published by the CSIRO.
1.67The Government has decided to create significant investment uncertainty in the Australian economy by shifting priority areas with no clear rationale.
1.68The Government was unable to provide any information as to how those conclusions were reached aside from a report which was incongruent with their own priority areas.
1.69Coalition Senators are concerned that priority areas were chosen on a political whim.
1.70Relevantly, stakeholders have expressed concerns that this investment uncertainty will cause important industries to move offshore.
1.71In their testimony, the Space Industry Association of Australia stated that:
There is concern in our industry about the lack of signalling on space investment at the moment in Australia. Government plays a pivotal and critical role in space industries in a way that it doesn't in other industries because of the nature of space. Programs have been under review for some time. That is causing uncertainty and a difficult environment for private investment.[15]
1.72The Government decision to strip entire industries of priority status with no real evidentiary basis for doing so is highly concerning.
1.73Coalition Senators believe that the shift in priority area will drive companies, economic stimulus and jobs offshore.
1.74Coalition Senators are gravely concerned that the Minister for Industry and Science has chosen to politicise national security and the AUKUS agreement.
1.75Coalition Senators condemn the Minister for these actions.
1.76It is clear from testimony of the Department of Industry, Science and Resourses that the Minister had absolutely no basis from which to make these spurious claims.
1.77The Department stated that they had provided no advice or briefing to the Minister, which stated if the Nation Reconstruction Fund Corporation Bill 2022 were to not pass it would have implications on Australia’s national security.[16]
1.78The Department stated that they had provided no advice or briefing to the Minister, which stated if the Nation Reconstruction Fund Corporation Bill 2022 were to not pass it would have implications on the AUKUS agreement.[17]
1.79The link between the NRF and national security that the Minister tried to create, namely through quantum computing, is severely undermined by the fact that he has, according to media reporting, failed to nominate a director for the quantum computing company that the Commonwealth has a $25 million equity stake in since being appointed to his portfolio.[18]
1.80Coalition Senators believe the Minister was totally misleading and disingenuous.
1.81Coalition Senators reiterate that national security and the AUKUS agreement should be bipartisan and above the politics of the day.
1.82Coalition Senators have concerns that the Department of Industry, Science and Resources conducted less than satisfactory consultation in the legislative drafting process of this Bill.
1.83The Explanatory Memorandum notes that the external consultation included the following non-government stakeholders: the Australian Banking Association, the Australian Council of Superannuation Investors, the Australian Council of Trade Unions, the Australian Investment Council, Industry Super Australia, Law Council of Australia.[19]
1.84None of those listed represent the interests of manufacturers in Australia.
1.85The Department did not properly consult manufacturing bodies in the drafting of legislation which is supposedly going to be the key pillar of policy supporting their sector.
1.86Coalition Senators believe this to be a highly inappropriate oversight by the Government and the Department.
1.87Coalition Senators believe that it was necessary for the Government to consult the manufacturing industry, and its constituent associations, in the drafting of this legislation. The Government failed to do so and stands condemned.
1.88Coalition Senators therefore believe that the Government is trying to tell manufacturers what they need, rather than listening to what they actually need.
1.89This is especially concerning given that stakeholders have expressed concerns about the exclusion of grants under the legislation.
Recommendation 2
1.90The National Reconstruction Fund Corporation Bill 2022 should not pass.
Recommendation 3
1.91An amendment must be moved to remove ministerial discretion to appoint the board and its chair, and this must be led by the Department of Industry through a transparent and documented process.
Recommendation 4
1.92An amendment should be moved to remove ministerial discretion to nominate priority areas by way of disallowable instruments and instead legislate priority areas:
That those priority areas remain the Modern Manufacturing Strategy priority areas as to create policy continuity and create investment certainty.
Recommendation 5
1.93An amendment be moved that the investment mandate must be put to Parliament for a vote.
Recommendation 6
1.94Amendments be moved to increase transparency and accountability by legislating:
An independent annual review of the operation of this Act;
A Performance Report at the end of each financial year;
That quarterly reports must be tabled in Parliament; and
That the Corporation must identify the entities to which financial accommodation has been provided in its quarterly reports.
Senator Andrew Bragg
Deputy Chair
Liberal Senator for New South Wales
Footnotes
[1]ACTU, Submission 4, p. 2.
[2]Mr Alexander, ACCI, Proof Committee Hansard, 22 February 2023, p. 4.
[3]The Hon Ed Husic MP, Minister for Industry and Science, ‘Committee appointed to help guide Robotics Strategy’, Media Release, 13 December 2022.
[4]Mr Alexander, ACCI, Proof Committee Hansard, 22 February 2023, p. 2.
[5]Mr Alexander, ACCI, Proof Committee Hansard, 22 February 2023, p. 2.
[6]Mr Moxham, ACTU, Proof Committee Hansard, 22 February 2023, p. 9.
[7]Ronald Mizen, ‘IMF warns on need to fix bracket creep’, Australian Financial Review, 16 November 2022.
[8]Ms Megan Quinn PSM, Secretary, DISR, Committee Hansard, 16 February 2023, p. 101.
[9]Ms Luchetti, DISR, Proof Committee Hansard, 22 February 2023, p. 49.
[10]Mr Mullins, Research Australia, Proof Committee Hansard, 22 February 2023, p. 36.
[11]ABA, Submission 2, p. 3.
[12]ABA, Submission 2, p. 1.
[13]Ms McGrath, AIG, Proof Committee Hansard, 22 February 2023, p. 3.
[14]Senator the Hon Tim Ayres, Assistant Minister for Manufacturing, Assistant Minister for Trade, Committee Hansard, 16 February 2023, p. 95.
[15]Mr Brown, SIAA, Proof Committee Hansard, 22 February 2023, p. 45.
[16]Ms Luchetti, DISR, Proof Committee Hansard, 22 February 2023, p. 49.
[17]Ms Luchetti, DISR, Proof Committee Hansard, 22 February 2023, p. 49.
[18]Joseph Brookes, ‘Key board seats at CSIRO, IISA, SQC remain unfilled’ InnovationAus, 10 February 2023.
[19]Explanatory Memorandum, p. 5.
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