The role of government: Facilitating exports, encouraging investment

Mr Keith Croker, who heads the federal Department of Industry, Science and Tourism's resource processing industries branch, provided a perspective on issues the government is addressing and gave a commitment to work with the sector in the future.

The role for government in industry policy has been articulated by the Coalition in its Industry and Commerce Policy. This comprises three areas of focus: macroeconomic policy direction; microeconomic reform; and trade-regional, multilateral and bilateral. However, I would also add that industry policy encompasses an acknowledgement of the importance of technological development, innovation, training and skills development and other issues that enhance productivity and competitiveness.

On the macroeconomic front, business investment is forecast to rise by around 14 per cent, which will boost demand growth to more than 4 per cent a year. Although this will stimulate imports, particularly due to rapid growth in highly import-intensive areas of investment, continued strong growth in Australia's major trading partners will give another year of strengthening exports. This will result in only a modest improvement in the current account deficit for 1996-97, which will remain at a high 4 per cent of gross domestic product, reflecting a structural weakness that the fiscal consolidation program is designed to address over time.

Microeconomic reform, which has already brought financial deregulation, reduced tariffs and some movement away from centralised wage fixing, will progress with the banking sector inquiry and the industrial relations bill currently before parliament.

The central thrust of the Coalition policy on trade is to boost competitiveness of exports and import replacement industries through raising productivity across the economy. The multilateral focus is on maximising benefits from the Uruguay round of negotiations and establishment of the World Trade Organisation, while maintaining a commitment to removal of discriminatory trade practices. The government is pursuing open regionalism within APEC, specifically opposing the emergence of a preferential trade bloc. On the bilateral track, it will exploit where possible opportunities to open and improve access for Australian exporters.

In the five years to 1993, APEC export trade grew at 8.7 per cent a year, significantly ahead of the global average, 5.5 per cent, to give it fully 45 per cent of the share of world trade. The APEC agenda includes the dismantling of trade and investment barriers by 2020. Australia has agreed to review its remaining tariff barriers before 2000, but there is no commitment to reduce them further at this stage.

Turning to the chemicals industry, sales in 1993-94 reached $21.1 billion, accounting for 11.5 per cent of total manufacturing turnover. Chemicals turnover (including basic chemicals, other chemical products, rubber products and plastic products, but excluding petroleum products and refining) grew 5.5 per cent in the three years to 1993-94 – only just ahead of the 4.8 per cent consumer price index growth, meaning little real growth – while imports went up 39 per cent to $9.4 billion, and exports 70.1 per cent to $2.4 billion. Employment, at 83800, declined by 7 per cent.

In summary, exports of chemicals are growing faster than imports, but on a relatively low base, with the standout performers being inorganic chemicals, pigments and pharmaceuticals, targeted largely at Asian markets. The major imports were fertilisers, soaps, pharmaceuticals, organic chemicals, starches and glues. The challenge is to fathom the reasons behind these imports and to determine what we as industry, government and research providers can do to arrest their growth.

New investment in the industry has the potential both to cut imports and boost exports. In examining its current operations, industry should focus on taking advantage of emerging markets, which means achieving internationally competitive production and marketing. One element of this is a need to restructure, with the aim of improving the productivity of sub-optimal operations to meet world-scale production benchmarks.

As the major growth markets are overseas, a more outward orientation is crucial and this demands a greater commitment to exports and a stronger regional presence. The key to sustainable growth is innovation, leading to the development and commercialisation of new products and technology, supported by effective marketing.

The government is committed to helping industry achieve its potential, and is actively promoting chemicals sector investment. Australia's research infrastructure is among the best in Asia, and it is becoming more attuned to working with industry to achieve commercial outcomes. Emerging markets on the Pacific Rim and their demand for new products present opportunities for the industry. A strong partnership between the industry, government and the research sector is necessary to capture those opportunities.