Speech in Parliament on the NSW Government’s Trains Procurement

2.15pm | September 14, 2016

Earlier this year the New South Wales Liberal government faced a choice. It needed to purchase new trains, a contract that would be worth billions of dollars and hundreds of jobs. The Baird government had the option in that process to choose a consortium that promised to manufacture the cars in a new facility in the Illawarra—a region that I think we could all agree deserves a break—or to pay slightly less to have the trains constructed in Korea. The Liberals chose Korea.

We have limited information about the basis for that decision, and that is part of the problem. The New South Wales government, in this and in so many other things, has kept the contract a secret. What we do know is that this contract is worth over $2.3 billion, and that is money that could have been invested in Australia. It is a contract that will involve hundreds of well-paid skilled manufacturing jobs, and it would have provided the opportunity for hundreds of new apprenticeships that could have assisted us in tackling very high rates of youth unemployment in our regions. We have some fantastic advanced manufacturing businesses in Australia, and we have highly trained and capable workers who staff them. Both EDI and UGL in the Hunter are more than capable of building this rolling stock. If we want to keep building things in Australia then we need to keep giving these businesses work.

I am not saying we should rebuild tariff walls, and I am not saying we should contract only with government owned firms or only with Australian firms. Sometimes sending work to the cheapest provider will be the right decision, but it should not be an automatic and reflexive decision. It is time to explore the possibility that we can have something more thoughtful than a doctrinaire approach to government procurement. I want to put two propositions.

The first is that we should think about coordinating our procurement in the rail transport sector. As we have seen with submarine procurement, the valley of death between contracts is a very significant issue for advanced manufacturers. Having a system for staggering orders for rolling stock across state governments, all of which need to procure significant volumes in the coming decades, has the potential to create significant economies of scale and drive down the costs of building in Australia.

The second is that we need to move beyond just comparing price tags as though we are shopping for a toaster. Government must take into account the economy-wide impacts of big procurements, and they should make it public when they do so. The Baird government justified their decision by saying that buying from overseas was better for taxpayers because it was 25 per cent cheaper than building here. There was not much public data available to support that, but that was their assertion. The Australia Institute has done some preliminary analysis. They acknowledge that their analysis is limited by that lack of data. Nonetheless, they found that building in New South Wales could have created thousands of jobs in the supply chain and in support industries. They found that the tax revenue to the New South Wales government from this economic boost could under some circumstances be more than the savings that would be achieved by sending the work overseas.

It is not just the question of tax revenue. The government sector is economically important in a way that the Liberal Party does not seem to appreciate. There has been a lot of celebration of the fact that we have had 25 years of continuous economic growth. However, we would not have had 25 years of continuous economic growth without government spending. In fact, last quarter our economy would have shrunk if not for a surge in public investment and public spending. Australia has a mixed economy in which government plays a role, and Labor is not ashamed of that fact. We recognise the important role of government in our economy. That is why in Victoria the Andrews government has stipulated a local build for its train contract, with at least 50 per cent local content required. That is why, federally, Labor were committed, when we were in government, to helping the steelworks in Whyalla and helping the steelworks in the Hunter, leading by example and working with Australian steel producers and their supply chains to maximise the use of Australian steel in government funded infrastructure projects.

The Baird government may say that we cannot afford to build these trains locally. Well, we just cannot agree. Labor say that we cannot afford to ignore our local businesses, to ignore our local workers and to ignore the benefits of building in Australia for our economy.