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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY

2007 ANNUAL REPORT & BUSINESS REVIEW

LEADING AUSTRALIAN BUSINESS


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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

Editor: Brett Hogan – Director of Communications, ACCI

CONTENTS

Australian Chamber of Commerce and Industry ABN 85 008 391 795 Canberra office: Commerce House, 24 Brisbane Avenue, Barton ACT 2600 PO Box 6005, Kingston, ACT 2604 Tel: +612 6273 2311 Fax: +612 6273 3286 Email: acci@acci.asn.au Melbourne office: Level 3, 486 Albert Street, East Melbourne, VIC 3002 PO Box 18008, Collins Street East, Melbourne, VIC 8003 Tel: +613 9668 9950 Fax: +613 9668 9958 Email: melb@acci.asn.au Web: www.acci.asn.au

ACCI – Leading Australian Business

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Our Structure

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President’s Message

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The Year in Review – Chief Executive’s Report

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Economics and Taxation

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ACCI Surveys

43

Workplace Relations

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Occupational Health, Safety and Compensation

59

Trade and International Affairs

63

Bilateral Business Councils

79

Awards

87

Education and Training

91

Published by:

Executive Media Pty Ltd ABN 30 007 224 204 430 William Street, Melbourne, VIC 3000 Tel: +613 9329 8715 Fax: +613 9274 4200 Email: media@executivemedia.com.au Web: www.executivemedia.com.au Printed by: Docklands Printing Pty Ltd DISCLAIMER: The editor, publisher, printer and their staff and agents are not responsible for the accuracy or correctness of the text of contributions contained in this publication or for the consequences of any use made of the products, and the information referred to in this publication. The editor, publisher, printer and their staff and agents expressly disclaim all liability of whatsoever nature for any consequences arising from any errors or omissions contained in this publication whether caused to a purchaser of this publication or otherwise. The views expressed in the articles and other material published herein do not necessarily reflect the views of the editor and publisher or their staff or agents. The responsibility for the accuracy of information is that of the individual contributors and neither the publisher or editor can accept responsibility for the accuracy of information which is supplied by others. It is impossible for the publisher and editors to ensure that the advertisements and other material herein comply with the Trade Practices Act 1974 (Cth). Readers should make their own inquiries in making any decisions, and where necessary, seek professional advice. © 2007 Executive Media Pty Ltd. All rights reserved. Reproduction in whole or part, without written permission is strictly prohibited.

Industry Policy

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Small Business

115

Environment

132

ACCI Members

138

Organisational Chart

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ACCI – LEADING AUSTRALIAN BUSINESS ACCI has been the peak council of Australian business associations for 106 years and traces its heritage back to Australia’s first chamber of commerce in 1826. Our motto is “Leading Australian Business.” We are also the ongoing amalgamation of the nation’s leading federal business organsiations – the Australian Chamber of Commerce, the Associated Chambers of Manufacturers of Australia, the Australian Council of Employers Federations and the Confederation of Australian Industry. Membership of ACCI is made up of the State and Territory Chambers of Commerce and Industry together with the major national industry associations. Through our membership, ACCI represents over 350,000 businesses nation-wide, including over 280,000 enterprises employing less than 20 people, over 55,000 enterprises employing between 20-100 people and the top 100 companies. Our employer network employs over 4 million people which makes ACCI the largest and most representative business organisation in Australia.

OUR ACTIVITIES ACCI takes a leading role in representing the views of Australian business to government. Our objective is to ensure that the voice of Australian businesses is heard, whether they are one of the top 100 Australian companies or a small sole trader.

A range of publications are available from ACCI, with details of our activities and policies including: q the ACCI Review a monthly analysis of major policy issues affecting the Australian economy and business; q issue papers commenting on business’ views of contemporary policy issues; q Policies of the Australian Chamber of Commerce and Industry – the bound compendium of ACCI’s policy platforms; q the ACCI-Westpac Survey of Industrial Trends – the longest, continuous running private sector survey in Australia. A leading barometer of economic activity and the most important survey of manufacturing industry in Australia; q the SAI Global-ACCI Survey of Investor Confidence – which gives an analysis of the direction of investment by business in Australia; q the St. George-ACCI Business Expectations Survey – which aggregates individual surveys by ACCI member organisations and covers firms of all sizes in all States and Territories; q the St. George-ACCI Small Business Survey – which is a survey of small business derived from the Business Expectations Survey data;

Our specific activities include:

q workplace relations reports and discussion papers, including the ACCI Modern Workplace: Modern Future Policy Blueprint;

q representation and advocacy to governments, parliaments, tribunals and policy makers both domestically and internationally;

q occupational health and safety guides and updates, including the Modern Workplace: Safer Workplace Policy Blueprint;

q business representation on a range of statutory and business boards, committees and other fora;

q trade reports and discussion papers including the Riding the Chinese Dragon: Opportunities and Challenges for Australia and the World and Riding the Indian Elephant: Opportunities and Challenges for Australia and the World position papers;

q representing business in national and international fora including the Australian Industrial Relations Commission, Australian Safety and Compensation Council, International Labour Organisation, International Organisation of Employers, International Chamber of Commerce, the Business and Industry Advisory Committee to the Organisation for Economic Co-operation and Development, the Confederation of Asia-Pacific Chambers of Commerce and Industry and the Confederation of Asia-Pacific Employers; q research and policy development on issues concerning Australian business; q the publication of leading business surveys and other information products; and q providing forums for collective discussion amongst businesses on matters of law and policy affecting commerce and industry.

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PUBLICATIONS

q education and training reports and discussion papers including the Skills for a Nation: A Blueprint for Improving Education and Training 2007-2017 Policy Blueprint; q the ACCI Annual Report providing a summary of major activities and achievements for the previous year; and q the ACCI Taxation Reform Blueprint: A Strategy for the Australian Taxation System 2004–2014. Most of this information, as well as ACCI media releases, parliamentary submissions and reports, is available on our website – www.acci.asn.au.


OUR STRUCTURE

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

OUR STRUCTURE The operations of ACCI are governed by articles of association, which are administered by our General Council and our Board.

Mr Graham Harris Group Manager Wesley Mission

General Council comprises representatives of all ACCI member organisations. It meets during the year to set policy and appoints a Board that includes the Chief Executive.

Mr Graham Heilbronn Board Chairman The Heilbronn Group Resource Strategists

The ACCI Board has oversight of operations, policy strategy and policy implementation. Members of the Board are industry leaders with expertise in a wide range of business activities that collectively have created a powerful base of knowledge and experience for ACCI.

Dr Brian Hewitt Immediate Past President Chamber of Commerce and Industry WA

Mr Peter O’Brien, Managing Director of Oceanis Holdings – the operator of various themed tourism complexes in Australia, Asia, Eastern Europe and the U.A.E, was elected President of ACCI in December 2005, having served on the ACCI Board since October 2001. He replaced Mr Neville Sawyer, AM who retired after serving the maximum term as President. Mr Roger du Blet, AM resigned from the Board in November 2006 and Mr Graham Heilbronn resigned from the Board in July 2007. Ms Beatrice Booth and Mr Tony Park were appointed to the Board in March 2007.

DIRECTORS FOR 2007 WERE: President Mr Peter O’Brien Managing Director Oceanis Holdings Deputy President Mr Tony Howarth, AO Independent Company Director Immediate Past President Neville Sawyer, AM Chairman NS Corporate Services Pty Ltd Chairman, Audit & Risk Committee Mr Tony Howarth, AO Chief Executive Mr Peter Hendy Directors Mr Nicholas Begakis, AM Chairman Bellis Fruit Bars Mr Tony Blake Immediate Past President Victorian Automobile Chamber of Commerce Ms Beatrice Booth President Commerce Queensland Mr Bruce Fadelli, AM Managing Director Bromavic Properties Pty Ltd

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Mr Richard Holyman Executive Director Martin and Pleasance Pty Ltd Mr David Michaelis Immediate Past President NSW Business Chamber Mr Tony Park Founder and Managing Director Cosy Cabins Group

ACCI AUDIT AND RISK COMMITTEE In 2003 the Board established the Audit and Risk Committee, which operates under a charter approved by the Board. The primary objective of the Audit and Risk Committee is to assist the Board in fulfilling its corporate governance and oversight responsibilities by: q monitoring and reviewing the integrity of the financial statements; q monitoring internal control process; q reviewing significant business risks and exposures; and q reporting to the Board, identifying any matters which it considers action or improvement is needed. Currently the members the committee are Tony Howarth, AO (Chairman), Bruce Fadelli, AM and David Michaelis. ACCI’s President, Deputy President, Chief Executive Officer, Company Secretary and external auditors attend meetings by invitation. Meetings are held as required, but are usually convened at least three times per year.

POLICY COMMITTEES ACCI’s policy committees and sub-committees have been appointed by General Council to undertake policy research and make recommendations to General Council for its consideration. The committee chairs are also members of the Board.


Chair: Neville Sawyer

Regional Development Working Party

Secretariat: Michael Potter

Chair: Tony Howarth, AO

Economic & Taxation

Secretariat: Greg Evans

Chair: Tony Howarth, AO

Energy Reform Working Party

Secretariat: Greg Evans

Chair: Iain MacGregor

Food Working Group

Secretariat: Greg Evans

Chair: Beatrice Booth

Industry Policy & Innovation Environment Chair: Beatrice Booth Secretariat: Greg Evans

Small Business Chair: Bruce Fadelli, AM Secretariat: Greg Evans

Secretariat: Scott Barklamb

Secretariat: Greg Evans

Secretariat: Kellie Quayle

Chair: Peter Anderson

National Employers OHS Consultative Forum

Secretariat: Kellie Quayle

Chair: Peter Anderson

Occupational Health & Safety Working Party

Chair: Peter Anderson

Workplace Relations Working Party

Secretariat: Peter Anderson

Chair: Graham Harris

Workplace Policy

Chair: David Michaelis

Business Law Working Party

Secretariat: Greg Evans

Chair: Peter O’Brien

Trade & International Affairs

ACCI POLICY COMMITTEES

Secretariat: Mary Hicks

Chair: Neville Sawyer, AM

Employment, Education & Training

AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

OUR STRUCTURE

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PRESIDENT’S MESSAGE

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

PRESIDENT’S MESSAGE In 2007, ACCI continued to build on its outstanding track record of influencing the national policy debate. ACCI’s Policy Priorities in 2007 were: q Implementation of Workplace Relations Reform, Resisting Its Roll-Back and OHS Reform; q Skills and Labour Shortages Development Strategies; q China Free Trade Agreement and related Trade Issues; q Commonwealth-State Relations Arrangements; q Climate Change and Related Environmental Issues; and q Continuing Taxation Reform I believe that significant progress has been made in each of these areas over the last twelve months, for which ACCI, its staff and Board can be justly proud.

Treasurer Hon Peter Costello MP with Peter O’Brien – November 2006 General Council Meeting, Canberra.

The business community wants a strong and growing economy, with a tax system that rewards effort, a skilled workforce able to adapt to the changing needs of the international marketplace, a workplace relations system that drives productivity, competitiveness and direct employeremployee relationships, and a commitment to climate change and free trade policies that allow Australian businesses to compete on an equal basis with other nations. In particular, this year ACCI has had a very big win in getting bipartisan political support for significant, structural personal income tax reform. Both major political parties are now committed to lower personal income tax rates, including at the top two levels.

Victorian Premier Hon John Brumby MP and Peter O’Brien – March 2007 General Council Meeting, Melbourne.

ACCI has been the leading lobby group in this policy area over recent years, and its strong, informed and consistent campaign, both publicly as well as behind the scenes, has obviously borne fruit. We will all be working to make sure the Australian Government implements its campaign tax promises. Finally, this will be my last report as ACCI President as I have already come to the end of my second one year term. I have very much appreciated my involvement at a Board level over the last 6 years. ACCI has a high media profile, genuine policy credibility and real respect amongst national policy makers. On behalf of the Board I would like to thank Chief Executive Peter Hendy and his outstanding team in the Canberra and Melbourne offices for their work to advance the cause of Australian business.

Prime Minister Hon John Howard MP with Peter O’Brien – July 2007 General Council Meeting, Perth.

Peter O’Brien President Australian Chamber of Commerce and Industry November 2007

Peter Switzer and Peter O’Brien at the 2007 Australian Export Awards Breakfast, Melbourne.

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THE YEAR IN REVIEW

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

THE YEAR IN REVIEW – THE CHIEF EXECUTIVE’S REPORT At the time of writing this report, the outcome of the 2007 Federal Election was not known, however ACCI looks forward to working with the next Australian Government, regardless of its political persuasion, to identify policies to continue our economic growth, increase skills and labour force participation, and improve industry competitiveness. 2007 represented another outstanding year of achievement for the Australian Chamber of Commerce and Industry and one which reaffirmed our position as the nation’s leading employer organisation. I am pleased to be able to present my sixth annual review of our achievements. The Australian economy has continued its sixteen year expansion over the last twelve months. Unemployment, which was 4.2 per cent in September, is at a 33 year low, interest rates are also at historic lows notwithstanding the six small increases since March 2005 which have brought the official cash rate target up to 6.75 per cent, inflation has remained around the Reserve Bank’s target 2-3 per cent band and the Federal fiscal situation is sound, with another strong surplus forecast in the 2007-08 Budget. The commencement of the new WorkChoices legislation on 27 March 2006 represented an important step forward in the ongoing effort to move away from the old centralised bargaining model and towards a new national workplace relations system that empowers more employers and employees across the nation to co-operatively tailor working arrangements to the conditions of their business. Notwithstanding some unnecessary complexity and excessive regulation (such as the imposition of a new Fairness Test during this year) which has presented industry with new implementation challenges, WorkChoices reflects a number of the key concepts of ACCI’s 2002 Modern Workplace: Modern Future Policy Blueprint and we look forward to a continued improvement in productivity, labour market performance and declines in industrial disputation. Based on September employment figures, since WorkChoices commenced in March 2006, employment in Australia had grown by 430,700 with around 80 per cent of this growth coming from full-time employment. During this period, the size of the labour force increased by 373,600 people and the participation rate increased by 0.6 per cent to 65.0 per cent. These figures put paid to the ridiculous arguments by many in the labour movement that WorkChoices would lead to massive employment losses and reductions in wages. ACCI and its member organisations have been strong advocates for many years now of labour market reforms of this type, notwithstanding well organised and well-funded opposition. We are also pleased to note that industrial action in Australia has continued its long term decline. The most recent Australian Bureau of Statistics figures show that days lost to industrial disputes in Australia fell to just 0.8 days per 1000 employees in the June quarter, compared to 104.6 days per 1000 employees in December 1992, 52.2 days in June 1996, 16.6 days in June 2001, and 6.1 days in June 2005. The number of disputes has also more than halved in the last two years.

Australian workplaces are not as dispute-ridden as unions would have us believe, with Australian employers and employees increasingly able to negotiate agreements cooperatively, without any suggestion of strikes or bans. However, while the labour market has performed strongly since WorkChoices commenced, we cannot rest on our laurels. There are still over 450,000 people out of work with more underemployed, and it would be heartless to argue that further reductions in unemployment are unachievable. Further improvements in the labour market should be achieved by rejecting unaffordable increases in minimum wages, bolstering workplace skills and continuing taxation reform to reduce the costs of entering the labour force. As we head into 2008, policymakers should take note of the November 2007 ACCI Business Expectations Survey, which found that while business conditions have risen to their highest level in thirteen years and all index levels are above their respective five year average, high wage and non-wage labour costs, skill shortages and interest rate uncertainty have the potential to end our dream run. In fact, skill shortages have been a major concern in the marketplace for some time, and it was ACCI’s quarterly SAI Global-ACCI Survey of Investor Confidence, which in 2004 found for the first time in 14 years that the Availability of Suitably Qualified Employees had become the number one constraint on future investment decisions. This has remained a major issue throughout 2005, 2006 and 2007. Economic reform must continue and ACCI’s six policy priority areas for 2007 reflected the major policy areas that need constant attention and where ongoing reform is a major priority: 1. Implementation of Workplace Relations Reform, Resisting Its Roll-Back and OHS Reform; 2. Skills and Labour Shortages Development Strategies; 3. China Free Trade Agreement and related Trade Issues; 4. Commonwealth-State Relations Arrangements; 5. Climate Change and Related Environmental Issues; and 6. Continuing Taxation Reform The pursuit of long term, meaningful reform in each of these areas will continue to be a priority for the Australian business community. 2007 has been a year of success and achievement for ACCI and one which has further enhanced our reputation as Australia’s largest, most representative and most influential business organisation. This year the Australian Newsagents’ Federation and the National Baking Industry Association joined our growing network of member organisations. We have also continued our hard work this year to build on our leading profile in the electronic and print media. Our media coverage has set new benchmarks over the past 12 months, with ACCI’s coverage continuing to improve in our targeted newspapers, as well as an increasing number of television and radio appearances. ACCI’s role as the leading employer representative, is also increasingly being recognised in media coverage as is our response to major

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

THE YEAR IN REVIEW – THE CHIEF EXECUTIVE’S REPORT events such as the Federal Budget, the bedding down of WorkChoices and tax reform. But for an organisation such as ours, it is our work on the policy front that best reflects the interests of our members and the wider business community. As well as the success of the first 18 months of WorkChoices, with lower unemployment levels, industrial disputation and working hours as well as higher growth in productivity, investment and wages, 2007 has been a big year for taxation reform.

Notwithstanding these important moves on personal income tax, ACCI remains disappointed that no major party has committed to reform Capital Gains Tax (CGT). The International Comparison of Australia’s Taxes Report found that we have the eighth highest CGT on shares held between one and two years and the seventh highest CGT on shares held for 10 years. Eleven of the OECD countries impose no CGT on shares. ACCI’s preferred policy is the introduction of a stepped rate of CGT, where the tax reduces the longer an asset is held.

Since the publication of our Taxation Reform Policy Blueprint in 2004, ACCI has been vigorously lobbying policymakers on the need to reduce personal income tax rates, increase thresholds and reduce complexity. Early last year, the Federal Treasurer, Hon Peter Costello MP, asked businessman Dick Warburton and me to author a study into how Australia’s tax system compared with other countries. The report, An International Comparison of Australia’s Taxes, which was released in April, made it clear that Australia’s tax system was uncompetitive in a number of areas and behind world’s best practice, and also played an important role in progressing the tax reform debate. May Budget Night Doorstop, Canberra.

ACCI will keep the pressure on both major parties over the next three years to keep their tax promises and will also keep CGT reform on the agenda in 2008. Since last year’s Annual General Meeting, ACCI has stepped up its profile in seeking to identify and promote the interests of the Australian business community – both domestically and internationally, to governments, courts and tribunals and within business fora.

With Treasurer Hon Peter Costello MP and ACCI President Peter O’Brien, November 2006 ACCI General Council Dinner, Canberra.

Since then, there has been some significant movement on the taxation front. In last year’s Federal Budget, the Government reduced the top marginal tax rate for the first time since 1990 and the 42 cent rate for the first time since 2000 as well as increasing tax thresholds. In this year’s May Budget, the Government announced further tax threshold increases. Finally, in the first week of the 2007 Federal Election Campaign, both major political parties promised significant tax reform over the next five to six years, including reducing the top personal income tax rate from 45 cents to 40 cents. Both parties also made commitments to reduce tax on low income earners, which should increase employment, reduce the incidence of jobless households, and help address Australia’s labour shortages. While there is still some way to go to achieve ACCI’s goal of a top tax rate of 30 cents to equal the corporate rate, from last year to five years hence, the top rate will have been reduced from 47 cents to 40 cents – a significant first step.

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In November 2006 ACCI welcomed the historic decision of the High Court of Australia which upheld the use of the corporations power to make national industrial relations laws. ACCI re-opened this debate with the launch of our 2002 workplace relations Policy Blueprint Modern Workplace: Modern Future and further articulated the case for this change since then. To have convinced government to proceed with this proposal, and to have it constitutionally upheld by the highest court in Australia, is a nation-building achievement, In December 2006, the Australian Government announced that it would change the law to ensure that hours of work beyond 38 per week should not be included in calculating annual leave and sick leave. This change, which followed intense ACCI lobbying, applies in all industries but has major impact in industries like mining and construction where nonstandard rosters are used. Without this change, industry would have conservatively paid more than $100 million per year in higher annual and sick leave payments. The House of Representatives Committee on Family & Human Services Inquiry into Balancing Work and Family released its report in December 2006, which amongst other initiatives, strongly supported ACCI’s argument that a Fringe Benefits Tax exemption should be provided for all childcare (currently an exemption is only provided for childcare that is provided by a business on their own premises).


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

THE YEAR IN REVIEW – THE CHIEF EXECUTIVE’S REPORT ACCI welcomed the news in mid December that the Australian and Japanese Governments would be entering into negotiations on a future free trade agreement (FTA). Despite recent growth in China, Japan remains our largest trading partner and an FTA would be a significant boost for Australian exports. ACCI has worked hard behind the scenes on negotiations, both directly and with the Australia-Japan Business Co-operation Committee for which we provide secretariat services.

With Amador Honrado, Deputy Director General of CACCI in Taipei for the CACCI 40th Anniversary Meeting.

The second week of January saw the release of ACCI’s new manufacturing policy paper The Future of Australia’s Manufacturing Sector: A Blueprint for Success. This paper countered the claims by some that the industry is dying and in desperate need of a return to protectionism, and identified the policies needed to ensure it continues to grow. In March, ACCI began releasing the results of a special survey of Australian employers that it commissioned to identify attitudes towards workplace relations reform. The survey found overwhelming support amongst employers for key aspects of WorkChoices including the right for employers and employees to bargain over wages and conditions of employment, as well as a belief that it had improved employment, flexibility and job security for employees. After a 12 month campaign, in April 2007 ACCI persuaded the Australian Fair Pay Commission (AFPC) to commence a programme of work to publish minimum wage pay scales. As a result, pay scales will be published, giving employers greater legal certainty about their minimum wage obligations, so as not to be exposed to courts deciding on minimum wage underpayments in the event of disputes or litigation about calculations. In mid April, Opposition Leader Kevin Rudd announced that a Labor Government would retain laws requiring secret ballots before lawful strike action, retain laws limiting strike action to bargaining disputes on the expiry of agreements, retain laws prohibiting strike action in support of pattern bargaining and retain laws prohibiting strike pay – all policy measures that have been advocated by ACCI to government and Opposition. In April, Opposition Leader Kevin Rudd also announced that a Labor Government would “adopt a ‘one in, one out’ principle for new Commonwealth regulations. In other words, when new regulations are proposed, they must be accompanied by proposals to remove regulations.” ACCI

argued strongly for ‘one-in one-out’ regulation in its submission to a Productivity Commission regulatory review, so as to make regulators more accountable for adding to the existing stock of regulation. While the Productivity Commission did not support our recommendation, we are pleased that the Opposition did. The busy month of April also saw the release of ACCI’s comprehensive ten year education and training Policy Blueprint Skills for a Nation: A Blueprint for Improving Education and Training 2007-2017, which sets out in some detail what employers want from the education and training system up to 2017. The document, which covered education from pre-school through to post-secondary levels, received very positive feedback from many quarters and will give real intellectual backing to employers’ efforts to influence policymakers in coming years. After the Australian Government’s May announcement of a new WorkChoices Fairness Test, which ACCI at the time described as disappointing and unnecessary, ACCI was able to convince the Government and the Senate to only apply these changes from May 2007 and not retrospectively, stopping retrospective red tape obligations from being imposed on some 300,000 Australian employers. In May, ACCI also penned the lead article Labour Relations Reform in Australia: The Employer Perspective for the inaugural edition of the International Organization of Employers’ journal, the International Labour and Social Policy Review in its continuing campaign to defend Australian employers from unjustified ACTU attacks in overseas fora. ACCI also highlighted the errors of process and extreme opinions contained in the June report of an International Labour Organisation global committee of labour lawyers and legal academics examining Australian union complaints about WorkChoices. In June ACCI released the first of four media statements and briefing papers containing the results of its triennial PreElection Survey of Australian employers. The first survey found that Economic Management was the single most important policy priority for business in the lead-up to the 2007 Federal Election, followed by Workplace Relations and Skills Development. In June, ACCI also released a major position paper Japan: Lifting the Clouds Over The Chrysanthemum, which examined the future economic and trade prospects of Japan, Australia’s largest single bilateral trading partner. ACCI again led national employer advocacy during early 2007 on the AFPC’s minimum wage inquiry. In its July decision, the AFPC awarded tiered increases of only $10.25 or $5.30 per week – the lowest dollar increase for a decade. ACCI advocacy also contributed to a guaranteed three month period prior to implementation, to give employers a chance to plan ahead. Many observers expected the AFPC to award $20 or above in 2007, as some State industrial tribunals already had, and ACCI advocacy saved Australian employers, mainly small and medium businesses, about $625 million each year in lower wage costs than might otherwise had been the case, should $20 per week have been ordered. In July, ACCI organised two days of highly successful international policy meetings in Perth. An ACCI-AIIA conference on “The Future of APEC” and a Council Meeting

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

THE YEAR IN REVIEW – THE CHIEF EXECUTIVE’S REPORT of the Confederation of Asia-Pacific Chambers of Commerce and Industry was attended by business leaders, speakers and policy makers from right around the country and the AsiaPacific region.

q employment would be cut by 2.9 per cent, with 316,000 jobs lost; q the cost of living (CPI) would be 1.3 percentage points higher; and q due to the higher rate of inflation, interest rates would be 1.4 per cent higher by 2011, with repayments on the average mortgage $273 higher per month. In August, the ALP announced that it would keep trade practices laws against unlawful trade union secondary boycotts – a significant win for Australian business. There is now bipartisan political support for one of the most significant protections in Australian law against indiscriminate union action damaging commercial interests, including of third party suppliers (often small business). ACCI, together with other business organisations, has been making out the case for this change in ALP policy for many years.

With Foreign Minister Hon Alexander Downer MP and SAI Global Managing Director Ross Wraight, at the ACCI-AIIA Conference, Perth.

Following on from this conference, in July ACCI released a major position paper Revitalising APEC, which set out a broad and comprehensive agenda for reform of this important international grouping. APEC’s 21 member countries account for 40 per cent of the world’s population, 56 per cent of global output and 48 per cent of all international trade. A new commitment to achieving real outcomes in areas such as trade liberalisation and facilitation as well as economic and technical cooperation, would make a real difference to the international trading environment, as well as Australia’s place in the world. As part of its lobbying on climate change, ACCI made a submission to the Prime Ministerial Task Group on Emissions Trading which emphasised the need for rigorous cost benefit modelling. The Government’s July response to the Task Group’s report included provision for the establishment of such a modelling unit within Treasury to advise on the distributional impacts of introducing an Emissions Trading Scheme in line with ACCI’s submission. The second week of August saw the launch of a national television advertising campaign in support of workplace relations reform. ACCI played a leading role in the Business Coalition for Workplace Reform – a coalition of 20 small and large business organisations – which had some success in neutralising aspects of the ACTU campaign against WorkChoices and demonstrated unity of purpose, and leadership amongst industry in the service of employers. In support of this national advertising campaign, in August ACCI also released the results of an economic study it had commissioned from the respected leading independent economic research firm Econtech, which found that by 2011, if the workplace reforms implemented by both major political parties since 1993 were wound back: q a person on average wages with an average mortgage would be $4,063 worse off per year; q GDP would be $57 billion or 4.8 per cent lower, which is equivalent to $2,700 per person; q business investment would be $11 billion lower, a fall of 5.6 per cent;

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In August, ACCI also published a new structural model for the education and training sector’s Industry Skills Councils, that creates a more responsible role for industry and provides clarity and transparency around the roles of other key stakeholders. ACCI will be further pursuing this model with the Australian Government during 2008. In September, ACCI vigorously defended yet another attack on the exemption of small business from the clutches of the Privacy Act. This time it was the Australian Law Reform Commission that advocated the overturning of the longstanding exemption, in spite of the massive compliance and red tape obligations forced on small business such a reversal would bring. ACCI will continue to campaign vigorously for the retention of the small business exemption and seek to further raise the exemption threshold, which currently stands at $3 million to $5 million. September also saw the passage of legislation to reform the tax treatment of Public-Private Partnerships (PPPs). ACCI has been lobbying for these changes since the publication of our Taxation Reform Blueprint in 2004. The new rules should help to encourage enhanced infrastructure investment. In October, the Australian Government announced that it would remove a superannuation double penalty on businesses. Currently, if a business is late paying the compulsory 9 per cent superannuation contribution to an employee’s super fund, a tax penalty is imposed on the business – equal to the super contribution plus charges. However if the employer subsequently pays the super contribution to the relevant super fund, they can still be liable for the tax penalty. Following lobbying by ACCI, the Government announced that the tax will be reduced by the amount contributed by the employer to the employee’s super fund. ACCI looks forward to legislating confirming this amendment passing through the Parliament soon after the 2007 Federal Election. Also in October, within two hours of the announcement of the 2007 Federal Election, ACCI had issued a comprehensive policy statement, detailing What Business Requires from the Next Australian Government, setting out key priorities in six major policy areas. During the year, ACCI has strongly defended Australia’s skilled migration system against sometimes xenophobic attacks by the trade union movement. Labour shortages in


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

THE YEAR IN REVIEW – THE CHIEF EXECUTIVE’S REPORT Australia are real and need to be urgently addressed. Employers will not stand idly by as unions seek to undermine public confidence in the system to suit their own political purposes. ACCI has also continued its strong public advocacy of bilateral FTAs, notably with China. While ACCI would prefer the advancement of the World Trade Organisation’s multilateral liberalisation agenda, we believe that the current Thailand, Singapore and US FTAs as well as potential FTAs with China, Malaysia, India, Indonesia, the UAE, Japan, Chile, South Korea and the 10 nation ASEAN grouping, will act as a key driver of Australia’s export growth in coming decades. Indeed, if an FTA with China is successful, Australia would be the only country in the world to have an FTA with the current (i.e. the USA) and future (i.e. China) economic giants. Other major activities in 2007 included: q keeping members informed about a wide range of economic and workplace relations reports, statistics and developments; q the publication of a series of seven workplace relations policy analysis documents between May and September informing employers about practical workplace relations issues including Understanding Employee Protections Under WorkChoices, Common Law Contracts vs AWAs and Coalition and Labor IR Policies: Ready Reckoner of 30 Major Differences; q successfully persuading the Australian Government to extend the WorkChoices Employer Advisory Program; q successfully lobbying the Australian Government to relax time and wage record-keeping requirements applying to award-free employees (such as managers and executives); q seeking and receiving a formal indication from both major political parties on policy concerning junior wages. The Australian Government included support for youth wages in WorkChoices, while the Federal ALP advised of support for the current system of youth wages, and opposition to a new AFPC inquiry; q continuing our high level support for the Defence Reserves Support Council; q continuing our influential work representing employers on the new Australian Safety and Compensation Council – the successor body to the National Occupational Health and Safety Commission; q finalising a new 3-year service contract with the Australian Safety and Compensation Council, which should result in a continuation of high quality collective advice to governments on industry responses to and participation in national policy and promotional initiatives; q continuing to give high level support to the National Occupational Health and Safety Strategy – a ten year national plan adopted in 2002 by ACCI, the ACTU and each Australian government at the Commonwealth, State and Territory level, which sets out national targets and priorities for the prevention of injuries and disease at work;

q again assisting with the launch of Encouraging Enterprise 2007, the Australian Government’s small business report, which outlines initiatives assisting small business innovation and growth and Government small business policies; q the adoption by ACCI General Council of new formal ACCI policy statements on Federalism and Communications; q undertaking significant work on a new ACCI Urban Water Policy, as well as a new services sector policy document; q being represented on a high level vocational education and training visit to India, featuring government, provider and industry representatives, to assess opportunities for deeper collaboration between our two countries as well as participating in an ILO Korean Regional Workshop on Improving Workplace Learning in Asia; q promoting the importance of trades education, through the new Institute for Trade Skills Excellence; q another successful Budget Night doorstop, press release and associated media coverage; q continuing to receive strong media coverage for each of ACCI’s sponsored business surveys – the ACCI-Westpac Survey of Industrial Trends, the St.George-ACCI Business Expectations Survey, the St.George-ACCI Small Business Survey and the SAI Global-ACCI Survey of Investor Confidence; q continuing our support of the currently stalled Doha Development Round of trade liberalisation negotiations, despite the lack of international progress that has been made; q the publication of new, comprehensive trade policy papers on a wide range of areas including on the trade in services, our relationship with Indonesia, and using free trade agreements to tackle corruption; q resuming our provision of secretariat services for the Australian National Committee of the International Chamber of Commerce (ICC); and q continuing our representation of Australian business in key international forums including the World Trade Organisation (WTO), the Organisation for Economic Cooperation and Development (OECD), the International Labour Organisation (ILO), the Confederation of AsiaPacific Chambers of Commerce and Industry (CACCI) and Confederation of Asia-Pacific Employers (CAPE).

COMMUNICATION AND CO-OPERATION An effective working relationship between ACCI and its members is critical to ACCI’s success. To that end ACCI places high priority on personal contact with our members and ongoing efforts to maintain effective communication within our membership and with a wider coalition of business and special interest groups. ACCI enjoys a good working relationship with the Australian Government, Ministers and their staff, as well as the Labor Opposition and minor parties.

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

THE YEAR IN REVIEW – THE CHIEF EXECUTIVE’S REPORT We conduct regular consultations with government departments in key portfolio areas and continue to develop excellent wider industry links. We have involved Ministers, Shadow Ministers, key Democrat spokespeople and government agency officials in our meetings and forums to talk with ACCI and our members about key policy issues.

ACCI also provides secretariat services for the Small Business Coalition and a number of Bilateral Business Councils. The ACCI Review continues to be an important vehicle for communicating ACCI policy concerns to MPs, the public service, the media and the general public. Published monthly, the Review is recognised as an authoritative source of the policy views of the business community. Major policy statements are published and distributed to all members and are available to the wider community through our enhanced website. Our CEO Update provides an important avenue for communication with our members and is regarded as an important source of up-to-date business information.

With Prime Minister Hon John Howard MP at ACCI’s July General Council in Perth.

We will continue this approach in 2008 and beyond. ACCI is continually improving the presentation, content and user-friendliness of our website which is an increasingly important access point for information about our activities, policies and products. We engage in a range of activities to promote greater understanding and awareness of the contribution of business and raise the profile of business issues. ACCI is a partner in the National Work and Family Awards and a co-host of the Australian Export Awards as well as providing judging support for the Australian Training Awards, Safe Work Australia Awards and Prime Minister’s Employer of the Year Awards.

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ACCI’s extensive and growing work program is undertaken by a team of committed professionals who work tirelessly to promote the views of business on national and international policy issues in order to achieve a better environment for doing business. The support and cooperative effort of our members, whose resources and intellectual input are the foundation of ACCI, our Council, policy committees, and our Board also deserve recognition and our appreciation. Finally, while there are always staff member and officebearer departures in any organisation, I would like to specifically acknowledge the contribution to ACCI over recent years of our outgoing President Mr Peter O’Brien. Peter Hendy Chief Executive Australian Chamber of Commerce and Industry November 2007


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

NOVEMBER 2006 GENERAL COUNCIL DINNER, CANBERRA

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

MARCH 2007 GENERAL COUNCIL DINNER, MELBOURNE

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

JULY 2007 GENERAL COUNCIL LUNCH, PERTH

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ECONOMICS & TAXATION REPORT 1


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT A strong economy provides many benefits to society, including increasing prosperity, employment and wellbeing, and provides the funds for health, welfare and the environment, creating a better quality of life. The role of the Economics and Taxation Unit of ACCI is to develop appropriate economic policy for Australia to ensure a strong economy is maintained, dealing with the following issues:

Economic Growth – Details

q the state of the macroeconomy;

The main elements of expenditure were:

q monetary policy and interest rates;

q total consumption increased by 3.4% over the year;

q the Federal Budget, including the level of public spending;

q business investment increased by 14.3% over the year;

q taxation; q superannuation;

q housing investment was up 3.7% over the year; q government investment increased by 16.5% over the year;

q statistics;

q domestic Final Demand (consumption plus investment) grew by 5.6% over the year;

q infrastructure policy generally;

q exports grew by 2.4% over the year; and

q microeconomic reform, including National Competition Policy;

q imports grew by 9.6% over the year;

q the economic aspects of workplace relations, including national wage cases; and q economic advice to other policy areas, such as training and occupational health and safety.

HIGHLIGHTS The highlights for ACCI in the Economics & Taxation area during 2007 were: q both major political parties accepting the need for substantial personal income tax reductions in the lead-up to the 2007 Federal Election. Both parties adopted policies that go a very substantial way towards implementing ACCI’s personal tax reform priorities; and

Over the year: q agricultural output fell by 26.4 %; q mining output grew by 8.5%; q manufacturing output grew by 4.5% (with metal products very strong and textile, clothing and footwear very weak); q electricity, gas and water output fell by 4.4%; q construction output grew by 7.1%; q transport output grew by 7.7%; q communications output grew by 7.4%; and q finance and insurance output grew by 6.6%. Other relevant data included:

q ACCI securing a Key Relationship Manager from the Australian Taxation Office to work closely with ACCI and members on improving information flows between the ATO and business.

q the terms of trade was up 6.2% over the year to June;

STATE OF THE ECONOMY

q the compensation of employees grew by 9.0% over the year;

Economic Growth – Overview The economy grew by 4.3 per cent for the 2006-07 financial year, which is a very strong result.

q the total value of Australia’s GDP for the 2006-07 financial year was $1,046 billion. Australia now has a trillion dollar economy;

q average compensation per employee increased by 5.5% over the year.

Non-farm GDP growth for the year was 5.2%, which is the highest growth rate since December 1994.

q GDP per hour worked (labour productivity) grew by 2.8% over the year;

The economy is currently subject to two pressures that present both challenges and opportunities – high resource prices and capacity constraints:

q the gross operating surplus (profits) grew by 10.3% over the year;

q High resource prices are greatly increasing our terms of trade and the returns to mining. However, it is putting much of the rest of the economy under pressure because of higher input costs. The higher terms of trade is also keeping the exchange rate high, which continues to put pressure on businesses subjected to increased import competition while also cutting the margins of exporters. q Capacity constraints due to tight labour markets (low

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unemployment) continued to present difficulties for business while high capital usage levels meant that expanding output has been difficult. The low unemployment result has been associated with labour and skill shortages and wage pressures in some sectors. High levels of capital usage are driving very high levels of capital investment.

q the Domestic Final Demand (DFD) price index increased by 2.6% over the year. This is a very good measure of inflation; and q the household savings ratio was positive 0.1%. Current Account Deficit For the 2006-07 financial year, the current account deficit was $59.2bn – a 10% increase on 2005-06. The trade deficit was $12.0bn, down $2.5bn on 2005-06. Exports increased 10% and


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT imports increased 8%.

q a ‘pick up’ in the pace of growth in demand and activity;

Australia’s foreign debt was $642.4bn, up 16 per cent on 2005-06.

q high levels of capacity utilisation and declining unemployment;

Investment

q strong business and household confidence;

New capital expenditure continues to expand very strongly.

q strong demand for finance; and

Total new expenditure increased 11.4% over the 2006-07 financial year. Building investment was up 9.9% over the year and investment in plant and equipment was up 12.2%.

q higher than expected underlying inflation, reversing previous results showing unexpectedly subdued inflation.

Economic Performance Since WorkChoices Growth figures from when WorkChoices started in March 2006 to June 2007 shows: q trend productivity growth since WorkChoices is 2.2% (annualised). This is well above the 5 year average of 1.3% per year, and also above the 10 year average of 1.9% and the 20 year average of 1.7%; q total investment as a proportion of GDP has hit a very high level of 29.4%. Private sector investment has hit a very high level of 24.9% of GDP. This shows that business feels the confidence to invest with the current workplace relations system; q the wages share of income is now at 53.8%, which is above the pre-WorkChoices level; and

The Bank noted that the recent turbulence in US credit markets has not changed the broader global outlook significantly. ACCI issued a press release in response to this decision and, while we didn’t specifically oppose it, noted that it would cost the Australian economy some $1.8 billion over the following 12 months. The Reserve Bank also increased interest rates in early November. Cost of Living for Particular Household Types On 29 August, the ABS released data on the cost of living for selected household types. The table below shows the increase in the cost of living for the household types in the year to 1 July 2007 and over the past nine years (since the index was started):

q average compensation per employee has grown by 4.3% annualised, well above the 5 year average of 3.9% and also above the 20 year average of 4.3%. Similar results apply for trend and non-farm compensation;

Increase over 1 year (1 July 2006 Increase to 1 July over past 9 2007) years

WorkChoices is clearly not driving down average wages.

Household type

More data on employment and WorkChoices is included later in this chapter.

Employee households

3.1%

32.6%

Age pensioner households

2.2%

32.0%

ACCI published a detailed analysis of the performance of the economy since WorkChoices in the September edition of our monthly ACCI Review, which is available on the ACCI website at http://www.acci.asn.au/text_files/review/r151.pdf

Other government transfer recipient households

2.8%

32.3%

Self-funded retiree households.

1.9%

29.3%

Inflation (for comparison)

2.1%

30.2%

ACCI Participation in Surveys During the year, ACCI continued to participate in a number of surveys about the state of the Australian economy, including: the Melbourne Age, the International Chamber of Commerce, and the Business & Industry Advisory Committee (BIAC) to the OECD. Reporting ACCI continued to report to members about key economic data releases, including GDP, inflation, unemployment, trade and the current account deficit. ACCI also reported on key publications, including the RBA’s Statements of Monetary Policy, the Department of Treasury’s Economic Roundup, the OECD and IMF surveys of Australia, the OECD Economic Outlook and the World Bank’s Economic Outlook. ACCI also provided briefings on major economic policy developments in other countries, such as tax changes in the UK. Interest Rates Interest Rates increased in August 2007. The Reserve Bank cited the following reasons for the increase:

Source: ABS (2007) Analytical Living Cost Indexes for Selected Australian Household Types, Cat No 6463.0

Employees are facing a higher cost of living mainly because they pay more interest on debt than the other household types. This table confirms that inflation is a very good measure of the cost of living over the longer term, although year to year movements may be different. The data is available from the ABS website. Household Income Distribution On 2 August 2007, the ABS also released data on the distribution of household income for 2005-06, which found that: q average household incomes increased by 10 per cent in real terms from 2003-04 to 2005-06. The increase is 34 per cent from 1994-5 to 2005-06; q there has been no significant change in income inequality from the mid 1990s to 2005-06; q people with household income between the bottom 10% and bottom 30% of incomes experienced an income growth of 8% ($24 per week) from 2003-04 to 2005-06, with 8% growth recorded for middle-income people

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT compared to 13% for high income people; q over the period from 1994-95, there was a 31% increase in the real mean income of low income people, compared to 32% for middle income people and 36% for high income people; and q overall, there appears to have been very little change in the distribution of income over the past decade. Note that the ABS excludes the bottom 10% because of methodological problems Meetings ACCI regularly met with the Treasury, Reserve Bank and Department of Prime Minister & Cabinet throughout the year to provide business input into the state of the national economy.

Inspector-General of Taxation David Vos at an ACCI Economics and Taxation Policy Committe Meeting, Canberra.

ACCI COMMITTEES & COUNCIL

FEDERAL BUDGET

Economics & Taxation Committee

Pre-Budget Submission

ACCI’s Economics & Taxation Committee met several times during 2007, where the following issues were discussed:

In December 2006, ACCI made a comprehensive and detailed submission for the 2007-08 Budget. The recommendations included calls to:

q the operation of the Commonwealth Grants Commission and federalism;

Fiscal Policy & Government Spending

q fiscal policy;

q return some of the surplus as tax cuts;

q ACCI’s Pre-Budget Submissions;

q reduce the size of government to enable the provision of larger tax cuts and reduce inflation;

q ACCI’s taxation reform priorities; q the ALP’s superannuation policies; q tax definitions of small business; q company tax; q superannuation contributions, including proposals for ‘soft compulsion’; q ACCI’s Pre-Election Survey; q ACCI’s revised Federalism Policy; q the Productivity Commission inquiry into local government revenue, including a presentation on the review by Judith Sloan from the Commission; q a Board of Taxation inquiry into small business compliance costs; q a Board of Taxation inquiry into foreign source income rules; and q productivity numbers. Guest speakers during the year included: q John Spasojevic, Secretary of the Commonwealth Grants Commission (CGC); q David Vos, Inspector-General of Taxation; and q Shadow Assistant Treasurer Chris Bowen.

q conduct an Independent Review of the effect of the Budget on national saving; and q conduct revenue modelling in the Intergenerational Report, particularly relating to the Government’s superannuation changes. Taxation Reform q reduce the top marginal tax rate over a number of years to equal the company rate of 30%; q reduce the number of tax thresholds to no more than two; q index personal tax thresholds, preferably to wages growth; q reduce the burden of Capital Gains Tax (CGT) by introducing a “stepped rate” CGT where the per centage of gains subject to the tax reduces the longer an asset is held; q broaden the FBT exemption for childcare to cover all businesses; q reduce the complexity and compliance costs of the tax system; q reduce high effective tax rates on low and middle income earners; q provide for a tax credit for dividends paid out of foreign source income; q tax fringe benefits in the hands of employees; and

(CONTINUED ON PAGE 6)

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT q reform the ability for companies to use prior year tax losses. The submission also detailed proposals relating to workplace relations, occupational health and safety, training and education, climate change and regulation. 2007-08 Federal Budget The Treasurer handed down the 2007-08 Budget on 8 May 2007. The Budget was forecast to have a surplus of $10.6 billion in 2007-08 or 1.0 per cent of GDP. The 2007-08 Budget contained the following highlights: q $31.5 billion of personal income tax cuts over four years, including increasing the top personal tax rate (45%) threshold to start at $180,000, increasing the threshold for the 40% rate to $80,000 (up from $75,000) and increasing the threshold for the 30% rate from $25,000 to $30,000; q establishing a Higher Education Endowment Fund. The earnings on this fund will be distributed to universities for capital works on a competitive basis; q streamlining the regulation of universities and increasing their funding; q providing an additional voucher for vocational education and training (VET) and extending FEE-HELP to VET; q bringing the child care rebate forward; q increasing transport infrastructure spending by $22.3 billion over five years; q doubling the superannuation co-contribution; q increasing the GST registration threshold to $75,000 (from $50,000); q expanding the eligibility for the simplified accounting methods for GST; q allowing small business to pay excise monthly; q an extra $702 million over four years for national security; and q an extra $2.1 billion for defence force recruitment and retention. Budget Communications ACCI issued a press release on the Budget immediately after it was delivered and ACCI Chief Executive Peter Hendy conducting his traditional media doorstop at Parliament House.

ACCI Economics and Taxation Policy Director Michael Potter addressing the ACT Chamber Post-Budget Breakfast.

ALP Budget Reply On Thursday 10 May, Opposition Leader Kevin Rudd delivered his Budget Reply, which included the following announcements: q the spending of $2.5 billion over the next ten years on a Trades in School Program, to lift secondary school retention rates and create a national system of high quality vocational education and training opportunities in Australian secondary schools; q a reiteration of the ALP’s policy to invest up to $4.7 billion from the Future Fund in a national broadband network; q giving small business the right to charge interest on late bill payments by Government departments and agencies; q the establishment of an optional superannuation clearing house, allowing businesses to pay superannuation entitlements to a body which would then distribute the funds to the super accounts of individual employees; q the introduction of a simple standard disclosure form for financial services; q the halving of withholding tax on distributions from Australian managed investment funds to non residents, from 30 per cent to 15 per cent; and q a reiteration of policies to ratify the Kyoto Protocol, committing to reduce greenhouse gas emissions by 60 per cent by 2050, establishing a $500 million national clean coal fund and introducing low-interest loans for the installation of energy-efficient measures such as solar panels Intergenerational Report

Both generated strong media interest on Budget Night and the following day.

On 2 April, the Government released its second intergenerational report.

The ACCI secretariat compiled a detailed Budget Edition CEO Update which it sent to members on the night, and Economic and Taxation Policy Director Michael Potter made a budget presentation at the ACT Chamber Post-Budget Breakfast the next morning.

The report found that a Budget deficit of around 3.5 per cent of GDP will exist in forty years time if no policy changes occur. This is a significant improvement from the forecast from 2002 of a deficit of 5 per cent of GDP. This improvement is

(CONTINUED ON PAGE 8)

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT because of higher fertility, increased participation of older Australians, increased migration and slower growth in government spending (mainly lower health spending), partly offset by reduced mortality. There was no change in the productivity growth assumption (1.75 per cent per year). ACCI issued a press release welcoming the report and arguing that it indicates the need for further policy reforms to increase workforce skills and participation.

This data shows that many government businesses do not provide a commercial return, so that the business is subsidised by government. This has a number of detrimental effects including that:

Budget Outcomes & Updates

q the government business is unfairly competing with commercial businesses who cannot continue in the long term if they don’t make a profit;

The Government released several Budget outcomes and updates throughout the year.

q government subsidies mean taxes are higher than they would otherwise be; and

As has become a regular occurrence, each of these tended to show that the Budget position was much stronger than previously estimated.

q the lack of a commercial return usually means the business is inefficient, which reduces the productivity of the economy.

For example:

ACCI provided briefings to members on these figures.

q the 2006-07 Mid-Year Economic and Fiscal Outlook (MYEFO) increased the surplus forecasts from $10.8bn to $11.8bn;

Tax Expenditures

q the final Budget result for 2006-07 showed the surplus for the financial year was $17.2 billion, well above the $13.6 billion originally forecast in the Budget in May; and q the 2007-08 MYEFO increased the surplus forecasts from $10.6bn to $14.8bn. ACCI has welcomed the strong Budget results, but argued that the: q significant Budget surplus and strong growth in tax revenues means that tax reform is eminently affordable; q the size of Government is too large and more should be done to reduce it; and q Government should not be running such large surpluses to hand these surpluses over to the Future Fund. ACCI consistently sought media coverage throughout 2007 to promote these views. Size of the Public Service On 30 November 2006, the Public Service Commission released data showing that the public service increased by 9.6 per cent over 2006. In media commentary on this release, ACCI expressed disappointment in the growth in the size of the public service, arguing that the large size of Government means that there is less money to undertake tax reform. Performance of Government Businesses The Productivity Commission every year compiles data on the financial performance of government businesses. The latest data, released on 26 July, found that for 2005-06: q the average profit of all government businesses increased by 61%; q profits fell for 37% of government businesses; q eleven government businesses (six in the water sector) failed to report a profit; and q about half of the monitored businesses (42) earned less than the long-term bond rate in 2005-06, with an even

8

greater proportion failing to earn a commercial rate of return (which includes a margin for risk).

A tax expenditure statement was released on 21 December 2006, detailing tax concessions, benefits and incentives provided through the tax system. An estimate of the cost of tax expenditures was provided where possible. The measured cost of tax expenditures was $42.1bn in 200506, and is forecast to be $52.7bn in 2009-10. The cost is forecast to fall from 4.4% of GDP in 2005-06 to 4.0% in 200607 (due to personal tax cuts) and then increase to 4.5% in 2009-10 (due to superannuation changes). Tax Revenue Data On 3 April, the ABS released the latest data on tax revenue received by governments around Australia. In 2005-06: q taxation revenue across all governments grew by 6.9%; q Commonwealth Government revenue rose by 7.0% to $245bn. Personal taxes rose 5.8% and company taxes rose 14.4%. Federal tax as a proportion of GDP fell from 25.6% to 25.4%; q State Government revenue rose by 6.2% to $44bn. Payroll taxes rose 9.1% and taxes on goods and services rose 9.6%. Taxes on property rose 5.6%; q Local Government revenue rose 7.4% to $8.9bn; q tax as a proportion of GDP fell from 31.1% to 30.8%; and q tax per capita was $14,551 – an increase of 5.5%. Taxes per capita were the highest in Western Australia and lowest in Tasmania. ACCI provided briefings on these figures to members, emphasising the strong growth in tax revenue, which supports our case for tax reform and tax reductions. Several members used these figures in subsequent media commentary and lobbying. ALP Future Fund Investment in Broadband The ALP announced on 21 March that a Labor Government would invest up to $4.7bn in a national broadband network using proceeds from the Future Fund. While ACCI does not oppose investment in broadband, ACCI expressed concerns that directing investment by the Future Fund is likely to reduce the returns to the Fund and is


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT moving the fund towards being an instrument for governments to “pick winners”, which has mostly failed in the past. Any government funding of broadband should occur through normal budgetary processes. ALP Spending Cuts On 2 March, the ALP indicated that it would make over $3bn in spending cuts in Government through the following changes: q saving $394m by “scrapping” WorkChoices; q cutting $350m from advertising;

consolidation plan should be given more time to operate before examining the option of automatic consolidation. In adopting these motions, Council considered that: q increases in the employer superannuation contribution would cause a large increase in employer costs and cut jobs. There is substantial evidence to suggest that an increase in compulsory employer contributions will not be offset by wage moderation; q there should not be a particular retirement goal, as individuals should be encouraged to determine their own retirement goal;

q saving $395m on the use of consultants;

q a universal retirement income forecast will be expensive, controversial and hard to implement; and

q folding Invest Australia functions into Austrade to save $70.5m;

q ACCI opposed the right to request salary sacrifice as this should be negotiated at the workplace level.

q abolishing the Prime Minister’s Community Business Partnerships to save $6.3m;

Better Superannuation Reforms

q deferring the Access Card to save $302m; q abolishing the WorkChoices Employer Adviser Program to save $12.5m; q abolishing the Inspector-General of Taxation to save $6.6m; q limiting Family Tax Benefit Part B to those earning below $250,000 to save $22.5m;

The Government implemented significant reforms to superannuation, called Better Superannuation, from 1 July 2007. There were a number of key issues in relation to these changes that were relevant to employers, including: q how the caps on contributions would be implemented; q deductibility for employers for contributions; q quotation of Tax File Numbers on contributions; and

q redirecting ATO funding to compliance activities to “produce larger compliance dividend” to raise $480m;

q the treatment of Eligible Termination Payments.

q reducing ASIC funding by $129.8m; and q cancelling the sale of Medibank Private, saving $12m.

ACCI provided comments on the legislation and supported the release of the final legislation. ACCI was involved in consultations on this legislation.

Later during the year, ACCI was able to establish that the ALP was committed to keeping the functions of the InspectorGeneral, but would absorb these functions into an existing body such as the Tax Ombudsman.

ACCI had several meetings with the Office of the Assistant Treasurer, the Tax Office, the Association of Superannuation Funds of Australia and ACCI members to discuss the reforms and how they affect employers.

Council:

ACCI participated in meetings with the ATO to discuss communications relating to Better Super, particularly focusing on communications with employers. Issues discussed included the draft booklet being sent to employers, use of employer associations to communicate with business, and concerns over requirements for employers to pass on tax file numbers to the ATO.

q strongly opposes any increase in the compulsory 9 per cent employer superannuation contribution;

ACCI provided comments on the ATO’s communications documents for business.

q welcomes the ALP’s policy on the Government’s superannuation reforms;

Regulation of the Superannuation Industry

SUPERANNUATION ACCI Council Resolution on Superannuation In November 2006, ACCI’s General Council passed the following motion:

q does not adopt a position on whether there should be a retirement income goal; q opposes proposals for there to be a universal retirement income forecast. Forecasts should be allowed but not mandated; q opposes proposals that employers should be required to implement salary sacrifice into superannuation if requested to by employees; and

ACCI made a submission to an Inquiry into the regulation of the super industry by the Parliamentary Joint Committee on Corporations and Financial Services in September 2006. The submission argued that: q the current regulation of trustees should continue. Uniform capital requirements should not apply to trustees, as the super funds themselves are already subject to adequate regulation. Trustees should not be required to

q argues that the Government’s superannuation (CONTINUED ON PAGE 14)

10


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ADVERTORIAL

EFIC gives SME exporters a working capital boost A new product from Export Finance and Insurance Corporation (EFIC), Australia’s export credit agency, is helping small and medium-sized Australian exporters reach their full growth potential in Asia. EFIC Headway is a financial guarantee from EFIC to a participating bank, designed especially for small to medium-sized exporters to overcome the common problem of limited access to working capital. A growing number of exporters are using EFIC Headway to access additional working capital finance from their banks, without needing to provide added security. Exporters who have used EFIC Headway cover diverse sectors, including food and beverage, textiles, agribusiness, information technology, construction and manufacturing. Haltech Engine Management Systems is making export inroads into the booming international high performance motor vehicle market with a contract to provide computerised engine management systems to one of Japan’s biggest motor sport companies. The Sydney-based company is using EFIC Headway to access additional working capital finance from its bank, ANZ. “EFIC Headway has allowed us to address the cash flow impact of designing, manufacturing and shipping stock to such a valued customer,” said Mark Bevan, the managing director of Haltech Engine Management Systems. “The high performance industry is massive in Japan and we expect our sales volume there will equal what we are currently doing worldwide.” Haltech’s computerised systems, designed to extract an engine’s maximum power and optimum fuel efficiency, have numerous applications in everything from drag, rally and circuit car racing to desert-grinding dune buggies in the United States.

“Shipping first stock to Japan would have been delayed significantly without EFIC Headway,” explained Mark Bevan. “With EFIC’s support, we were able to move quickly on the opportunity and to hasten the start of our cash flow in the process.” Another Australian exporter, Perth-based Rural Liquid Fertilisers Pty Ltd, is using EFIC Headway to increase its liquid fertiliser exports to China. The increasing sophistication of farming methods in China and the dietary expectations of a growing Chinese middle class represent significant export opportunities. “Previously foreign enterprises in China were conducted through local joint ventures but now it is possible to register a private company in your own right,” said Rural Liquid Fertilisers managing director, Ken Hancock. Rural Liquid Fertilisers has established a private company at Zhengzhou in Henan Province, in the north of China. Thanks to EFIC Headway, additional funds from Westpac will assist the company to achieve its aim of becoming one of Australia’s leading exporters of liquid fertiliser technology to China, where its products are being used in the cultivation of a wide range of crops including vegetables and grains. “EFIC’s support of our latest expansion has been essential because it has allowed us to raise additional working capital with minimal security,” Mr Hancock said. “The EFIC Headway facility was easy to access, and without it, we could not have achieved the current rate of expansion of our business.” EFIC Headway is distributed by Westpac, HSBC, NAB, ANZ, BankWest, Commonwealth Bank, Bank of Queensland and Bendigo Bank. For more information call Mark Skinner or Jonathan Reso at EFIC on 1800 093 724 or visit www.efic.gov.au/headway.


EFIC Headway enabled ‘ us to move quickly to fulfil our first order from a major Japanese client.

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Haltech Engine Management Systems

With support from EFIC and ANZ, Haltech is racing to success on the international motor sports market, selling its computerised engine management technology to Japanese, US, European and other customers. EFIC Headway gave Haltech simple and easy access to extra funds through ANZ, with no additional security needed. To find out how you can expand your export horizons using EFIC Headway, contact your Relationship Manager at ANZ, Westpac, HSBC, NAB, BankWest, Commonwealth Bank, Bank of Queensland or Bendigo Bank.

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT become public companies; q there are significant concerns over the regulation of financial advice. We are particularly concerned about the difficulties of businesses distinguishing between advice and information provided to employees; q regulations on investment choice are not warranted at this stage; q the costs of complying with the 9 per cent superannuation guarantee are significant for employers. This compulsory impost should not be increased and increases in exemption thresholds should be implemented; and q there is insufficient data on the loss of superannuation entitlements due to employer insolvency. Further research is required. At this stage, we do not support the extension of the Government’s GEERS scheme to provide for unpaid superannuation contributions. The final report of the Committee was released on 7 August 2007. The report argued that: q in the long run (and with appropriate safeguards in place) super choice will increase competition, resulting in efficiencies and improved returns on superannuation savings; q the laws and regulations governing superannuation have become too complex, onerous and conflicting in some instances and have not kept pace with industry developments; q APRA and the superannuation industry should strive to find common ground in compulsory and specific disclosure by funds of expenditure on advertising and promotion; q more disclosure should occur over the purchase of services by industry funds, and key service provision agreements should be put out to tender (the ALP minority on the committee did not agree with this recommendation); q regulations should give greater allowance for member investment choice; q the government should mandate a uniform unit pricing methodology for all public offer superannuation funds (the ALP minority on the committee did not agree with this recommendation); q where a tax file number is attached to a lost account it should be automatically consolidated or rolled together into a member’s last active account using the tax file number system; q APRA should provide regular reports on the size of super contributions above the 9% level; q there should be a cap on excessive exit fees; and The report made various recommendations relating to the regulation of financial advice, but did not recommend a ban on commissions on superannuation products. The report largely did not make any recommendations that would increase regulation on industry funds. In fact some of the recommendations would reduce the regulatory burden on industry funds. ACCI supports these recommendations.

Superannuation Guarantee Complaints by Employees On 8 May, the Government announced that it would allow the ATO to inform employees about the progress of complaints made by employees about the non-payment of superannuation by employers. Every year, the ATO takes action on about 22,000 complaints by employees about late and non-payment of the super guarantee by employers. Before 1 July 2007, the ATO was not able to reveal any details about the progress of a complaint due to privacy rules. However, the Government made a change to allow the ATO to keep employees informed about their complaints. The ATO has argued that this will not allow employees to receive confidential information on employers. ACCI monitored this change closely and provided comments on various aspects of it. Superannuation of Temporary Residents On 15 October, the Government announced that it will allow businesses to make superannuation contributions for temporary residents to the Australian Government rather than to superannuation funds. Super funds would be required to pay any super balances to the Government at the end of the year. This measure will not apply to residents of New Zealand. Details include that: q temporary residents who permanently depart Australia will be able to claim back their superannuation within five years of permanent departure; q temporary residents who become permanent residents will be able to have their superannuation transferred back from the Government into a superannuation fund (with interest); and q the goal of this measure is to make it easier for temporary residents to locate and claim super money. ACCI is involved in consultations on this measure. Superannuation Guarantee – Removal of Double Penalty On 2 October, the Government announced that it will remove the double penalty from businesses who pay the compulsory 9% super guarantee (SG) late. Currently, if a business pays the SG to a super fund late, they can also be liable for paying a tax to the ATO equal to the SG contribution plus interest. The Government will allow any SG amount paid to the super fund to be offset against the tax. The ALP has supported this proposal for some time. ACCI had been seeking this change for some time, and issued a press release welcoming this change, but noted that it required legislative change and Royal Assent – something not able to be done before the Federal Election. ATO Superannuation Consultative Committee During the year, ACCI attended meeting of the ATO’s

(CONTINUED ON PAGE 16)

14


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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT Superannuation Consultative Committee which discussed the following issues: q the advertising campaign for simplified superannuation; q the readiness of various groups (including employers) for the changes to superannuation; q mailouts to employees about tax file numbers; q advertising about the Government’s simpler superannuation plans; q communications relating to the change in the calculation of the super guarantee (to be calculated on ordinary time earnings); q issues relating to salary sacrifice; and q regulation of self managed super funds. ACCI reiterated its arguments that the ATO should make full use of industry associations to advise employers of the changes ALP Superannuation Policy The ALP announced various policies relating to superannuation, including the introduction of a superannuation clearing house for small business. The ALP has a policy of wanting superannuation contributions to increase to 15 per cent, but has indicated to ACCI that it does not support proposals for increased contributions to come from employers. ACCI had several meetings with the ALP to discuss this policy.

asset is held. The article argued that the tax burden on capital must be reduced, and presents significant evidence that reforms to CGT will: q increase economic growth. The tax rate on capital should be low or zero to maximise economic growth; q encourage a better allocation of Australia’s capital resources; q reduce the double taxation of retained earnings, which will also reduce the disincentives for corporate saving; q encourage investment, capital accumulation, innovation, research and development; q improve Australia’s international competitiveness for mobile capital. Last year’s International Comparison of Australia’s Taxes report, co-authored by ACCI Chief Executive Peter Hendy, found that Australia was clearly uncompetitive on CGT; q eliminate the need for legislation to exempt assets that were bought before 1985 (because there would be an exemption for all assets held for more than 10 years under ACCI’s proposal); and q increase consistency with the treatment of non-residents. The article notes that the 1999 reforms to CGT actually increased the tax rate on assets held for less than one year or for assets that increase in value by less than double the inflation rate. It also addresses concerns that CGT reforms are unfair, cause excessive price increases for housing or lead to large reductions in revenue.

TAXATION

Abolition of Inefficient State Taxes

Personal Income Tax Reform

During the year, ACCI has supported the Australian Government’s campaign for state governments to abolish all of the taxes that were covered in the GST agreement of 1999.

In a major win for Australian business, both major political parties agreed to fundamental personal income tax reform at the beginning of the 2007 Federal Election campaign in mid October. Both parties: q indicated their long-term goal was for a top personal tax rate of 40 per cent, which is a major step towards ACCI’s goal of a top rate of 30 per cent; and

The State and Territory Treasurers have indicated that they plan to remove all of these taxes, with the exception of stamp duty on sales of business property. ACCI has expressed disappointment with this decision, because this tax is very inefficient and is a significant burden on Australian business. Payroll Tax Harmonisation

q supported substantial reductions in tax at low income levels, which will encourage more people into work.

On 29 March, the State and Territory Governments agreed to simplify and “partially harmonise” their payroll tax provisions from 1 July 2008.

However, ACCI expressed disappointment that the ALP would defer the reductions in the top personal tax rate.

The harmonisation is likely to include:

ACCI has strongly campaigned for significant structural taxation reform since the publication of our Taxation Reform Blueprint in 2004 and is pleased that this has become a major part of the national political agenda. Capital Gains Tax The May edition of the ACCI Review had a detailed article explaining the arguments for reductions in Capital Gains Tax (CGT).

q timing of lodgement; q motor vehicle allowances; q accommodation allowances; q a range of fringe benefits; q work performed outside a jurisdiction; q employee share acquisition schemes;

ACCI has been campaigning CGT reform for some time and is calling for the introduction of a stepped rate CGT where the per centage of gains subject to the tax reduces the longer an (CONTINUED ON PAGE 20)

16


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ADVERTORIAL

AusIndustry AusIndustry delivers a program range of more than 35 innovation grants, tax and duty concessions, industry support, and venture capital programs to more than 10,000 businesses and 40,000 individuals every year. It offers both entitlement and competitive based products. For an entitlement based product, such as a tax concession, a customer qualifies to receive the assistance. For a competitive or merit-based product, such as an innovation grant, applicants compete on merit for limited funds, based on their application. To help customers with product and eligibility information, AusIndustry has customer service managers located in 27 offices across Australia, a national hotline and website, plus more than 65 small business field officers in regional areas. The Australian Government’s Small Business Field Officers network in regional and outer metropolitan areas is proving to be one of the Government’s most successful programs for dispersing information to small and homebased businesses. Commercial Ready Commercial Ready is a competitive meritbased grant program supporting innovation and its commercialisation. Commercial Ready provides grants from $50,000 up to a limit of $5 million for eligible projects of up to three years in duration. An eligible project must aim to produce, commercialise or establish the commercial or technical viability of a new, clearly identified product process or service. Commercial Ready aims to supports the: I

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hmaC064596


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT q superannuation contributions for non-working directors; and

More details about ACCI 2007 Pre-Election Survey are in the Surveys chapter of this Annual Report.

q grouping of businesses.

CGT on Non-Residents

ACCI is monitoring these plans, particularly to address concerns that harmonisation could mean a significant increase in the payroll tax base for some states.

In December 2006, the Government gave an exemption from CGT for non-residents for all assets other than real property (i.e. land). This measure makes Australia consistent with how other developed countries treat non-residents. It is also practically very difficult to collect CGT from non-residents, and the exemption is already provided for in many tax treaties Australia has with its major trading partners.

Tax Definition of Small Business In March, ACCI made a short submission on draft legislation to define small business for tax purposes. We welcomed the plan to implement a common definition to allow access to various small business concessions. Small business is defined as businesses having a turnover less than $2 million. Businesses that meet this test are eligible to access the following concessions: q CGT 15-year asset exemption; q CGT 50 per cent active asset reduction; q CGT retirement exemption; q CGT roll-over provisions; q simpler depreciation rules; q simplified trading stock rules; q immediate deductions for certain prepaid business expenses; q choice to account for GST on a cash basis; q annual apportionment of input tax credits for acquisitions and importations that are partly creditable; q choice to pay GST by instalments; q FBT car parking exemption; and q PAYG instalments based on notional tax. The draft allowed small businesses to choose whether to use each concession. ACCI argued that the Government should examine whether this choice will increase compliance costs at least in the transition to the new system. ACCI Pre-Election Survey – Taxation In October, ACCI released the results of its Pre-Election Survey on tax. The key findings from this survey of 1,331 businesses were that: q businesses are more concerned about personal income tax than any other federal tax, with 71% rating it as a major or moderate concern. The survey clearly shows this is a higher priority than reductions in company tax; q the overall complexity of the tax system remains a very significant concern (85.9% of business were concerned); q in relation to tax levels, business expresses the strongest degree of concern about payroll taxes and stamp duties with 75.0% and 72.9% respectively; and q in relation to tax complexity, business expresses the greatest level of concern about the frequency of changes to the tax system (69.8% concerned) and the complexity of FBT, with 61.5% of businesses expressing concern.

However, this change provided a CGT exemption that is not available to Australian residents. In public commentary, ACCI argued that this measure increases the argument for CGT relief for Australian residents. Taxation of Financial Arrangements The long-awaited Taxation of Financial Arrangements Bill was introduced into Parliament on 20 September 2007. The current tax treatment of financial arrangements (debt, equity, derivatives, commodities and foreign exchange) is very ad hoc, complex and out of date, encouraging tax minimisation. The TOFA Bill is designed to make the law more systematic, reducing complexity and compliance costs while reducing tax minimisation. In simple terms, the TOFA Bill will mean that the gains and losses on most financial arrangements will be taxed as they accrue rather than being taxed on a cashflow basis as currently. Some transactions are exempt from the accrual rules, including equity and trade credit. Most transactions of smaller business and individuals will be fully excluded. Instead of using accruals, taxpayers can instead use other methods, including fair value (or market value), retranslation, hedging or financial accounts. ACCI has expressed support for the proposed changes in a submission on the draft of the Bill. However, ACCI raised concerns over the definition of “sufficiently certain” in the legislation, options for reducing compliance costs, the availability of accrual options for medium sized companies, the interaction of the TOFA rules with other rules, and the need for detailed communication with business (including through business associations) about the proposals. The legislation lapsed with the calling of the 2007 election, and is expected to be re-introduced in early 2008. Tax on Disguised Distributions by Private Companies On 6 December 2006, the Government announced that it would reform the tax treatment of disguised distributions by private companies to reduce excessive penalties and reduce compliance costs. Extra taxes are imposed on disguised distributions by private companies – particularly dividends that are called loans (taxpayers try to convert dividends to loans because dividends are taxed while loans are not). Essentially, most advances, loans and other credits to shareholders are treated as assessable dividends to the extent that there are profits in

(CONTINUED ON PAGE 23)

20


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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT the company. The Government removed the excessive penalties applying to these distributions and reduced compliance costs, including: q removing the automatic debiting of the company’s franking account; q allowing the ATO to disregard the provisions where there is evidence the taxpayer has made an honest mistake; q simplifying the interaction of these rules with the FBT rules; q providing for more flexibility for taxpayers; and q repealing the predecessor to Division 7A. The legislation was passed by Parliament on 13 June. ACCI was involved in the consultations on these changes. Government Industry Statement – R&D Tax Concession The Government’s Industry Statement was released on 1 May 2007. The statement indicated that the Government would change the 175% premium R&D Tax Concession to make it available to companies where the intellectual property (IP) of the R&D is held offshore. Currently the concession is only available for R&D where the IP is owned in Australia. ACCI welcomed this change. More information on the Industry Statement is in the Industry Policy chapter of this Annual Report. Review of R&D Tax Concession In June, the Government released an evaluation of the new elements of the R&D Tax Concession. Analysis of the 175% Premium R&D Concession found: q the Premium resulted in greater commitment to speculative high-risk R&D projects; q after the Premium was introduced, firms registering for the Concession more than doubled their average R&D growth rate to 25 per cent a year, from 11 per cent a year prior to the Premium; q the Premium concession is estimated to increase R&D spending by $379m – the businesses that claim the premium concession have total spending $379m above their trend spending; q the cost to Government of this increase is $83m; and q the review cannot tell at this stage whether this strong trend growth will continue. Analysis of the tax offset found: q the tax offset has led to an extra 1,000 firms investing in R&D and has increased expenditure by about $310m per year, representing a doubling of expenditure by the average startup firm; q businesses receiving the tax offset indicated that the offset had a positive effect on cash flow but were not overly concerned with compliance costs; q the key deterrent to further expenditure is the $1m cap (only businesses spending less than $1m are eligible for the offset). There is evidence that there is a ‘cluster’ of firms that are spending just below the cap. This suggests

that the cap is actually reducing R&D spending for firms that are near the cap; and q the report suggests that the government should examine the appropriateness of the threshold. These findings show that these elements of the R&D Tax Concession provide significant incentives to engage in research and development and provide some support for ACCI’s arguments that the R&D Tax Concession should be increased. World Bank Report on Business Tax On 7 November 2006, the World Bank released a major report into business taxes. Key findings included that: q the corporate tax burden on Australian businesses is well above the average. Corporate taxes account for 36% of the tax burden on businesses around the world, compared to 52% for Australia; q the average number of tax payments in Australia per year is 11, well below the international average of 35; q the time taken to fill out business tax returns is well below average, at 107 hours, compared to the world average of 329 hours; q the average corporate tax rate fell from 46% to 33% between 1982 and 1999, while corporate tax as a proportion of GDP increased from 2.1% to 2.4%, largely because of base broadening and reductions in the cash economy; q higher company taxes are not associated with better social outcomes, in fact higher company tax payments are associated with lower infrastructure quality, lower educational quality, a larger informal economy and lower investment levels; and q out of the 20 largest economies in the world, Australia’s income tax legislation has about 5,650 pages compared to the average of 3,010. This report supports ACCI’s arguments that Australia’s tax system is too complex.

TAXATION INQUIRIES Inquiry into Local Government Revenue On 4 April, the Government announced that it had asked the Productivity Commission to undertake an inquiry into Local Government revenue raising through rates and charges. In June, ACCI met with the Commission to discuss the review. Issues discussed included developer charges, the ability of business to influence rates, grants to local government, local government efficiency, rate capping and governance. In September, ACCI made a submission to the review, arguing that: q better data is needed on the growth in local government rates and charges and their effect on business;

(CONTINUED ON PAGE 26)

23


ADVERTORIAL

My Business, My People A Victorian government initiative assisting small business

It would surprise most people to know that 95.7 per cent of all businesses operating in Victoria are small businesses. That is 470,283 companies – a number that is increasing by 1.4 per cent annually. These small businesses (20 employees or less), combined with the many large and medium-sized businesses that have set up in Victoria, help make Victoria the vibrant place it is. To ensure Victoria’s businesses continue to prosper, the Victorian Government has allocated $241 million to the Maintaining the Advantage: Skilled Victorians package. Part of that package includes $10.6 million to be invested over four years into the My Business, My People program. This program provides small and medium-sized businesses (up to 100 employees) with the opportunity to have an independent expert consultant review their business and provide useful and workable plans. Why is this important?

investment from a business standpoint is time for the consultant to conduct the workforce planning diagnostic, go through the action plan with the business owner or manager, and outline the components of the subsidies and how they can be accessed. For micro businesses (under 5 employees), a toolkit of core workforce planning resources is also available through the Business Victoria website (www.business.vic.gov.au/mybusinessmypeople). This includes: 3

Recruitment guidelines

3

How to advertise a job

3

Job description templates

3

Training and development plans

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Workforce planning templates

The Minister for Small Business, Joe Helper, said the program was developed to provide practical support for the growing number of small businesses in Victoria in managing their workforce through:

According to a Sweeney Research report commissioned by the Victorian Government, 60% of small businesses have trouble accessing and attracting skilled staff. Just on 74% of small businesses have no workforce plan in place to address retention and skills issues.

3

Recruiting the right people

3

Retaining quality staff

3

Improving staff training and development

3

Developing management capabilities

The Victorian Government has recognised these shortfalls and the program was launched in March 2007.

“Finding the best staff with the best qualifications can be a daunting task for a small business owner,” said Mr Helper. “This initiative will help small businesses find and keep valued employees. For example, the government will provide financial assistance for training managers on recruitment strategies.

The program is divided into three main components: 3

A free on-site workforce planning diagnostic where a business consultant attends the workplace

3

An action plan on how the business can be improved through workforce planning

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A program to develop management capabilities where up to 50% subsidies are available for the development of management skills, training needs and developing the capabilities of owners and managers

Depending on the size of the business, the initial part of the program is valued at approximately $5,000. The only

“Under this initiative, businesses will now be able to get a workforce planning specialist to visit their site and conduct a free assessment of their workforce needs to produce a tailored plan.” Information on the My Business My People program is available by visiting www.business.vic.gov.au/mybusinessmypeople or contacting the Victorian Business Line on 13 22 15


My Business, My People Assisting businesses to avoid skills shortages and attract and retain a skilled workforce.

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‘We are developing a workforce plan to identify the critical skills to grow and to ensure we keep skilled people in the business.’ Martin Soloman, General Manager of BRITANNIA METAL INDUSTRIES

Small Business Victoria


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT q rate capping in NSW should remain until the transparency and management of councils is improved;

There were a number of recommendations on tax issues, including that:

q governments should pay local rates and charges, particularly if they are competing with business;

q FBT should be removed from all childcare. This is ACCI policy;

q user charges should be for meeting the direct costs of the service that is being charged for, and should not be used for general revenue raising;

q families should be allowed to obtain a tax deduction for childcare;

q direct funding of Local Government by the Federal Government should be explored; q the funding formula for local and state governments should be reviewed; q councils should not provide services that are more appropriately provided by the private sector; and q various measures should be explored to promote Local Government efficiency. Parliamentary Inquiry into the Taxation Laws Amendment Bill No 5 The Taxation Laws Amendment Bill No 5 was passed by Parliament in September. ACCI welcomed the following elements in the Bill: q the long awaited reforms to the tax treatment of public private partnerships (PPPs). The technical name for these reforms is tax preferred asset financing. The previous tax rules were very harsh and unnecessarily penalised many PPPs. The new rules significantly reduce the tax penalties on PPPs. ACCI argued that the old rules may have been delaying essential infrastructure investment. q removing the cap for the loss recoupment rules. This $100 million cap meant that most large businesses could not use tax losses if they were sold. This cap adversely affected businesses that are likely to have tax losses (which would include private infrastructure). ACCI, along with a number of other business and professional groups, called for the removal of this cap in 2005; and q amendments to allow multinational firms to access the premium 175 per cent Research & Development (R&D) tax concession. This will encourage multinationals to conduct R&D in Australia. ACCI made a submission to the Senate Economics Committee on the Bill in August. We noted a few concerns – i.e. that the Bill is complex, it has taken too long to develop, and the cap on loss recoupment should never have been introduced. Despite these concerns, ACCI argued that the Bill should be passed quickly. ACCI also appeared before the Committee to discuss these issues. Earlier in 2007, ACCI made a submission to draft legislation on the taxation of public private partnerships. The submission argued that the legislation was very complex and should be simplified, perhaps by increasing the use of provisions in the draft Taxation of Financial Arrangements (TOFA) legislation. Parliamentary Inquiry into Work & Family: Childcare & Tax

q the payments and tax concessions for childcare should be extended to cover family day care, occasional care, care outside school hours, private preschools and in-home care; and q the next intergenerational report should consider women’s workforce participation issues. ACCI provided a submission to the Committee on these issues earlier in 2006. ACCI welcomed the Committee’s strong support for our policy of broadening the FBT exemption for childcare. Parliamentary Inquiry into Taxation Issues ACCI appeared before the Joint Parliamentary Committee on Public Accounts and Audit to discuss its inquiry into “certain taxation matters” on 9 November 2006. ACCI discussed the following issues: q the high level of taxation concerns expressed by business in our 2004 Pre-Election Survey and similar concerns expressed in our other surveys; q concerns raised by ACCI members about two GST rulings – one on commercial residential property (relating to the Marana decision) and another on the treatment of deposits. ACCI provided a supplementary submission explaining these concerns in more detail; q the need for FBT reform to address interactions with the Family Tax Benefit system; and q ACCI’s support for the broadening of the FBT exemption for childcare so that all businesses can supply FBT-exempt childcare, whether or not it is provided on site. Taxation of Offmarket Share Buybacks ACCI attended a consultation with the Board of Taxation to discuss their inquiry into the tax treatment of offmarket share buybacks in July. The current tax treatment of these buybacks provides tax benefits to shareholders with low tax rates. Concerns have been raised that this creates inequities between shareholders and has a large revenue cost. Consultations with Treasury ACCI was involved in other consultations with Treasury on various tax policy changes throughout the year, including: q the GST grouping rules; q a review of the same business test for loss recoupment; q the international tax anti-deferral regime (Board of Tax review); q venture capital;

The House of Representatives committee on Family & Human Services (chaired by Hon Bronwyn Bishop MP) released its report into balancing work and family on 7 December 2006. (CONTINUED ON PAGE 28)

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT q amendments to R&D provisions; q the Review of Unlimited Tax Amendment Periods; q the taxation of structured settlements; and q a review of tax discretions

TAXATION ADMINISTRATION ATO Key Relationship Manager In October, the Australian Taxation Office agreed to pilot a project assigning a Key Relationship Manager to work closely with ACCI. The pilot will allow opportunities for the improvement in communication and relations between the Tax Office and the chamber movement.

Use of the initiative will be voluntary. There will be initial costs to business from training and upgrading software, but the Government estimates that the ongoing benefit to business will be $795m per year when the system is fully utilised. The system will be fully operational in mid-2010, with take-up by business escalating over the subsequent three years. The cost to the Government will be $208.1 million over the next three years. ACCI strongly supports the goals of the initiative, which are:

The Key Relationship Manager has two responsibilities:

q a reduction in the volume of reporting from businesses to government;

1. to act as a conduit for disseminating important taxation information to ACCI and its members; and

q improved consistency in business to government reporting; and

2. to act as a liaison point in relation to systemic tax compliance and administration issues faced by ACCI members.

q a reduction in the number of channels for business to government reporting. ACCI argued that:

The Key Relationship Manager does not address individual members’ specific tax enquiries. The pilot is expected to conclude in February 2008, but may be extended.

q State Revenue Offices should cooperate fully with the initiative;

Board of Taxation Report into Small Business Compliance Costs

q the initiative should not mean that governments increase reporting requirements on business because it is cheaper and easier to get the data;

In July, ACCI provided comments on a draft report by the Board of Taxation into small business tax compliance costs. ACCI argued that: q more emphasis is needed on the compliance costs of GST and income tax; q the compliance costs of various taxes should be quantified; q it would be helpful to include evidence that compliance costs are higher for smaller businesses as a proportion of turnover;

q the Government should make the technology very secure so confidential business data can’t be accessed by hackers; q education and assistance to small business in using the initiative is needed (including through business associations); q the private sector should be allowed to make use of new reporting frameworks, for example financial institutions should be allowed to make some use of the new reporting systems for reports from their clients; and

q if a small business uses an accountant they may not see compliance costs directly, but they still bear the costs because the costs of the accountant are higher than they otherwise would be;

q other initiatives to reduce regulations must continue. The SBR initiative does not mean that business red tape concerns will end.

q the Government should not be imposing record-keeping burdens on business because the Government thinks it is good for businesses to keep records;

ACCI members raised a number of concerns about GST rulings on the treatment of deposits. ACCI kept abreast of these concerns and raised them with various key policy makers.

q increased regulation of bookkeepers may lead to higher accounting costs; and q business complaints about the Business Activity Statement may actually be complaints about the GST. Single Business Reporting On 30 August, the Treasurer announced that the Government would proceed with an initiative for Single Business Reporting (SBR). Under SBR, businesses will be able to use their existing software to submit government forms, such as the BAS, electronically using a single secure login. Other forms that will be covered include Company Income Tax Returns, TFN Declarations and the Quarterly Business Indicators Survey (for the ABS). The agencies covered include

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the Australian Bureau of Statistics, the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission, the Australian Taxation Office and potentially State Revenue Offices.

GST on Security Deposits

ACCI kept members informed about developments in this area, including the announcement by the ATO on 4 September that it will appeal a court decision that GST was not payable on a forfeited security deposit. The appeal of the Full Federal Court decision will go to the High Court. ATO Corporate Consultative Committee ACCI is a member of the ATO’s Corporate Consultative Committee. In meetings during 2007, the Committee

(CONTINUED ON PAGE 30)


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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT discussed:

q consultations should be adequately resourced; and

q the operation and membership of the Committee;

q there should be at least six weeks for consultations.

q the performance of tax revenues and the economy;

The Government accepted all these recommendations. ACCI is discussing these recommendations with the Government.

q management of tax compliance risks; q the Government’s plans to streamline business reporting;

INSPECTOR-GENERAL OF TAXATION

q a charter for the committee;

Meetings

q OECD work on tax intermediaries (which include accountants and lawyers);

ACCI is a member of the Inspector-General of Taxation’s consultative group. Several meetings of this group were held in 2007 to discuss his work program, including:

q the ATO’s visits to the top 100 taxpayers; q an overview of the real-time compliance projects; and q the ATO’s change program ATO Small Business Consultative Committee ACCI is also a member of the ATO’s Small Business Consultative Committee with the Commissioner of Taxation, Michael D’Ascenzo. Issues discussed by the Committee in 2007 included: q the Government’s proposals to align the tax definitions of small business; q the implementation of the Government’s superannuation reforms; q the standard business reporting measures; q the small business assistance program;

q safe harbours (where the ATO allows low risk transactions to escape further scrutiny); q ATO investment in staff that set legal precedents; q the quality of ATO guidance on important compliance risks; q whether the ATO is making as much advice legally binding as possible; q Tax Office approaches to settling and finalising issues with taxpayers; q non-lodgement of income tax returns; q the potential use of guidance such as the service entity booklet to increase certainty in other areas of compliance focus; and

q pre-filling of tax returns;

q the Tax Office’s management of the Higher Education Loan Program (HELP).

q extension of GST simplified accounting systems; and

Issues specifically raised by ACCI included:

q the Board of Taxation review of small business compliance costs.

q ATO consultation over GST rulings; and

Board of Taxation Report into Tax Consultation On 15 August, the Government released a report from the Board of Taxation into the consultation processes of Treasury on tax issues. The report found tax consultation arrangements have improved significantly since 2002, are consistent with international practice, are generally functioning well and have community support. However, the Board did make some recommendations for improvement, including that: q government should continue to ensure that policy intent is clearly described in initial consultation documents; q more emphasis should be placed on ensuring relevant skills and experience are available in consultations; q external stakeholders should try to form one group (or at least fewer groups) for responding to consultations; q there should be increased engagement with sectors currently under-represented in consultations; q Treasury should use technology to communicate over consultations; q Treasury should provide more feedback as part of consultations;

q ATO efforts to increase integration of ATO systems with accounting software. Inspector-General Upcoming Reviews The Inspector-General of Taxation is currently conducting reviews into the following issues: q the ATO’s administration of public binding advice. The review will focus on whether the ATO is making enough advice legally binding on itself. Examples of advice that is not binding includes practice statements and interpretive decisions; q the non-lodgement of income tax returns. The review will examine whether the ATO is doing enough to apply pressure to taxpayers who aren’t lodging tax returns and the fairness of their approach to non-lodgement; q the management of objections to ATO decisions; q the administration of GST audits; q the ATO’s settlement of active compliance activities. This mainly relates to agreements between the ATO and taxpayers about the payment of disputed tax debts. Usually, the ATO settles for less than the ‘headline’ tax amount that is due. There have been some recent

q public consultations should be used wherever possible; (CONTINUED ON PAGE 32)

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT settlements for very large sums of money – six settlements amounted to more than $1 billion. The review will examine whether the ATO is being consistent and fair in its settlements. Some specific allegations are that: p the ATO provides lower settlements for high profile taxpayers; p the ATO makes ambit claims to encourage settlement; p the ATO unnecessarily creates disputes to encourage settlement; p settlements do not take into account taxpayer compliance history; and p there is an alleged revenue bias in tax rulings. ACCI was involved in discussions with the Inspector-General on these reviews.

FINANCE Financial Stability Throughout the year, ACCI monitored and reported to members on issues relating to global financial stability, following from sub-prime credit issues in the US. In September, the RBA assessed the stability of the Australian financial system, finding that: q there has been a “marked tightening” in global financial markets, after several years where risk was underpriced; q market confidence has been dented; q generally, the price of risk has increased, but not the riskiness of the overall world economy;

q improve the outcomes for creditors by strengthening the protection of employee entitlements, improving insolvency practitioner disclosures to creditors (including on independence and remuneration), and removing unnecessary costs by streamlining procedures and facilitating the liquidation of corporate groups; q deter corporate misconduct by extending ASIC’s investigative powers in monitoring liquidators and improving court processes in relation to misconduct by company officers. These reforms will complement the $23 million assetless administration fund that has already been implemented by the Government to combat phoenix company activity; q improve the regulation of insolvency practitioners by introducing more regular reporting requirements, requiring adequate insurance to be held and providing greater flexibility to the Companies Auditors and Liquidators Disciplinary Board; and q fine tune the voluntary administration process in light of stakeholder experiences since its introduction in 1993. ACCI expressed particular interest in the changes to employee entitlements and kept members informed about developments in this area. Register of Personal Property Securities The Government consulted on proposals to implement a national register of personal property securities (PPS) – the securities (other than real estate) used as collateral for borrowing money from a financial institution. A register is used to ensure that fraud is reduced and the sale of collateral is controlled.

q investors aren’t sure about the size of losses, particularly from the US sub-prime market;

Currently, there are over 70 Acts governing PPS, administered by over 30 different Federal, State and Territory agencies, and the compliance costs are high.

q in the medium term, adjustment in risk spreads is welcomed – however the adjustment process has been surprising to some;

The Government argues that reform will:

q the credit quality of most corporates in most countries is strong; and

q simplify processes; q facilitate financial innovation; q increase certainty in insolvency;

q the outlook for world growth remains positive, even though growth is likely to slow in the US;

q make lending more cost-effective; and

Australia has been affected by the world turmoil, but not as much as some countries, because:

q allow unsecured lending to be replaced by secured lending, reducing effective interest rates.

q we have small exposure to the US sub-prime market;

ACCI provided a submission to this inquiry in February, arguing that:

q the number of sub-prime loans here is very small; q loan arrears and bad debts remain low; q the Australian banking system remains highly profitable and is well capitalised; q the competitive position of banks is likely to improve compared to non-bank financial institutions; and q the Australian economy remains strong, even though there are some pockets of stress, particularly in western Sydney. Insolvency The Government implemented a package of reforms to insolvency in September, to:

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q ACCI generally supports the concept of a single national personal property securities register; q a national register could become unwieldy due to the large number and diverse range of personal property securities which may be registered on it; q businesses (both creditors and debtors) should be fully informed of their rights and obligations under the new arrangements; and q the legal status of purchase money security interests needs to be clarified.


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT Senate Inquiry Into Private Equity ACCI made a submission to a Senate Economics Committee inquiry into private equity in July, which argued that: q private equity is growing quickly, but is not yet a significant portion of asset ownership (e.g. leveraged buyouts accounted for about 2 per cent of the value of the whole corporate sector in 2006);

increase in mortgage repayments) by 2011. Even a partial winding back of these reforms would have a substantial cost on Australian workers and businesses. This research underscores the business campaign calling for the retention of all workplace reforms since 1993. Workplace reform was started by the Keating Labor Government in 1993 when enterprise bargaining was first established. It was built on by the Howard Government in 1996 and again in 2006.

q the growth in private equity is due to a number of factors, including lower debt costs, the increased regulation of share markets, ability to improve management, greater alignment of interests between owners and managers, faster decision making, and the increased supply of private equity funds;

q GDP would be $57 billion or 4.8 per cent lower, which is equivalent to $2,700 per person;

q at this stage, there is no indication that private equity is substantially altering the riskiness of the Australian economy;

q employment would be cut by 2.9 per cent, with 316,000 jobs lost;

q the effect of leveraged private equity on tax revenues is not likely to be large, because offshore borrowings are subject to thin capitalisation rules, the interest paid on domestic borrowings are taxable in the hands of lenders, and the imputation system actually can create an incentive for companies to increase taxable income in Australia; and q if government regulation is diverting investment away from the share market, the appropriate response is to reduce the government regulation on the share market, not increase regulation on alternatives. Increased regulation of private equity could affect all privately held companies, which would be a severe overreaction. The majority report of the Inquiry broadly supported ACCI’s position, arguing that: q characteristics of private equity should limit its size; q at the moment, private equity is not having a significant effect on the Australian stockmarket; q the ATO is paying sufficient attention to private equity to ensure that risks to revenue from private equity are being identified. The current tax law for private equity is sufficient, but this should be monitored closely; q the case for other regulations on private equity has not been made. The Committee however endorsed the watching brief that various agencies are keeping on private equity; and q private equity allows the opportunity for reinvigoration of public companies. The ALP largely endorsed this finding, but noted more risks from private equity.

ECONOMIC STATS AND WORKPLACE POLICY Modelling of the Economic Effects of Workplace Reform In August, ACCI released detailed modelling of the effects of workplace reform since 1993. According to this research by a leading independent economic research firm, Econtech, abolishing the workplace reforms since 1993 would make a person on average wages with an average mortgage $4,063 worse off per year (comprising a $787 cut to real wages after tax and a $3,276

The report also finds that, by 2011:

q business investment would be $11 billion lower, a fall of 5.6 per cent;

q the cost of living (CPI) would be 1.3 per centage points higher; and q due to the higher rate of inflation, interest rates would be 1.4 per cent higher by 2011, with repayments on the average mortgage $273 higher per month. Trade-exposed industries would be hit the hardest by the rollback of reform, with output of agriculture falling by 7 per cent, mining falling by 8 per cent and manufacturing by 11 per cent. Separate calculations drawn from data in the report show that winding back workplace reforms will cause Australia’s ranking against world GDP per person to fall from 8th to 14th. Even though these are substantial numbers, the results are conservative because they do not include some of the benefits of workplace reform such as the positive effects on productivity of the Australian Building and Construction Commission and increased enterprise bargaining. Importantly, the report warns that ‘if only some of the reforms were reversed, the effects would still materialise but be smaller’. This research formed a central part of subsequent advertising by the Business Coalition for Workplace Reform. More information on this campaign is in the Workplace Relations chapter of this Annual Report. Australian Fair Pay Commission ACCI’s Economics & Taxation Unit continued to provide detailed input to submissions on workplace policy, particularly the submission to the Australian Fair Pay Commission (AFPC), and was involved in various meetings and discussions. ACCI attended a presentation at the AFPC by David Neumark in August, one of the world’s leading experts on minimum wage research. Professor Neumark outlined his recent research showing that minimum wages do have an adverse effect on employment. He also outlined research showing minimum wages do not have a beneficial effect on poverty.

(CONTINUED ON PAGE 35)

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT ACCI also met with Professor Neumark separately to discuss his work and how it relates to the labour market situation in Australia. Employment Since WorkChoices ACCI regularly briefed members on the performance of the labour market since WorkChoices commenced in March 2006. Under WorkChoices, the unemployment rate has fallen to generational lows – 4.2 per cent by September 2007. Since WorkChoices, the following changes to the labour market have occurred: q employment has grown by 430,700 which is an annualised growth rate of 2.8%. This is well above the 5 year average of 2.5%, the 10 year average of 2.2% and the 20 year average of 1.9%; q full-time employment growth was 332,500 which is an annualised growth rate of 3.1%. This is well above the 5 year average of 2.4%, the 10 year average of 1.8% and the 20 year average of 1.4%: p full-time employment growth was 77.2% of total employment growth. This is well above the 5 year average of 69%, the 10 year average of 60% and the 20 year average of 53%; and p part-time employment growth was 22.8% of total employment growth. q the number of people unemployed fell by 57,100. This is a (negative) growth rate of 7.5%, again better than the 5, 10 or 20 year average; q the labour force has increased by 373,600 a growth rate of 2.3%, again better than the 5, 10 or 20 year average; q the unemployment rate has fallen by 0.7 per centage points (pp) to 4.2%; q the participation rate has increased by 0.6 pp (1.0 pp for women and 0.2 pp for men); and q the employment to population ratio has increased by 1.0 pp. Working Hours ACCI also provided detailed commentary on the state of working hours in Australia throughout the year. Every month, the ABS releases data on working hours. This data shows that since 2000 (or earlier in some cases): q average yearly hours worked per employee have declined; q average yearly hours worked per full-time employee have declined; q average yearly hours worked per part-time employee have increased; q the proportion of employees working 60 hours or more has fallen; q the proportion of employees working 50 hours or more has fallen; and

This totally refutes the arguments of the labour movement that working hours are increasing and becoming fragmented. Productivity Commission and Employment The Productivity Commission released several reports into employment in Australia: q The Effects of Health and Education on Labour Force Participation in May; q Workforce Participation Rates – How Does Australia Compare? in December; and q Men Not at Work – an Analysis of Men Outside the Labour Force in January. These reports showed that there is significant scope for increasing employment in Australia, particularly from mature aged Australians, women of child bearing age, men aged 25 to 54, Indigenous Australians, migrants and people on the Disability Support Pension. ACCI met with the Commission during the year to discuss these findings and how ACCI’s policies would address these employment needs. Reserve Bank on Workplace Relations ACCI issued a media release on 17 August, welcoming comments in support of workplace reform by the Governor of the Reserve Bank, Glenn Stevens, during his appearance before the House of Representatives Standing Committee on Economics, Finance and Public Administration that day. Mr Stevens’ comments included: q “The main point is that, whoever is in government, a flexible labour market works very well, and it is very important to keep that. I think everybody knows that.” q “The centralised system that we had was characterised by strong notions of comparative justice. I think that system would not handle the current circumstances at all well.” q “Fundamentally, in the long run, a deregulated labour market I think gives you a lower rate of unemployment.” q “changes to product and labour markets make the economy’s pricing behaviour less likely to be disrupted by a temporary shock to demand, which makes [the RBA’s] job easier in the sense that we have more time to respond to those shocks.” q “I think most people agree that, if you remove labour market flexibility as a general idea, that is productivity disenhancing and welfare disenhancing for the aggregate economy. There is no question that that is true.”

ECONOMIC POLICY ACCI Board Meeting with Treasury On 20 April, ACCI’s Board held its regular meeting with the Secretary of the Department of Treasury. Issues discussed included the state of the economy, infrastructure (particularly ports and energy), water, the National Reform Agenda (particularly training), climate change, workplace relations reform and tax reform.

q the proportion of employees working 45 hours or more has fallen.

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT ACCI Board Meeting with RBA Governor

Parliamentary Inquiry into Petrol Prices

On 23 August, the ACCI Board also met with the Governor of the Reserve Bank, Glenn Stevens.

In October 2006, ACCI appeared before the Senate Economics Committee’s inquiry into the price of petrol. Issues discussed included competition in petrol retailing, the taxation of fuel, environmental externalities from fuel use, the priorities for tax reform and promotion of alternative fuels.

Issues discussed included workplace reform, the current account deficit, house prices, the current turmoil in financial markets and the effect of government budgets on interest rates. ALP Housing Summit ACCI attended the ALP’s Housing Summit in Canberra on 26 July. The summit included a large number of presentations from many interested parties, including the Real Estate Institute, the Property Council, the National Affordable Housing Summit, developers and various State Ministers for Housing and Development. The topics for the summit were:

ACCI indicated that we do not support proposals for proscriptive regulation of fuel prices and we oppose the reintroduction of fuel excise indexation. Meetings with Centrelink ACCI had several meetings with Centrelink throughout the year to discuss issues including reducing red tape on businesses who have dealings with Centrelink, the advertising of Centrelink’s services to business through industry associations, and the programs that Centrelink has to improve employability skills

q the economics of housing;

Component Pricing

q planning issues and home ownership;

In January, the Government released a second exposure draft of legislation to deal with component pricing (this legislation deals with concerns that some businesses are not advertising an all-inclusive price for goods and services, instead advertising components of the price without a total price).

q public and community ownership; q public and community housing; and q investment in private rental housing. Many participants argued that there is a housing challenge currently and increasing supply was an essential part of addressing it. As expected, there was less agreement about the causes of housing affordability problems. ALP Policy Announcements on Regulation On 17 April, the ALP announced that it would in Government:

The new draft makes substantial changes from the previous draft, particularly by removing the concept of “minimum” and using instead a concept of “total price”. ACCI was involved in consultations on this legislation, raising concerns that the legislation would not work as planned and could prevent a substantial number of legitimate marketing practices, such as pricing per kilogram. Productivity Comparison with the US

q have a national objective of harmonising state regulations within five years (including occupational health and safety, payroll tax administration, building codes and trades and professional body recognition); q make Governments accountable for harmonisation by having the Productivity Commission do a cost-benefit analysis of harmonisation; q provide for financial rewards to the States to encourage reform (similar to the old National Competition Policy payments); q protect business from unnecessary new regulations, particularly by having regulations reviewed by a new Small Business Advisory Council; q require a “one in one out” approach to new regulations – a key policy recommendation of ACCI;

The report indicated that Australia’s productivity is about 87 per cent of the US productivity level. Some catch-up in productivity is possible, particularly from wholesale and retail trade, utilities, communications and finance and from higher education levels. The size of the possible catch-up is 3 to 5 per centage points. Further catch-up is constrained by Australia’s remoteness and sparse population. Australia’s catch-up with the US has been slow. Productivity was 77 per cent of the US level in 1950 and is now around 87 per cent. This is smaller than the catch-up of other OECD countries.

q introduce a common commencement date for new regulations (e.g. 1 July); and

On an industry basis, Australia’s productivity is better than the US in mining and construction, and is worse than the US in most other industries, particularly electricity gas and water, wholesale trade, manufacturing, and retail trade.

q implement BAS simplification as outlined in the Banks Report and introduce a new “BAS Easy” system, to be announced in due course by Shadow Minister Craig Emerson.

INTERNATIONAL COMMENTARY ON AUSTRALIA

The ALP also announced it would consider raising the GST registration threshold to $75,000. ACCI supports this proposal and the proposal to introduce a “one in one out” approach to new regulation.

36

On 8 March, the Productivity Commission released a research report into Australia’s productivity levels and whether we can catch up to US productivity levels.

ACCI kept members informed of significant international commentary on the Australian economy and participated in discussions with important international organisations in relation to Australia.


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT OECD Delegation to Australia ACCI met with an OECD delegation to Australia in July to discuss their upcoming country study for Australia. The OECD was particularly interested in ACCI’s perspectives on how to increase labour supply. Discussion on this issue included: q immigration & fertility; q training; q increasing participation, particularly amongst single parents and people with disability, including increased used of activity tests on these groups; q the effect of minimum wages on participation; q the tax and welfare system, particularly the effects on second income earners; q access and affordability of childcare (including the FBT treatment of childcare); q the mobility of the population (whether people can and do move to locations with labour needs); q government spending – the Government can be creating excessive demand for labour through its spending; and q productivity growth (increasing productivity reduces the labour needed to produce a given level of output) The OECD also raised issues relating to labour market regulation and innovation.

shortest time to complete registration IMF Survey of Australia In September, the International Monetary Fund (IMF) released its annual survey of Australia, which found: q the economy is “well placed” to withstand potential shocks; q if growth and revenue exceed forecasts, the surplus should be higher; q the IMF welcomed the “ambitious” National Reform Agenda, and recommends that the Government should use the strong fiscal position to spur implementation of reforms; q the IMF supported the Government’s superannuation plans, but called for long-term costings. This is exactly ACCI’s policy; q Australia’s Current Account Deficit (CAD) is sustainable; q commodity prices were “clearly not the main driving force behind the strong fiscal performance of the general government;” q risks to growth are on the upside – that is, it is more likely that growth and inflation will be above the forecast than below the forecast (if the drought ends and/or commodity prices increase further). The IMF says that the challenge for the Government is to guard against these upside risks, by promoting productive capacity without adding to inflationary pressures; q interest rates: The current settings are appropriate; q Federal Budget: The IMF commends Australia on its very strong fiscal position. The IMF noted that the Australian Government has returned some of the strong fiscal position as tax cuts, arguing that these tax cuts have been done in a manner consistent with the government’s medium-term objective of raising potential growth. The IMF considers that this year’s expenditure be kept to the current budget plan, even if revenues run ahead of projections;

ACCI Workplace Relations Advisor Daniel Mammone and Assistant Workplace Relations Director Scott Barklamb with the visiting OECD Delegation, Melbourne.

UN Doing Business Report The United Nations released its latest review of doing business in many UN countries on 26 September. Australia’s rank has improved from 9th to 8th on the list (out of 178). The countries that perform better than Australia are Singapore, New Zealand, the United States, Canada, Hong Kong, the United Kingdom and Denmark (in descending rank order). According to the report, Australia: q has eased restrictions on employing workers and registering property and improved enforcement of contracts; and

q State Budgets: In contrast, the IMF has raised concerns about the fiscal position of State Governments, arguing that their infrastructure spending comes at a time when there is already strong competition for resources from the private sector. As a result, this is putting pressure on resources and could increase prices; q long-term fiscal position: The IMF commends the longterm fiscal sustainability of the Australian Government. Measures have been put in place to address long-term fiscal challenges, but the IMF argues that more needs to be done, particularly on the efficiency and effectiveness of spending; q national reform: The IMF praises Australia’s record on reforming labour and product markets, noting that these reforms have provided a large payoff. They call for progress on the National Reform Agenda (NRA) and environmental reform; and

q is the easiest country in the world to obtain a business licence, with the fewest number of procedures and the (CONTINUED ON PAGE 39)

37


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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT q financial regulation: The IMF considers that Australia is ‘well placed’ to deal with the current financial turmoil. The direct impact of the turmoil on Australia is ‘modest’. ACCI reported on this survey to members. Index of Economic Freedom In January, the Heritage Foundation and Wall St Journal released their 2007 Index of Economic Freedom, showing Australia is ranked as the third freest economy in the world, a large improvement from ninth last year. However while the index does not include a number of important changes that would improve our situation (particularly tax cuts), ACCI believes that it overstates Australia’s labour market freedom.

STATISTICS

q reducing business compliance costs through standard business reporting; q the quarterly business indicators survey; q the Australian fertility rate; q industry measures of multifactor productivity; q the effect of bananas on inflation; q annual hours worked; q the development of a business longitudinal database, which looks at the performance of businesses over time; q proposed revisions to definitions for the national accounts (GDP) and balance of payments; q measures of the quality of the national accounts; q the ABS publication of underlying measures of inflation;

2006 Census The first results from the 2006 Census were released during the year. ACCI was a 2006 Census partner and provided a statement of support for the Census which was featured prominently in Census campaigns. “The Australian Census is essential to knowing who we are. It forms the centrepiece of all economic and social statistics, and without it Governments and businesses would find it immeasurably harder to plan for the future. Governments would struggle to know where to put schools, hospitals, and police stations; and businesses would struggle to know where to build shops, houses and factories. Therefore ACCI strongly supports the Census and encourages you to complete the Census form accurately” Meeting with the Head of the ABS ACCI met with the new head of the Australian Bureau of Statistics (ABS), Brian Pink, in May. Issues discussed included: q government plans to reduce red tape on business, particularly through the Simplified Business Reporting framework and improving electronic communication with business; q the need to improve statistics for agriculture; and q the development of the business longitudinal database (a database showing the performance of business over time). ABS Survey of Contract Work and Labour Hire On 22 August, ACCI made a submission to the Australian Bureau of Statistics on their planned 2008 survey of contract work and labour hire. ACCI’s submission indicated support for the survey, presented ACCI’s preferred definition of independent contractor, and argued that surveys of patterns of work and work hours should make clear distinction between employees and contractors. ABS Economic Statistics

q ABS access to tax returns of individuals with strict privacy controls; q measures of retail margins; and q the number of businesses in Australia and different definitions of small business. ACCI was also involved in various discussions with the ABS about productivity, including measuring productivity by industry. Labour Statistics ACCI is a member of the ABS Labour Statistics Advisory Group, where the following issues were discussed in 2007: q the presentation format of the monthly unemployment figures; q the availability of data for examining work and family balance; q the availability of data for examining the effect of WorkChoices on the labour market; q the availability of data for examining the effect of welfare to work; q surveys of persons not in the labour force; and q improving estimates of hours worked (it has long been assumed that Australians work amongst the longest hours in the developed world. ABS re-examination of this data shows this belief to be incorrect).

MEETINGS ACCI continued to conduct regular meetings with key policy makers during the year, including with representatives from: q the Treasurer’s Office; q the Assistant Treasurer’s Office; q the office of the Shadow Treasurer; q the Shadow Assistant Treasurer;

ACCI is a member of the ABS Economic Statistics Advisory Group, where the following issues were discussed during 2007: q statistics relating to venture capital;

(CONTINUED ON PAGE 42)

39


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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ECONOMICS & TAXATION REPORT q the Shadow Finance Minister;

ACCI PRESENTATIONS

q Treasury; and

ACCI made a number of presentations during the year, including to:

q the Australian Taxation Office. In December 2006, ACCI met with John Key, the leader of the New Zealand National Party Opposition. Issues discussed included WorkChoices, red tape and training reform. ACCI met with member organisations frequently to discuss the activities of ACCI in the Economics & Taxation area. ACCI also met with other key organisations, including the National Farmers Federation, Australian Institute of Company Directors, Corporate Tax Association, and Taxpayers Australia. ACCI met with economic counsellors to key embassies, including the United States, New Zealand and the delegation of the European Union to Australia. ACCI attended a number of Melbourne Institute Public Economic Forums, covering topics including: q Skilled Workforce for the Future; q Working Hours; and q the State of the Economy

q the International Paint & Printing Ink Council meeting in Sydney. The presentation compared Australia to other countries in terms of area, population and economy, showed Australia’s recent economic performance and outlined the reasons for Australia’s recent good economic performance; q ANU GovNet on infrastructure; q the annual breakfast hosted by the ACT & Region Chamber of Commerce & Industry to discuss the Federal Budget; and q ACCORD (ACCI’s member industry association representing the consumer, cosmetic, hygiene and specialty products industry) about the state of the economy and ACCI’s policy agenda for 2008. During the year, ACCI’s Director of Economics and Taxation, Michael Potter, visited Brussels and Frankfurt as a guest of the European Union to examine the functioning of the EU’s economics and tax operations.

ACCI met with the new Director of the Melbourne Institute, Professor Steven Sedgwick, to discuss the Institute’s Forums and other work of the Institute of importance to ACCI.

MMA is proud to have assisted the following valued clients over the past year: 3 National Grid with its sale of Basslink 3 The National Emissions Trading Taskforce in modelling the potential effects of emissions trading on electricity markets 3 KPMG with analysis of possible structures for Israel’s electricity industry 3 Electricity Reform Implementation Group with modelling of the effect of electricity market reforms 3 Xstrata with analysis of the gas market 3 The MCE/MCMPR Joint Working Group with its review of Australian domestic and export gas supply 3 Incitec Pivot with advice on the gas market 3 AGL with its purchase of Powerdirect in Queensland 3 Rio Tinto with analysis of energy issues 3 QAL with analysis of its energy supply options 3 GMBHA with strategic analysis and market research 3 City West Water, South East Water and Yarra Valley Water with a review of their water demand forecasts MMA assisted these clients with strategic advice across its range of expertise in electricity, gas and environmental markets, water demand and market research. www.MMAssociates.com.au

42


ACCI SURVEYS

43


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ACCI SURVEYS Surveys conducted by ACCI provide an independent and detailed source of information on business conditions, attitudes and concerns based on the data collected from employers.

Selected Constraints on Investment Constraint

Jan07

Apr07

Jul07

Oct07

Availability of Suitably Qualified Employees Rank

2

1

1

1

ACCI surveys can offer insight into major matters of concern to business, on a wide range of economic issues. Given the effectiveness of the surveys in communicating views of businesses, governments have come to rely on the surveys to obtain an accurate reflection of business conditions.

Business Taxes and Charges

Rank

1

2

2

2

State Government Regulations

Rank

3

3

3

4

Wage Costs

Rank

4

4

4

3

Non-Wage Labour Costs

Rank

6

5

5

5

During the year, ACCI has continued to work towards increasing the reliability, and usefulness of data as well as reducing administrative processing times to increase data timeliness and availability.

Local Competition

Rank

7

7

6

6

Federal Government Regulations

Rank

5

6

7

10

Local Government Regulations

Rank

9

8

8

7

Interest Rates

Rank

10

9

9

8

Insufficient Demand

Rank

8

10

11

11

The data for the surveys is now available online – an important addition to the survey program. Online data allows readers to access more detail than is available in the published versions and supports the use of the surveys as tools for business, government and the press.

ACCI-WESTPAC SURVEY OF INDUSTRIAL TRENDS The ACCI-Westpac Survey of Industrial Trends has been conducted on a quarterly basis since 1966 and is the most important survey of the manufacturing industry in Australia. The survey retains its authority due to its outstanding ability to track trends in the economy and is the longest continuously run private sector survey in Australia. In 2007, the survey indicated a strong performance by the manufacturing industry. General business sentiment improved to its highest level since 2004, with activity levels consistently at above-trend growth rates despite interest rate rises. Furthermore, business investment plan are near historical highs buoyed by better profit expectations.

SAI GLOBAL-ACCI SURVEY OF INVESTOR CONFIDENCE The SAI Global-ACCI Survey of Investor Confidence commenced in 1991 and focuses heavily on business investment while also polling businesses on actual outcomes and expectations for other economic data. The survey showed a remarkable recovery from the lows of 2006, with a number of indexes at or near an all time high, including expected level of activity, trend in own sales, trend in own business conditions and expected number of full-time employees. This shows that businesses enjoyed favourable trading conditions in 2007, with positive expectations for 2008. The survey also asks respondents about the relative importance of a list of twenty factors as constraints on the level of investment. In 2007, the Availability of Suitably Qualified Employees, ranked as the number one constraint on business investment for three of the four quarters, coming in at number 2 in the other quarter. Government taxes and regulations, labour and interest rate related costs also featured prominently in the top 10 this year.

Source: SAI Global- ACCI Survey of Investor confidence Jan 07 to Oct -07

ST.GEORGE-ACCI BUSINESS EXPECTATIONS SURVEY The St.George-ACCI Business Expectations Survey has been running since 1994 and researches data in a range of areas. Over 2007, business have generally been upbeat, with every index above their respective five-year averages. In particular, sales revenue and investment in plant and equipment has been outstanding. Expected economic growth rose strongly as well, which suggests that businesses should continue to do well under favourable conditions in 2008.

ST.GEORGE-ACCI SMALL BUSINESS SURVEY The St.George-ACCI Small Business Survey is drawn from the St.George-ACCI Business Expectations Survey and allows a comparison to be made between small, medium and large business. This survey commenced in 1997 and it celebrated its tenth anniversary this year. Small business had similar views on current business conditions and GDP expectations to medium and large business over 2007. Overall, the small business sector performed well over the year with all indexes above their five year average and expectations for next year showing that small business should continue to expand modestly.

ACCI 2007 PRE-ELECTION SURVEY This year, in addition to our four long running quarterly surveys, ACCI coordinated its triennial Pre-Election Survey of Australian businesses. The surveys presented views of businesses from across Australia on what they believe are the priorities for the next Australian Government. ACCI member associations disseminated the survey and the results were aggregated into a single national total. The results of this survey are the most comprehensive assessment of business attitudes to national policy priorities available in Australia. The 2007 Pre-Election Survey polled 1,331 small, medium

(CONTINUED ON PAGE 46)

44


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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ACCI SURVEYS and large businesses on a diverse range of business issues totalling some 101 questions. Survey Release Number 1 – Economic Management Overall, this survey found that the single most important issue for business is Economic Management, followed by Workplace Relations, Skills Development, Level of Taxation, Infrastructure, Government Regulation, and lastly Complying with the Tax System.

Nuclear power should be included as an option for meeting Australia’s future energy needs

Per cent* (%)

Per cent* (%)

Strongly Agree

55.8

34

Agree

37.4

35

Interestingly, since ACCI’s 2004 Pre-Election Survey the number of businesses primarily concerned with:

Neither Agree nor Disagree

2.9

12.5

Disagree

2.3

7.3

q Workplace Relations has almost doubled from 9.6% to 18.4%;

Strongly Disagree

1.7

11.2

q the Level of Taxation has dropped from 32.2% to 13.0%; and q Skills Development has risen from 5.9% to 15.3%. Single Most Important Factor for All Business

Single Most Important

2007 Weighted Results

2004 Weighted Results

Economic Management

27.50%

26.10%

Workplace Relations

18.40%

9.60%

Skills Development

15.30%

5.90%

Level of Taxation

13.00%

32.10%

Infrastructure

12.80%

6.60%

Government Regulation

6.90%

8.40%

Complying with Tax System

6.00%

11.30

Source: ACCI Pre-Election Surveys 2007 and ACCI Pre-Election Survey 2004.

Survey Release Number 2 – Australian Business and the Environment The second Pre-Election Survey release found that business strongly supports both the recycling of water and a closer examination of the role of nuclear power in meeting Australia’s future energy needs. Water recycling was supported by an overwhelming 93.2% of survey respondents while nuclear power was supported by a very solid 69.0% of respondents. Clearly, water recycling and nuclear power must be considered as part of the response to the policy challenges of climate change. Other issues highlighted by the survey include: q environmental regulations were of concern for 50.0% of businesses; q 43.2% of businesses expect climate change to adversely impact on their business; and q for 59.5% of businesses energy costs are already a concern.

Response

The recycling of water should be more intensively used as a solution to Australia’s water shortages

Source: ACCI 2007 Pre-Election Survey No.2. *Weighted by industry and size of firm.

Survey Release Number 3 – Industrial Relations The third Pre-Election Survey release found that: q 71% of businesses believe that productivity, efficiency and the capacity to create jobs has increased as a result of greater national consistency in industrial relations laws and freeing up of agreement making (two of the principal reforms in WorkChoices); q 68.2% of businesses reported concern or substantial concern at the prospect that industrial relations reform could be reversed. Alarm at policy rollback is particularly acute in the construction, retail and wholesale industries; q 77.5% of businesses reported concern with workers’ compensation costs; q concern with unfair dismissal laws remains high at 53%, but has dropped from 76% following the commencement of the ‘small business’ and the ‘operational reasons’ exemptions created by WorkChoices; and q a high level of concern with wage levels (69.6%), reflecting the tight labour market. Business is also concerned at the prospect of wages and labour costs becoming divorced from productivity and workplace circumstances. Other survey responses reveal business concern regarding employment regulation and minimum wages. The survey supported the findings of ACCI surveys earlier this year which found that 86.8% of businesses think it is wrong to abolish AWAs, 76.5% of businesses consider WorkChoices good for the economy and jobs and 46% of employers thought they would hire more staff if exempt from unfair dismissal laws. Survey Release Number 4 – Taxation The fourth Pre-Election Survey release, showed that: q businesses are more concerned about personal taxes than any other federal tax, with 71% rating it as a major or moderate concern. The survey clearly shows that this is a higher priority than reductions in company tax; q the overall complexity of the tax system remains a very significant concern (85.9% of business were concerned);

(CONTINUED ON PAGE 48)

46


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To register an Expression of Interest in one of the following proposed Gunns Plantations Ltd (GPL) Managed Investment Schemes Horticulture Viticulture Forestry please email gpl@gunns.com.au or contact us on 1800 015 123

Disclaimer: Gunns Plantations Limited (ABN: 36 091 232 209) (AFSL: 238701). All Gunns Plantations Limited Managed Investment Scheme projects are pending ATO Product Rulings and are therefore currently closed. By registering an Expression of Interest, you will be sent a Product Disclosure Statement (PDS) and any other Supplementary PDS if and when a Product Ruling is issued for the relevant Managed Investment Scheme project. GPL will not accept any applications until a Product Ruling has been issued, GPL has provided you with a copy of the relevant supplemental PDS and you have confirmed you wish to proceed with your application for investment. Before deciding to acquire an interest under any of Gunns Plantations Limited’s projects you should read the relevant PDS and any other supplementary PDS in full. We also recommend that before making a decision to invest you consult a financial adviser or other professional adviser. Allocations will only be made to successful applicants that have properly completed an Application and Power of Attorney Form attached to a registered PDS. This information does not take into account the investment objectives, financial situation and particular need of any potential investor and does not constitute financial product advice. A current version of each current PDS and any supplementary PDS can be obtained from Gunns Plantations Ltd via our website (www.gunns.com.au/plantations) or by phoning freecall: 1800 015 023.


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ACCI SURVEYS q in relation to tax levels, business expresses the strongest degree of concern about payroll taxes and stamp duties with 75.0% and 72.9% respectively; and q in relation to tax complexity, business expresses the greatest level of concern about the frequency of changes to the tax system (69.8% concerned) and the complexity of Fringe Benefits Tax (FBT) (61.5% concerned). Detailed Results from ACCI’s 2007 Pre-Election Survey Issue Level of taxation Level of Taxation Personal Tax (PAYG) Capital Gains Tax Superannuation Guarantee Fringe Benefits Tax Company Tax GST Payroll Tax Stamp Duties Land Tax Compliance with tax system Overall complexity of the tax system Difficulty in complying with company tax Difficulty in complying with capital gains tax Difficulty in complying with FBT Difficulty in complying with GST provisions Time required to complete BAS Forms Frequency of changes to tax laws and rules ATO administration of the tax system

Major (%)

Moderate (%)

Minor (%)

None (%)

Total (%)

44.3 28.8 24.9 15.8 31.7 22.4 14.4 49.7 48.2 40.5

39.8 42.4 32.9 37.1 36.6 39.2 29.6 25.3 24.7 22.7

13.7 23.4 25.3 35.7 22.5 27.8 40.8 13.9 17.6 20.4

2.2 5.4 16.9 11.3 9.3 10.6 15.2 11.1 9.5 16.4

84.1 71.2 57.8 52.9 68.3 61.6 44.0 75.0 72.9 63.2

40.9 13.7 12.5 22.8 12.6 15.9 29.8 20.8

45.0 44.4 32.8 38.7 38.5 37.1 40.0 40.2

12.1 31.9 38.7 28 38.1 34.1 24.2 32.4

2.1 10.0 16.0 6 9.9 10.7 12.9 6.0 6.6

85.9 58.1 45.3 61.5 51.1 53.0 69.8 61.0

Source: ACCI 2007 Pre-Election Survey No.4 Results weighted by industry and size of firm. The survey covered 1,331 businesses, of which 644 were small businesses (48%). Total reflects those who indicated either major or moderate concern.

Full details of the four ACCI Pre-Election Survey releases, on the topics of Economic Management, The Environment, Industrial Relations and Taxation are available on the ACCI website at www.acci.asn.au

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48


WORKPLACE RELATIONS

49


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NBAFP


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

WORKPLACE RELATIONS When setting policy priorities for 2007, ACCI members rated workplace reform as a key priority for employer organisations and industry. More specifically, members encouraged ACCI to pursue two dimensions of this reform agenda – advocacy on behalf of employers during the implementation of WorkChoices, and resisting workplace reform policy rollback. These became the guiding principles of ACCI’s workplace relations work during 2007. The foundation of ACCI’s advocacy and workplace services was the implementation of ACCI’s workplace relations policy and Modern Workplace: Modern Future blueprint – a Policy Blueprint devised by employer organisations for the betterment of industry, employees and the economy. It is ACCI’s policy, and not WorkChoices or its alternatives, that remains the guiding principles and end-point of our advocacy on workplace matters. 2007 has been the first full year of operation of the March 2006 overhaul of workplace relations, known as WorkChoices. WorkChoices made many fundamental changes to workplace relations law and practice. Many of those changes represented long overdue structural improvements to the former system. However, its implementation has been a major challenge for employer organisations and employers. ACCI and our employer organisation members have been at the cutting edge of advising industry on these changes, and acting as a bridge between government, and its WorkChoices regulators both old and new. By the end of 2007 the new system is still bedding down, although very encouraging outcomes for the labour market and broader economy are starting to become apparent. Nonetheless, ACCI still continued to advocate some changes to WorkChoices throughout 2007, and had some important successes in limiting excessive regulatory intervention. Resisting policy rollback has been a key task on two fronts. In May 2007 the Australian Government decided to change the WorkChoices system, by adding a fairness test to the making of collective or individual agreements – an initiative ACCI did not support due to its red tape implications for employers, especially in the services sector. This was not forecast at the start of 2007, and meant that ACCI and our members had a major task in new policy advocacy and explanation of changes to industry. Less unexpected was the continuing campaign against workplace reform being conducted by the trade union movement, in an endeavour to influence public opinion and the policy of the federal Labor Party and minor Senate parties. Considerable resources were invested during 2007 by ACCI and employer organisations in rebutting this campaign, both in direct dialogue with the federal ALP, and in the public arena. In an environment where the union campaign risked turning public opinion against workplace and economic reform, and misleading the public about the contribution employers make to employing staff and providing good wages and working conditions, ACCI and a coalition of business organisations took the important step in August 2007 of financing a public information ‘Let’s Keep Workplace Reform’ campaign. This campaign was based on solid research, independent economic analysis and a strong but politically neutral policy message directed at both the public and all politicians. Employer bodies had various successes as a result of the

information campaign, and other initiatives. Public attitudes towards workplace reform made small but significant improvements. The federal ALP policy Forward with Fairness, released in April 2007, was met with widespread criticism by the business community, only to be modified in August 2007 in the midst of the ‘Let’s Keep Workplace Reform’ information campaign. As we conclude 2007, it continues to be apparent that the trade union campaign against workplace reform has had some resonance within the community, and that the interests of employers and employer organisations will be served by the continuation of a strong policy-oriented message about the benefits of a flexible decentralised workplace relations system. This is especially important given that the Senate will determine the fate of both WorkChoices and the alternatives to it. The level of co-ordination of employer activities, and the support ACCI members have given to the ACCI secretariat in prosecuting the case for workplace reform, was one of the highlights of 2007. In respect of both WorkChoices and alternative approaches by the Labor Party and minor Senate parties, ACCI has ensured that all major stakeholders were informed of the employer responses, and able to communicate at short notice with key ACCI executives and business leaders. ACCI values and appreciates the dialogue with all elected representatives in the Commonwealth parliament on workplace relations issues. These relationships provide a solid foundation for future advocacy and an appreciation of private sector business considerations. During 2007, the WorkChoices debate brought into public focus major policy differences between the employer movement and the trade union movement on workplace reform. Notwithstanding this, ACCI continues to maintain co-operative working relationships with the ACTU and senior national union officials, and respects the collective representative role of unions in the workplace relations system. Aside from informal engagement, ACCI actively participates with the union movement in the peak tripartite federal body, the National Workplace Relations Consultative Council, and its subcommittees – the Committee on Industrial Legislation and the International Labour Affairs Committee. While devoting considerable resources to the national policy debate on workplace relations during the year, ACCI maintained a significant programme of other workplace relations activities on behalf of Australian employers, including national representation and advocacy in the new system of fixing minimum wages, the publication and review of pay scales, and interface with new regulators created during 2007 such as the Workplace Authority and the Workplace Ombudsman. ACCI also continued to provide a full international service to members on workplace relations, including well publicized intervention in the International Labour Organisation in June 2007 in support of workplace reforms that were under attack on the world stage by the Australian and international trade union movement. No less important was ACCI’s commitment to supporting and building the capacity of our sister employer organisations in our South-East Asia and Pacific regions.

ACHIEVING A NATIONAL IR SYSTEM USING THE CORPORATIONS POWER In November 2006 ACCI welcomed the historic decision of the

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

WORKPLACE RELATIONS High Court of Australia which by a 5:2 majority upheld the use of the corporations power to make national industrial relations laws. ACCI re-opened this debate with the launch of our 2002 workplace relations reform Policy Blueprint (Modern Workplace: Modern Future) and further articulated the case for this change in a nationally recognised Issues Paper on federalism released in 2005.

important message about the benefits of workplace reform to the economy and labour market at a time when, in contrast, the focus of government and union advertising was on employee rights under workplace laws.

To have convinced government to proceed with this proposal, and to have it constitutionally upheld by the highest court in Australia, is a nation-building achievement. It is unlikely to be reversed by national governments of either political persuasion. Intergovernmental agreements to bring unincorporated employers under the single national system are now needed to complete this microeconomic reform.

GETTING RID OF MASS UNION LOGS OF CLAIM AND PAPER DISPUTES Employers benefit considerably from a single national system of industrial relations that was made possible by the High Court decision. Not only is there a reduction in duplication of law and administration, but employers will no longer face the prospect of having to attend court in response to unions sending small businesses logs of claims containing extreme industrial demands in order to create the jurisdiction for industrial laws to be made. Unions will not be able to decide which employers should be under federal laws, and which should be under state laws. A century of technical legal fictions that gave unions there unnecessary institutional powers have been removed from Australian industry.

NATIONAL INFORMATION CAMPAIGN ON WORKPLACE REFORM For a six-week period in August / September 2007 ACCI, together with 19 other business organisations forming the Business Coalition for Workplace Reform, launched a multimillion dollar ‘Let’s Keep Workplace Reform’ information campaign advocating the retention of major workplace reforms undertaken in 1993, 1996 and 2006. The campaign took place in the context of a major national policy debate over industrial relations. The information campaign was issues-based, and primarily comprised five television advertisements screened across all States and Territories (including in regional areas), and targeted billboard and newspaper advertising. It was commissioned by the National Business Action Fund, on behalf of the Business Coalition for Workplace Reform. A copy of a newspaper advertisement published during 2007 as part of this campaign is included at the beginning of this chapter. Fifteen of the twenty business organisations comprising the Business Coalition for Workplace Reform were ACCI members. All State and Territory chambers of commerce and industry were participants, together with a number of industry organisations. ACCI members not directly participating in the funding of the Business Coalition for Workplace Reform expressed their support during the course of the campaign for ACCI workplace relations policy. The campaign was a major leadership undertaking by ACCI and employer organisations. It achieved its goals, communicating an

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ACCI Deputy President Tony Howarth, AO at the media launch of the BCWR campaign with Charlie Lenegan and Michael Chaney.

ADVOCATING THE BENEFITS OF WORKPLACE REFORM Throughout 2007 ACCI advocated the benefits of a more flexible workplace relations system where employers and employees are able to determine wages and working conditions with less third party intervention. While this goal is yet to be realised, there are powerful reasons, based on independent research, for this advocacy. In August 2007 ACCI released an economic study by a leading independent economic research firm, Econtech, showing the significant benefits of workplace reform to Australia. The report found that if the workplace reforms since 1993 were wound back, then by 2011: q a person on average wages with an average mortgage will be $4,063 worse off per year; q GDP will be $57 billion or 4.8 per cent lower, which is equivalent to $2,700 per person; q business investment will be $11 billion lower, a fall of 5.6 per cent; q employment will be cut by 2.9 per cent, with 316,000 jobs lost; q the cost of living (CPI) will be 1.3 per centage points higher; and q due to the higher rate of inflation, interest rates will be 1.4 per cent higher by 2011, with repayments on the average mortgage $273 higher per month. Separate calculations drawn from data in the report showed that winding back workplace reforms would cause Australia’s ranking against world GDP per person to fall from 8th to 14th. The report also found that even a partial winding back of these reforms would have a substantial cost to Australian workers and businesses. In September 2007 ACCI released an analysis of major economic and labour market indicators in the first 18 months of WorkChoices. While medium to long term trends are awaited, the initial data indicated very significant employment growth and a meaningful contribution to excellent economic


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

WORKPLACE RELATIONS performance. Some of this data is in the Economics and Taxation chapter of this Annual Report.

SURVEYING EMPLOYERS ABOUT WORKPLACE REFORM From March through to May 2007 ACCI released data on a special survey of over 1,300 employers on workplace reform. The National Employer Industrial Relations and Skills Survey found that 86.8% of businesses thought it was wrong to abolish Australian Workplace Agreements (AWAs), 76.5% of businesses considered WorkChoices good for the economy and jobs and 46% of employers thought they would hire more staff if exempt from unfair dismissal laws. This survey complemented the ACCI Pre-Election Survey released in September 2007 which found that 71% of businesses believed that productivity, efficiency and the capacity to create jobs had increased as a result of greater national consistency in industrial relations laws and freeing up of agreement making, and 68.2% of businesses reported concern or substantial concern at the prospect that industrial relations reform could be reversed.

ADVOCACY ON KEY ELECTION YEAR WORKPLACE REFORM ISSUES During 2007 ACCI released a Policy Analysis Series on key election-year workplace reform issues. This series assisted employer organisations discern implications for industry, and communicate to employers. The seven papers in the ACCI policy series released between May and September 2007 were: q An Inconvenient Truth: WorkChoices Delivers Workers More Than AIRC on Working Hours (May 2007); q Understanding Employee Protections Under WorkChoices (June 2007); q Common Law Contracts vs AWAs (July 2007); q Snapshot of Coalition and ALP Industrial Relations Policies’ (July 2007 and updated September 2007); q Compulsory Collective Bargaining: Assessing the ALP Industrial Relations Policy and ALP Collective Bargaining Policy and 20 Questions Which Arise (August 2007); q Coalition and Labor IR Policies: Ready Reckoner of 30 Major Differences (September 2007); and q The ALP IR Rollback: How Far? (September 2007) In addition, ACCI prepared a policy analysis document Federal ALP Industrial Relations Policy Forward with Fairness: Analysis and Briefing Notes for Employer Organisations for employer bodies in May 2007, and also briefed members on election policies released by the Liberal-National Coalition and minor Senate parties. ACCI’s workplace relations unit also contributed extensively to policy-based contributions in the monthly ACCI Review.

Government to extend the WorkChoices Employer Advisory Program, through which employer organisations brief industry (and employees) on changes to workplace laws. Through these briefings, employers are provided with crucial information about the reforms and able to provide feedback to employer bodies, which has been invaluable in ACCI’s advocacy of improvements to the package and in advising government of implementation issues.

STOPPING HIGHER ANNUAL AND SICK LEAVE PAYMENTS IN MINING, BUILDING INDUSTRIES ACCI convinced the Australian Government that hours of work beyond 38 per week should not be included in calculating annual leave and sick leave. After initial hesitation, the government changed the law in December 2006. This change applies in all industries but has major impact in industries like mining and construction where non standard rosters are used. Without this change, industry would have conservatively paid more than $100 million per year in higher annual and sick leave payments.

RESISTING EXTRA RECORD KEEPING RED TAPE During 2007 ACCI maintained the pressure on government to reduce the red tape associated with the new workplace relations system. Among success in our lobbying efforts, was an important decision by government to relax time and wage record keeping requirements applying to award-free employees (such as managers and executives). ACCI also made extensive representations to the Workplace Authority and the Workplace Ombudsman on practical measures to reduce administrative burdens on employers.

OPPOSING THE FAIRNESS TEST RED TAPE In May 2007 the Australian Government announced a ‘fairness test’ as a condition for the approval of both AWAs (covering employees earning less than $75,000 per annum in industries covered by an award) and collective agreements. Legislation was enacted in June 2007 under which employees must receive “fair compensation” for the removal or modification of penalty rates for weekend and public holiday work, loadings for shift work, loadings for overtime, monetary allowances, leave loadings, rest breaks and incentive-based payments and bonuses. This measure had the effect of limiting bargaining flexibility and locking the dollar value of penalty rates, loadings and other allowances into industry costs. ACCI did not support the announcement, pointing in particular to the increase to red tape in workplace bargaining. ACCI was able to successfully persuade the Government and the Senate that the fairness test should only apply to agreements lodged since May 2007, and not since WorkChoices commenced in March 2006. As a result ACCI advocacy maintained contractual certainty for 300,000 AWAs and avoided increased costs and red tape for employers of those employees.

INFORMING EMPLOYERS ABOUT WORKCHOICES

INFLUENCING FEDERAL LABOR POLICY

During 2007 ACCI was successful in persuading the Australian

In April 2007 the Federal ALP released its industrial relations policy, Forward with Fairness. The policy announcement

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

WORKPLACE RELATIONS covered a wide range of subject matters. ACCI immediately convened a special meeting of the ACCI Workplace Relations Working Party which concluded that the ALP policy would, if implemented, represent a significant rollback of workplace reform. ACCI committed to ongoing dialogue with the ALP, and during the course of 2007 met on numerous occasions with leading ALP figures. On 28 August 2007 the Federal ALP issued a revised policy and implementation plan. This modified or deferred the implementation of some of the previously announced measures. A number of these changes were welcomed by ACCI, although proposals such as new compulsory collective bargaining powers, re-imposition of compulsory arbitration, removal of the small business exemption from unfair dismissal laws and the abolition of AWAs continued to be of major concern to employers, and the subject of ACCI advocacy.

suppliers (often small business). ACCI, together with other business organisations, had been making out the case for this change in ALP policy for a number of years. Moderation of Federal ALP Industrial Relations Policy Other announcements by the Federal Labor Party on 28 August moderated aspects of the earlier policy statement Forward with Fairness. These moderations fall well short of what ACCI would consider acceptable, as the ALP policy once implemented would still constitute a significant rollback of workplace reform. However the moderations mainly concern a deferral of implementation of most policy proposals until January 2010. This will provide industry with some breathing space in the event of an ALP government being elected, and scope to undertake further dialogue with ALP Ministers in government, and of course Senate parties. Moderations include retaining the building industry regulator until 2010, not extending award coverage to persons earning above $100,000 per year, a transitional statutory individual agreement between 2008 and 2010, and individual flexibility clauses in awards and agreements.

WORKING WITH MINOR SENATE PARTIES ON WORKPLACE REFORM Even though government parties had, throughout 2007, a slender majority in the Senate, ACCI has continued to liaise with and brief minor Senate parties on workplace matters including the Australian Democrats and the Family First Party. These are important relationships which help shape future Senate attitudes to workplace legislation and practice. Deputy Opposition Leader and Shadow Employment and Industrial Relations Minister Julia Gillard MP at a February ACCI Workplace Policy Committee Meeting, Melbourne.

Unfair Dismissals – Influencing Labor During 2007, ACCI was not able to convince the Federal Labor Party to retain the small business exemption from unfair dismissal laws. However, view advanced by ACCI that special measures are required to address small business interests has had some limited recognition, with the Federal ALP proposing to extend the current 6 month qualifying period before an employee can make a claim to 12 months, where the employee is employed in a business that employs less than 15 employees. Although this is far from adequate, it is some movement from traditional Labor approaches to the issue. ACCI has also been able to successfully impress on the Federal Labor Party the need to simplify procedural costs in the unfair dismissal jurisdiction – with the result that the ALP has announced that claims will generally have to be filed within 7 days (currently 21 days). This will at least give employers earlier notice of a disputed termination.

WORKING WITH THE WORKPLACE AUTHORITY AND WORKPLACE OMBUDSMAN Government legislation in June 2007 established the Workplace Authority and Workplace Ombudsman. The Authority was established to administer the new ‘fairness test’, while the Ombudsman operated an expanding industrial inspectorate. These are important and powerful new regulators, and ACCI developed direct relationships with senior officers, and facilitated their meeting with the collective employer movement. This assisted employer association access to these regulators, and advocacy of employer interests. ACCI also secured specific high-level access for members with senior officers of these regulators.

Deterrents Against Union Secondary Boycotts Now Bipartisan The 28 August announcement by the Federal Labor Party that it would retain trade practices laws (and enforcement powers of the ACCC) against unlawful trade union secondary boycotts was a significant win for Australian business. It means that there is now bipartisan political support by both major parties at a national level for one of the most significant protections in Australian law against indiscriminate union action damaging commercial interests, including of third party

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Workplace Authority Director Barbara Bennett listening to employer feedback at an ACCI Workplace Policy Meeting, Melbourne.

(CONTINUED ON PAGE 56)


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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

WORKPLACE RELATIONS SUCCESSFUL ADVOCACY ON MINIMUM WAGES

ADVOCACY AND SUBMISSIONS ON PAY SCALES

ACCI again led national employer advocacy during April and May 2007 in the 2007 minimum wage inquiry by the Australian Fair Pay Commission (AFPC).

After a 12 month campaign, in April 2007 ACCI persuaded the AFPC to commence a programme of work to publish minimum wage pay scales.

In a decision in July 2007, tiered increases of $10.25 or $5.30 per week were awarded. ACCI advocacy also directly contributed to the lowest dollar increase for a decade. ACCI advocacy contributed to a guaranteed three month period prior to implementation, to give employers a chance to plan ahead. Many observers expected the AFPC to award $20 or above in 2007, as some State industrial tribunals already had.

As a result, employers will have greater legal certainty about their minimum wage obligations, so as not to be exposed to courts deciding on minimum wage underpayments in the event of disputes or litigation about calculations.

ACCI advocacy saved Australian employees, mainly small and medium businesses, about $625 million each year in lower wage costs than might otherwise had been the case, should $20 per week have been ordered.

SUPPORTING A NATIONAL WORKPLACE RELATIONS SYSTEM

PROTECTING THE YOUTH WAGE SYSTEM During 2007 ACCI activated an industry campaign for the retention of youth wages in Australia, in light of a review announced by the AFPC. The system of age-based youth wages has served Australia well for decades. In the retail industry alone about 200,000 young people are employed on this basis. The system guarantees wage increases each year (usually until age 21) on top of general minimum wage increases. An inquiry by the independent Australian Industrial Relations Commission in 1999 found that the age-based system gives young people a foot in the door of the labour market, is an effective proxy for maturity and skills, no suitable substitute exists, and getting rid of it would cost jobs. Some unions claim that youth wages are negative discrimination. This is wrong. If anything they discriminate in favour of young people, by making it easier for them to take the first steps into the labour market, instead of being unemployed. Replacing age-based wages with an unspecified skill-based system would be a backdoor way of increasing wages for the same work being d`one. Fewer young people would be employed if youth wages go up to adult or near-adult wages. ACCI sought, and received, a formal indication from both major political parties on policy concerning junior wages. The Australian Government included support for youth wages in WorkChoices, while the Federal ALP advised of support for the current system of youth wages, and opposition to the AFPC inquiry. While not expressing policy support for all youth wage principles raised by ACCI, this was a welcome development given that ALP policy between 1993 and 2006 supported the removal of youth wages, on at least a case-by-case basis. During 2007 ACCI also convened a special working party of members with a direct interest in junior wages for the purposes of developing ACCI submissions to the AFPC review. Youth unemployment in Australia has reduced with the system of age-based youth wages and workplace reform. In the early 1990s it hit nearly 40%. By late 2007 it stood at 14.2%. However, that is still about 121,000 young people. ACCI will continue to discuss with politicians and unions, ways to get all of these young people into jobs and off welfare, not to price them or their employers out of jobs.

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ACCI also developed industry submissions on the rationalisation of Australia’s 105,000 minimum wage pay scales.

During 2007 ACCI continued to advocate for completion of the national system of workplace relations regulation, in place of multiple Commonwealth and State laws. In light of the 2006 decision of the High Court upholding Commonwealth powers, ACCI advocated a co-operative approach between Commonwealth and State Governments as the preferred method for completing the system. This has not been manifest in 2007, largely as a consequence of pre-election politics. This remains important unfinished business for Australia’s governments and employer organisations into 2008.

ADDITIONAL WORKPLACE ADVOCACY During 2007 ACCI advocated on behalf of employers (including submissions and appearances before parliamentary committees) in a wide of range of additional policy areas affecting workplaces, including: q protecting employer exemptions from unfair dismissal laws; q supporting building industry reform; q monitoring new contracting laws; q advocating balanced discrimination laws; q opposing removal of business exemptions from privacy laws; q minimising superannuation obligations; and q providing balanced insolvency laws.

ENGAGING WITH EMPLOYER BODIES During 2007 ACCI widely consulted with employers and employer organisations on workplace matters. The ACCI Workplace Policy Committee met under the chairmanship of ACCI Board Member and President of Employers First, Graham Harris. The Committee was addressed by new Federal Minister Hon Joe Hockey MP, by Deputy Leader of the Federal Opposition and Shadow Employment and Industrial Relations Minister Julia Gillard MP, by the Workplace Ombudsman Nicholas Wilson and by the Director of the Workplace Authority Barbara Bennett.


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

WORKPLACE RELATIONS of purpose and team-oriented values that employees in the Defence Reserves display in our workplaces. The success of the Reserves depends on the ongoing support of employers who are willing to employ and accommodate Reservists in their workplaces. ACCI is committed to promoting closer partnerships between the ADF and the private sector.

INTERNATIONAL ORGANISATION OF EMPLOYERS

ACCI Workplace Policy Committee, October 2007.

The ACCI Workplace Relations Working Party also met regularly to discuss ALP policy, minimum wage reviews and the “fairness test.” Member input is invaluable and strengthens the position of both ACCI and the services provided by employer bodies. A large number of members attended these meetings. In addition, ACCI produced a record level of member advisory circulars and other communications on workplace matters. A number of ACCI members have adapted the ACCI Modern Workplace: Modern Future Policy Blueprint to help develop industry-specific policy and reform agendas. During 2007 ACCI commended our member, Master Builders Australia, which released a building and construction industry-specific Blueprint for regulatory and workplace reform in that sector. On behalf of employer organisations, in July 2007 the Chairman of ACCI’s Workplace Policy Committee Graham Harris formally congratulated former Business SA General Manager and ACCI Workplace Policy Committee member, Mary Jo Fisher, who was appointed to the Australian Senate as a Senator for South Australia.

ACCI is the Australian voice in the world’s peak council of employer bodies – the International Organisation of Employers (IOE). ACCI works closely with the IOE on international matters as they affect Australian industry, including in the International Labour Organisation (ILO) and in social policy areas of the OECD and the United Nations. The IOE provides ACCI with an excellent forum for information exchange on labour matters with other employer organisations from both developed and developing countries. It is also at the forefront of international debates on globalisation and global labour compacts as they affect the private sector. Through this relationship ACCI is able to receive early notice of regulatory developments elsewhere, many of which find their way into the Australian workplace reform debate. In 2007 ACCI was the lead contributor to the inaugural IOE publication International Labour and Social Policy Review, with an article by ACCI Director of Workplace Policy, Peter Anderson, on workplace reform in Australia. Mr Anderson addressed global employer association executives on the publication at a meeting in Geneva in June 2007.

BALANCING WORK AND FAMILY ACCI was a leading partner and judging panel member in the biennial ACCI/BCA National Work and Family Awards which were held in 2007. Winners, runners-up and highly commended employers were recognised at a gala dinner in July 2007 attended by the federal Minister for Employment and Workplace Relations, Hon Joe Hockey MP. The awards provided an opportunity for employers to showcase excellence in work and family arrangements and to receive national recognition for those efforts. ACCI executives Peter Anderson and Kellie Quayle were members of the judging panel for these awards, and conducted site visits and staff interviews to assess contemporary work and family measures across the nation. More information on these awards is in the Awards chapter of this Annual Report.

ACCI Workplace Policy Director Peter Anderson at the inaugural IOE journal launch, Geneva.

EMPLOYER ADVOCACY IN THE ASIA-PACIFIC ACCI is a founding member and executive council member of the Confederation of Asia-Pacific Employers (CAPE), and in conjunction with the IOE, has developed strong links with employer bodies in our Asian region and in our South East Asia-Pacific sub-region.

During 2007 ACCI maintained high level representation on the Defence Reserves Support Council.

ACCI is acutely concerned to help build the capacity of employer bodies in our near region. Strong employer bodies in these countries contribute to policies that promote economic development, jobs and political stability.

ACCI is a strong supporter of the Council and the private sector guidelines it has developed for Defence Force Reserves. Industry gains much from the leadership, management, strength

In August 2007 ACCI, in conjunction with the NSW Business Chamber, was honored to host a 4-day International Labour Organisation/International Organisation of Employers workshop

SUPPORTING DEFENCE FORCE RESERVES

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

WORKPLACE RELATIONS for Pacific Employer Associations in Sydney. The workshop brought together employer representatives from Papua New Guinea, the Solomon Islands, East Timor, Fiji and Kiribati, along with ACCI and our New Zealand counterparts. Senior ACCI executives Peter Hendy, Peter Anderson and Scott Barklamb attended the workshop, with a keynote address being given by Mr. Anderson. At ACCI’s request, ITUC and ACTU President Sharan Burrow also addressed Pacific employers. In August 2007 ACCI’s Assistant Director – Workplace Relations, Scott Barklamb, represented employer organisations at the ILO Asian Regional Forum in Beijing. The Forum was a follow up to the 2006 Asian Regional Meeting and focussed on labour market institutions, labour market efficiency, poverty, and productivity. In May 2007 ACCI also represented Australian employers in a tripartite bilateral meeting on industrial relations between Australia and New Zealand.

INTERNATIONAL LABOR ORGANISATION ACCI is the representative of Australian employers at the International Labour Organisation (ILO). The ILO is the global forum of the world’s governments, trade union leaders and employer leaders on labour issues and labour standards. ACCI took a lead role in debates at the International Labour Conference (ILC) in June 2007, particularly in a global debate on trade unions claims (and views of an ILO committee) that Australian law contravened international labour standards. During 2007 ACCI nominees also represented Australian industry in technical meetings of the ILO. ACCI’s Director of Workplace Policy, Peter Anderson, is a member of the governing body of the ILO, and a member of its powerful and influential committee on freedom of association that scrutinises complaints against world governments for breaches of fundamental labour standards.

STAFFING Given that 2007 was the first full calendar year of the new workplace relations system, with all its attendant regulation, national structures and need for industry advice, and the pursuit of the high-profile national information campaign, an enormous load has been cast upon ACCI’s workplace relations unit during 2007.

Workplace Policy Committe Director Peter Anderson with Pacific Island employer representatives at an ILO Workshop, Sydney.

ACCI’s Director of Workplace Policy, Peter Anderson, continued to provide leadership to ACCI members and the business community on these issues. The high quality policy work of ACCI’s Assistant Director of Workplace Relations, Scott Barklamb, and the legal services of Daniel Mammone have been keenly valued assets to the organisation and ACCI members throughout the year.

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OCCUPATIONAL HEALTH, SAFETY AND COMPENSATION 59


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

OCCUPATIONAL HEALTH, SAFETY AND COMPENSATION ACCI is recognised by industry and governments, as well as by national and international law, as the peak representative of Australian employers on occupational health, safety (OHS) and compensation matters. As such, during 2007 ACCI devoted substantial resources to these issues, and acted as an unparalleled link between OHS regulators, policy makers, and employers. During the year, workplace health and safety issues continued to emerge in ACCI and other industry surveys as high level issues of interest and concern for employers. 2007 also saw a heightened debate about workers’ compensation frameworks in Australia, reflecting the increasing demands by national employers for single and consistent compensation schemes, and of concerns by all employers about duplication and over-regulation feeding compensation costs. ACCI’s work during 2007 on health, safety and compensation involved both industry leadership, and industry advocacy. Through leadership, ACCI seeks to raise awareness of the economic and social benefits of workplaces free from injury, disease or death, and the practical initiatives that can be taken throughout the commercial supply chain to improve heath and safety cultures and systems. Through advocacy, ACCI has continued to lift the awareness of governments, parliaments and regulators of industry concerns at poor quality regulation, and over-regulation.

IMPLEMENTING THE ACCI OHS BLUEPRINT The ACCI OHS Modern Workplace: Safer Workplace Policy Blueprint continued to be the guiding template for the work of ACCI and ACCI members on occupational health and safety at a national level during 2007. The Blueprint calls for a fundamental re-think by industry and governments about OHS law and policy. It urges industry, of all sizes and capacities, to develop safety management plans according to their size and capacity. It is also a critique on the inadequacy of current laws, and the tendency of governments towards poor quality OHS regulation and unbalanced enforcement. ACCI members continue to use the ACCI Blueprint and National OHS Strategy to pursue industry-specific strategies. In July 2007 ACCI commended the Printing Industries Association for taking initiatives on OHS that were launched by the Chairman of the Australian Safety and Compensation Council (ASCC), Bill Scales, AO.

REDUCING FATALITIES AND INJURIES During 2007 ACCI continued to support the National Occupational Health and Safety Strategy. The Strategy is a ten year national plan adopted in 2002 by ACCI, the ACTU and each Australian government at the Commonwealth, State and Territory level. The National Strategy sets out national targets and national priorities and is a focal point around which industry sectors, governments, regulators, employers, employees and trade unions can develop and implement complementary strategies, programs and action plans to prevent injuries and disease at work and as a benchmark of OHS performance both nationally and internationally.

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2007 saw the Strategy meet its half way mark. While the continuing reduction in workplace fatalities suggests that Australia is on track to meet the target for reduced workplace deaths, a slower downward trend in reduced workplace injuries and diseases suggests that targets will not be met unless significantly improved outcomes are achieved over the next five years. To assist in this endeavour, ACCI continues to encourage industry and governments to focus OHS strategies and laws on prevention activities, rather than seeing solutions in more regulation. The promotion of OHS prevention activities and better OHS cultures is a positive contribution that governments and regulators can make, in conjunction with industry, employees and unions. ACCI used ‘Safe Work Australia Week’ in October 2007 to promote this message. ACCI also provided judging support for and promoted the Safe Work Australia Awards held in April 2007.

OHS REGULATION Regrettably, 2007 did not see an improvement in OHS regulatory systems. Indeed, in some sectors, such as building and construction, governments and parliaments of all political persuasions continued to equate more regulation with better safety, despite no evidence that the quantity of regulation drives safety cultures. Poor regulatory outcomes were also imposed on industries such as retail, with a revised manual handling standard, code and guidelines that contemplates extreme obligations concerning risk assessments, and impractical consultation requirements. ACCI worked with our members to place special focus during 2007 on regulatory issues in New South Wales, where the State Government failed to meet the expectations of industry to pursue reform measures that industry and many objective observers consider essential to bring about a more balanced and effective regulatory system in that State. This continues to be an important task as we proceed into 2008. Building an effective coalition of business interests from within that State, working co-operatively on common causes and raising public awareness of regulatory failure and excesses, provides the best opportunity to improve outcomes for employers and employees. During 2007 ACCI made submissions about many national OHS regulations and standards. Of special attention as we move into 2008 are proposed new regulatory systems affecting the chemicals industry in Australia, based on a global harmonisation initiative. While the concept of global harmonisation is supported, it is important that Australian industry is not disadvantaged against its global competitors by overzealous domestic regulators. ACCI also worked with the chemicals industry on submissions to a Productivity Commission inquiry into regulation of chemicals and plastics, that was announced by the Australian Government in July 2007. As 2007 concluded, new OHS issues are being placed on the national agenda, including regulators examining health and safety issues in stevedoring and diving industries, and nanotechnology. ACCI will need the continued support of industries affected by these proposals in national advocacy on these issues.


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

OCCUPATIONAL HEALTH, SAFETY AND COMPENSATION DIALOGUE WITH AND BETWEEN GOVERNMENTS 2007 continued to see a fall in Commonwealth/State government to government co-operation on OHS and workers’ compensation issues, largely as a result of governments playing out the politics of WorkChoices in the OHS and workers’ compensation field. This is not in the interests of industry, and ACCI will need to re-double its efforts in 2008 to encourage governments of all political persuasions to work co-operatively on common OHS causes. Despite this, some progress was made in the ASCC on the implementation of COAG decisions of February 2006 and April 2007 supporting greater national consistency in OHS regulation, particularly with the release of a ‘core elements document’ by the ASCC in July 2007.

NATIONAL EMPLOYER SERVICES ACCI continues to provide national policy assistance to employers on workplace health, safety and compensation matters, with the active support of employer associations and the ASCC. During 2007 ACCI finalised a new 3-year service contract with the ASCC which should result in a continuation of high quality collective advice to governments on industry responses to and participation in national policy and promotional initiatives.

NATIONAL TRIPARTITE DIALOGUE ACCI strongly believes in a national tripartite dialogue with governments of all political persuasions, and with the trade union movement on health, safety and compensation matters. This is crucial to ensure that governments are well advised on industry views, that governments do not act unilaterally, and that common ground can be pursed between employer and worker interests. The Australian Safety and Compensation Council provides that forum, through the Council and its working parties and reference groups. ACCI continues to develop and appreciate a strong working relationship with ASCC executives, staff and members. It is appropriate to specifically acknowledge the leadership during 2007 of the ASCC by its chairman, Bill Scales, AO, and also the constructive rapport ACCI has enjoyed with ACTU Assistant Secretary Richard Marles who resigned as a member of the ASCC during 2007 to pursue a federal parliamentary career.

OHS COMPLIANCE During 2007 ACCI continued to monitor OHS enforcement and compliance activities by regulators and inspectorates, and approaches being adopted by the courts. ACCI provided members with a report on developments, that acts as a basis for evidence-based advocacy to all governments and regulators to adopt a balanced approach to compliance activities and penalty imposition. That report shows that prosecution and penalties are increasing, notwithstanding a decline in workplace deaths and injuries.

CONSULTING ACCI MEMBERS ACCI members are critical participants in the OHS and workers’ compensation debate given that these are issues dealt with by all levels of government and affect all industry sectors. The ACCI Occupational Health and Safety Working Party met on a formal basis three times during 2007, bringing together national OHS executives from employer bodies to discuss and develop effective industry policy and responses to OHS issues. Additional meetings were also held by teleconference. ACCI executives also took opportunities presented during 2007 to meet with ACCI member organisations and address forums and seminars on OHS and compensation matters. This included a Business SA regional forum in August 2007 and a Chemicals Industry Conference in May 2007.

ENGAGING WITH THE EMPLOYER COMMUNITY ACCI, as the industry body co-coordinating representation of employers on the ASCC, convenes regular meetings of employer bodies prior to each ASCC meeting. These meetings comprise the National Employers Occupational Health and Safety Consultative Forum (NEOHSCF), for which ACCI continued to act as the secretariat during 2007. Meetings of this forum discuss forthcoming matters on the ASCC agenda and provide guidance and direction of employer representatives on the ASCC. During 2007 employers were represented on the ASCC by ACCI’s Director of Workplace Policy, Peter Anderson, and by industry executives Anne Bellamy from the Chamber of Commerce and Industry Western Australia and Sylvia Kidziak, consultant to the NSW Business Chamber. Industry was represented on the ASCC’s OHS Working Group by ACCI managers Chris Harris and Kellie Quayle, and on the ASCC’s Workers’ Compensation Working Party by Employers First executive Jill Allen. ACCI offers a sincere ‘thank-you’ to all industry representatives, especially Anne, Sylvia and Jill for their service to the wider employer community.

NATIONAL WORKERS’ COMPENSATION DEVELOPMENTS 2007 witnessed a heightened debate about workers’ compensation frameworks in Australia, reflective of the increasing demands by national employers for single and consistent compensation schemes, and of concerns by all employers about duplication and over-regulation feeding into compensation costs. This was accelerated by a High Court decision in March 2007 which confirmed the legality of Commonwealth powers to issue licenses to national companies to operate under the national Comcare scheme. The issue is now on the national political agenda, and governments of both political persuasions will need to take it seriously as we move into 2008. ACCI represents the collective national voice of industry on these matters, and during 2007 we initiated a review of ACCI’s workers’ compensation policy for the purposes of addressing these new developments. A national debate on workers’ compensation does not necessarily mean that there should be

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

OCCUPATIONAL HEALTH, SAFETY AND COMPENSATION a national workers’ compensation system or a single national workers’ compensation system. However, the reality of a national economy and nationally operating employers (including self-insured employers) makes this a crucial debate. ACCI’s policy review has also highlighted the very important interests of small business under state and territory compensation schemes who do not operate across state or territory borders.

STAFFING During 2007 ACCI farewelled Chris Harris, after seven years of service in both the workplace relations and OHS fields. At a dinner for Chris in June 2007 ACCI and members acknowledged his exceptional service, and wished him well for his new career in the corporate sector.

ACCI Workplace Policy Director Peter Anderson farewells Chris Harris, Melbourne.

In July 2007 members welcomed Kellie Quayle as ACCI’s new Manager of Health, Safety and Compensation. Kellie is ably assisted by Toula Papadopoulos and Kathryn Walton, who are two of Australia’s most respected and experienced industry representatives on OHS matters. Kathryn was acknowledged as such by the International Organisation of Employers and International Labour Organisation, who in December 2007 selected Kathryn to represent employers at a meeting in Europe on OHS matters affecting the global chemical industry.

ACCI OHS Team, March General Council Drinks, Melbourne.

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TRADE AND INTERNATIONAL AFFAIRS 63


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

TRADE AND INTERNATIONAL AFFAIRS The international trade agenda has been dominated by the holding of the Asia Pacific Economic Cooperation (APEC) Leaders Meeting in Sydney in September 2007 and the continuation of bilateral trade negotiations with major trading partners. ACCI has played a key role in both matters. In addition, ACCI continues to be a strong supporter of international attempts to come to a satisfactory conclusion with the World Trade Organisation’s (WTO) current Doha Development Round negotiations. Also our work in trade and international affairs continues to strike a balance between policy advocacy work, especially on multilateral and bilateral themes, and trade facilitation and promotion (where we continue to act in conjunction with our trade-active member organisations). ACCI also continues to broaden and deepen its engagement with the International Chamber of Commerce (ICC), resuming the role of providing the secretariat for the Australian National Committee of the ICC in mid 2007.

MULTILATERAL The World Trade Organisation’s Doha Development Round of trade liberalisation negotiations has effectively stalled, with little realistic prospect of any worthwhile outcome in the foreseeable future.

Intellectual Property Protection ACCI also stepped up its program of work on intellectual property protection and rights issues, especially the impact on international trade and commerce. Early priorities in our work program have been identified as covering: q Australia’s international treaty obligations in the intellectual property area; q the place of ‘first to file’ considerations in international intellectual property applications; and q challenges for smaller to medium-sized firms in registering and defending their patents and trademarks, especially in developing and transitional economies. Other important issues to be considered include: q the desirability and practicality of a single, global system of intellectual property registration; q the importance of harmonisation of intellectual property systems in key export markets; and q the respective roles of government and the private sector in intellectual property enforcement.

While it may be tempting to play a ‘blame game’ or seek to apportion responsibility for the lack of progress, in reality it would appear that there is insufficient political leadership and will, and/or willingness to compromise, in key WTO member countries.

As part of this increased engagement on international intellectual property protection and rights enforcement, ACCI has accepted an invitation to join a select business-government panel on these issues and will be looking to champion a small exporter perspective.

Ongoing talks within the WTO on Doha Development Round matters are little more than ‘talks about talks’ or ‘keeping the pilot flame on.’

Corruption

While the outlook for the WTO Doha Development Round remains far from optimistic, it does not, as some malevolent commentators have claimed, spell the demise of the multilateral, rule-of-law-based trading system. Regardless of the outcome of the Doha Round, the existing expansive suite of WTO agreements – covering manufactures, agriculture, services, investment and intellectual property amongst others – will continue in place. At the same time, utilisation of the WTO’s powerful dispute settlement mechanism is likely to increase. In this regard, the Australian Government would be well advised to develop a carefully thought out policy and strategy for engaging in disputes where we have important national interests. The current United States – China dispute over intellectual property is likely to be an important first test in this context.

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particular interest in both its trade policy and trade facilitation work programs.

We have also intensified our commitment to tackling corruption, which is a blight on international trade and commerce and affects economic growth, productivity and competitiveness. It can have a particularly devastating effect on small businesses. As part of this work, the ACCI called upon the APEC grouping to build upon its landmark “APEC Course of Action on Fighting Corruption and Ensuring Transparency”. Another approach would be the inclusion of specific anticorruption chapters into all of the free trade agreements that all APEC members, including Australia, has, is, or will be negotiating.

Trade Advisory Council

Such a chapter should build upon the United Nations Convention Against Corruption (UNCAC), and contain rigorous provisions within a legally binding treaty. Negotiation of such a chapter should be relatively uncontroversial to those countries where corruption is not a problem and of valuable assistance to those countries where it is.

The Australian Government has established a new Trade Advisory Council as the Trade Minister’s pre-eminent source of advice from the business community on trade and investment issues.

It would be particularly revealing where the principle, let alone the substance, of such a chapter was a ‘deal-breaker’. Where this happens, it would have useful information value for both the Australian and international trading communities.

This new Council replaces three existing groups (the Trade Policy Advisory Council, the WTO Advisory Group and the FTA Export Advisory Panel). The new Council will discuss the key opportunities and challenges for Australian business in the current trade environment. ACCI Chief Executive Peter Hendy has been appointed as a member of the Council, taking a

Trade in Services ACCI also stepped up its advocacy for greater attention to be given to the trade in services in our various trade liberalisation initiatives. Unfortunately, the ‘trade in services’ is often regarded as a poor


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

TRADE AND INTERNATIONAL AFFAIRS cousin to the ‘trade in manufactured goods’, but in reality it is becoming increasingly important, especially to Australia. It is not widely recognised that services dominate the Australian economy, accounting for 78 per cent (or some $A550 billion) of our national output, and 84 per cent of all jobs (about 8.2 million people). Services are also an important part of our export performance, with services’ share of total exports increasing from around 16 per cent in the early 1970s to 23 per cent in the early 2000s – totaling more than $A37 billion in calendar 2005. Trade barriers typically encountered by services exporters include foreign equity limitations, lack of recognition of qualifications, restrictions on rights of practice, and constraints on commercial presence (for example, on the number and location of branches or representative offices).

industry to the APEC processes, ACCI and the Australian Institute for International Affairs (AIIA) co-hosted a major international conference entitled “The Future of APEC”. The event, which was well attended by business leaders and government policy makers, was held in Perth, Western Australia, in late July 2007. The strong program of Australian and international speakers included: q Australian Foreign Minister, Hon Alexander Downer MP (on the topic of “APEC’s Role in Asia Pacific Regionalism”); q Robert McClelland MP, Opposition Spokesman on Foreign Affairs (“The APEC Agenda: a Broad Sweep”); q Mark Johnson, Chair of ABAC in 2007 (“Strengthening the Business Voice in APEC”); and

Unlike tariffs, which are reasonably easy to find, one of the greatest challenges in liberalising the trade in services is just identifying, let alone estimating the impact of, the various nontariff barriers.

q Harvey Chang, President of CACCI (“APEC: A view from Asian Business”).

There is much scope for future multilateral, regional and bilateral trade liberalisation talks to achieve some real progress in this area provided that negotiators are committed to removing trade barriers that are often opaque and embedded in government regulations, practices and standards, whether through the WTO’s General Agreement on the Trade in Services, or the various FTA negotiations in which Australia is participating.

ACCI continues to play an active role in the work of the Confederation of Asia-Pacific Chambers of Commerce and Industry (CACCI), of which we are the Australian national chamber member. This work focuses primarily on ACCI Chief Executive Peter Hendy’s continuing position as chairman of its influential Joint Working Group on Policy, which is CACCI’s main policy development mechanism.

REGIONAL APEC

CACCI

In this context, the Chamber developed a position paper on linkages between innovation and durable economic development at CACCI’s 40th Anniversary meeting, held in Taiwan in October 2006.

During the year, ACCI released a landmark report on the importance of, and strategies for, the revitalisation of the AsiaPacific Economic Co-operation (APEC) grouping. Australia has a range of national interests in a strong and vibrant APEC grouping. We were a key founder-member of the vehicle in the late 1980s and a driving force in its development in the early 1990s. These national interests include having a seat at the table of the senior mechanism of Asia-Pacific regionalism both at Leaders and Ministerial level, access to other regional fora where Australia may otherwise find it difficult to gain membership, and a vehicle for promoting our trade liberalisation and trade facilitation agenda. CACCI 2006 Local Chamber Awards Judging Panel, Taipei.

However since the mid 1990s, APEC has been in a state of drift, reflecting the absence of a clear leader or leadership group within the organisation, differences of opinion amongst its members on its agenda, and lack of meaningful progress on its high profile trade liberalisation objective (free and open trade and investment in the region by 2010/2020). ACCI believes that the Australian Government, as the chair of APEC in 2007 and as a key founder-member, should take a leadership role in the rejuvenation of APEC, as a means of enhancing our position in Asia-Pacific generally, and for progressing our trade liberalisation and facilitation agenda. Without meaningful efforts to rejuvenate APEC, the grouping may well be eclipsed for attention, commitment and profile by emerging, competing mechanisms such as the East Asian Summit and the ASEAN Plus Three, where Australia has much less influence or we are not even a member. As part of the commitment by Australian commerce and

Key points made in the position paper include that innovation policy should focus primarily on creating an environment in which new ideas are generated and translated into new products, services and processes by the private sector, and that where government assistance is provided to facilitate innovation, it should not involve ‘picking winners’ but be open to all businesses irrespective of size, sector, location, export focus or other commercial characteristics. During the CACCI Council meeting in Taiwan, Peter Hendy was elected a Vice President (designate) of CACCI, a position which will allow the Australian Chamber to play an enhanced role in setting the broader direction for CACCI, especially in its policy-related work. ACCI, in conjunction with the Chamber of Commerce and (CONTINUED ON PAGE 67)

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

TRADE AND INTERNATIONAL AFFAIRS Industry of Western Australia (CCIWA) hosted a meeting of the CACCI Council in Perth in July.

which includes agricultural products would be a significant boost for future Australian exports.

The meeting, which featured strong representation from amongst CACCI’s 22 member national chambers, focused on the performance and future directions for the APEC grouping, and looked at strategies for strengthening business engagement in its work.

The announcement in December 2006 by the Prime Ministers of Australia and Japan that they will enter into negotiations for a FTA was welcomed by ACCI.

A key outcome of the CACCI Council meeting was the adoption of a Policy Statement on APEC which called on the APEC Leaders to, inter alia, rebalance its program of work to give greater emphasis to delivering meaningful outcomes in the area of trade facilitation ahead of the intra-regional trade liberalisation and eco-tech agenda, and lift the moratorium on new membership, admitting India as a full member of APEC at the earliest opportunity.

The year also saw the publication in June 2007 of ACCI’s position paper on the Australia-Japan trade and investment relationship as a foundation for our planned engagement in the Australia-Japan Free Trade Agreement (AJFTA) negotiations. Japan: Lifting the Clouds Over the Chrysanthemum, highlighted Australia’s critical interest in Japan’s economic, political and trade policy performance. Japan is our largest single trading partner, and our closest diplomatic partner in the Asian region. It accounts for more than one dollar in every seven of our international trade. It is also our largest single export market, taking more than one fifth of our exports, and the third largest source of imports, providing around 11 per cent of such products. The study also emphasised the need for bold and comprehensive structural reforms of the Japanese economy across the broad spectrum of monetary, fiscal, infrastructure and labour market policy settings. On trade policy reform, ACCI called for attention to be given to the low levels of import competition, of foreign direct investment penetration, and of foreign labour (through immigration), with barriers, especially to agricultural and services trade, and to inward foreign investment, being reduced.

CACCI General Council Meeting, Perth.

BILATERAL The importance attached to bilateralism continues to increase within Australian foreign and trade policies, reflecting discrete policy choices at home and growing concern at the future role and effectiveness of multilateral institutions. In recent years, comprehensive Free Trade Agreements (FTAs) have been signed with the United States of America, Thailand and Singapore. Negotiations have also been going on for a period of time with China, the Association of East Asian Nations (ASEAN) in partnership with New Zealand, Malaysia, and the Gulf Cooperation Council (GCC). ACCI has been involved in all these negotiations. For example, ACCI participated in a joint Australian Government-Business mission to China as part of the proposed Australia-China Free Trade Agreement (ACFTA). The mission focused on the rules of origin (ROO) elements of the potential FTA, meeting with relevant Chinese Government agencies and industry associations. The talks focused largely on the relative merits of the different approaches to ROO matters, and Australia’s experiences with the Change of Tariff Classification (CTC) model, which is being considered as the model for the ACFTA. In addition, over the last twelve months, the Australian Government announced the beginnings of negotiations for potential bilateral agreements with a number of nations including Japan, South Korea, India, Indonesia and Chile. Japan Japan still remains Australia’s major trading partner and an FTA

We also expressed our clear support for negotiation of an Australia-Japan Free Trade Agreement (AJFTA), on the standard conditions – that it be bold and comprehensive, cover substantially all trade, be ‘WTO-plus’, and deliver substantial dividends to both sides within a reasonable period of time. South Korea In December 2006, ACCI also welcomed the announcement by the Australian and South Korean Governments of a scoping study which hopefully will lead to a fully-fledged AustraliaSouth Korea Free Trade Agreement. South Korea is our 4th largest merchandise trade partner, with two way trade (both exports and imports) topping $A16.2 billion in 2005/06 – an increase of almost 24 per cent on the preceding financial year. South Korea is also our 3rd largest merchandise export market, taking more than $A11.7 billion in commodities and manufactures last financial year, a rise of almost 21 per cent. Australia also performs strongly in the export of services to South Korea, in particular education and personal travel which together were worth more than $A1.2 billion last financial year. Chile Additionally in December 2006, ACCI welcomed the Australian Government’s announcement that it had decided to commence discussions with Chile that may lead to an Australia-Chile Free Trade Agreement. Chile is Australia’s third largest trading partner in Latin America and has a growing economy with a strong focus on the importance of international trade. Australia hosted a visit last year by the then President of Chile, HE Ricardo Lagos and this year by the current Foreign Minister, Alejandro Foxley. (CONTINUED ON PAGE 69)

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TRADE AND INTERNATIONAL AFFAIRS Australian and Chilean ministers also signed a Memorandum of Understanding on mining co-operation in November 2006. ACCI provides secretariat services for the Australia-Latin America Business Council and is keen to see stronger ties between our two countries in coming years. India On 31 August 2007 the Australian Government announced that Australia and India had agreed to undertake a joint feasibility study into the merits of an FTA between the two countries. ACCI welcomed this announcement. Earlier in the year ACCI appeared before the Federal Parliament’s Joint Standing Committee on Foreign Affairs, Defence and Trade (JSCFADT) for its inquiry into Australia’s relationship with India. The backbone of our appearance was discussion of our August 2006 country report Riding the Indian Elephant, a research report which has previously been approved by this Committee. In our evidence to the inquiry, ACCI underscored that each nation is growing in trade and investment importance to the other, with Australia having the capacity to provide India with useful technical assistance on policy design, sequencing and implementation, building on our own experiences over the past two or so decades with domestic and international liberalisation. The existing Trade and Economic Framework (TEF) between the two countries is a further positive contribution, which should eventually transform into a robust Australia-India Free Trade Agreement. Indonesia ACCI also completed another major country report, Riding the Indonesian Garuda: Priorities and Strategies for Closer Relations as the foundation for our work in promoting the negotiation of closer relations between Australia and Indonesia, and an Australia-Indonesia Free Trade Agreement in particular. The Australia-Indonesia bilateral relationship is one of our most important, and one of our most complex. Indonesia is our second closest (geographic) neighbour after Papua New Guinea and one of the most influential in the Asian region for Australian foreign and strategic policy objectives. However, if one were to consider the interaction of the indicators of geographic proximity/economic engagement/regional influence/quality of the relationship, the Australia-Indonesia bilateral would have to score poorly. ACCI considers that Indonesia’s policy challenge is to broaden and deepen its economic and political reform processes to consolidate the nation’s future. While the reform agenda remains broad, the three main priorities should be:

potential. On 27 July 2007, Australian Prime Minister Hon John Howard MP and his Indonesian counterpart, President Yudhoyono, announced in Bali that a joint feasibility study would be undertaken into the merits of a free trade agreement (FTA) between Australia and Indonesia. This announcement was welcomed by ACCI.

BUSINESS-GOVERNMENT ROUNDTABLES During the year, ACCI convened several Business-Government roundtables, in conjunction with interested member organisations, on the content and strategies for, and participated in a large number of intensive closed forum discussions on key issues within, several of the bilateral trade negotiations, most notably those covering China, Japan, the Middle East and ASEAN. Key themes covered in these discussions covered the trade in manufactures, the trade in services, intellectual property protection and rights, rules of origin, investment and movement of natural persons. Feedback from negotiators indicates that they find these dialogues to be valuable in determining negotiating priorities and strategies, and appreciate the value-adding which comes from hearing alternative views.

TRADE FACILITATION As usual ACCI had a particular focus on trade facilitation issues during the year. Working with the Australian Customs Service ACCI stepped up its program of active engagement with the Australian Customs Service (ACS), including our role as lead representative for the trade and transport sectors in several Business-ACS consultative processes. In our various engagements with senior Customs officers, ACCI continues to press for continuous improvements to streamline ACS processes to deliver efficiency benefits to both exporters and importers. In relation to this, we have taken a strong interest in the ACS’s Strategic Work Program, in particular elements such as Alternative Cargo Reporting, Supply Chain Security, and implementation of the new Standardised Data Set model for data reporting. Ongoing work will concentrate on redressing the problems associated with the CMR initiative, reliability and security of data exchange, and emphasising the need for the ACS to distinguish between front-line cargo owners and agents in assessing the views of the trading community. ACCI has also offered its support-in-principle for the Australian Customs Service Single Window initiative as a means of simplifying and streamlining data reporting for smaller to medium sized exporters and importers.

q putting in place policy settings to attract and retain foreign direct investment; q creating a more favourable commercial environment for infrastructure (especially for private and foreign investors); and q decisive action to eradicate the scourges of corruption, collusion and nepotism. Absent further reforms, Indonesia would appear to be locked into an economic development and growth path well below its

(CONTINUED ON PAGE 71)

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

TRADE AND INTERNATIONAL AFFAIRS businesses, to identify opportunities to bid for work on major international projects and integrate into global supply chains. The Program, to operate through the Department of Industry, Tourism and Resources (DITR), will: q identify and assess the feasibility of Australian firms bidding for work on major international projects; q provide market intelligence on emerging opportunities and support groups to bid for work in global projects; and q facilitate trade missions, place Australian experts in procurement offices for international projects, and offer other initiatives to link Australian expertise with global procurement offices and managers of global supply chains. Australian Customs Service CEO Michael Carmody addressing an ACCI Trade Policy Committee Meeting in Melbourne.

Our approach to the Single Window initiative is founded on both the laudable objective being pursued – a single point of data reporting for business engaged in the trade-transport chain, as well as the practical need for reducing the data reporting load borne by the trading community. In Australia, 41 national and sub-national agencies collect information from exporters, importers and transport operators within Australia to meet their regulatory mandates. These regulators use 275 different paper forms and an unknown number of electronic screens to yield some 7,649 data elements. Just harmonising the ‘same as’ data elements within these Australian agencies would reduce the number to 3,993 – pointing to a duplication of 3,656 elements. Even then, a duplication rate of 48 per cent! Export Market Development Grants Scheme ACCI also took a close interest in the new guidelines released for the treatment of applicants where there has been a change of business ownership under the Export Market Development Grants Scheme (EMDGS). The guidelines were released by Austrade, which has administrative responsibility for the program. In the past, where a business has changed hands, but remains in substantially the same line of commercial activity, it may be limited in the number of grants it can receive under the program. The new guidelines set down a range of factors that those administering the EMDGS need to take into account in determining continuity of commercial activity and hence access to the program Anti-Dumping Regime ACCI was an active participant in a consultative panel supported by the Australian ACS which was tasked with reviewing the administrative arrangements underpinning our national anti-dumping regime. Key elements of the administrative reform package subsequently endorsed by the Australian Government include expanded use of plain English, user-friendly guidelines for applicants, improvements to transparency of processes and complaints, and greater use of external experts to improve analysis and decision-making. Global Opportunities Program ACCI has also taken a special interest in the Australian Government’s new Global Opportunities Program, which is intended to build the capability of Australian small to medium sized enterprises (SMEs) to become globally-orientated

ACCI is currently developing a proposal to assist trade-active members more actively engage in, and capitalise upon the opportunities arising from, international supply chains, whether as producers of manufactures or providers of services. International Anti-Corruption Rules Elsewhere, ACCI stepped up its efforts to promote awareness amongst smaller exporters of changes to Australian laws covering bribery abroad. These efforts included co-operative work with the Australian Government in the development of an information package of Fact Sheets which addressed issues such as the nature of the bribery offence under Australian law, taxation implications of foreign bribery, identification of suspicious transactions and notification requirements, and the nature of Australia’s international legal obligations in the bribery area. International Investment Rules ACCI has also taken an active interest in the liberalisation and the facilitation of international investment. While there is no single ‘one size fits all’ approach to attracting and retaining foreign direct investment, the OECD’s Policy Framework for Investment is a good place for many developing countries to start. The OECD’s Guidelines for Multinational Enterprises and the unrealised Multilateral Agreement on Investment (MAI) could also usefully inform such work. In addition, we would like to see a new General Agreement on Investment eventually developed under the auspices of the World Trade Organisation. However given the slow progress on the Doha Round of trade negotiations, ACCI sees merit in APEC countries leading by example and conducting rigorous domestic investment framework assessments

IMMIGRATION The past year saw two major reviews of the ‘457 temporary business (long stay) visa’, which allows employers to sponsor skilled migrants to enter Australia, including by the Department of Immigration and Citizenship (DIAC), as part of a broader Council of Australian Governments process, and the Australian Parliament’s Joint Standing Committee on Migration. Key issues considered in the reviews included: q the nature and extent of skilled labour shortages; q the need for mandatory training requirements; q impediments to the use of Labour Agreements; (CONTINUED ON PAGE 74)

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

TRADE AND INTERNATIONAL AFFAIRS q English language thresholds; q wage levels for 457 visa holders; q investigation of, and penalties for, breaches; q labour market testing; and q the role of regional certifying bodies. As part of the DIAC review process, ACCI co-hosted a series of roundtables with State Chamber members in NSW and Queensland, and a number of industry associations, to discuss issues being considered by the review panel. ACCI made substantive submissions to both reviews, with the main proposals in both ranging across: q any changes to the 457 visa program must not increase the compliance burden on business, especially smaller to medium sized enterprises; and q the development of co-operative mechanisms, implemented jointly by DIAC and business, to enhance the information provided to those entering Australia under the 457 visa class and to those employing them. Unfortunately, during the year the Australian Government introduced legislation into the Australian Parliament to substantially increase the obligations of sponsors who employ 457 visa holders. The Migration Amendment (Sponsorship Obligations) Bill 2007 may become a serious disincentive to employers to take on foreign-sourced employees, and thus exacerbate the already serious skill shortages problem. Employer obligations under the legislation will include: q payment of the Minimum Salary Level (MSL); q payment of all costs associated with recruitment of the sponsored worker and migration agent fees for the worker and their family; q payment of fees for mandatory licence, registration or membership required for the sponsored worker to work; q payment of a number of other costs, such as recruitment, medical and travel costs; and q employing skilled workers in skilled positions, as opposed to semi or unskilled work. Private sector estimates suggest the additional expenses could raise the cost of employing foreign-sourced personnel by almost 45 per cent – without the potentially open-ended liability of employers for sponsored employees who abuse their visa rights by, for example, over-staying or requiring apprehension and deportation. ACCI also stepped up its advocacy for other improvements to the business short stay visa program, building on the hard reality that business needs a better visa arrangement for skilled personnel coming to Australia for periods of less than three months. The current subclass 457 visa is not suitable, as it can only be granted for periods of over three months. For such short stays, employers find the full 457 sponsorship process unduly cumbersome, while the use of the short-stay business visitor visa (456) does not provide the necessary certainty for both employers and their prospective employees. In the past, when a full subclass 457 sponsorship and visa application for low risk cases was processed rapidly (in some

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cases within 24 hours, but typically in around 10 working days), using the 457 visa was a viable option, although not ideal, for some sponsors. However, more recently, with the increase in processing times to around 6-8 weeks, this process is too slow for genuinely urgent cases. Subclass 459 visas have many elements that make them attractive for this purpose, most notably a requirement for an onshore entity to sponsor the visa applicant. This requirement could be used to ensure that only businesses that met the criteria the Australian Government applied (e.g. for example a history of good immigration practice, commitment to training Australians, compliance with workplace legislation) could access this visa arrangement. The year also saw the release of the Birrell Report into the performance, and potential future directions for the general skilled migration program. One of the most controversial recommendations of the report was to increase the English language proficiency of long-stay, foreign-sourced personnel to International English Language Testing System (IELTS) Level 6.0 as the minimum level necessary for such employment. While ACCI believes higher levels of English proficiency should be rewarded, the stipulation of a higher level of English (from Vocational to Competent) is not justifiable and should not be introduced except where a demonstrated need exists. An excessive requisite level of English could potentially undermine Australia’s competitive position as a destination for scarce skilled migrants. Rather, as an incentive to improve English language competencies, an additional five bonus points should be available to those applicants who demonstrate sufficient English language skills. The level of “sufficient” will depend on the circumstances of the occupation. At the same time, we have serious reservations about any proposal to increase the minimum English competency for occupations where this is not essential for occupational safety or for job readiness. The better approach would be to tailor the IELTS score to the level of English language capacity necessary in the relevant skilled occupation. ACCI also published a substantive research report during the year, Expanding and Simplifying Business Mobility Arrangements, which focused on potential initiatives to liberalise the movement of business and key labour skilled personnel. The report observed that international trade is ultimately about contacts and networks – in particular, the capacity of the buyer and seller to engage, build confidence and cement a commercial relationship of mutual advantage. While the internet has added a new dimension to the capacity to promote one’s products and services, in a great many cases there is no real substitute for “being there.” An important priority in this area is the need to streamline the processes for the short-term entry of business people engaged in the conduct of trade and investment. A key recommendation of the paper was that the Australian Government should look to replicate the concept of the APEC Business Travel Card to other regions as a means of enhancing Australia’s trade and investment competitiveness.


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

TRADE AND INTERNATIONAL AFFAIRS A near-term priority in this area should include consideration of a discrete Business Travel Card arrangement as part of the negotiations for a potential Australia-Gulf Co-operation Council (GCC) Free Trade Agreement. ACCI provided a formal submission to the Australian Government as part of its annual public consultation process on the general direction and the composition and level of the general migration intake for the 2007-08 program year. The main points made in our written submission included:

engagement with the world, and any differences more at the margin. Nevertheless, the challenges for the next Australian Government, of whatever political persuasion, will largely remain the same – assisting in re-energising the WTO’s Doha Development Round, continuing with the ambitious FTA negotiation agenda, and ensuring that our migration program continues to relieve already serious labour market pressures, especially for skilled labour.

q the level of the program intake (it should be around 134,000 persons in net terms or around 185,000 in gross terms); q the importance of the 457 visa program to commerce and industry; q skilled and other labour force pressures; and q options for better utilising the humanitarian program to deal with low/un-skilled labour shortages.

CONCLUSION Future directions for Australian policy settings in trade, international affairs and immigration, and on trade facilitation, will be framed by the outcome of the 2007 Federal Election.

ACCI Trade Policy Committee Meeting, Perth.

In contrast to some other policy domains, trade, international affairs and immigration enjoy a high degree of bipartisanship between the two major Australian political parties – with both committed to broadening and deepening Australia’s

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ADVERTORIAL

ICC Uniform Customs and Practice for Documentary Credits (UCP) 600 –

How will it impact your business? The UCP, now in its 6th revision since its inception in 1951, underpins global trade valued in the billions annually. The well publicised UCP 600 revision came into force from 1 July 2007 and replaces UCP 500 which was implemented in 1993. The changes introduced by UCP 600 affect banks, applicants and beneficiaries. A key objective of the revision was to reduce the number of non-compliant presentations by clarifying articles that had attracted queries or complaint under UCP 500. Material changes effected by the revision include:

its interests by exercising extreme attention to detail in scrutinising the terms of the credit, and in preparing the documents for presentation – nothing in the revision changes that. It is obvious that the beneficiary is looking for credit terms it can comply with in order to secure payment, with the applicant seeking adequate protection to be satisfied of contract performance prior to payment. These do not need to be competing objectives and much doubt and delay can be removed by writing the credit terms into the contract it is securing in the first place rather than leaving this to another negotiation after the underlying deal is done. Some eventualities affecting payment risk will remain outside the scope of UCP and out of the beneficiary’s control, such as political events, shortages of currency, bank insolvency, changes in import regulations and the occasional failure of local banks to conform to standard banking practice. Nonetheless, the documentary credit system as administered under UCP will continue to provide a secure platform for the facilitation of international trade.

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a presumption that credits are irrevocable (whether a credit says so or not)

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a suite of new definitions

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a different time frame for examination of documents

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greater clarity on inconsistent or conflicting data in documents

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specific provision to overcome problems relating to determining what is an “original” document

Gavin Vallely is the Managing Partner and Hazel Brasington a Special Counsel at Holman Fenwick and Willan’s Melbourne office.

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a new position on charterparty bills of lading – which are now acceptable transport documents

For more information on UCP 600 they can be contacted on Tel +61 3 8601 4500 or email holmans@hfw-aus.com.au.

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a stricter approach to ‘claused’ transport documents

As a documentary credit stands separately from the contract to which it relates, its value as a secure payment mechanism hinges on the principle of strict compliance. When the beneficiary presents documents conforming to the requirements of the credit, the banks’ obligation to pay is triggered. Therefore, the beneficiary can do much to safeguard

HOLMAN FENWICK & WILLAN Level 39, Bourke Place 600 Bourke Street Melbourne, VIC 3000 Australia Tel: +61 3 8601 4500 Fax: +61 3 8601 4555 Email: holmans@hfw-aus.com.au www.hfw.com


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

JULY 2007 ACCI-AIIA “FUTURE OF APEC” CONFERENCE – PERTH

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Virgin Blue Sets New Benchmark in Corporate Travel

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ith its evolving business strategy, Virgin Blue is becoming more relevant to the corporate market whilst retaining and keeping its promise to serving its traditional leisure base. With over 75 per cent of the Top 200 ASX listed companies now holding corporate accounts with Virgin Blue, the multi-award winning airline has certainly come of age. The carrier offers a product and service distinctly different to that of a traditional ‘no frills’ low-cost carriers and vastly different to traditional legacy carriers charging exorbitant, all inclusive fares. Unlike traditional ‘no frills’ low-cost carriers, Virgin Blue offers competitive fares as well as a wide range of leading ancillary products and services based on innovation and leading technology, offered on a pay-per-use basis. Designed especially with the corporate market in mind some these additional extras include: 3 The special Corporate Plus Fare which offers flexible terms and conditions for business travellers, including a full refund option, 3 The award winning free frequent flier program, Velocity, through which members can earn points on all travel and, 3 The Lounge, an all-inclusive business friendly airport facility open in Sydney, Brisbane, Melbourne, Adelaide and Canberra. Virgin Blue also offers quality airport facilities, interline options with regional and

international airlines, through-checked baggage, excellent on-time performance, enhanced business schedules and increased frequencies, and an extensive holiday program. The airline was also the first to introduce a progressive ‘Web-check-In’ service, where you can save time and avoid queues by checking in for your flight, selecting your seat and printing your boarding pass within 24 hours of your flight from any internet-connected personal computer before you arrive at the airport. With innovation considered a hallmark, in an Australian first, Virgin Blue joined forces with FOXTEL to launch the revolutionary ‘live2air’ technology, which allows you to view 24 live FOXTEL and AUSTAR channels, just as you would in your own lounge room at home, so you’ll never miss the latest news broadcast. When travelling for business with Virgin Blue you can also opt to do your bit for the environment by choosing to off-set your flights through Virgin Blue’s Government certified voluntary carbon offset program. You can offset the carbon emissions from your flight for as little as $1. Progressing on its path of continual improvement for its Guests, Virgin Blue has a corporate sales team dedicated to understanding the needs of business travellers and finding solutions to the travel requirements of companies large and small. The services of Virgin Blue’s Corporate Sales Team are available nation wide and are contactable via email at salessupport.corporate@virginblue.com.au.


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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

BILATERAL BUSINESS COUNCILS AUSTRALIA ASEAN BUSINESS COUNCIL (AABC)

links. AACCI remains well placed to play a leading role in expanding trade relations between the two countries.

As part of its Mission, the first and most pressing activity of the Australia-ASEAN Business Council (AABC) is to facilitate the interface of Australian business with the ASEAN-AustraliaNew Zealand Free Trade Agreement (AANZFTA) negotiators.

In February 2007, an Executive member of AACCI, Dr Fiona Hill, led a delegation of Australian business and professional women to Saudi Arabia in a ground-breaking visit that was generously facilitated by the Saudi Arabian Government. Such activities play a an important role in building up personal and institutional links that can support the growth of the commercial relationship.

Michael Mugliston, Australia’s lead negotiator on the AANZFTA and the Malaysia-Australia Free Trade Agreement (MAFTA) has on a number of occasions met with interested businesses at Council-organised briefings to obtain their input into the negotiations. There have been eleven rounds of AANZFTA negotiations to date. The AABC was greatly heartened to learn of the strong commitment to the completion of the Free Trade Agreement demonstrated at the 12th annual ASEAN Economic Ministers Closer Economic Relations (AEM-CER) consultations held in Manila on 25 and 26 August. Difficult issues remain to be resolved but the Manila meeting agreed that it should be possible to complete the negotiations by mid-2008. Australia’s Minister for Trade, Hon Warren Truss, MP, when commenting upon the Manila meeting, noted the importance of Australia obtaining commitments on its market access to ASEAN that ensured that Australia was not disadvantaged in comparison to ASEAN’s other major trading partners. ASEAN is currently involved in FTA negotiations with China, the Republic of Korea, Japan and India, and has recently launched negotiations with the EU. “Trade between Australia and ASEAN increased by 20 per cent in 2006, and ASEAN, as a group, is a larger trading partner for Australia than any single country. It now accounts for 16 per cent of Australia’s two-way trade,” Mr Truss said. At the Council’s formation meeting in March 2007, John K Connor was elected the inaugural President.

AUSTRALIA ARAB CHAMBER OF COMMERCE AND INDUSTRY (AACCI) AACCI’s membership stood at 469 at the end of June 2007. This represents a stable level of membership, but with the growth in trade between Australia and the Arab countries, AACCI is working to attract new members to its ranks. Merchandise exports to the Arab countries from Australia grew in 2006 by more than 30 per cent over the previous year. The Chamber is expecting similar figures for the 200607 financial year when they are released. Services continue to play a role in the overall composition of Australia’s exports to the Arab countries, particularly to the Member States of the Gulf Cooperation Council. In November 2006, the Hon Warren Truss, MP, Minister for Trade, led the Australian delegation to the Australia-Saudi Arabia Joint Ministerial Consultations in Riyadh. The National Chairman of AACCI, Syd Giller, was invited to lead the accompanying business mission, which comprised mainly AACCI members. This was a valuable opportunity to network with a number of leading Saudi Arabian business houses, and demonstrated the huge potential that exists for the further development of Australian-Saudi Arabian commercial

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AACCI welcomed the commencement earlier in 2007 of negotiations for a Free Trade Agreement with the Gulf Cooperation Council (GCC). The Chamber has been keen to encourage a balanced approach to the negotiations that would provide opportunities for expanding Australia’s traditional exports to the GCC states while upholding the interests of smaller interests and industry groups. AACCI is in dialogue with the government about practical ways in which business flows between Australia and GCC states could be facilitated, including by the adoption of an APEC-style business visa scheme. AACCI continues to monitor the expanding trade and investment opportunities that exist beyond the GCC in North Africa and other parts of the Arab world. Through its continuing membership of the General Union of Arab Chambers of Commerce, Industry and Agriculture, AACCI maintains important links with a large range of business councils and Arab Chambers of Commerce, which contribute in a range of practical ways to Australia’s commercial links with the Arab countries.

AUSTRALIA JAPAN BUSINESS CO-OPERATION COMMITTEE (AJBCC) 2007 is the fiftieth anniversary of the milestone AustraliaJapan Agreement on Commerce 1957 that has underpinned the trading relationship of the past fifty years. That relationship is unique and greatly envied by many of Japan’s other trade partners. At $32.4 billion, Japan remains Australia’s largest export destination – substantially greater than China at $20.4 billion which is destination number two. On 12th December 2006, Prime Ministers John Howard and Shinzo Abe announced that both countries had agreed to commence negotiations of a bilateral Economic Partnership Agreement/Free Trade Agreement (EPA/FTA). The Australia Japan Business Co-operation Committee (AJBCC) and its JABCC counterpart welcomed this news with much pleasure as over the prior four years they had issued three Joint Statements proposing that there be a bilateral Economic Partnership Agreement including a Free Trade Agreement. Business, like Government, is aware that there are ‘sensitivities’ on both sides but possesses a strong belief that a comprehensive agreement will be important for the integration of our two economies. Commenting at the start of the third investigative study in April 2005, Australia’s Deputy Prime Minister and then Minister for Trade, Hon Mark Vaile MP said “…if the study concludes that Australia and Japan should proceed to negotiate an FTA, we need to be realistic that any negotiation will require a firm political commitment on both sides.”


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

BILATERAL BUSINESS COUNCILS Business encourages the negotiating teams and our politicians to move with ambition, creativity, and flexibility towards the goal of the earliest realisation of a comprehensive EPA/FTA.

towards Japan to ensure they were obtaining the optimum exposure from a Japanese economy that has more than five consecutive years of monthly economic growth. Over 160 companies/organisations attended.

In early February 2007, Mr Fujio Mitarai, Chairman & CEO Canon Inc and Chairman of the Nippon Keidanren, the most respected of the Japanese industry bodies, led a Mission to Sydney and Canberra that included four Keidanren ViceChairmen and the Chair of the Keidanren’s Committee on Asia and Oceania to voice their support for a comprehensive agreement. The AJBCC organised a ‘Round-table’ in Sydney that included representatives of the Australian Chamber of Commerce & Industry and the Business Council of Australia to consider ways of further strengthening the relationship. The Mission met with Prime Minister John Howard, Treasurer Peter Costello, and other Ministers when in Canberra.

At the Committee’s Annual General Meeting in August Sir Rod Eddington was re-elected President.

AUSTRALIA-LATIN AMERICA BUSINESS COUNCIL (ALABC) Australian business interest in Latin America has been growing during 2007, and the ALABC is continuously consolidating its position as the peak organisation for the promotion of Australian and Latin American business relationships, strongly supported by Government bodies such as COALAR (Council on Australia and Latin America Relations), DFAT and Austrade. 2007 has been a year of Trade Agreement talks between our two regions.

Sir Rod Eddington, Mr Fujio Mitarai and Mr Hugh Morgan AC, Sydney.

The 45th Japan-Australia Joint Business Conference was held in Tokyo from 21 to 23 October 2007. Seventy-five Australian delegates joined 120 Japanese colleagues in an information rich conference. The conference celebrated the achievements of the past fifty years and looked forward to the next fifty years. We were honoured by the presence of Prime Minister Yasuo Fukuda who gave a congratulatory address. Twenty-three authoritative Japanese and Australian speakers shared their insights and perceptions during six plenary sessions of the conference: q Food and Energy Security; q Clean Development – The Real Challenge of Climate Change; q Future Opportunities for Japan-Australia Businesses; q Business Challenges and Opportunities – Climate Change; q Business Challenges and Opportunities – Emerging Links; and q Realising the Future – Visions for the Japan-Australia Relationship. Late July, together with Austrade Japan and a member of DFAT’s FTA Task Force, the AJBCC undertook seminars in the five mainland capitals under the theme: ‘Japan – Ripe for Re-Assessment’. This encouraged technology companies with some present engagement to review their existing strategies

The first meeting of the Australian-Mexican Joint Expert Group (JEG) was held in Adelaide on 17-18 April 2007, after Australia and Mexico agreed to form a JEG in March 2006 to enhance bilateral commercial relations between the two nations. The Australia-Mexico bilateral economic and trade relationship is in very good shape. Mexico was Australia’s largest merchandise trading partner in Latin America in 2006 with two-way trade worth $1.9 billion. Australia’s exports to Mexico were valued at $846 million, dominated by coal, meat, leather, live animals, dairy and a growing range of other services. The trade in Australian education and training services has been especially strong. Australian food and wine brands are increasingly on sale in Mexico. Imports from Mexico were valued at $1.05 billion and have increased significantly over the past decade. Formal talks on the Australia-Chile Free Trade Agreement negotiations were held in Canberra from 7-9 August. A second round of negotiations was scheduled for October in Santiago, Chile. If realised, an Australia-Chile FTA would be the first free trade agreement between Australia and a South American country. ALABC also held its Annual Dinner in Sydney on 19 October, for the presentation of the COALAR sponsored 2007 Latin American Awards. The gathering of over 250 guests from a wide cross-section of Australian business highlighted the importance of the region for the Australian business community. ALABC led a high level mining-sector delegation to Colombia from 28 October to 2 November, with the aim of helping Australian companies to learn about the extensive opportunities currently on offer in Colombia’s rapidly growing mining sector. The mission was led by the Council’s Chairman, Jose Blanco, and was supported by the Council on Australia Latin America Relations (COALAR) ALABC continued to organise and run networking seminars in all capital cities through the year, attracting potential new members and raising the general awareness of the Business Council.

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

BILATERAL BUSINESS COUNCILS AUSTRALIAN MALAYSIA BUSINESS COUNCIL (AMBC) The 8th Malaysia-Australia Joint Business Conference held in Kuala Lumpur in November 2006 coincided with the visit of Australian Prime Minister John Howard to Malaysia. The Prime Minister was the Guest of Honour and Speaker at the Conference Lunch, where over thirty Australian and over two hundred Malaysian-based delegates were joined by an additional 130 guests, including many senior government officials and business leaders. In his speech, the Prime Minister observed that normality has been restored at the senior levels of government between the two countries and that existing differences do not represent a problem in the relationship, noting that the two countries can bring together their cultural and religious traditions. 2007 marked the 50th Anniversary of Malaysian Independence and AMBC joined the celebrations by hosting a business community commemoration dinner inviting Dato’ Seri Rafidah Aziz, Malaysia’s Minister for International Trade and Industry to Sydney in July during her trade mission to Australia. Besides Sydney, the Malaysian trade seminars, supported by AMBC entitled “Business Opportunities in Malaysia”, were also organised in Brisbane and in Perth. All AMBC State Chapters also hosted gala Balls marking the Golden Jubilee of “Merdeka”.

its Queensland Chapter in July 2007. The Council is also pleased by the resumption of MAFTA negotiations, being stalled due to personnel changes on the Malaysian side. The Federal Trade Minister, Hon Warren Truss MP, became the co-patron of the AMBC in September 2007.

AUSTRALIA RUSSIA BUSINESS COUNCIL (ARBC) The year 2007 was an interesting year full of significant anniversaries and events relevant for the ARBC. Russian Federation President Vladimir Putin’s arrival for APEC meeting in Sydney marked the first ever visit of a Russian head of government to Australia. This year also marks 200 years since first Russian-Australian contacts, 150 years of Consular relations and 65 years of official diplomatic relations between Australia and Russia.

Archbishop Hilarion, RF Foreign Minister Lavrov, ARBC President Savitsky, President Putin, and Canberra resident Russian Count De Wouich at an APEC Meeting in Sydney in September

Malaysia’s Minister for International Trade, Dato’ Seri Rafidah Aziz, in Sydney

The AMBC has contributed to a Parliamentary enquiry into Australia’s relations with Malaysia with a formal submission and appearance before the Joint Parliamentary Standing Committee on Foreign Affairs, Defence and Trade in November 2006. The AMBC was an official “Supporting Organisation” for The Economist Conference series “Business Roundtable with the Government of Malaysia” that took place from 9-10 July 2007 in Kuala Lumpur. The Council is delighted to advise that Wee Keat Chan, AMBC National President and his predecessor, Ted Sharp have received Honours in the birthday honours list of the Malaysian King, His Majesty Sultan Mizan Zainal Abidin. This is a unique honour for both Wee and Ted and was given in recognition of their work over many years in fostering the bilateral commercial relationship. AMBC is proud to announce that the Australia Malaysia Business Council Queensland joined the AMBC National as

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Given the similarities between the Australian and Russian economies, both being energy and minerals suppliers and both targeting the Asia-Pacific Region with their expansion plans, with significant potential for cooperation supported by recent examples of activities involving companies like BHP, Rio Tinto, Rusal, Mincom and Norilsk Nickel, there is much optimism for a stronger and bigger ARBC in coming years. In its endeavours to make the ARBC a principal national body of organizations doing business with Russia and to raise the awareness of the Council throughout the Australian business community, the ARBC is continuing its series of events in order to reach the wider audience of enterprises and other interested parties which see Russia as a commercial partner. The Council held a series of regional meetings, first in Melbourne, followed by Brisbane in July this year. Plans are being made for similar meetings in Adelaide and Perth in early 2008.


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

BILATERAL BUSINESS COUNCILS late December, and the prospects of steady progress towards restoration of democracy to follow, some sense of normality has returned. In a situation when business in Thailand also had to deal with political issues, the Council hosted or co-hosted a higher than usual number of functions, offering to its members a number of opportunities to meet with Thai-based commentators, speakers from business, as well as Thai Ministers and diplomats. With access to information a key benefit of being a member of a business council, the ATBC has been able to deliver a robust program of activity.

ARBC Regional Meeting Brisbane, July 2007

From early 2007 various delegations from APEC members, including Russia, visited Australia. Unfortunately, opportunities for productive meetings with them on matters of interest to ARBC were few. One exemption was a business lunch session with the Russian Duma’s AustraliaNew Zealand Parliamentary Friendship Group. Recently, at the request of Russian students studying in Australia, the ARBC created a non-voting student membership category. These young energetic people are keen to get involved assisting in administrative work of the ARBC and of any member company on a work experience basis.

In its third year of implementation, the Thailand-Australia Free Trade Agreement (TAFTA) has become an important factor underpinning growth in bilateral trade, creating a ‘winwin situation’ for both sides. As a result, in 2006 over 80 per cent of Australian merchandise exports to Thailand were tariff-free, with the growing pace of 26% in that year. Thailand became Australia’s ninth-largest two-way trading partner capturing 2.9% of total Australian overseas trade. Some ATBC members like Kingsgate, BlueScope Steel, ANCA, and Oxiana, have used the partnership opportunities under TAFTA to its fullest potential. Other firms will follow suit, investing in such areas as agribusiness, food and dairy industry, infrastructure development, and ICT.

Exchange of information between Russian and Australian ARBC members is being further improved by the creation of a bilingual quarterly newsletter from September this year. The mechanisms are being created for processing business enquiries from both sides through synergies with the Russian trade office in Canberra and Austrade offices.

Russian members with ARBC President Savitsky in Moscow.

(CONTINUED ON PAGE 86)

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ADVERTORIAL

Nuenco—where the market needs it most Nuenco (ASX Code: NEO) is an Australian Stock Exchange listed oil and gas explorer with a focus in California. The Company’s mission is to develop a significant position in the American market—the world’s premier energy market—to maximise the return on the investment it is making in oil and gas exploration. Mr Anthony Kain, the Company’s Managing Director, told ACCI Business Report about exciting developments with respect to this oil and gas project and the Company’s vision for the future. Nuenco NL was incorporated on 12 February 1987 as Anzoil NL and changed its management, focus and name to Nuenco NL in 2004. The focus was on substantial undiscovered oil and gas potential in California’s San Joaquin Basin, a prolific oil province which had already generated billions of barrels of oil and trillions of cubic feet of gas. Nuenco’s investigations into this area found that most of this oil was discovered decades ago in large shallow anticlines apparent as surface structures or identified through simple 2D seismic. From these enquiries and the work that followed, Nuenco became convinced that the San Joaquin was ripe for reappraisal and re-evaluation offering unexplored or unexploited low cost shallow drilling targets as well as high cost large targets in more complex traps and new geological play types. To quote one of the oil majors which has been operating in the San Joaquin for some time: “Over the past 100 years, the San Joaquin Valley Business Unit has produced only 25 percent of the oil in the ground and each year is finding more oil that can be produced.”

Managing Director Anthony Kain on site while drilling in the San Joaquin

joint venture Nuenco now has a 50 per cent stake in 260,000 acres in the San Joaquin of which 116,000 acres is under lease and 146,000 acres under exclusive option to lease.

Nuenco started drilling in California in 2004 to farm into the South East lost Hills Oil and Gas project, and what became clear was that Nuenco needed two things, a large land position and a large working interest.

The acreage containing multiple prospects represents a large footprint over some of the richest and most prospective oil and gas land in California. The position has pushed Nuenco way up to the tree, effectively on the other side of the table to where it started. Now the company can farm out the cost and risk of developing a much larger acreage position over multiple plays around major oil fields and this distinguishes Nuenco from its rivals.

This was achieved in the later part of 2006 with the formation of the San Joaquin Joint Venture. Through this

“When we originally went into California we had a lot to learn,” Mr Kain commented. “Now we have spent

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a significant amount of time working in this area and we’ve learned through experience. Based on that we took a view, positioned ourselves and acquired a large acreage position within an area generating much interest. This is happening as more people start to understand there are significant undeveloped reserves in the San Joaquin Basin that are becoming increasingly valuable as the stability of supply from traditional and emerging markets is threatened.” Nuenco’s intention is to build its business in California strategically positioned to give it access to a big part of the oil and gas reserves that remain in the San Joaquin. For further information please visit www.nuenco.com


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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

BILATERAL BUSINESS COUNCILS The ATBC’s July CEO briefings and seminar series “ThailandWhat’s Really Happening” in Sydney and Melbourne, attracted many members, guests and corporates. Arriving direct from Thailand, Dr Chris Baker, Dr Pasuk Phongchaichit and Sean Riley, Senior Trade Commissioner Austrade Bangkok, provided real insights as to what is happening in Thailand and how business can continue to profit from the bilateral relationship. The overall theme that emerged was that business was continuing largely as usual, and that to be successful in Thailand, it was essential to remain committed in the long term and take a flexible approach.

From left: Prue Holstein (Asia Society), Hugh Morgan (Asia Society), HE Foreign Minister Nitya Pibulsonggram, Robert Taylor (ATBC National President) , Honorary Consul General Simon Wallace, HE Ambassador Bandhit Sotipalalit, Graham Sherry (ATBC Vice Chair).

“Thailand – What’s Really Happening” Seminar Series.

During the past year, the ATBC members appreciated exchanging views with two visiting Thai Ministers. The luncheon with the Thai Minister of Commerce, HE Mr KrirkKrai Jirapaet in early June was attended by ATBC members mainly from the mining industry, keen to discuss their commitment to Thailand and the potential for future collaboration.

After many months of preparation, in late July the ATBC’s NSW and Victorian Chapters both signed an MOU with the Federation of Thai Industries (FTI) in Bangkok, and in late August, a number of members of the ATBC National Executive met with senior representatives of FTI in Sydney. The agreement will strengthen a close cooperative working relationship that will bring many benefits to mutual membership. Both organisations are committed to work together to further the commercial interests of both countries and expressed their willingness to address some difficult issues in respect of bilateral trade and investments. The major event at the end of 2007 will be the 17th Australia Thailand Joint Business Conference, as a part of a two-day Asia Growth Conference co-hosted with AustCham and the Thai Chamber of Commerce in Bangkok. The timing of this year’s conference will enable attendees to obtain a better understanding of how Thailand in particular and its Asia Pacific neighbours are likely to grow and develop. The ATBC also maintains close co-operation with the Thai Embassy in Canberra and supported the August 2007 Asia Society CEO Luncheon Briefing in Melbourne with ATBC patron, HE Bandhit Sotipalalit, Ambassador of Thailand, on the occasion of his official visit to Victoria.

Left to right: Mr Bruce Loveday, Mr Gavin Thomas, H.E. Kiattikhun Chartprasert, H.E. Krirk Krai Jirapaet, Prof Tony Moon, Ms Tamerlaine Beasley, Mr Zimi Meka, Mr David Doherty, Mr Ross Smyth Kirk, Ms Kanittha Ninubon, Mr Jom Jirapaet.

After the APEC meetings, the ATBC co-hosted a major public luncheon in Melbourne to welcome H.E. Nitya Pibulsonggram, the Thai Foreign Minister, who delivered a speech titled “Update on Thailand’s Trade and Foreign Policy Direction.”

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AWARDS

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

AWARDS The Australian Chamber of Commerce and Industry proudly sponsors and provides judges for a range of Awards recognising and supporting the Australian business community. ACCI considers it vital that the Australian business community is encouraged to participate in these Awards to establish benchmarks and role models for other businesses and to promote the role of business in the broader community.

AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY-BUSINESS COUNCIL OF AUSTRALIA NATIONAL WORK AND FAMILY AWARDS The ACCI/BCA National Work & Family Awards began in 1992 and recognise excellence in work and family initiatives. They showcase organisations with outstanding flexible working arrangements that meet the needs of the business and its employees. They also provide an opportunity to promote the business benefits of managing work and family issues. The Awards are supported by the Department of Employment and Workplace Relations and the Diversity Council of Australia. The major corporate sponsor of the 2007 Awards was IBM. Assistance is also provided by other agencies of government, and the Australian Institute of Family Studies.

q Regional and Rural Award; and q Community Sector Award. ACCI was represented on the Work and Family Awards Judging Panel and Steering Committee this year by Workplace Policy Director Peter Anderson and Occupational Health, Safety and Compensation Manager Kellie Quayle. The awards were presented at a dinner in Sydney on 18 July 2007 by the Federal Minister for Employment and Workplace Relations, Hon Joe Hockey MP. Further information, including a full list of winners, can be found at www.workplace.gov.au.

AUSTRADE-AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY AUSTRALIAN EXPORT AWARDS The Australian Export Awards, co-presented by Austrade and ACCI, are acknowledged by the business community as one of Australia’s most prestigious industry awards. ACCI has been involved with the Australian Export Awards since their inception in 1963, making 2007 the 45th year these awards have showcased and promoted Australian exports.

The Awards focus on outcomes rather than just policies. They acknowledge businesses that: q recognise the business benefits in responding to the actual work-life needs of their employees; q make efforts to ensure that managers, supervisors and employees accommodate work-life needs as appropriate; and q demonstrate a commitment to continuous improvement in the development and implementation of work-life policies, practices and initiatives.

Australian Export Awards Winners’ Dinner, Melbourne.

The Awards aim to: q demonstrate and promote the business benefits of flexible working arrangements; q recognise organisations that accommodate employees’ work-life needs; q provide an opportunity for companies to review and benchmark their working arrangements; and q provide case studies, model policies and initiatives that serve as useful tools for other employers. The Award Categories are as follows: q Gold Award – Private Sector; q Gold Award – Public or Community Sector; q Large Business Award; q Medium Business Award; q Small Business Award; q Rising Star Award;

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The Australian Export Awards perform a number of important functions. They: q identify and reward Australia’s most successful and innovative exporters; q promote top exporters as corporate role models in order to stimulate greater involvement in exporting amongst Australian businesses; q promote Australia’s leading exporters to the same status and public recognition as sporting and entertainment heroes; and q further develop community awareness of the importance of exporting to Australia’s economic future. ACCI considers it vital that exporting excellence, which underpins the Australian economy, is appropriately recognised. Exporting creates jobs and wealth for communities in all parts of Australia and the businesses which contribute to this deserve recognition for their hard work and impressive achievements.


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

AWARDS The Awards are national and cover all sectors of the economy. With eight State and Territory awards covering thirteen categories of exporters, including the overall Exporter of the Year, there are great stories about the ingenuity and commitment of the single business person with an idea and a dream, through to the biggest corporates in manufacturing, mining and financial services leading the world. Whatever the size of the business or the product and service that they export, the Australian Export Awards are justifiably the most highly regarded recognition of exporting excellence in Australia. This year categories were: q Agribusiness Award; q Arts, Entertainment and Design Award; q Education Award; q Emerging Exporter Award; q Information and Communication Technology Award; q Large Advanced Manufacturer Award; q Minerals and Energy Award; q Regional Exporter Award; q Services Award; q Small to Medium Manufacturer Award; q Small Business Award; q Sports, Events and Tourism Award; and q Australian Exporter of the Year Award. The Australian Exporter of the Year Award is selected from the winners of the first 12 categories.

SAFE WORK AUSTRALIA AWARDS ACCI is represented on the judging panel for the Australian Safety and Compensation Council (ASCC) Safe Work Australia Awards, which acknowledge national Occupational Health and Safety excellence. The national Safe Work Australia Awards were held in Canberra on 23 April 2007. There were five award categories that recognised excellence and innovation in safety performance as follows: q Best Workplace Health and Safety Management System; q Best Solution to an Identified Workplace Health and Safety Issue; q Best Workplace Health and Safety Practices in Small Business; q Public Sector Leadership Award for Injury Prevention and Management; and q Best Individual Contribution to Workplace Health and Safety. Additional information, including a full list of winners, is available at www.ascc.gov.au/ascc/NewsEvents/SafetyAwards.

PRIME MINISTER’S EMPLOYER OF THE YEAR AWARDS (PEOPLE WITH A DISABILITY) In 2007, ACCI was represented on the judging panel for the Prime Minister’s Employer of the Year Awards by Education and Training Policy Director Mary Hicks. The Awards were presented at a gala dinner held at Parliament House Canberra on 9 August 2007, hosted by the Minister for Workforce Participation, Dr Sharman Stone MP. The awards recognise Australian businesses that employ people with a disability. One in five people in Australia are said to have a disability. Over 700,000 Australians are dependent on a disability support pension and many want to find work. It is widely accepted that for many who have a disability, or mental health issue, one of the best ways to be fully rehabilitated is to gain or stay in paid employment. In 2007, fifteen finalists were selected from a total of 252 nominations. There were five award categories in 2007 including: q National Employer of the Year;

ACCI President Peter O’Brien (right) at the 2007 Australian Export Awards Top Exporters Breakfast, Melbourne.

q Large Employer of the Year; q Medium Employer of the Year;; q Small Employer of the Year; and

The winners were announced at a gala dinner in Brisbane on 22 November. ACCI was again pleased to co-present these awards with Austrade and promote the vital role that exporting excellence contributes to the Australian community. Further information on the Australian Export Awards, including a full list of winners, can be found at www.exportawards.gov.au.

q Employment Services (for providers of Australian Government Employment Services). The Prime Minister’s Employer of the Year was chosen from the winners of the first four categories. The details of the winners can be found at www.dewr.gov.au.

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

AWARDS AUSTRALIAN TRAINING AWARDS

q Vocational Student of the Year.

The Australian Training Awards are the peak national awards for vocational education and training, recognising innovation and excellence in the training sector.

ACCI Education and Training Policy Director Mary Hicks was a judge for 2007 Employer of the Year category.

The Australian Training Awards build on state and territory awards with winners from each state and territory competing in the national finals. Eleven award categories are presented at the Australian Training Awards including six organisational categories: q Employer of the Year; q Prime Minister’s Small Business of the Year; q Australian Training Initiative;

This year the event also included the inaugural Australian Trade Teacher of the Year Award sponsored by The Institute of Trade Skills Excellence. The Institute is industry-led, Federal Government funded and owned through its key stakeholders – ACCI, AI Group and the National Farmers Federation. The Australian Training Awards were held in Hobart on 8 November and are hosted by the Department of Education, Science and Training on behalf of the Australian vocational education and training sector.

q VET in Schools; q Large Training Provider of the Year; and q Small Training Provider of the Year. and five student categories: q Australian Apprentice of the Year; q Australian Apprentice (Trainee) of the Year; q Stella Axarlis Australian School-based Apprentice of the Year; q Aboriginal and Torres Strait Islander Student of the Year; and

People without valid working visas: new penalties for employers From August 2007 it is a criminal offence to knowingly or recklessly hire an illegal worker, either as an employee or an independent contractor, or refer an illegal worker for work. People convicted of these offences could face fines of $13 200 and two years’ imprisonment, while companies face fines of $66 000 per illegal worker. Illegal workers are non-Australian citizens working in Australia without a visa or with a visa that doesn’t allow them to perform the work they are doing. Know your obligations – make sure your workers are entitled to work in Australia. Go to www.immi.gov.au/employer-obligations or phone 1800 040 070 for more information.

hmaC068388

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EDUCATION AND TRAINING

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

EDUCATION AND TRAINING In 2007, education and training issues were placed at the top of the national policy agenda, by the business community and policymakers of all political colours. The quarterly SAI Global-ACCI Survey of Investor Confidence continued to show the significant concerns businesses have about the lack of skilled employees, with the Availability of Suitably Qualified Employees the Number One constraint on investment for the last three quarters of the year. This concern has rated as either the Number One or Number Two concern for business in almost every such survey since 2004. As well as a generally higher profile throughout the year, the May Federal Budget, saw the Australian Government announce additional new education and training initiatives and the Opposition Leader’s Budget Right of Reply also focused on new policies to improve workforce skills. ACCI hopes that 2008 will see a continued prioritisation of these issues, as well as a greater recognition of the role business much play in addressing skill shortages and improving workforce participation.

systems, there is still a long way to go to make it the world’s best. The education system needs more market-led solutions that maximise choice for students, parents, business and education providers. ACCI identified 153 proposals to improve the operation of Australia’s education and training system. Employers spend approximately $36.5b annually on education and training and eighty per cent of employers provide some sort of training for their employees. ACCI called on the Australian and State and Territory governments to increase spending to the tune of $7.8 billion over the next three years. Of this, $2.6 billion would be contributed by the Australian Government and $5.2 billion by the States and Territories. The proportions replicate current patterns of spending under federal arrangements. Increased spending must achieve outcomes in a targeted way and focus on quality. Australian public expenditure on education as a per centage of GDP lags behind a number of countries including the USA, UK, France, South Korea, New Zealand and Malaysia. The Blueprint included a never before published National Survey of some 1337 businesses. Amongst other things the Survey found that: q 52.6% of employers had only mixed results in attracting employees with the right qualifications; q only 44.9% of employers felt that TAFE graduates met their expectations; q only 38.1% of employees agreed that TAFE teachers had industry skills that were up to date;

Education and Training Policy Director Mary Hicks at the March General Council Drinks, Melbourne.

ACCI BLUEPRINT The focus of ACCI’s Education and Training Policy Unit this year has been the production and promotion of ACCI’s comprehensive education Policy Blueprint Skills for a Nation: A Blueprint for Improving Education and Training 20072017. The Blueprint, which was released in April, consolidated ACCI’s existing education and training policies into one document but also included new policy in areas including, but not exclusive to, early childhood education. The raison d’être for the Blueprint was based on the premise that education and training are of great importance to business. It is the business community that creates jobs, income and wealth for Australia and the education and training system that gives people the skills, training and confidence to fulfil their responsibilities as employers or employees. High standards of education and training are one of the ways a middle sized nation like Australia can multiply its effectiveness and enable it to punch above its weight in the world economy and world political forums. While Australia has one of the world’s better education

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q 51.7% of employers felt that schools had not provided up to date advice on careers in their industry; and q 71.8% of employers said they had NO interaction with universities. Other policy highlights in the Blueprint included: q a graduated introduction of vouchers into the higher education sector; q the introduction of a HECS and FEE-HELP system for the VET sector; q support for an Australian Certificate of Education; q a greater focus on employability skills and improving literacy and numeracy results; q a move towards a national curriculum framework in the secondary school sector; q powers for principals to hire and fire, compulsory learning of a foreign language from 7 years of age or earlier, consideration of opening school premises between 8am and 6pm and enhanced teaching and learning standards in the primary school sector; and q a focus on improving the quality of teachers through more practical teacher training. The Blueprint was distributed widely amongst Ministers, parliamentarians, government officials and other stakeholders. It also was distributed amongst overseas nations with copies


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

EDUCATION AND TRAINING provided to the governments of UK, Pakistan, China, India, Korea, Vietnam, Malaysia and New Zealand. Feedback about the Blueprint, included: “…Organisations such as the chamber are expected to suit those they represent. In the case of the chamber, that’s 355,000 businesses. However there’s nothing narrow about the chamber’s approach; its latest educational policy looks at all levels and types of education as they affect Australians, from those who have yet to start school to the retraining of those who have long since left it. As such, it deserves the close attention of federal, state and territory governments... The chamber’s proposals are a cogent reminder that nowhere in the global economy is competition stronger than in education – and Australia neglects it at its peril.”

process. The revised structure of ISCs should include an Industry Panel, Sector Advisory Committees, a revised Board structure focusing on business operations and corporate governance, and a secretariat focusing exclusively on Training Packages, associated products and relevant support for Registered Training Organisations. The model creates a more responsible role for industry and provides clarity and transparency around the roles of other key stakeholders as well as addressing long term concerns within the employer community about consultation processes. Full details of the model were published in the August edition of the monthly ACCI Review, which is available on the ACCI website.

Sydney Morning Herald Editorial – 30 April 2007: “Chamber Top of the Class” “Thank you very much for the impressive document “Skills for a Nation”. This is not an overnight work and the recommendations are very to the point and consistent as a whole.” Chiel Renique Senior Advisor – Education and Training Delegate to IOE Geneva In addition, many State/Territory jurisdictions have incorporated recommendations in the ACCI Blueprint in their education and training strategies. The Blueprint enjoyed bipartisan interest and support, which ACCI will pursue further in 2008. A copy of the Blueprint is available on the ACCI website at http://www.acci.asn.au/SkillsBlueprintMain.htm.

INDUSTRY SKILLS COUNCIL MODEL In August 2007, ACCI published the business community’s preferred future model for Industry Skills Councils (ISCs). ACCI’s model separates the Training Package and industry intelligence roles currently taken by ISCs, and would introduce an official role for relevant peak industry bodies through the establishment of a new Industry Panel. The Industry Panel, consisting of ACCI and other relevant industry organisations, would: q set strategic frameworks to provide strategic direction and advice to ISCs on issues around governance and Training Package reviews; q provide nominees for Board positions based on competency and skills required; q establish relevant Industry Steering Committees comprised of industry experts to oversee Training Package activities and work directly with consultants; q provide Industry Chairs of Steering Committees; and q validate the extent of industry connectivity in a tendering

Federal Minister for Vocational and Further Education Hon Andrew Robb AO, MP at ACCI’s March General Council.

OVERSEAS REPRESENTATION ILO Korea In May 2007, ACCI participated in an ILO Skills Korean Regional Workshop on Improving Workplace Learning in Asia. Australia, China, India, Malaysia, Singapore, Thailand, Vietnam and Korea participated in the meeting. The focus of the meeting was to recognise the importance of skills in a global economy. Globalisation is introducing competition to all parts of the world and enterprises are finding that in order to survive, skills need to be continually updated to increase productivity, achieve new standards, and add value to products and services developed. While the importance of formal training procedures was recognised in this process, non-formal learning, through workplace learning, is often not recognised. The meeting produced a guide for regional entrepreneurs and their workers, employer organisations, employee organisations, local and national governments, and other policymakers and practitioners involved in addressing enterprise training and learning issues. India A senior Australian Vocational Education and Training (VET) delegation comprising government, provider and industry (CONTINUED ON PAGE 96)

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ADVERTORIAL

UTS answers market calls for better executives Two years of research in world’s best practice and consultation with Australian business has produced a new University of Technology, Sydney Executive MBA (EMBA) program that prepares Australian executives for the pressures of a globalised economy. Commencing in 2008 the degree will focus on real-life, experiential learning opportunities and factor in new and complex pressures on company executives in the areas of governance and environmental sustainability. The UTS EMBA has been tailor-made for Australian executives and is similar to courses being offered at Harvard in the US and at INSEAD in France. No longer will students have to venture overseas to gain access to the highest level of post-graduate learning. EMBA students have the opportunity to become part of an effective network within their graduating cohort that remains close well beyond graduation. UTS has introduced new core content in the EMBA to reflect some of the growing pressures on corporate Australia such as the increasing demands of corporate governance and the growing desire for enterprises to act sustainably. Course Director Antoine Hermens said that “Business has told us they need exposure to real-life, highly practical learning opportunities and that’s what we have done with this new program. Our new Global Business Strategies core subject will provide students with a chance to understand corporate organisations and situations in practice.” EMBA students will be introduced to the course in a five day residential workshop where a range of skills, attitudes and beliefs will be challenged using both computer-based simulations and outdoor problem solving activities. Leadership and teamwork will be used as catalysts for learning. “Participants are able to hear world-class lecturers as well as undertake industry visits to global companies. The course offers a unique international module allowing students to visit either a European or North American business school. The subject presents a superb opportunity to delve deeply into the issues facing international companies,” Mr Hermens said. For further information, please visit www.gsb.uts.edu.au

Antoine Hermens Director of MBA Programs UTS Faculty of Business


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

EDUCATION AND TRAINING representatives, visited India in September 2007 to assess opportunities for collaboration between our two countries. The visit initiated relationships that may lead to ongoing collaborative/commercial linkages, and raised Australia’s profile in India as a high-quality provider of technical education and a leading edge VET system.

WorldSkills Australia

ACCI’s Director of Education and Training, Mary Hicks, was part of the delegation.

ACCI participates at the Board level on WorldSkills Australia (WSA). WSA is a not-for-profit organisation that highlights young Australians’ skills excellence through trade competitions which showcase the talents of apprentices, Australian trainees and VET students at a Regional, National and International level.

A better skilled workforce is critical to improving prosperity in both countries. As the pressure of skills shortages continues to be felt amongst Australian enterprises, alternative ways of sourcing labour, including training overseas workers in skills in demand to Australian standards, is a reality that needs to be recognised and further developed.

In 2007, Australia will participate in the International WorldSkills Competition in Japan. The “Skillaroos” are 27 of Australia’s best young skilled competitors who were selected after their medallist performances at the WorldSkills Australia 2006 National Competition. They represent 24 skill categories ranging from hairdressing and bricklaying to web design and auto repair.

ACCI has strong business and commercial linkages with India through its sister organisations, the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industry (CII). FICCI and ACCI are both leading members of the Confederation of Asia-Pacific Chambers of Commerce and Industry (CACCI).

The WorldSkills International Competition is a large-scale global ‘Skill Olympics’ showcase that will host over 200,000 spectators and 850 competitors from 48 competing countries. Australia currently holds the 9th place rank in the world.

The Australia-India commercial relationship appears well placed for expansion. Mathematic-economic modelling undertaken by ACCI in the preparation of its 2007 policy paper Riding the Indian Elephant highlights a healthy trade complementarity between the two countries – a trend likely to be sustained into the foreseeable future.

PROMOTING THE TRADES The Institute for Trade Skills Excellence ACCI is a member of the company that formed the Institute for Trade Skills Excellence (ITSE). It was established to promote and advance learning, teaching and training in Australian trades education and elevate the status of traditional trades and trades education as career choices. In 2007, SkillsOne Television was launched which comprised a series of short television interviews and case studies for career counsellors, parents and students interested in skilled trades. Supporting SkillsOne Televsion is a website – www.skillsone.com.au, which allows viewers and web users to access content about SkillsOne programs. Most importantly for ACCI, was the launch of the Star Rating Scheme, which recognises excellence in trade skills training among TAFE and private training providers, with a Star Rating. The Scheme aims to recognise high performing registered training providers, and help individual schools and faculties understand exactly what their clients want from their training. It is a national initiative to help promote and advance the quality and relevance of vocational and technical training for the trades in Australia.

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have been developed by industry.

SYSTEMIC INVOLVEMENT National Quality Council The National Quality Council is a Committee of the Ministerial Council for Vocational and Technical Education (MCVTE), and oversees quality assurance and ensures national consistency in the application of the Australian Quality Training Framework (AQTF) 2007 standards for the audit and registration of training providers. It has specific decision-making powers in relation to the endorsement of Training Packages and other aspects of quality assurance under the National Skills Framework. The National Quality Council has a key role in bringing together the major players in the vocational and technical education sector – industry, unions, governments, equity groups and practitioners – to oversee and support the current and future quality of vocational and technical education across Australia. It is also critical to ensuring the successful operation of the National Skills Framework – the system’s requirements for quality and national consistency in terms of qualifications and the delivery of training. ACCI has participated fully in the National Quality Council and its standing committees. This year major work has been undertaken to introduce the AQTF 2007 and to look at the design of Training Packages. Incorporating employability skills into Training Packages is well underway as is the process of rationalising Training Packages. Work is also underway to investigate employer confidence in assessment. These are typical of the issues that come before the National Quality Council and they are dealt with in a collaborative manner. An industry voice at this table is critical to a responsive training system. AQFAB

The Scheme recognises and awards high performing registered training providers with a One Gold Star, Two Gold Star or Three Gold Star rating, with Three Gold Stars being the highest level of recognition.

The Australian Qualifications Framework Advisory Board (AQFAB) reports to the Ministerial Council on Education, Employment, Training and Youth Affairs (MCEETYA). ACCI has been part of AQFAB in 2007.

The criteria used to evaluate registered training organisations

It provides advice on Australia’s qualification system, the


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

EDUCATION AND TRAINING Australian Qualifications Framework (commonly known as the AQF). It is a unified system of national qualifications in schools, vocational education and training (TAFEs and private providers) and the higher education sector (mainly universities). Earlier this year, Ministers agreed to agree to establish the Australian Qualifications Framework Council (AQFC), with the agreement of the MCVTE. The Australian Qualifications Framework Council will report and be accountable to MCEETYA, with explicit principles and procedures for making reports to MCVTE and receiving references from MCVTE as required which complement the Australian Qualifications Framework Council’s relationship with MCEETYA. The new Council is in the process of being established and will replace AQFAB next year. Under the new arrangements, employer involvement in this group is likely to continue.

BUILDING RELATIONSHIPS WITH STAKEHOLDERS ACCI has been actively engaged with TAFE Directors Australia (TDA) to build better relationships between our two organisations. We welcomed the business/tertiary round table discussion at the September TDA National Convention Reframe – Refresh – Fresh Start, which looked at how the TAFE sector can better meet the skill needs of industry. Strong links between business and industry and the VET sectors are important to create a demand-responsive system for delivering improved skills. ACCI considers that microeconomic reform of the TAFE sector is necessary to ensure that Australia’s skills needs can be effectively addressed. At the Reforming the National Skills Strategy – AFR Skilling Australia 2007 Conference held in August 2007, ACCI Chief Executive Peter Hendy called for TAFE governance reforms which would enable the forward thinking sections of the TAFE community the necessary flexibility to move to a more business-like model. ACCI called for governments to set a goal of 1 July 2008 for microeconomic reform and provide targeted funding support to establish an environment where responsiveness on the supply side can be freed up. In 2008, ACCI will continue to build its relationship with TDA and also with the Australian Council for Private Education and Training (ACPET).

PART-TIME ENGINEERING COURSES This year, the Immediate Past President of the Australian Chamber of Commerce and Industry (ACCI), Mr Neville Sawyer, AM, wrote to Australia’s Vice Chancellors about the lack of availability of part-time undergraduate engineering courses in Australia. Many Australian enterprises are experiencing pressure from skills shortages that are restricting their capacity to grow and expand. In some instances these shortages have resulted in a contraction of business. One of ACCI’s member organisations, the Association of Consulting Engineers Australia (ACEA) estimates that the existing pool of engineers

is insufficient to meet the need for work on Australia’s infrastructure projects, even when this pool is distributed around the country to work on priority projects. There is not a simple solution to growing the number of engineers. The pool can only be increased by a number of factors working together, such as improved careers information services, support and incentives to study engineering and industry support for providing workplace experience. The availability of part-time study is one of the factors that is currently limiting the capacity to expand engineer numbers. From an industry perspective, increasing the numbers of engineering graduates is a priority as the contribution to infrastructure projects underpins the capacity of the economy to operate efficiently and grow. The introduction of part-time engineering courses is part of the solution to this problem.

EDUCATION AND TRAINING ADVISOR PROGRAM Under the Commonwealth’s Industry Training Strategies Programme, the Department of Education, Science and Training (DEST), provides funded assistance to support eight full-time state and territory-based Education and Training Advisors (ETAs) based in State/Territory Chambers of Commerce and Industry/equivalents and one full-time National Coordinator based in Canberra, for 2007-2008. The activities of the ETAs address the five priority areas of: q increasing employer confidence in and understanding of the Australian Government’s national vocational education and training policies and priorities and the National Training System; q promoting the flexibilities and advantages for enterprises/employers’ workforce development approaches through engagement with the National Training System and the use of training packages, including promoting innovative activities to improve takeup of Australian Apprenticeships by enterprises/employers; q working with enterprises/employers to build their capacity to address the current and future skills needs of their workforce and target projects to assist in reducing skills shortages in specific industry sectors, occupations or regions; q promoting and encouraging increased participation in Australian Apprenticeships of disadvantaged and specifically targeted groups including support for the increased participation of Indigenous Australians in formal and nationally recognised vocational education and training; and q developing and distributing training information and related advice. ACCI’s Skills for a Nation: A Blueprint for Improving Education and Training 2007-2017, outlines the importance

(CONTINUED ON PAGE 100)

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

EDUCATION AND TRAINING of recognising the value of a VET career and the need to open up more opportunities for individuals to pursue a worthwhile and financially rewarding career through VET to address the skills shortages, especially in the trades. The national network of ETAs has participated in a range of forums/workshops/committees that have addressed a range of state vocational education and training matters. This network has broadened its scope of influence to allow ACCI and its member bodies to make a valuable contribution to these activities: q creating partnerships between schools and local employers; q VET in schools and school-based New Apprenticeships; q indigenous employment and training; q workforce development; q informing employers and employees of their rights and obligations under the contract of training; q employer recruitment practices; q employability skills; q promotion of career advice; q improving access to new apprenticeships; q providing information to employers to simplify the confusion between state and federal government initiatives in the training system; q proposals in relation to people with disabilities’ access to VET; q issues relating to National Industry Skills Forum; and q proposals to address regional skill shortages.

CAREERS ADVICE AUSTRALIA INITIATIVE Career Advice Australia is an Australian Government initiative committed to providing quality career education, and helping all young Australians make a smooth transition through school and on to further study, training or work.

Industry Career Advisers by providing industry sectorspecific information; q Youth Pathways which offer personalised assistance to help young people who are at risk of not making it through school or on to further education, training or employment; and q Connections (previously known as Partnership Outreach Education Model (POEM)) which gives young people who have left school another chance at learning through flexible and accredited education and training options. The RICA and NICS programmes contribute to the provision of high quality career information, advice and vocational experiences for young people to help them make good career decisions. An ACCI consortium comprising of ACCI and State/Territory Chambers of Commerce or equivalent, has carriage of 13 RICAs which include Service Regions in WA, SA, NSW, ACT, VIC, WA and the NT. Further, an ACCI Consortium comprised of ACCI, the Australian Hotels Association, Australian Retailers’ Association, National Retail Association, Restaurant and Catering Australia and Service Skills Australia, was successful in winning the service contract for the NICS Services Industry Sector. Service Agreements have been developed by ACCI for RICAs and NICS Networks for implementation of DEST Services Contracts. ACCI acts as the lead agency responsible for the Services Contracts with DEST for both RICAs and NICS and will also act to project manage the contract deliverables. ACCI participated in the School-Business Dialogue meeting hosted by the Hon. Julie Bishop MP, Federal Minister for Education, Science and Training, at Parliament House on 6 June. ACCI President Mr Peter O’Brien presented an address Ensuring Students Leave School Equipped with Life Skills that are Relevant in the 21st Century. Numerous speakers on the day congratulated ACCI on the timely publication of its Education and Training Policy Blueprint, and many recommendations arising from the facilitated group discussion reiterated recommendations contained in it.

Its programmes and services aim to help all young people aged 13 to 19 years get the skills, training and advice they need to make the most of their future. The CAA initiative will run until December 2009. The main elements of the Career Advice Australia initiative include: q Local Community Partnerships which assist schools and local businesses, community organisations and industry bodies to deliver career development and transition support services to help all young people gain skills, experience, professional guidance and access to industrybased career information; q Regional Industry Career Advisers (RICAs) which ensure that young people, parents, schools and local businesses receive relevant localised industry career information, advice and resources; q National Industry Career Specialists (NICS), representing the 10 industry sectors, which support the Regional

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ACCI President Peter O’Brien addressing the Schools-Business Dialogue, Canberra.

The Minister later announced the establishment of a SchoolBusiness Alliance to provide ongoing advice to government to which ACCI’s Director of Education and Training, Mary Hicks, has been appointed.


INDUSTRY POLICY

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

INDUSTRY POLICY Industry policy remained a core focus of ACCI research and advocacy in 2007. The broad intellectual foundation of ACCI’s reform agenda promotes a pro-competitive and selfregulatory perspective, combining facilitation and cooperation with government where necessary. ACCI’s objectives in the industry policy area aim to improve the functioning of markets and eliminate unnecessary regulatory burdens, thereby ensuring markets remain responsive to both supply and demand conditions. Properly functioning markets underlie strong economic outcomes and are conducive to dynamism and efficiency. Immediate priorities in the industry policy arena reflect this imperative and include: q manufacturing; q services; q communications; q federalism; and q the food industry ACCI’s Industry Policy Committee, under the chairmanship of Graham Heilbronn and subsequently Beatrice Booth, has formulated proposals that support ACCI’s commitment to a competitive industry policy as part of a longer-term view of the economic and industrial development of Australian business and community.

The Australian manufacturing sector has been facing challenging circumstances for many decades now, but contrary to the views of some, it is neither dying nor chronically sick. While manufacturing’s share of the Australian economy has been steadily declining as the economy has grown, the sector still accounts for 12.5 per cent of the national economy, or output of $96 billion, and averages around 1.5 per cent growth per annum. In recent decades, Australia has followed a path of engagement with international markets through lower tariffs and reducing barriers to inflows of international capital. The rise of low-cost production centres for simplytransformed manufactures combined with lower tariffs has pushed some Australian firms offshore or out of business. Australian manufacturers have become more outwardlyfocussed, manufacture higher-value goods, develop niche products for global markets or mass-produced goods for global supply chains. The manufacturing sector contains success stories that defy a more negative view. Australia has industries within the manufacturing sector which maintain comparative and competitive advantages over even the lowest cost countries. Regardless of the relative decline of manufacturing to GDP, it is a vital part of the Australian economy and will remain so long into the future. However ACCI believes that recent difficulties faced by manufacturing should not be used as an excuse to lead governments back to old, failed policies of protectionism and intervention. The future of manufacturing does not lie in increasing government intervention, building higher tariff walls, providing greater subsidies or picking winners.

Federal Industry Minister Hon Ian Macfarlane MP addressing an ACCI Industry Policy Committee Meeting, Canberra.

ACCI believes the greatest improvements in economic performance and efficiency will come through removing impediments. However, government has a role in facilitating adjustment processes in response to technological and policy changes, and correcting underlying market failures, particularly where benefits accrue to the wider community as well as individual enterprises.

MANUFACTURING In January 2007 ACCI released a major manufacturing position paper entitled The Future of Australia’s Manufacturing Sector: A Blueprint for Success. ACCI produced the position paper in light of a renewed focus on the sector and its role in the Australian economy. ACCI is the oldest business organisation representing manufacturing at the national level, with the widest reach across the Australian manufacturing sector.

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The future of Australian manufacturing lies with policies that strengthen the overall economy and support competition such as sound taxation and industrial relations policies, initiatives to address skill shortages, policies to increase investment in infrastructure, innovation and research and development, continued support for trade negotiations that reduce tariff and other barriers in other countries as well as the implementation of recent undertakings to reduce the regulatory burden on business. Survey material presented in the quarterly ACCI-Westpac Survey of Industrial Trends and SAI Global-ACCI Survey of Investor Confidence shows that while the level of demand for product and the competitive environment weighs heavily on the future investment decisions of Australian manufacturers, key generic issues common across Australia’s economy are to the fore. In particular, major constraints on manufacturing investment continue to be: q the level of business taxes and charges; q the availability of suitably qualified employees; q wage costs and non-wage labour costs; q interest rates and current levels of debt; and


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

INDUSTRY POLICY q both federal and state government regulations. The priority for the manufacturing sector, as for all industry sectors in the Australian economy, is to ensure that we have the appropriate policy settings for each component part of the wider reform agenda. This allows producers to better deal with a potentially adverse trading environment. ACCI gave a copy of the position paper to relevant departments and political leaders. ACCI also provided evidence to the House of Representatives Standing Committee on Economics, Finance and Public Administration Inquiry into the State of Australia’s Manufactured Export and Import Competing Base Now and Beyond the Resources Boom on 2 March 2007. The final report entitled Australian Manufacturing Today and Tomorrow and released in July, picked up a number of issues relating to ACCI’s evidence, particularly our focus on reducing personal tax rates, the need for tariff reform to continue and allowances for the carry-forward of unspent budgeted funding in the Export Development Grants programmes. The Future of Australia’s Manufacturing Sector: A Blueprint for Success is available on the ACCI website at http://www.acci.asn.au/ManufacturingSectorPositionPaperMai n.htm.

2007-08; and q R&D Tax Concession Beneficial Ownership Provisions – $50 million in 2007-08. ACCI welcomed further discussion on the Global Opportunities programme in relation to how industry can assist in global engagement and identifying export opportunities. In relation to the R&D Tax Concession, the changes to the beneficial ownership provisions on expenditure under the 175% Premium Tax Concession arrangement are welcome. However ACCI considers a simpler and more effective approach would be to restore the previous 150% tax concession. More information on the R&D Tax Concession is in the Economics and Taxation chapter of this Annual Report. Industry Policy Statement Initiatives include: 175 Premium Tax Concession – Businesses which hold their intellectual property overseas do not qualify for R&D Tax Concessions. From 1 July 2007, this restriction will be abolished for the 175 per cent premium concession. Export and Finance Insurance Company – The Government will expand the mandate of EFIC to support other export-related activities, such as the establishment of offshore distribution facilities. A national benefit test will apply in all cases. National Nanotechnology Strategy – The Australian Government is providing $21.5 million over four years to establish the National Nanotechnology Strategy. Niche Manufacturing National Research Flagship – The Australian Government is establishing a new National Research Flagship for Niche Manufacturing within the Commonwealth Scientific and Industrial Research Organisation (CSIRO) with the aim of adding further value to existing high value-add segments of the manufacturing industry and creating a new wave of niche industries based on nanotechnology.

Shadow Industry Minister Senator Kim Carr addresses an ACCI Industry Policy Committee Meeting, Canberra.

INDUSTRY POLICY STATEMENT The Australian Government released its Industry Policy Statement on 1 March 2007 and its direction was supported by ACCI. As ACCI has previously argued, sections of Australian industry, most notably manufacturing, have significantly reshaped their approach for the better over the past decade. Part of the adjustment process in an era of lower tariffs is recognising the role Australian industry can play in global supply chains and the need to constantly innovate and participate in research and development opportunities. In this context the three major initiatives are well targeted including:

Food Innovation Grants Programme – The Australian Government is providing funding of $54.2 million over four years to support the continuation of the Food Innovation Grants (FIG) programme. The programme continues the focus on developing industry competitiveness, efficiency and new niche market opportunities by supporting food businesses undertaking research and development. Building Entrepreneurship in Small Business Programme – same programme focus (training and mentoring, succession planning, incubators and Field Officers) but increased funding of $2.6 million in 2007-08 and $11.7 million in 2008-09. ABN/Business Names Registration Project – $89.2 million over ten years beginning 2007-08 to enable 24/7 online registration, capture common data and educate about intellectual property rights and business names. Additionally the following announcements are also targeted

q the Global Opportunities Programme – $17 million in 2007-08; q Australian Industry Productivity Centres – $27 million in (CONTINUED ON PAGE 106)

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

INDUSTRY POLICY at SMEs:

COMMUNICATIONS – BROADBAND

Australian Industry Productivity Centres – $351.8 million over ten years to provide business diagnostic tools and grants to individual businesses to implement the advice.

ACCI’s General Council, at its March 2007 meeting, asked the ACCI Secretariat to develop a communications policy, and more specifically, a broadband policy document.

The Centres will operate in partnership with industry associations and similar bodies. ACCI is currently in consultation with the Government on these arrangements.

Communication and information systems are becoming the cornerstones of modern, knowledge-based economies. The competitiveness of Australia and its ability to access and integrate into world markets will be determined by our access to internationally competitive telecommunications infrastructure.

Global Opportunities Programme – $254.1 over ten years from 2007-08 to help SMEs integrate into global supply chains. Intermediary Access Programme – $20.1 million over five years from 2007-08 to assist SMEs with access to new technologies and partnerships. Continuation of Export Facilitators Programme AUSFTA – $11.1 million over two years to continue the work of trade facilitators to help SMEs do business in the United States Commercial Ready Plus – Designed to extend the support available to emerging Australian companies and spin-offs from public sector research organisations. Australian Productivity Centres On 3 October, the Government announced the launch of its Productivity Centres. The Australian Productivity Centres initiative provides funding of $351.8 million over four years for small and medium-sized enterprises to source and finance specialised advise and technologies to improve business performance. At ACCI’s July Industry Policy and Environment Committee meeting, members were introduced to the Department’s program manager. ACCI members attracted a substantial amount of funding and advisors from the program.

SERVICES With the publication of our manufacturing policy paper, ACCI is now looking towards producing a companion document covering the services sector. ACCI will release this document in 2008. Our study of the services sector will focus on both exports and domestic issues. While the services sector is heterogeneous, some important areas on which ACCI will focus, though by no means exclusively, include education, health, utilities and tourism. ACCI also has extensive experience in these areas, which provides a foundation for an in-depth analysis of the relevant issues. The new document will look at the link between innovative service industries, (information and communications technology industries or ICT, selected professional, scientific and technical services, selected natural resources industries and selected transportation industries) and the ability of other sectors to leverage off or benefit from these advances. ACCI will analyse current support for the services sector relative to other sectors in the economy and whether these programs currently deliver the right outcomes for businesses. ACCI will also undertake analysis of the growing importance that the services plays in the manufacturing sector, though surveys and consultations.

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Access to large pools of information allows products and ideas to flow more quickly throughout societies. New products in consumer goods, finance and medicine are quickly adapted by new users, which broadens the potential benefits and uses of existing ideas. Communications encompasses a broad array of media, industries and technologies. Issues include cross media ownership laws, broadband, allocating spectrum and third party access regimes for diverse formats such as radio, television, telephony, the Internet and newspapers. In regard to broadband, while moving from dial-up Internet to broadband represents only one aspect of communications, it remains central to the working and leisure times of many individuals. Broadband penetration distributes the benefits of greater information flows throughout the community while speed increases the number of applications for which the Internet can be used. An assessment of Australia’s OECD ranking1 indicates that Australia’s ranking is 11th for total broadband subscription, 9th for 256kbps or higher and sixth if a new statistical banding is adopted. Over the past five years Australia has increased the uptake of broadband subscribers at a rate faster, from 0.9 subscribers per 100 inhabitants to 19.2 subscribers per 100 inhabitants, than the OECD average and the EU 15 averages. Pricing, along with download speeds and penetration, also provides a measure by which Australia’s broadband landscape can be compared. ITIF data on the price per bit ranks Australia 5th using the fastest technology. Comparisons with other countries, when taking into account our different circumstances, can be a model for what might be expected by the community in terms of what degree of access and speed are desirable in Australia. It is not the case that the biggest and fastest is the most economically efficient. More importantly, it is perhaps a lack of data on how important broadband is to Australian business which is of the most concern. Anecdotal evidence would suggest that prices are a major constraint rather than access. Knowing where the ‘gaps’ reside in the communications market is the basic research required to make an informed decision on what constitutes

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here are a number of reports generated in Australia and throughout the world that indicate that fraud is pervasive in businesses of all sizes, especially small to medium enterprises. Further research indicates that companies that have not taken preventative action, or indeed who have not attempted to address the risk of fraud in any way, are actually more likely to be the victim of fraud, and to suffer losses greater than those who have taken pre-emptive action. Australia has a great entrepreneurial spirit, whereby there are few impediments between those with a vision and commercial success. However, also a part of the Australian psyche is the tenet of giving a break to fellow Australians and trusting others unless proven otherwise. “She’ll be right mate”, is the catchcry of many an employer and manager, “My employees wouldn’t do that to me, they are good people”. Unfortunately, this relaxed attitude also means that Australian small to medium enterprises are especially at risk. Managers and business owners may also, quite consciously, make a decision not to bother looking for fraud, accepting that it is probably happening and considering it immaterial, or not worth the effort. However, it is estimated that fraud costs small to medium enterprises around $3 billion annually in Australia. SMEs often lack basic internal controls that would significantly reduce the possibility of a fraud being perpetrated against it, or would reduce the impact of any fraud that did occur. A comprehensive, integrated fraud risk management strategy is imperative to reducing the fraud risk exposure of any company, whether it is a multinational financial services conglomerate, or a small family-run

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Fraud – Are you doing enough? The cost of fraud in Australia is difficult to quantify. In 2004, the Australian Institute of Criminology estimated that fraud costs the Australian economy approximately $5.3 billion each year, making up a massive 31% of the total annual cost of crime. It is likely that most businesses will, at some time, be touched by fraud of some kind.

T

here are a number of reports generated in Australia and throughout the world that indicate that fraud is pervasive in businesses of all sizes, especially small to medium enterprises. Further research indicates that companies that have not taken preventative action, or indeed who have not attempted to address the risk of fraud in any way, are actually more likely to be the victim of fraud, and to suffer losses greater than those who have taken pre-emptive action. Australia has a great entrepreneurial spirit, whereby there are few impediments between those with a vision and commercial success. However, also a part of the Australian psyche is the tenet of giving a break to fellow Australians and trusting others unless proven otherwise. “She’ll be right mate”, is the catchcry of many an employer and manager, “My employees wouldn’t do that to me, they are good people”. Unfortunately, this relaxed attitude also means that Australian small to medium enterprises are especially at risk. Managers and business owners may also, quite consciously, make a decision not to bother looking for fraud, accepting that it is probably happening and considering it immaterial, or not worth the effort. However, it is estimated that fraud costs small to medium enterprises around $3 billion annually in Australia. SMEs often lack basic internal controls that would significantly reduce the possibility of a fraud being perpetrated against it, or would reduce the impact of any fraud that did occur. A comprehensive, integrated fraud risk management strategy is imperative to reducing the fraud risk exposure of any company, whether it is a multinational financial services conglomerate, or a small family-run

business. Simply put, awareness of the potential problem and vigilance in its prevention are a crucial first step in fraud prevention. Whilst small to medium businesses may have a greater “hands-on” approach to business that requires proprietors to understand all facets of the business’s operations, there is a disadvantage. Once a business begins to grow, its employee and client base expands and the logistics of business operations changes such that internal controls that have been adequate in the past, no longer “cut the mustard”. It is in times of such growth and operational flux that small to medium businesses are at their most vulnerable. Fraud risk management had not, until this point, been a specific cause for concern due to the ease of oversight that a proprietor could maintain, but it is precisely at this stage that an effective integrated fraud risk management strategy must be introduced.

What Can You Do? It is difficult to over-emphasise the importance of good corporate governance in fraud prevention. Good corporate governance does not only concern itself with ensuring policies and procedures exist and that decision making power is appropriately distributed within the company, but also relates to how these policies are applied and customs that exist within the organisation. The cornerstone of good corporate governance is robust, effective internal control mechanisms. Statistics on fraud in small business in the US indicated that in over 46% of cases examined, fraud occurred due to insufficient internal controls. In an additional 40% of cases internal controls were defined, but simply ignored within the organisation.


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

INDUSTRY POLICY the most appropriate regulatory structure. A competitive, market-based solution remains the best option for delivering the market’s requirements, absent of externalities, at the lowest cost. Government policy, at present, runs the risk of basing industry, technological solutions and debate on faulty data which is contrary to an informed decision-making process. In the debate on investment it is necessary that regulated firms receive a ‘fair’ market based return on capital. All competitors must cover the cost of service delivery, including the Universal Service Obligation, and no one company should cross-subsidise the investments of others. Government expenditure on broadband should not lead to a ‘gold plating’ race that delivers services well above those required for the majority of businesses, governments or consumers. Governments should also avoid “regulate and compensate” models where possible. ACCI considers industry access to broadband services to be critical for the economic development of Australia. Failure by Government to effectively implement a solution which provides for fast, competitive and cost-effective solutions for metro and regional businesses will impede business development and continue to isolate regional towns throughout Australia.

ACCI BROADBAND POLICY ACCI’s July General Council passed a policy resolution that ACCI: q considers industry access to reliable, high speed and internationally competitive broadband services to be critical for the economic development of Australia; q urges the Australian Government in collaboration with Australian Chamber of Commerce and Industry, as a matter of urgency, to map a way forward using factsbased analysis benchmarked against comparable economies resulting in the establishment of a timetable of action to progress this issue; and q considers failure by Government to effectively implement a solution which provides for fast, competitive and costeffective solutions for metro and regional businesses will impede business development and continue to isolate regional towns throughout Australia. Further, ACCI recommends: q better information on Australia’s relative standing on broadband services with industrialised countries needs to be determined: p the Government could assist in this task by undertaking analysis of the importance of increased access and speed of broadband to households, the business community and the wider economy; q seeking better information and developing a cost/benefit analysis should not be used to delay the introduction of broadband but should be used to inform decisions on the requirements business has for a broadband network; q the provision and use of broadband services is generally a private good and therefore it is most appropriately and

110

hence more efficiently provided by the private sector; q competition at all levels must be encouraged in order to deliver an affordable regime for Australian business. Requests for ‘regulatory holidays’ and the imposition of statutory monopolies must be very carefully weighed against the costs; q the determination of access prices is of critical importance. This process should recognise real costs rather than theoretical costs, as investment will only occur where returns commensurate with risk are achievable; q the continuation of support for the universal service obligation, which provides for basic service levels to remote customers. However the cost of this should be accurately determined and transparent; q the Government review of the universal service obligation should be broadened to include other mechanisms to raise funds; and q a competitive environment should exist to encourage the delivery of broadband through all available practical technologies including fibre, wireless and satellite.

FEDERALISM The Australian economy is continually exposed to international competition and must be supported by efficient and workable tiers of government. Of particular importance is the relationship between the Commonwealth, States and Territories and Local Governments and their respective roles and responsibilities in policy development and service delivery. This relationship plays out in the provision of vital social and physical infrastructure upon which the national economy relies. Our understanding and expectations from our federal system of government continues to evolve, but most recently the Commonwealth government has assumed some policy and functional responsibilities previously only considered areas of State interest. If such a process continues it could lead to greater centralisation of power, which is not necessarily the desired outcome. Australia needs to reform the roles and responsibilities of the Commonwealth, State and Territory governments for a number of reasons, including: q the increasing national focus of business, showing the significant costs of national inconsistency; q increased globalisation, which is forcing Australia to become more internationally competitive; q looming fiscal pressures, particularly from an ageing population; and q the tax system, at all levels of government, becoming increasingly uncompetitive against our trading partners. While a federal system of government has many advantages, including dispersion of power, giving increased control and responsibility to local communities, encouraging competition


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

INDUSTRY POLICY between jurisdictions, allowing services to be tailored to local communities and encouraging policy innovation, it also has disadvantages including increased costs due to duplication, national inconsistency, increasing costs on national businesses, reductions in economies of scale, lack of accounting for externalities (or spillover effects between jurisdictions), inefficient cost shifting and fragmentation. Against this background, ACCI considers a well-reasoned federalism policy advanced by the business sector can provide a framework to determine important questions regarding the division of responsibilities and the financial relationship between levels of government (such as Vertical Fiscal Imbalance and Horizontal Fiscal Equalisation). ACCI’s July General Council Meeting endorsed a new ACCI Federalism Policy that incorporates the following principles: Nationhood Policy areas that have significant effect beyond the boundary of any one State should be the responsibility of the Commonwealth government, with State and Territory governments providing support for Commonwealth responsibility for such matters.

q maximising the private sector role in service delivery. This addresses one of the main problems with the current Commonwealth system – too many services are government provided; q eliminating overlaps, inconsistencies and duplication between each level of Government, particularly where these arise flowing from shared responsibilities; q reforming the institutional framework that coordinates Commonwealth and State policy positions, to improve efficiency and produce more timely outcomes. COAG is an example of where improvements can be made; q implementing the new national reform agenda that focuses on collaboration as well as competition and includes a financial reward mechanism for States and Territories that achieves agreed outcomes; and q addressing the widening vertical fiscal imbalance between the Commonwealth and the States (where the expenditures of States are much greater than their taxing powers). As part of this, the system for distributing funds between States should be reviewed.

Subsidiarity Where possible, the responsibility for a particular function should reside with the level of government most accessible, responsive and accountable to its citizens (this is called the principle of subsidiarity). Where a policy does not have significant effect beyond the boundary of any one state, it can reasonably be delegated to the state (or local) level. q Based on the two above principles, some examples of functions that should be provided at a national level include defence, foreign affairs, trade, monetary policy and immigration. Other functions such as education, health, law & order and environment can be provided by a mix of jurisdictions with standards set at higher levels of government and implementation undertaken by lower levels.

ACCI’s July General Council Meeting, Perth

Transparency

FOOD WORKING GROUP

The individual roles and responsibilities of each level of government must be made clear and understandable and there should be clear systems for coordination between governments.

According to Australian Food Statistics 2006 the food manufacturing sector employed over 181,775 people in 2005-2006.2

Efficiency The allocation of responsibilities should promote economic efficiency, particularly by promoting the use of markets and the private sector. Accountability Intergovernmental relations should promote democratic accountability of government to reduce the opportunity for so-called ‘buck passing’. Flexibility Intergovernmental relations should allow flexibility to respond to changing circumstances. The current system can be improved by: q delineating Commonwealth, State and Territory responsibilities more clearly;

Under Chairman Iain Macgregor, ACCI’s Food Working Group has continued to work to closely with government and industry to achieve optimal outcomes for the Australian food industry. The ACCI Secretariat and the Working Group meet regularly with representatives from the Department of Health and Ageing, the Department of Agriculture Fisheries and Forestry and Food Standards Australia New Zealand (FSANZ). ACCI is also represented on the Food Chain Assurance Advisory Group (FCAAG), which is part of the Australian Government’s Trusted Information Sharing Network. Bethwaite Review In January, former Australian Business Ltd (now NSW Business Chamber) Chief Executive Mr Mark Bethwaite, was commissioned by the Australian Government to identify how the food regulatory framework could be streamlined and

111


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

INDUSTRY POLICY made nationally consistent, to improve the competitiveness of the Australian food industry. In March, ACCI made a submission to the Bethwaite Review, which included some of the following issues: Governance Governance issues represent the fundamental problem in the food regulatory system for ACCI members. ACCI’s Food Policy states that the food industry should have a dedicated Commonwealth Department that deals with all aspects of food, rather than persevering with the split across the Department of Agriculture, Fisheries and Forestry and the Department of Health and Ageing. ACCI considers that vesting responsibility for food regulation in a single Commonwealth Department where the Minister would retain executive responsibility for FSANZ, and single Departments at the State and Territory level, would encourage a far more streamlined food regulatory environment and as such should be given immediate priority. Standards ACCI considers that the separation of policy development (the responsibility of the Australia New Zealand Food Regulation Ministerial Council) and standards development (the responsibility of FSANZ) encourages extensive delays in the system. ACCI considers that, at the very least, a majority vote of parties should be required to request the review of an existing standard or a FSANZ decision. To achieve greater transparency, the parties requesting the review and the reasons for the review should be made publicly available. Further Proposals Further ACCI proposals within the Bethwaite review were reforms to the:

Performance Benchmarking of Australian Business Regulation The Productivity Commission report, Performance Benchmarking of Australian Business Regulation, was released on 6 March 2007. The report presents the initial findings of the commissioned study. The key points include that: q while much business regulation is essential, it can involve unnecessary compliance costs. Such burdens are compounded for firms operating across Australia; q benchmarking compliance burdens could help identify where costs could be reduced, and complement other regulatory reform initiatives; q such benchmarking is technically feasible and could yield significant benefits. However, there are methodological complexities and uncertainties about data, requiring a careful, staged approach to implementation; and q benchmarking across jurisdictions would need to be confined to areas of regulation with comparable objectives and benefits, and rely mainly on indirect indicators that would not be definitive about performance gaps. The Commission noted that benchmarking compliance costs of key regulatory areas should include the costs of: q becoming and being a business, arising from one-off activities such as licensing and ongoing activities such as meeting OHS standards; q the delays, uncertainties and compliance activities associated with obtaining government approvals in doing business; and

q Food Regulation Standing Committee;

q regulatory duplication and inconsistencies in doing business interstate.

q Food Regulation Consultative Council;

In addition:

q small business representation on FSANZ; and

q benchmarking the quality and quantity of regulation across jurisdictions and over time (including for specific business categories) would provide complementary insights into cumulative burdens and systemic problems;

q consistent legislation and implementation. Detailed recommendations can be found in the submission, which is available on the ACCI website. Food Standards Australia New Zealand ACCI continued to work with FSANZ and met with representatives throughout the year. Stephen McCutcheon has taken on the role of CEO for FSANZ. Previously Mr McCutcheon was the executive manager, Product Integrity Animal and Plant Health Division, in the Department of Agriculture, Fisheries and Forestry. He has led the team that developed the new food regulatory framework for Australia and New Zealand under the auspices of the Council of Australian Governments, and led the Australian delegations to the Codex Alimentarius Commission and OECD.

112

REGULATION REFORM

q it would be desirable to follow a limited and targeted program over the first three years, that would allow ‘learning by doing’; q the first year would focus on benchmarking the quantity and quality of regulation, as well as compliance costs for a single area of regulation, and developing data sets for other areas. Progressively more regulation would be benchmarked in subsequent years; q based on the likely significance of compliance burdens and other criteria, suggested priorities for inclusion in the initial three year program are occupational health and safety, land development assessments, environmental approvals, stamp duty and payroll tax, business registration, financial services regulation and food safety;


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

INDUSTRY POLICY q data for many indicators is obtainable from published sources and governments, but face-to-face surveys of individual businesses would also be needed;

Nevertheless, ACCI considers that “one-in one-out� brings prioritisation into the regulatory process and helps to develop the culture of ownership and balance in regulation.

q survey costs, including for business, can be reduced by targeting ‘reference businesses’ with appropriate attributes; and

ACCI will continue to push this regulatory initiative for the development of better regulation.

q the cooperation and support of governments and business – in advising on indicators and supplying comparable data – would be crucial to the success of any regulatory benchmarking program. Advisory panels would facilitate necessary interaction.

REFERENCES 1

Market Clarity (2007), Broadband Wars: The OECD International Broadband Arms Race, Publication Number 06114, 17 May 2007.

2

Department of Agriculture, Fisheries and Forestry, Australian Food Statistics 2006, Commonwealth of Australia, 2007.

ACCI remains supportive of programs, which reduce regulations on businesses and lead to greater accountability on all levels of Government. A discussion paper by the Productivity Commission entitled Business Regulation Benchmarking Stage 2 was released on 19 October 2007. Stage 2 is a three-year program to benchmark across jurisdictions various areas of regulation which impose compliance cost on business. ACCI will continue to provide comments in areas of regulation to ensure Australian has the most efficient regulatory regime possible.

ONE-IN, ONE-OUT In mid April, Opposition Leader Kevin Rudd announced that a Labor Government would “adopt a ‘one in, one out’ principle for new Commonwealth regulations. In other words, when new regulations are proposed, they must be accompanied by proposals to remove regulations.� ACCI argued strongly for “one-in one-out� regulation to the Productivity Commission Review, so as to make regulators more accountable for adding to the existing stock of regulation, however this was not part of the final Productivity Commission recommendation.

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113


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SMALL BUSINESS

115


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Customs has an SME Officer – helping small business navigate Australia’s anti-dumping system Late last year, the Federal Government announced a number of changes to the administration of Australia’s anti-dumping system. The announcement was the result of the Joint Study Report on the Administration of Australia’s Anti-Dumping System. The report found that while all businesses were entitled to seek relief under Australia’s anti-dumping and countervailing system, small to medium enterprises (SMEs) often found the process difficult. SMEs are firms with less than 200 full time equivalent employees and/or less than $10 million turnover. Such firms often don’t have the resources to develop familiarity with the complexities of Australia’s anti-dumping and countervailing system, and can face disproportionately large costs in seeking a remedy. Customs has a dedicated officer available to advise SMEs on the World Trade Organisation Anti-dumping and Countervailing Agreements and Australia’s anti-dumping and countervailing system and potential remedies available.

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Call the SME Officer on 02 6275 6327 or email smeliaison@customs.gov.au


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

SMALL BUSINESS ACCI has a strong small business constituency and is committed to promoting its interests.

Further details on these Surveys are in the Surveys chapter of this Annual Report.

At last count ACCI recorded in excess of 280,000 small businesses amongst its membership. These businesses are home-based, micro and small businesses operating in all industries across Australia. We are committed to ensuring that this important sector of the Australian economy remains viable, productive and profitable.

Through member consultation, committee meetings and small business surveys, ACCI has an intimate understanding of the issues confronting small businesses today.

ACCI has a dedicated Small Business Adviser within its Industry Policy Unit and provides key support to two important Small Business forums – the ACCI Small Business Committee and the Small Business Coalition (SBC) which includes industry associations beyond those direct members of ACCI. ACCI is also a member of the Australian Taxation Commissioner’s Small Business Consultative Forum, the Australian Competition and Consumer Commission (ACCC) Small Business Advisory Group, and the Australian Government’s National Small Business Forum. ACCI also undertakes regular surveys of its small business membership. The St.George-ACCI Small Business Survey is completed quarterly and provides key information on small business conditions and impediments to investment and growth. Since its commencement in November 1999, it has consistently ranked Business Taxes and Government Charges, and Cost of Compliance with Government Regulations as key issues to small business. Over recent years the Availability of Suitably Qualified Employees has also risen in prominence to be a major impediment to investment.

Under the chairmanship of ACCI Board member Mr Bruce Fadelli AM, the ACCI Small Business Committee continues to play an important role on those issues affecting the growth, investment and competitiveness of the Australian small business sector. Over the past year, ACCI’s Small Business Committee has been influential in shaping progress on issues such as regulation reform, privacy and environmental regulations. Throughout 2007 ACCI continued to play a leading role in representing small business.

SMALL BUSINESS NUMBERS AND GROWTH From an economic perspective, the value of this sector cannot be underestimated. Small businesses employ approximately 46 per cent of the private sector workforce. The Australian Bureau of Statistics Business Counts Database indicates that there were nearly 800,000 ‘employing’ small businesses operating at the end of the 2005-06 financial year and a total of approximately 1.9 million small businesses. Employing small businesses refers to those small businesses that have between 1 to 99 employees since many small businesses are recorded as non-employing. The growth rates for the number of small businesses has been very high for most industry sectors, however

Number of Employing Small Businesses 1,000,000

ABS Business Register (less than 100 employees)

900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0

2002-03

2003-04

2004-05

2005-06

Source: ABS 8165.0 Jun 2003 to Jun 2006 Counts of Australian Businesses

(CONTINUED ON PAGE 124)

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Life is like a game of chess.

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

SMALL BUSINESS agriculture, forestry and fishing has languished over this period as the drought continues to depress agriculture. The stand out growth sector has been the number of startups within the communications services industry with an average growth rate of 19.3 per cent per annum. This sector will come to play a proportionally larger role over the next few years. Small Business Growth

Communication Services Accommodation, Cafes & Restaurants Personal & Other Services Retail Trade Transport & Storage Construction Mining Property & Business Services Electricity, Gas & Water Supply Education Wholesale Trade Cultural & Recreational Services Finance & Insurance Manufacturing Health & Community Services Agriculture, Forestry & Fishing

Small Business Growth Rates* (%) 19.3 13.7 12.8 11.1 10.9 10.8 10.5 9.8 9.8 9.1 9.1 9.0 8.7 6.5 6.0 1.8

Source: ABS 8165.0 Jun 2003 to Jun 2006 Counts of Australian Businesses. *3 Year Average 2003-2006

Small businesses are a major contributor to the economy and provide the following advantages: q because they are attuned to economic markets, they are able to remain productive even in turbulent conditions; q they often serve a special role in creating social capital (that is, they are often ‘entrenched’ in local communities); q because they are adaptable and close to their customers, they can often compete effectively against large firms; q they play an important role in creating entry level positions (that is, they offer a high amount of employment in casual, part-time, low-training, low-skilled jobs); q they are an invaluable source of entrepreneurship, employment growth and output growth; q they perform important sub-contract functions; and q small firms are innovators – creating new ventures is critical for getting new ideas into the economy.

AUSTRALIAN EXPORT AWARDS ACCI has been a supporter of the Australian Export Awards for 45 years. Last year a new Small and Micro Business Award Category was introduced by ACCI and Austrade, to specifically cater for businesses with total annual sales under $5 million. From 2007, this award category will be known as the Small Business Award. More information on this involvement is included in the Awards chapter of this Annual Report.

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ENCOURAGING ENTERPRISE ACCI again assisted with the launch of Encouraging Enterprise 2007, the latest Australian Government small business report. ACCI Past President and former Small Business Committee Chair Mr David Gray and the Minister for Small Business and Tourism, the Hon Fran Bailey MP, together released the publication in Perth coinciding with ACCI’s July 2007 General Council meeting. The publication Encouraging Enterprise outlines a range of initiatives assisting small business innovation and growth and the Government’s small business policies. A copy of Encouraging Enterprise, and further information about the Government’s programs, services and policies for small business, is available at www.industry.gov.au/smallbusiness.

SMALL BUSINESS EXEMPTION – PRIVACY ACT In late November 2006, Attorney-General Hon Philip Ruddock MP, released the Australian Government’s response to the Senate Legal and Constitutional References Committee Inquiry into the Privacy Act 1988 and the Office of the Federal Privacy Commissioner’s Review of the Private Sector Provisions of the Privacy Act 1988. In accordance with ACCI lobbying, the Government stated that it will maintain the current small business exemption. Notwithstanding the Government’s announcement, in 2007 the Australian Law Reform Commission conducted yet another review of the Privacy Act, and in February ACCI provided another written submission arguing for the retention of the exemption as well as the exemption of employee records. Disappointingly, the Commission’s preliminary report, which was handed down in September, recommended the removal of the small business exemption. ACCI has calculated that if implemented, this recommendation would cost Australian small businesses an initial $6 billion in red tape expenses. This does not include substantial ongoing costs. The Privacy Commissioner recommended keeping the small business exemption in 2005. The Australian Government unequivocally supported keeping the exemption in 2006. The small business community continues to support keeping the exemption. In light of this, the ALRC should carefully consider its final recommendations. In its submission to the ALRC, ACCI raised very cogent reasons for retention of the exemption, as the costs of compliance would be a significant impost, which in many instances would end up hurting consumers. ACCI believes that the original reasons for the exemption have not changed and we have conservatively estimated that if it were removed, up to 1.8 million businesses could potentially face initial compliance costs of around $3,500 per business with additional annual costs to satisfy ongoing adherence to the Act.


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

SMALL BUSINESS We reiterate that small businesses poses a low risk to privacy and the removal of the exemption would increase overall regulatory burdens and compliance costs. While the small business community is committed to ensuring appropriate protection is given to personal information, the Privacy Act should not contain provisions that impose extra regulations when no compelling case for change has been advanced. Small business poses little risk to privacy and the regulatory burdens of complying with the laws would be disproportionately large. ACCI will continue to campaign vigorously for the retention of the small business exemption and to further raise the exemption threshold which currently stands at $3 million to $5 million. The ACCI submission is available at: www.acci.asn.au/text_files/submissions/2007/ReviewofPrivacy Feb2007.pdf

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With this in mind, small business owners are being urged to rethink their insurance to better protect themselves. “When properly arranged business interruption insurance endeavours to ensure a business is in the same financial position after the event as before.” Mr McDermott recommends exploring all the options for business interruption cover.

Gerard McDermott, Executive General Manager, GIO Business Insurance Sales and Service, said the problem arises when businesses discover they can no longer operate after a major calamity such as a fire or hail storm causes damage to their business premises. “Most business owners insure against loss and things like theft, accidental damage, and workers compensation,” Mr McDermott said. “What they don’t think about is the need to preserve cash-flow even when the business is not operational due to unforseen damage to things such as their building, stock or business content.”

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Limited cash-flow can have catastrophic effects because most small businesses (if they don’t have money to pay their continuing expenses such as rent and staff) will simply close their doors. This is also likely to impact on business owners as its revenue is usually their only source of income with both partners often heavily involved in the day-to-day running of the company. Mr McDermott said while many business owners have coverage for property damage, there is often a lengthy gap between settlement of claims and the restarting of operations. “The bills don’t stop just because the business does, and this is why business interruption insurance is a valuable part of an insurance policy,” Mr McDermott explained. “At GIO we see a lot of instances where good businesses disappear simply because they can’t afford to continue when no income is coming in.

purchases of stock or raw materials. It is also important to carefully consider the indemnity period or the duration of the business interruption. When considering this aspect the following should be considered: 3

Are alternative premises easily sourced?

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Time lag in the replacement of equipment.

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If business is seasonal, the indemnity period should be 12 months. According to Mr McDermott, the old saying of being

prepared for any eventuality applies in spades when thinking about under-insurance and particularly business interruption insurance.

1 There is approx. 1.88m SMEs in Australia, ABS SME Figures 2007. Research suggests that 65% of small business don’t have business interruption insurance. The Australian Small Business Market for Financial Services, Ross Cameron Group, 2006. 2 Insurance Council of Australia Report on Non-Insurance & Under-Insurance Survey 2002


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ENVIRONMENT

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ENVIRONMENT Two major environmental concerns dominated 2007 – water (both regional and urban) and climate change. ACCI has been particularly active in these areas with the release of ACCI’s Urban Water Policy as well as numerous discussions with government and businesses on the issue of climate change. ACCI has vigorously pursued market-based solutions to these issues rather than heavy regulatory oversight. International lessons, particularly on emissions trading, must be closely watched and adapted to Australia’s own circumstances. The Environment Committee, under the chairmanship of Graham Heilbronn and Beatrice Booth, has pursued the following work priorities over the past year.

WATER ACCI 2007 Pre-Election Survey – Water The second release from ACCI’s 2007 Pre-Election Survey, also referred to in the Surveys chapter, revealed that business supports water recycling as a key feature of domestic water policy. A metropolitan-regional water market is also broadly supported, though support was strongest amongst metropolitan business. Question: The Recycling of Water Should be More Intensively Used as a Solution to Australia’s Water Shortages. The recycling of water was supported by 93.2% of businesses, with a closer look at the numbers revealing that 55.8% strongly agree that the recycling of water should be used more intensively while only 1.7% of businesses strongly disagree. Support for water recycling was broadly based with very similar results for both metropolitan and regional business as well as by industry classification. Question: Urban Areas Should be Allowed to Buy Water from Rural Areas. On the issue of water markets and trading water between metropolitan and rural sectors, business has mixed reactions. On balance there was support for metropolitan customers being able to access water from rural areas, with 45.4% of businesses supporting the policy and 30.6% of businesses not in favour. Support for water trading was slightly higher amongst metropolitan business than regional business. Support for trading was 40.4% and 33.3% respectively for metropolitan and regional businesses however regional businesses expressed stronger opposition with 20.7% opposed compared with only 10.0% for metropolitan businesses. ACCI supports wider adoption of market-based measures to promote water use efficiencies. If recycling or a water market is established, the private sector should be widely involved in the process. Urban Water Urban water is fundamental to Australia’s economic and social welfare, yet its importance to the community can make meaningful reforms difficult. However, water reform should not be linked to dam levels or rain but to a desire to improve the overall efficiency and sustainability of Australia’s water resources.

The current drought may have placed urban water in the minds of policy makers and the community alike but climate change will keep it at the forefront. No single policy instrument contains all the answers but reforms to pricing and property rights can address both the short-term difficulties and long-term challenges. There are major benefits to providing water at the correct price. ACCI considers that water from all supply options where possible be auctioned for the resource to be fully priced through competitive allocation. Monopoly water providers have access to the cheapest source of potable water. Auctioning will remove the ability of current water retailers to under-price this resource and create an incentive for alternative approaches to water management to enter the market. Access to water must go further than access to new or alternative water sources. While making use of existing supplies will benefit Australia, restrictions on finding new water sources must be removed. Water trading is not beyond the engineering capabilities of Australia yet it remains beyond the political capabilities. ACCI supports rural/urban water trading as a mechanism to further allocate water to its most valuable use. Trading can further enhance competition of urban water by introducing new low-cost supplies to new market entrants. However, urban water prices are the symptom of a wider regulatory disease. While it is argued that urban water remains underpriced, it is the regulatory environment which creates artificial constraints on supply and demand which is the main issue. Introducing water trading between rural and urban areas may see the price of water fall. The enhancing of competition for alternative and bulk water supplies will better allocate water resources than under the present system. Utilising the rivers of stormwater and wastewater that flow into the ocean is the most environmentally and economically responsible action for urban water planners. Regulation slows down and restricts uptake from new water sources and technologies. Yet in some areas of water use such as aquifers, poor information and lack of appropriate regulations leads to their unsustainable use. Regulations in other areas of water use and reuse provide a poor return for industry and households. While industry uses one third of urban water it has delivered large efficiency savings on this vital input. Regulations on industry cannot and should not be compared with those imposed upon households. Water is not a discretionary item in many industry processes. Australia’s urban water plan to date has led residents and business to: q use more potable water than is needed for a wide range of household uses including indoor, from toilets to dishwashers to showers, and outdoor, including gardens and with industry; q lose water in municipal water supply systems; q fail to re-use water when it is possible, after it has been used once;

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ENVIRONMENT q fail to take maximum advantage of opportunities to use surface and groundwater conjunctively, storing surplus surface supplies in wet years in aquifers for retrieval in dry years; and q fail to allocate water to its most efficient use. Time and cost advantages mean that water-use efficiency, both demand and supply, should be the primary focus before large-scale building of new dams, desalination and water trading measures are put in place. Yet, at the same time, efficiency requires an adequate pricing signal. The focus on water use efficiency must begin with the relevant pricing structures and regulatory mechanisms so that consumers and industry are given the proper incentives to invest in water-saving measures. Water efficiency options alone however are unlikely to provide long-term security to urban areas. Governments must also develop regulations for stormwater, wastewater and aquifers and provide the correct market signals for private sector investment. ACCI believes that reforms to urban water policy must revolve around the efficient supply, demand and re-use of water within a framework of tradable rights, light-handed regulation, competitive water service provision, smart technologies and clear market signals.

approach we should adopt to mitigate the negative effects that are anticipated. Question: The Federal Government Should Introduce an Emissions Trading Scheme in Advance of Decisions by Other Major Emitters (e.g. the USA, China & India) Whether or Not They Introduce Any Emissions Trading Scheme. Australian industry was moderately supportive of an emissions trading system even where other countries had not themselves adopted the practice. 52.3% of businesses felt that adopting an ETS in advance of others was a good policy measure, while 28.4% were unsure. 19.2% were against any move to an emissions trading system. Question: Indicate Your Level of Concern Regarding Level of Energy Costs. Energy costs were an important concern for business, with 59.5% of businesses indicating a major to moderate concern. In contrast, only 7.6% of businesses indicated that energy costs were not a concern. Given this strong level of concern in relation to energy costs it is imperative that any ETS has regard to the impact on energy prices. Question: The Federal Government Should Introduce a Greenhouse Gas Emissions Trading System, if it Includes a Reasonable Transition Recognising Increased Energy Costs. On the basis that there is a transition recognising energy costs, business was supportive of an ETS with 63.1% of businesses strongly agreeing or agreeing. ACCI advocates that where an ETS is to be enacted, a phase-in period and transition arrangements must be put in place, particularly for those most affected. Emissions Trading Scheme (ETS)

Shadow Infrastructure and Water Minister Anthony Albanese MP and ACCI Industry and Innovation Policy Director Greg Evans before an ACCI Industry Policy Committee Meeting, Canberra.

CLIMATE CHANGE ACCI 2007 Pre-Election Survey – Climate Change ACCI’s 2007 Pre-Election Survey, also found that climate change is a key concern for Australian business. Question: Climate Change is Likely to Have a Significant Negative Impact on My Business. 43.2% of businesses expect they will be negatively affected by climate change. Climate change was even more of a concern for regional businesses with 55.4% stating that it would have a negative impact on their business. ACCI recognises the impact of CO2 on climate change and considers that there should be a range of responses including technological improvements, a global Emissions Trading Scheme (ETS) and an examination of the role that nuclear power might have in electricity generation. The question that arises given the large exposure to potential climate change liabilities for Australian industry is what

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In March 2007, ACCI provided a submission to the Prime Ministerial Task Group on Emissions Trading highlighting the need for careful consideration before the introduction of a domestic emissions trading scheme. International political and business leaders have mostly stopped debating the merits of climate change science. While acknowledging some uncertainty still exists, they have already begun implementing policies which are designed to avoid or adapt to global warming. National and transnational emission trading schemes have become operational over the past decade while the Kyoto Protocol has been ratified and came into force in February 2005. In Australia the political position is no different with both sides of politics entering into dialogue on which the policy instruments better deliver on our Protocol commitments. A number of changes have occurred within the past year with regard to climate change since the Kyoto Protocol came into force, including the development and implementation of a European market for carbon, the consideration given by some US states to the development of their own markets and carbon trading support from potential US Presidential candidates. Given the political reality and the increasingly intense debate on carbon trading it is necessary that business has a best practice policy in order that its climate change position is given serious consideration.


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ENVIRONMENT Given the possible distribution impacts of climate change policy on business and the community in general, ACCI has identified six areas of policy priority: q Environmental Outcomes; q Economic Efficiency; q Australia’s welfare must not be substantially damaged; q Australian jobs must not be sacrificed; q Competitiveness of efficient Australian industries must be maintained; and q Australia should assume a fair share of the burden to reduce greenhouse gas emissions. Any ETS design will need to find the appropriate balance between these key policy priorities. However, while overarching principles such as those outlined above are important, it is also necessary to develop practical solutions to give effect to high-level policy. Therefore, a range of issues has been addressed by ACCI in relation to an ETS. These issues include the viability of including all greenhouse gases in an ETS, a ‘cap and trade’ or ‘baseline and credit’ scheme, emissions coverage, addressing trade-exposed sectors, upstream or downstream acquittal, linkages to international schemes and carbon credits. ACCI is formally opposed to the introduction of a carbon tax. The setting of a ‘tax price’ that is equitable and efficient is extremely difficult and is likely to understate or overstate the original objective which is to achieve a certain predetermined abatement target. ACCI also maintains that a number of key criteria must be met by any ETS before industry can endorse such a scheme. As with any policy, various options and criteria need to be weighted against the desired outcomes. Policy options that conflict require trade-offs between these competing objectives.

efficiencies are to be achieved, along with environmental goals. Aside from introducing additional complexity, an adhoc system would encourage firms to move interstate to the lowest cost jurisdiction based on the stringency of emissions regulations. This greatly reduces the economic efficiency of any scheme, depending on size of emission costs relative to other considerations and may encourage increased generation in states that are not covered by the ETS – particularly with a National Energy Market (NEM). On Friday 1 June 2007, Prime Minister John Howard released the Report of the Task Group on Emissions Trading. The report accepted the evidence on climate change and that risk management is required to address any adverse economic, social and environmental outcomes. ACCI welcomed the Report, which provides a workable framework with which all businesses, whether large or small, can engage. It represents a sensible approach which gives industry time to adapt yet provides more certainty in the economy especially where investment in carbon-intensive industries and infrastructure is being considered. The proposal also correctly identifies that any measures implemented must take account of Australia’s economic circumstances, our export industries, and jobs and growth throughout the economy. ACCI recognises the benefit of creating a worldwide carbon price signal through a trading scheme that includes China, India and the USA. In the short to medium term this does not seem possible, however the framework provided does offer a platform for their later participation. ACCI remains of the view that widespread participation of these countries is essential for a meaningful reduction in total emissions, recognising that Australia only produces around 1.5% of global emissions. In the absence of an international scheme, ACCI considers at minimum any ETS should:

The costs of climate change policy should be fairly distributed throughout the community.

q be a national scheme to avoid inconsistencies of a Statebased approach:

Furthermore, policies should be implemented so as to maximise environmental outcomes, economic efficiency or a combination of both. ACCI also believes that technology will provide the ultimate solution to global warming and as such any ETS should encourage new technologies, the development of old technologies and new entrants into the market.

q only proceed if there are no impediment on the uptake of energy from all fuel sources;

Any ETS must balance issues of complexity, coverage, abatement and technological incentives. Starting with a comprehensive ETS which includes all sources and ‘sinks’ supported by all level of Government with clearly outlined objectives must form the basis of debate with the broader community. A non-comprehensive ETS increases the costs of abatement, reduces economic efficiency and can create leakage of greenhouse gas emissions. Consequently, ACCI considers a state-based system, which does not cover all jurisdictions, as completely unworkable. National consistency in an ETS is imperative if economic

q the ETS needs to encourage less carbon-intensive energy generation including nuclear energy; and q not be used principally as a revenue raiser by government with any revenues raised allocated to lower emission technology development. The Taskforce model appears to provide for these key principles. ACCI endorses the principle of a comprehensive ETS and is encouraged by the direction of this report. There is no doubt a properly designed ETS can foster investment in sequestration technology, clean coal, expansion of natural gas and the serious consideration of the viability of nuclear power. On Tuesday 17 July, Prime Minister John Howard formally released the Government’s response to the Emissions Trading Task Group report. The response, entitled Australia’s Climate

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ENVIRONMENT Change Policy – Our Economy, Our Environment, Our Future, noted that climate is a serious global issue and that Australia is vulnerable to its influence. Furthermore, while Australia cannot address the issue on its own, it must prepare for a carbon-constrained future. ACCI welcomed the report’s recommendations and conclusions, noting that the measures outlined provide Australian business with a practical road map on how we can reduce greenhouse emissions, yet at the same time balancing this with the needs of an expanding economy which is creating jobs. We agree that tackling the issue of emissions growth needs a global approach and that the APEC Leaders meeting in September provided a unique opportunity for Australia to lead the development of a workable international solution. The Declaration announced a climate change action agenda including: q highlighting the importance of improving energy efficiency by working towards achieving an APEC-wide regional aspirational goal of a reduction in energy intensity of at least 25 per cent by 2030 (with 2005 as the base year); q working to achieve an APEC-wide aspirational goal of increasing forest cover in the region by at least 20 million hectares of all types of forests by 2020 – a goal which if achieved would store approximately 1.4 billion tonnes of carbon, equivalent to around 11 per cent of annual global emissions (in 2004); q establishing an Asia-Pacific Network for Energy Technology (APNet) to strengthen collaboration on energy research in our region particularly in areas such as clean fossil energy and renewable energy sources; q establishing an Asia-Pacific Network for Sustainable Forest Management and Rehabilitation to enhance capacity building and strengthen information sharing in the forestry sector; and q further measures in trade in environmental goods and services, aviation transport, alternative and low carbon energy uses, energy security, the protection of marine biological resources, policy analysis capabilities and a cobenefit approach. The main principles that guide ACCI’s approach continue to be that: q Australia’s largest contribution to address climate change will be through indirect measures, such as technology development, rather than through direct reductions in emissions; q Australia can reduce its own direct emissions, however its contribution to global climate change will be marginal; q all technologies must be available for abatement and not regulated out of consideration – including nuclear; q the broadest range of sectors must be included in an ETS; q all greenhouse gases must be included in an ETS; q a market-based solution, such as the introduction of an ETS, must be accompanied by the removal of mandatory regulations, quasi-market measures and subsidies for

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emissions abatement; and q Australia’s relative contribution to climate change is likely to decline relative to other countries. While a long term target is required to deliver business certainty, ACCI is not in favour of implementing an uncosted and premature goal which may have adverse economic implications. The Government response to the Task Group’s report included provision for the establishment of a modelling unit within Treasury to advise on the distributional impacts of introducing an Emissions Trading Scheme in line with ACCI lobbying. ACCI believes that Australian-specific modelling would be of greater policy benefit than international studies such as the Stern Review and would help to ensure that the final composition of a scheme appropriately reflected the needs of the Australian business community.

STATE EMISSIONS TRADING In 2004, a National Emissions Trading Taskforce (NETT) was established by the State and Territory Governments to develop a multi-jurisdictional ETS. After the Prime Minister’s Task Group on Emission Trading released its report, NETT changed its terms of reference to develop its own economy-wide ETS study. The NETT noted that ‘based on feedback from many stakeholders, and findings from continued analysis, State and Territory Governments have agreed to expand the Taskforce’s Terms of Reference. The Taskforce will now consider a scheme with broader coverage than that specified in its original Terms of Reference, and is investigating whether it is appropriate for a national emissions trading scheme to include other sectors – beyond the stationary energy sector – or to have economy-wide coverage’. Progress continues on developing an economy-wide, rather than an electricity-generator-specific ETS. Development work by the NETT includes the release of a discussion paper aimed at informing the further definition of auctioning proposals. As previously stated some permits would be given freely to the stationary energy sector and trade-exposed industries with the remainder being auctioned. Greenhouse Gas and Energy Reporting At the Council of Australian Government’s (COAG) meeting on 13 April 2007, COAG agreed to establish a mandatory national greenhouse gas emissions and energy reporting system, with the detailed design to be settled after the Prime Minister’s Task Group on Emissions Trading reported its findings. On Friday 28 September the National Greenhouse Gas and Energy Reporting Act 2007, was passed by Parliament. The Government has set aside $26.1 million over five years to implement the scheme. The Act establishes a national framework for Australian corporations to report greenhouse gas emissions, reductions, removals and offsets, and energy consumption and production, from 1 July 2008. The key design objectives of the NGER Act include: q cutting red tape for business by reducing the number of


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ENVIRONMENT reports to government and eliminating duplication across existing State, Territory and national schemes; q providing robust data as a foundation for an Australian Emissions Trading Scheme; q facilitating reporting of abatement and offsets prior to commencement of emissions trading; q providing company level information to the public on greenhouse and energy performance for the first time; and q creating a single online entry point for reporting based on the Australian Government’s Online System for Comprehensive Activity Reporting. It is estimated that approximately 700 medium and large companies will be reporting – an additional 300 businesses which are currently not required to report. The reporting system will cover more than 70 per cent of greenhouse gases in the cover sectors. From 1 July 2008, corporations will be required to register and report if they control facilities that emit 25 kilotonnes or more of greenhouse gas (CO2 equivalent), or produce/consume 100 terajoules or more of energy; or if their corporate group emits 125 kilotonnes or more greenhouse gas (CO2 equivalent), or produces/consumes 500 terajoules or more of energy. Lower thresholds for corporate groups will be phased in by 2010-11. The final thresholds will be 50 kilotonnes of CO2 equivalent or 200 terajoules of energy. Companies must register by 31 August, and report by 31 October, following the financial year in which they meet a threshold. Data will be published by the Greenhouse and Energy Data Officer by 28 February following each reporting period. ACCI will continue to engage in discussion with the Government on how the Greenhouse and Energy Reporting System may be implemented.

750 EMPLOYEES NO FOOTPRINTS Going carbon neutral for the future ABN AMRO knows the climate is changing and we believe we should too. As a founding signatory of the Equator Principles and leading participant in global carbon markets, we are now minimising our environmental footprint by going carbon neutral in Australia and New Zealand.

In addition to a range of green initiatives we are now purchasing carbon credits to offset travel, electricity and gas consumption, waste and paper use in our local business. Getting to grips with climate change is a global challenge. Reducing our own footprint will help address it. www.abnamro.com.au

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ACCI MEMBERS

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ACCI MEMBERS CHAMBERS OF COMMERCE AND INDUSTRY ACT and Region Chamber of Commerce & Industry 12A Thesiger Court DEAKIN ACT 2600 Telephone: 02 6283 5200 Facsimile: 02 6282 5045 Email: chamber@actchamber.com.au Website: www.actchamber.com.au Business SA Enterprise House 136 Greenhill Road UNLEY SA 5061 Telephone: 08 8300 0000 Facsimile: 08 8300 0001 Email: enquiries@business-sa.com Website: www.business-sa.com Chamber of Commerce & Industry of Western Australia (Inc) PO Box 6209 EAST PERTH WA 6892 Telephone: 08 9365 7555 Facsimile: 08 9365 7550 Email: info@cciwa.com Website: www.cciwa.com Chamber of Commerce Northern Territory Confederation House 1/2 Shepherd Street DARWIN NT 0800 Telephone: 08 8982 8100 Facsimile: 08 8981 1405 Email: darwin@chambernt.com.au Website: www.chambernt.com.au Commerce Queensland Industry House 375 Wickham Terrace BRISBANE QLD 4000 Telephone: 07 3842 2244 Facsimile: 07 3832 3195 Email: info@commerceqld.com.au Website: www.commerceqld.com.au Employers First™ PO Box A233 SYDNEY SOUTH NSW 1235 Telephone: 02 9264 2000 Facsimile: 02 9261 1968 Email: empfirst@ef.org.au Website: www.ef.org.au NSW Business Chamber Level 15 140 Arthur Street NORTH SYDNEY NSW 2060 Telephone: 13 26 96 Facsimile: 1300 655 277 Email: navigation@nswbc.com.au Website: www.nswbusinesschamber.com.au

Tasmanian Chamber of Commerce & Industry Ltd GPO Box 793 HOBART TAS 7001 Telephone: 03 6236 3600 Facsimile: 03 6231 1278 Email: admin@tcci.com.au Website: www.tcci.com.au Victorian Employers’ Chamber of Commerce & Industry GPO Box 4352QQ MELBOURNE VIC 3001 Telephone: 03 8662 5333 Facsimile: 03 8662 5367 Email: vecci@vecci.org.au Website: www.vecci.org.au

NATIONAL INDUSTRY ASSOCIATIONS ACCORD – advocate for the consumer, cosmetic, hygiene and specialty products industry Fusion Building Suite 4.02 (Level 4) 22-36 Mountain Street ULTIMO NSW 2007 Telephone: 02 9281 2322 Facsimile: 02 9281 0366 Email: bcapanna@accord.asn.au Website: www.accord.asn.au/association Agribusiness Employers’ Federation GPO Box 2883 ADELAIDE SA 5001 Telephone: 08 8212 0585 Facsimile: 08 8212 0311 Email: aef@aef.net.au Website: www.aef.net.au Air Conditioning and Mechanical Contractors’ Association 30 Cromwell Street BURWOOD VIC 3125 Telephone: 03 9888 8266 Facsimile: 03 9888 8459 Email: deynon@amca.com.au Website: www.amca.com.au/vic Association of Consulting Engineers Australia (The) L6/50 Clarence Street SYDNEY NSW 2000 Telephone: 02 9922 4711 Facsmilie: 02 9957 2484 Email: acea@acea.com.au Website: www.acea.com.au Australian Beverages Council Ltd Suite 4 Level 1 6-8 Crewe Place ROSEBERRY NSW 2018 Telephone: 02 9662 2844 Facsimile: 02 9662 2899 Email: info@australianbeverages.org Website: www.australianbeverages.org

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AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ACCI MEMBERS Australian Hotels Association 24 Brisbane Avenue BARTON ACT 2600 Telephone: 02 6273 4007 Facsimile: 02 6273 4011 Email: aha@aha.org.au Website: www.aha.org.au Australian International Airlines Operations Group C/- QANTAS Airways Qantas Centre QCA4 203 Coward Street MASCOT NSW 2020 Telephone: 02 9691 3636 Australian Made Campaign Limited 486 Albert Street EAST MELBOURNE VIC 3002 Telephone: 03 8662 5390 Facsimile: 03 8662 5201 Email: ausmade@australianmade.com.au Website: www.australianmade.com.au Australian Mines and Metals Association Level 10 607 Bourke Street MELBOURNE VIC 3000 Telephone: 03 9614 4777 Facsimile: 03 9614 3970 Email: vicamma@amma.org.au Website: www.amma.org.au Australian Newsagents’ Federation Ltd Level 3 33-35 Atchison Street ST LEONARDS NSW 2065 Telephone: 02 8425 9600 Facsimile: 02 8425 9688 Email: website@anf.net.au Website: www.anf.net.au Australian Paint Manufacturers’ Federation Inc Suite 1201, Level 12 275 Alfred Street NORTH SYDNEY NSW 2060 Telephone: 02 9922 3955 Facsimile: 02 9929 9743 Email: office@apmf.asn.au Website: www.apmf.asn.au Australian Retailers’ Association Level 11 45 Market Street SYDNEY NSW 2000 Telephone: 02 9290 3766 Facsimile: 02 9290 7180 Email: duncan.shaw@nsw.ara.com.au Website: www.ara.com.au Insurance Council of Australia Level 3 56 Pitt Street SYDNEY NSW 2000 Telephone: 02 9253 5100 Facsimile: 02 9253 5111 Email: comms@insurancecouncil.com.au Website: www.insurancecouncil.com.au

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Live Performance Australia Level 1 15-17 Queen Street MELBOURNE VIC 3000 Telephone: 03 9614 1111 Facsimile: 03 9614 1166 Email: info@liveperformance.com.au Website: www.liveperformance.com.au Master Builders Australia Inc. 16 Bentham Street YARRALUMLA ACT 2600 Telephone: 02 6202 8888 Facsimile: 02 6202 8877 Email: enquiries@masterbuilders.com.au Website: www.masterbuilders.com.au Master Plumbers’ and Mechanical Services Association of Australia (The) 525 King Street WEST MELBOURNE VIC 3003 Telephone: 03 9329 9622 Facsimile: 03 9329 5060 Email: info@mpmsaa.org.au Website: www.plumber.com.au National Baking Industry Association Bread House 49 Gregory Terrace SPRING HILL QLD 4000 Telephone: 1300 557 022 Facsimile: 07 3832 6960 Email: nbia@nbia.org.au Website: www.nbia.org.au National Electrical and Communications Association Level 4 30 Atchison Street ST LEONARDS NSW 2065 Telephone: 02 9439 8523 Facsimile: 02 9439 8525 Email: necanat@neca.asn.au Website: www.neca.asn.au National Fire Industry Association PO Box 6825 ST KILDA RD CENTRAL VIC 3000 Telephone: 03 9865 8611 Facsimile: 03 9865 8615 Email: info@nfia.com.au Website: www.nfia.com.au National Retail Association Ltd PO Box 91 FORTITUDE VALLEY QLD 4006 Telephone: 07 3251 3000 Facsimile: 07 3251 3030 Email: info@nra.net.au Website: www.nra.net.au/ NSW Farmers Industrial Association Level 10, 255 Elizabeth Street SYDNEY NSW 2000 Telephone: 02 8251 1700 Facsimilie: 02 8251 1750 Email: industrial@nswfarmers.org.au Website: www.iressentials.com


AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ACCI MEMBERS Oil Industry Industrial Association c/- Shell Australia GPO Box 872K MELBOURNE VIC 3001 Telephone: 03 9666 5444 Facsimile: 03 9666 5008 Pharmacy Guild of Australia PO Box 7036 CANBERRA BC ACT 2610 Telephone: 02 6270 1888 Facsimile: 02 6270 1800 Email: guild.nat@guild.org.au Website: www.guild.org.au/ Plastics And Chemicals Industries Association Inc Level 2 263 Mary Street RICHMOND VIC 3121 Telephone: 03 9429 0670 Facsimile: 03 9429 0690 Email: info@pacia.org.au Website: www.pacia.org.au Printing Industries Association of Australia 25 South Parade AUBURN NSW 2144 Telephone: 02 8789 7300 Facsimile: 02 8789 7387 Email: info@printnet.com.au Website: www.printnet.com.au Restaurant & Catering Australia Suite 32 401 Pacific Highway ARTARMON NSW 2064 Telephone: 02 9966 0055 Facsimile: 02 9966 9915 Email: restncat@restaurantcater.asn.au Website: www.restaurantcater.asn.au Standards Australia Level 10, The Exchange Centre 20 Bridge Street SYDNEY NSW 2000 Telephone: 02 9237 6000 Facsimile: 02 9237 6010 Email: mail@standards.org.au Website: www.standards.org.au Victorian Automobile Chamber of Commerce 7th Floor 464 St Kilda Road MELBOURNE VIC 3000 Telephone: 03 9829 1111 Facsimile: 03 9820 3401 Email: vacc@vacc.com.au Website: www.vacc.com.au

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142

Will Scherer Exceed (IT Services)

Glenis Bacon PGB Consulting (Accounting Services)

Peter Bacon PGB Consulting (Accounting Services)

Natalie Nikro Admin Support

Danielle Thompson Admin Support

Janice Webster Admin Support

Monica Mosmandor Publications Officer/ Web Administrator

Rozanne Crawford Manager Corporate Services

Brett Hogan Director Communications

Steve Hatzis Administrative Assistant

Daniel Mammone Workplace Relations Advisor

Scott Barklamb Assistant Director Workplace Relations

As of October 2007

Kathryn Walton OHS Advisor

Toula Papadopoulos OHS Advisor

Kellie Quayle Acting Manager OHS & Compensation

Peter Anderson Director Workplace Policy

Coreena D'Souza Executive Assistant / Office Supervisor

Nicolle Flint Director Corporate Relations

Personal Assistant

Peter Hendy Chief Executive

Bill Ma Economist / Statistician

Andrew Firestone Policy Advisor

Peter Johnson Policy Advisor

Greg Evans Director Industry Policy & Innovation

ACCI Organisational Chart

Don Jones Advisor Careers Advisors Australia

Anne Wilson Employment & Training Senior Advisor

Mary Hicks Director Education & Training

Interns

Branko Jovanovic (Thailand, Malaysia, Russia)

Marcela Bernal Executive Assistant

Robert Newton Arab, Latin America

Judy Bunfield Executive Assistant

Paul Gallagher (Japan, ASEAN)

Executive Directors Bilateral Business Councils

Advisor Skilled Migration

Director Trade & International

Michael Potter Director Economics & Taxation

AUSTRALIAN CHAMBER OF COMMERCE AND INDUSTRY 2007 ANNUAL REPORT & BUSINESS REVIEW

ACCI ORGANISATIONAL CHART


Austrade – Australia’s global business network

Austrade is the Australian Government agency that builds sustainable relationships between Australian exporters and international businesses through: > A global network of more than 140 overseas locations in over 60 countries, offering tailored advice, local market intelligence and industry insight; > TradeStart, a national network of export assistance ofďŹ ces, run in partnership between Austrade and local private and public sector organisations; > The Australian Export Awards, recognising Australian businesses for excellence in export; > Business Club Australia, connecting international buyers with Australian exporters at major international events including Rugby World Cup France 2007, the Melbourne Cup Carnival and the Beijing 2008 Olympic Games; > Reimbursing up to 50% of eligible overseas promotional expenses through the Export Market Development Grants scheme. To learn more about services available to exporters contact Austrade, your trusted international business partner. Phone: Web:

13 28 78 www.austrade.gov.au www.austrade.com


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