The Hon. Rob Lucas MLC

The Hon

Rob Lucas MLC

Treasurer

Speeches

Steel Industry Protection Bill

Monday, 7 November 2016

The Hon. R.I. LUCAS ( 19:46 :56 ): I rise on behalf of the Liberal members to speak to the second reading of the Steel Industry Protection Bill. In doing so, I reflect the views of all of my Liberal colleagues to say that our thoughts are with the ongoing battle of industry and workers, in particular in Whyalla, but nationally as well—those in the steel industry: an important industry for the future of the nation, in particular, but also an important industry for the future of the state. The bill we are being asked to speak to today is introduced by the Hon. Mr Parnell on behalf of the Greens, similar to bills introduced by other Greens members in other jurisdictions as well.

All governments, whether they have been Liberal or Labor, state or federal, have generally shared the view of trying to respond to the challenges of the steel industry internationally in the best way they see possible, in terms of assisting the industry. In South Australia, the state Labor government has implemented a steel industry participation initiative to ensure that all South Australian government projects include contract conditions specifying that steel must be sourced from mills with Australasian Certification Authority for Reinforcing and Structural Steels (ACRS) third‑party certification, and that steelwork must be sourced from steel fabricators independently certified to the recently created National Structural Steelwork Compliance Scheme.

The government, through the steel task force, has provided $4.3 million in funding over four years to assist the South Australian steel fabrication sector to become compliant with Steelwork Compliance Australia's requirements. In doing so, the Liberal opposition is supportive of the initiatives that the Labor government has taken, insofar as they go.

In looking at what the state government has done, and what this bill seeks to do, there are clearly some significant differences, and I guess because we are in opposition we are not privy to the legal advice that the government would have received. On my recollection, many years ago when we were in government, in relation to any decisions that state government sought to take which might or might not be seen to be in conflict with national or international agreements, I suspect the way the state government's response has been structured is based on the legal advice as to how far they are able to go in terms of favouring Australian producers—steel manufacturers—as a result of international agreements.

As I said, being in the opposition we are not privy to the latest legal advice that the government would be privy to, and I am assuming that, whoever speaks—I think the Hon. Mr Ngo speaks on behalf of the government—it is possible that part of his contribution may well include the government's legal advice in relation to this bill and what the state government has done already in terms of trying to assist the steel industry.

The federal government and the member for Sturt, in the various portfolios he has held in the last 24 months, have been prominent in terms of seeking to assist. They have introduced import duties of between 11.7 per cent and 53 per cent on Chinese-made steel products. As they describe it, this antidumping action was designed to ensure that Arrium could compete on an even ground with imported steel. I do not have the exact detail, but they did bring forward a major rail contact to try to provide increased work activity for Arrium and its workers at an earlier stage to assist Arrium in its ongoing battle for financial viability.

Both the federal Liberal government and the state Labor government have sought, in their different ways, given the levers available to them, to do what they can to assist the steel industry and Arrium in particular. In looking at the other state governments, the Liberal government in New South Wales, for example, sought to provide assistance in a different way. They recognise the importance of local steel manufacture there, but they maintain their commitment to trade agreements and being globally competitive. They sought to reduce regulation, business taxes and red tape as it applied to the steel industry located in the state of New South Wales.

The Victorian Labor government introduced an industry participation policy, we are told—back a number of years ago now, this is not a recent initiative, and I will not go to the detail of all of that—but the point that is being made is that it appears that whether it is a Liberal government or a Labor government, whether it is a state government or a federal government, everyone has been seeking to do what they could to try to ensure the ongoing viability of the steel industry in the nation in particular, but from our viewpoint in the state of South Australia.

One of the key issues in relation to the bill that is before the house this evening—and I indicate on behalf of Liberal members that we will support the second reading of the bill—is that we will be moving amendments, which I think have been filed in my name. As I understand it, should the bill get through the second reading this evening, we will delay the committee stage to enable members to have a good look at the amendments that we have crafted, or the party room has approved, for consideration.

Essentially, those amendments are seeking to ensure that, whatever steel is being used in South Australian government projects, the origin of that steel would be disclosed contemporaneously—I think that is the appropriate word, although it is not used within the drafting of the amendments as I have seen them. However, the intention is that there be early advisement of the origin of the steel that is being used in the state government funded projects.

There has been recent controversy—I have not been actively engaged in it, but in a number of the state government funded projects I know that members of my party, Independent members and members of the media, have raised issues as to whether or not the steel being used in the O‑Bahn project, for example, and in various other projects, was Australian steel or not.

The question has been raised as to whether the Royal Adelaide Hospital project or the Festival Centre project or the Adelaide Oval project, etc., whether the steel being used was Australian steel or not. Because of the confidentiality of both the approach of the government and also the confidentiality of the contracts which have been entered into between the government and the lead contractors, that information is not made public, or is not always made public, and we are not left in a position of knowing whether or not Australian steel has being used, assuming that there was Australian steel available for the sort of project that was being funded by the government.

I will be interested to see the government's response delivered at the second reading in terms of the compliance of the legislation with international trade agreements and procurement agreements. The other interesting thing is—in terms of the drafting of the bill—I think as the Hon. Mr Parnell, as a man with a legal background will know, there are lots of interesting variations of what we might refer to as publicly funded projects. So, the easiest one is where it is completely public funded and it is on our balance sheet and taxpayers' money clearly has paid for it. I suspect the closest of that in the examples I have given would be the O-Bahn extension.

The Adelaide Oval one is an interesting one in that, for example, the state granted money; the football associations and others—cricket associations—borrowed money. There was a vehicle called the Stadium Management Authority which managed it. It was not what I would call a traditional public sector funded procurement project. So, I think when we get into the committee stage, these are the sorts of issues I am sure the Hon. Mr Parnell, if he has not addressed, will address in terms of how he sees his draft bill applying in that sort of circumstance.

The next level of complication we have, of course, is what we now call the PPP project. Let us take the new Royal Adelaide Hospital project, where at this stage, the vast bulk of the money that has gone into the approximately $2 billion that has been funded for the project, which obviously includes some for steel, is actually all private sector funded, and there is a legal case going on at the moment before the building is handed over to the state. The taxpayers will not start paying for that building until—who knows—2018, 2019, or whenever it is that we start making annual lease payments of approximately $396 million a year for the next 35 years, or whatever it is, for the project.

So, with the money that has been expended on the steel, etc., that is going in there, there is an interesting legal question. Clearly, there is a contract. Technically we do not have to take control of the project: we can write it all off and say, 'Too bad, we're not going to take the hospital.' It is highly unlikely but I guess that is the game the Minister for Health is currently playing with the builders and others through the court system at the moment. Technically, in the end, that is a legal possibility, not a probability but a possibility.

So, the money that has been expended on the steel at the moment is obviously private sector money and it will eventually be paid for, if the contract is concluded and it is handed over, so there is the applicability of the drafting of the legislation to that sort of circumstance. The PPP, of course, has, as the Auditor-General has noted, become a more common procurement device in recent times. We then have the much more complicated and difficult area of the debate about an interconnector.

There is a bucketload of steel that is used in an interconnector, and there is a half a million dollar or a million dollar study going on at the moment about potentially a new interconnector between South Australia and New South Wales, with an estimated price of maybe $500 million-plus for an interconnector, and a lot of steel involved if that interconnector goes ahead. That is a private sector company. It may or may not undertake that particular project. If it does it in the way currently envisaged by the National Electricity Market rules, it would be funded by electricity users in New South Wales and South Australia.

I have seen, however, the state government raise the possibility that maybe the state of New South Wales and the state of South Australia might make payments towards it. There is no commitment, I am not suggesting that, but that particular option has been flagged. If the state governments were to make a contribution towards an interconnector to a private sector company would that comply with the requirement? Certainly, on my advice, the cost differential between Australian steel and steel from overseas which might comply with the state government's requirement of the national Australian standard, would be, potentially, tens of millions of dollars difference.

It is an interesting issue because if in the end it costs more, then the electricity users of South Australia and New South Wales pay the differential of the increased costs through their electricity bills over the next 30 or 40 years, if that is the case. I do not profess to have sought to apply the Hon. Mr Parnell's legislation to each of those procurement options, really because at this stage I am saying I am interested to hear the state government's position and legal advice in relation to it and I will be interested to hear the Hon. Mr Parnell's views in relation to how it might apply.

For those reasons, and for the other reasons that I have ready indicated, the Liberal Party's position is supporting what the state Labor government has done thus far, and what the Federal Liberal government has done thus far, and certainly by way of amendments seeking to put in an additional requirement that we are aware of the origin of the steel that is being used in publicly funded projects, however that might be ultimately defined, which might assist transparency and accountability in the public debate.

Ultimately, the position the party adopted was not to, in essence, enforce, as is envisaged in the legislation, a requirement on state government procurement that Australian steel has to be used in all circumstances irrespective of the cost penalty that that might impose upon the taxpayers of South Australia.

In conclusion, on behalf of Liberal members, I indicate that the Liberal Party supports the second reading, but we do so with the intention of, when next we discuss this in the committee stage, moving the amendments which have been circulated only today or yesterday in my name.

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© Rob Lucas 2016 | Authorised by Rob Lucas, Parliament House, Adelaide SA 5000