Australian Government Cuts Carpet Industry Aid

Sydney, Australia, June 8, 2009--Australia's $1.6 billion carpet industry faces a new threat to its viability following a federal government decision to slash support for capital investment by 90 percent next year.

The executive director of the Carpet Institute of Australia, Allan Firth, said the Government's move was buried beneath the economic news in last month's federal budget.

Responding to the review of post-2010 assistance for the textiles, clothing and footwear (TCF) industries, the Government announced it would cut import tariffs from 10 percent to 5 percent next year, and stop the strategic investment program (SIP).

"The tariff cut was expected, but the removal of SIP is baffling and mystifying," Firth said.

Program funding for TCF was reduced from about $330 million in 2005-10 to $30 million over the next five years. The carpet sector will receive a portion of that funding.

Firth said SIP had been highly effective, providing real help to companies for investment and new product development. "It worked well, and it takes quite a time for these schemes to bed down," he said.

Firth said SIP was designed because textiles, clothing and footwear did not have a good match between its R&D requirements and the guidelines of the grants scheme. There had been a low take-up by the carpet and other sectors, he said.

The Government's own expert review, the Green report, recommended a 40 percent rise in funding and a program that would include SIP elements from 2010 to 2015.

"But that was not supported," he said. "I don't think the guidelines for the new R&D program have been developed. It won't be an effective replacement for SIP."

The carpet manufacturing industry employs 2400 people directly and another 12,000 indirectly in carpet supply, retailing and installation. Many of the manufacturing jobs are in regional areas.

Victoria Carpets, for example, was established in 1954 and has a manufacturing base at Dandenong in Melbourne's south-east and spinning mills at Castlemaine and Bendigo.

The company employs more than 300 people and can produce pure wool, wool blends and synthetic carpets.

Firth said carpet had been a success story, capturing 65 per cent of the Australian market with substantial investment in equipment and innovation.

"One of the main reasons for this success was the Federal Government's support for capital investment and innovation," he said.