Listening to MMM radio last night, I was surprised listening to the news about Arrium as it quoted Bill Shorten extensively. It didn’t even mention Malcolm Turnbull or the Coalition. Bill Shorten might as well have been PM.
It’s becoming a recurring theme in the economy and politics. Malcolm Turnbull does nothing and that vacancy is filled by the ALP and the revitalised and policy driven Mr Shorten.
Don’t get me wrong. He didn’t come across as terribly well, with that piping and nervy voice no match for PM Turnbull’s natural gravitas, but he was at least visible and his ideas weren’t too bad.
The Australian today captures the milieu:
Malcolm Turnbull has directly intervened in the Arrium crisis, urging creditors and the company to co-operate and continue trading to allow time to develop a rescue plan to protect almost 7000 jobs across Australia.
…Bill Shorten pledged a Labor government would compel federal, state and local government agencies to buy Australian steel.
…Industry Minister Christopher Pyne said the Prime Minister had already announced $80 million in steel orders for Arrium’s Whyalla Steelworks by bringing forward the upgrade of 600km of rail line between Adelaide and Tarcoola in the far north of the state.
Arrium has estimated it needs between $100m and $120m in additional orders over the next two years to underpin its Whyalla operations.
The Opposition Leader said the government should consider a “co-investment” in the domestic steel industry to ensure it stays alive. “Tough times call for unusual actions. There’s a role for government in something as important as the steel industry; that we look (at whether) there are opportunities for co-investment for a period of time. If there is a way in which government can help the steel industry to stay on its feet, (whether it’s) helping them with technology transfer, so that we upgrade our industry, we should.”
Shorten has framed this in the wrong way. He should be saying that government will intervene only when there is a clear case of market failure, and that that is the case here given Chinese government owned enterprises are dumping steel on global markets. Because steel is an essential strategic industry we should bail out ARI but only with tough conditions to ensure tax-payer dollars get a return when the business is restructured and re-floated. It should be done at the Federal level because ARI is a national firm and the state government has less leverage to protect taxpayers. This stuff about protecting jobs and co-investment is very yesterday and will not resonate outside of the Labor heartland.
But it is still superior to do-nothing Malcolm who calls a couple of mates on the blower and sees his job done. Then he rolls out Chris Pyne on the 7.30 Report to defend the vacuum:
LEIGH SALES: Has the Federal Government and the South Australian State Government done any war gaming on a contingency plan if the Whyalla steelworks can’t survive in some form?
CHRISTOPHER PYNE: Well we’ve been working closely together over the last few weeks since really the issue became quite critical for Arrium and we’ve obviously been talking to them for a long time and since the weekend when Malcolm was – Malcolm Turnbull was very hands-on over the weekend talking to the banks. And the South Australian Government and the Federal Government are both talking about measures not to deal with the closure of Whyalla, but how to keep Whyalla open and to keep the business operating. Already, the Commonwealth Government’s brought forward the 72,000 tonnes of steel for the Tarcoola-Adelaide rail line. That’s a contract worth $80 million plus and I as the Industry Minister are using the anti-dumping commission rules to protect Australian businesses from being injured by unfair Chinese, Taiwanese, Malaysians, South Korean competition. So, we’re doing what we can. We’re using the levers that are at our disposal.
LEIGH SALES: Would you mount a bailout if it were required to prevent the company from going under?
CHRISTOPHER PYNE: Well Tom Koutsantonis, the South Australian Treasurer, has talked about putting cash on the table. That is the South Australian Government’s decision. They need to choose how they want to respond. We’ve responded by doing things like giving a big contract worth over $80 million for 72,000 tonnes, making that available to Arrium. That is a better lever from the Commonwealth Government’s point of view. If the State Government want to put a bailout package on the table, that’s a different matter, but they would obviously want to get some collateral for that and that’s why they need to be in discussion with the administrators and the banks.
LEIGH SALES: It’s fair to say, isn’t it, that they are a state Labor government, so they would be more inclined toward as bailout where because you are a federal Coalition government, generally you would support the operation of the free market and if the company can’t stand in the free market, that you would not be inclined to prop it up?
CHRISTOPHER PYNE: Well, BlueScope Steel, for example, at Port Kembla, have faced similar problems to Arrium. They haven’t got the debt, but they’ve got a debt, but they’ve got similar problems to Arrium. They have restructured their business, they’ve worked with their workforce, with the NSW State Government, who gave them a payroll tax holiday, effectively, worth over $30 million. There were a few measures that the Federal Government could bring about that were worth a little bit of money to them and they’ve made their own costs cutting and their business is now operating profitably. That’s a good model for the Whyalla steelworks. And let’s not forget that Arrium has spread throughout the country. There’s 500 workers in WA, 1,000 in Victoria, 1,000 in Queensland, 1,500 in NSW, 3,000 in South Australia. All of those state governments need to also to be in this – around this table talking about Arrium. But we are – we would be less inclined to put cash on the table because we brought forward the 72,000 tonnes of steel and we’ve got the Anti-Dumping Commission powers.
If you are going abandon your national responsibilities to the states then I’d recommend not underlining that abdication on the ABC.
Malcolm might try leading some time, you never know, he might enjoy it.
Meanwhile, from Business Spectator:
A senior banking source yesterday said the ripple effects of Whyalla shutting down on businesses and households in SA would be worse than any losses sustained as a result of Arrium’s collapse.
“Losing Whyalla would be a very bad option for us,” he said.
While not yet an agreed plan, the banks and the AWU could agree on a marriage of convenience if administrators from insolvency firm Grant Thorton resolve to shut Whyalla, which is bleeding cash.
…The banks’ preferred administrator, McGrathNicol, is believed to be have developed a plan that includes the short to medium-term survival of the steelworks.
This is the second article at News in two days refuting the claims by Matthew Stevens at the AFR that the bank consortium wanted to shut Whyalla. It matters because the only future for the firm is steel and that belief must drive the administrator in control.
