27th Parliament · 2nd Session
Mr SPEAKER (Hon. Sir William Aston) took the eli air at 2 p.m., and read prayers.
Mr FOX presented from certain residents of the State of Victoria a petition showing that the red kangaroo and many other marsupials, through shooting for commercial purposes, have been reduced to a numerical level where their survival is in jeopardy; none of the Australian States has sufficient wardens to detect and apprehend people breaking the laws in existence in each State, and in such a vast country only uniform laws and a complete cessation of commercialisation can ensure the survival of our national emblem; and it is an indisputable fact that no natural resource can withstand hunting on such a concentrated scale unless some provision is made for its future.
The petitioners pray that the export of all kangaroo products be banned immediately, and the Commonwealth Government make a serious appraisal of its responsibility in the matter to ensure the survival of the kangaroo.
Petition received and read.
– I move -
That the petition be printed. In accordance with the requirements of standing order 1 32, I inform the House that I intend to submit a notice of motion in connection with the petition.
Question resolved in the affirmative.
Mr WHITTORN presented from certain residents of the State of Victoria a petition showing that our national symbol, the red kangaroo, is, through shooting for commerce, being reduced to a numerical level where, if the shooting is not stopped, the animal will become extinct; reports from scientists, conservationists, tourists, graziers and shooters confirm that State governments are unable to effectively enforce legislation to control shooting and that kangaroos are already extinct in many areas where they once were prolific; science has estab. lished that kangaroos seldom come into direct competition for forage with sheep; there is, therefore, no reason why this unwarranted killing, which is branding us internationally as barbarians, should be allowed to continue; and we, the residents of this nation, want the kangaroo, which can be found nowhere else in the world, to be part of the Australian landscape. We believe that tourists, who will play an increasing part in the national balance of payments, want this too.
The petitioners pray that the House of Representatives will ban the export of products made from kangaroo; and quickly pass the legislation necessary to make the kangaroo a protected animal throughout Australia - the culling of herds for tha protection of the few property owners genuinely threatened by excessive numbers, or for the welfare of kangaroos themselves, to be carried out by or under direct supervision of Government officers.
Mr JARMAN presented from certain residents of the State of Victoria a petition showing that because of uncontrolled shooting for commercial purposes the population of kangaroos, particularly the big red species, is now so low that they may become extinct; there are insufficient wardens in any State of the Commonwealth to detect or apprehend those who break the inadequate laws which exist; as a tourist attraction the kangaroo is a permanent source of revenue to this country; and it is an indisputable fact that no species can withstand hunting on such a scale when there is no provision being made for its future.
The petitioners pray that the export of kangaroo products be banned immediately, and the Commonwealth Government take the necessary steps to have all wildlife in Australia brought under its control. Only a complete cessation of killing for commercial purposes can save surviving kangaroos.
Sir WILFRID KENT HUGHES presented from certain residents of the State of Victoria a petition showing that because of uncontrolled shooting for commercial purposes the population of kangaroos, particularly the big red species, is now so low that they may become extinct. There are insufficient wardens in any State of the Commonwealth to detect or apprehend those who break the inadequate laws which exist; as a tourist attraction the kangaroo is a permanent source of revenue to this country; and it is an indisputable fact that no species can withstand hunting on such a scale when there is no provision being made for its future.
The petitioners pray that the export of kangaroo products be banned immediately, and the Commonwealth Government take the necessary steps to have all wildlife in Australia brought under its control. Only a complete cessation of killing for commercial purposes can save surviving kangaroos.
Mr HAMER presented from certain residents of the State of Victoria a petition showing that because of uncontrolled shooting for commercial purposes the population of kangaroos, particularly big red, the largest living marsupial, has been reduced to a level which places their survival in jeopardy; none of the States has sufficient wardens to detect or apprehend people breaking the inadequate laws in existence. Only uniform laws, brought in at Federal level, and a complete cessation of killing for commercial purposes can ensure the survival of the kangaroo; and it is an indisputable fact that no natural resource can withstand hunting on such a concentrated scale unless some provision is made for its future.
The petitioners pray that the export of all kangaroo products be banned immediately, and the Commonwealth Government make a serious appraisal of its responsibility in the matter, to ensure the survival of the kangaroo.
Mr HUNT presented from certain residents of the Commonwealth of Australia a petition showing that the red kangaroo and many other marsupials, through shooting for commercial purposes, have been reduced to a numerical level where their survival is in jeopardy; none of the Australian States has sufficient wardens to detect and apprehend people breaking the laws in existence in each State, and in such a vast country only uniform laws and a complete cessation of commercialisation can ensure the survival of our national emblem; and it is an indisputable fact that no natural resource can withstand hunting on such a concentrated scale unless some provision is made for its future.
The petitioners pray that the export of all kangaroo products be banned immediately, and the Comonwealth Government make a serious appraisal of its responsibility in the matter to ensure the survival of the kangaroo.
Dr EVERINGHAM presented from certain citizens of Australia a petition showing that arms races, in which Australia is involved, have war as their natural conclusion; that peace movements have never succeeded except by general acceptance of a superior jurisdiction by previously independent sovereign regimes and their followers; that the size of the supreme unit of government has progressed, along wilh increasing communications, bringing mutual understanding and the means for unified administration to nations consisting of units formerly alien to each other; and that for the survival of mankind and the lasting security of nations, sovereignty over the means of making war must be passed to the citizens of a unitary world.
The petitioners pray that the House of Representatives will give leadership to other citizens by declaring adherence to the general principle of working for a democratic legislative, judicial and executive authority, with constitutionally limited and adequate powers over armaments and disarmament, and over diversion of a proportion of war budgets to a world development fund.
Petition received and read.
Mr COPE presented from certain citizens of the State of New South Wales a petition showing that clue to higher living costs persons on social service pensions are finding it extremely difficult to live in even the most frugal way; we therefore call upon the Common ‘.ealth Government to increase the base pension rate to 30% of average weekly male earnings, plus supplementary assistance in accordance with ACTU policy and by so doing give a reasonably moderate pension; and the average weekly earnings for adult male unit wage and salary earners means the figures issued from time to time by the Commonwealth Statistician and published quarterly.
The petitioners pray that the House of Representatives will take immediate steps to bring about the wishes expressed in our petition; so that our citizens receiving the social service pensions may live their lives in dignity.
Petition received and read.
– I ask the Prime Minister whether he or any of his Ministers would like to say anything this week about the Vietnam Moratorium Campaign. Would they l:ke to change any of the statements they made last week? In particular has the Prime Minister consulted with the Minister for Labour and National Service to ascertain from him how many ‘pack-raping bikies took part in the Campaign? If so, would he inform the House of the number? Finally, has he noticed the editorial comment of a leading Melbourne newspaper of 11th May:
It has been shown that a massive parade of dissent can make its viewpoint known.
– Order! I would remind the honourable member of the ruling I gave last week about giving information at question time. The honourable member will ask his question.
– The comment went on to say that the decisions have to be made here in Parliament. Can the Prime Minister say whether his Government will take any notice whatsoever of this massive parade of dissent, or will he continue to dismiss the views of the 200,000 people who took part in the Vietnam Moratorium around Australia and the views of those who support them? Will he and his colleagues, including the honourable member who is interjecting, continue to dismiss their views in terms of slander and insult as they did last week?
– I would say at the beginning that I am happy and I believe the Government is happy that the demonstrations were peaceful demonstrations. On the other hand, I am not at all sure - I have grave doubts - whether many of the Communist organisers are equally happy that they were peaceful demonstrations. As for the other part of the honourable member’s question, Government policy is to be determined at the ballot box on policies put to the electors at election time. These were put to the people of Australia at the last election and they were determined. I can assure the honourable member that that will be the democratic way in which this Government will formulate its policies; not as a result of marches in the streets.
– Mr Speaker, in. the honourable gentleman’s question there was reference to a statement made by me.
– I rise to a point of order. Under what provision of the Standing Orders is the Minister making a statement? Is he asking for leave to make a statement, is he answering the question, or is he just trying to pull his head in?
– Does the Minister wish to make a statement? If so, I suggest that it might be made after question time.
– The question concerned the Prime Minister or any of h”s Ministers.
-Order! The Minister has not leave to make a statement at this stage.
– Has the Minister for External Affairs any information available concerning the situation in Cambodia at the present time? What consequences can be foreseen for the future as a result of the military moves that have taken place over the past few days?
– The main conclusion that one can reach about the combined military operations in Cambodia in recent days is that tension has been considerably reduced. From the reports that have been made available by the United States and the South Vietnamese military representatives and Government, it seems that the operations have been completely successful. Certain other things can be said, too. The closing of the Mekong, which held up the movement of supplies and troops into Phnom Penh, has been relieved. South Vietnamese ships have passed up the river as far as Phnom Penh and will probably go as far as Kampong Cham. Vast quantities of arms, ammunition and supplies of all kinds have been captured, and in some quarters it is felt that it will take at least 8 months before these can be restored. The COSVN, or Central Office for South Vietnam, has been attacked and for some time it was out of communication. Above all one other lesson can be learnt. If the United States makes up its mind and gives up the doctrine of privileged sanctuary, there is no doubt whatever that it can make a decisive impact. I hope that this message will be learnt not only in South Vietnam but throughout the world.
– I ask the Prime Minister: Does his Government subscribe to a policy of freedom of association, or does it subscribe to a policy of guilt by association? Is he aware that over 200,000 people throughout Australia who were under considerable pressure against taking part did participate in demonstrations against Australia’s involvement in the war in Vietnam and against conscription? Does he not realise that these demonstrations were very much the result of a conviction that the Government is contemptuous of the views of a substantial number of the Australian people?
– There can be no doubt in anybody’s mind that this Government does subscribe to freedom of association and to the rights of people and citizens to express their views even when they dissent from the Government or dissent from any other mode of authority. We in fact - I said this in the House the week before last - believe that every member of this Parliament ought to support the right of an individual to be able to demonstrate bis beliefs. We do not believe that the individual has a right to interfere with the rights of other people when demonstrating those beliefs nor to break the law in so doing nor to lead to actions of violence by refusing to accept that they are breaking the law. These are 2 quite distinct things but the honourable member can be quite sure that, insofar as peaceful expressions of opinion which do not interfere with the rights of other citizens are concerned, the Government is concerned to support them.
– Is the Minister for Customs and Excise aware of a recent report in a newspaper in which a social worker in Melbourne when addressing Melbourne University students is alleged to have said that ‘drug abuse in this country is sensationally enlarged but in fact is not enough to worry about’? He is also alleged to have said that Australians must accept drug taking by young people just as they had learned to accept alcoholism and that educating young people against taking drugs would probably have more harmful effects than helpful ones. Does the Minister have any comparative figures which could indicate the growth and extent of drug taking in Australia? Does he agree that any drug taking by young people must be accepted? ls he aware of any evidence to suggest that educating young people against taking drugs is more harmful than helpful?
– My answer to the last part of the honourable gentleman’s question is that I would agree with the social worker, who must be respected because, as I understand it, he has had a great amount of experience with young people taking drugs, if he said that health education wrongly directed or in the hands of amateurs can be counterproductive or can be more harmful than useful. On the other hand the honourable gentleman asks whether the Government is concerned with the drug taking problems in Australia and seeks some comparative statistics, lt is very hard to announce a set of facts with any amount of certainty. When I say that the Department of Customs and Excise seized 18 times more marihuana and hashish this year than last year, that can mean a great number of things. It can mean that our methods are more efficient. It can also mean that our competitors’ methods are more efficient. There can be no shadow of doubt that international syndicates which want to smuggle this garbage into Australia are stepping up their activities. The honourable gentleman asks how we should regard this. Statistics issued in the United States of America as late as 11th March from the White House indicate that somewhere between 12 million and 20 million Americans today are using, or have used, marihuana and hashish. This is a figure which fills me with great concern. The honourable gentleman also asks what we can do about it. I believe that no matter how efficient we are in the Department of Customs and Excise we cannot and shall not stop all the narcotics coming into Australia. We shall stop only the tip of the iceberg and we shall never know how big the submerged part is. So the only conceivable answer is health education and the provision of the appropriate amount of money to support the kind of health education programme that is needed. The kind of health education we need would be not only the education of parents so that they will be aware of the possible dangers and how to alert their children to those dangers, but also the education of the community itself to look for things such as the quality of life rather than the material things which tend to drive people on to seeking false methods of gaining euphoria.
– I direct my question to the Prime Minister. A few minutes ago he implied that laws were broken in the streets of Melbourne last Friday. I ask the Prime Minister to say what laws the people of Melbourne broke in their manifestations in Bourke Street last Friday? As between 75,000 and 100,000 people surged into the Melbourne streets on a working day in the largest manifestation of political concern in Australian history, will he apologise to the people of Melbourne for the series of insults levelled at them by Government supporters last week? If no laws were broken does he approve of what happened?
– The honourable member obviously cannot have listened to the question that was asked of me and the answer which I gave only a few minutes ago. I was asked whether the Government approved of freedom of association. There was no mention of Melbourne or Melbourne streets or any other particular locality, but whether one approved of freedom of association, and the answer I gave I will now have pleasure in repeating: That we do approve of that, that we do believe that ought to be supported by ali members of Parliament, and we equally believe that when the false claim is made that there is a right for people to associate to interfere with the rights of other citizens or to break the law then every member of Parliament ought to resist that, and these are the principles to which I gave an answer on a question of principle.
– I rise on a point of order.
-Order! The honourable member for Reid will cease interjecting across the table. I raised this matter with honourable members last week. The honourable member for Wills has risen on a point of order.
– The point of order is with reference to the relevance of the answer. The question I asked was-
-Order! The honourable member will state his point of order.
– The Standing Orders are quite clear that an answer must be relevant to the question. The question that I asked was: Were any laws broken in the streets of Melbourne last Friday?
-Order! The honourable member well knows that a Minister may answer a question as he thinks fit. In fact, a Minister is not obliged to answer a question.
– I direct a question to the Minister for Primary Industry. I refer to the announcement this morning by the United States Department of Agriculture that a ban has been placed on imports of mutton from Australia. Can the Minister inform me of the reasons for such a ban and of what steps are being taken to deal with the matter?
– While I was in Ottawa last week at the wheat talks, the Secretary of Agriculture in the United States, Mr Hardin, told me that he was deeply concerned at the high rejection rate of Australian mutton exported to the United States. The rejection rate had amounted to about 1 million lb up to the middle of April. This indicated that our meat was not meeting the standards necessary for entry to the United States market. He also told me that he was coming under very severe criticism by the Congress because this meat was coming to the United Stales market. Because of this 1 arranged for the Secretary of my Department, who was with me, to fly immediately to Washington to have talks with the Department of Agriculture there and to ascertain what the position was. He reported to me that it seemed inevitable that a decision would be taken to place a temporary ban on the import of mutton from Australia until the general standards of hygiene and of mutton inspection in Australia came up to the US requirement. An announcement was made yesterday afternoon that this ban is to apply. The US decision is that mutton produced in Australian meat works after 15th May will not be eligible for export to the American market but mutton packed up to and including 15th May will be allowed. This restriction will remain in effect until the US authorities are satisfied that the Austraiian inspection standards are the same as those that apply to the US Department of Agriculture and as required under the United States Wholesome Meat Act. Mutton export meat works will be reinstated only after recommendation by my Department and after reinspection of each works by US officials. My Department has also convened a meeting of the Meat Industry Advisory Committee in Canberra for this Thursday so that the whole matter might be discussed and we might be able to implement measures so that mutton meat works can be reinstated.
– Mr Speaker-
– I take a point of order, Mr Speaker. The Minister was asked a question about the conduct of some soldiers in Adelaide last Friday. He is now making comments which he prefaced with the comment that he does not know whether they apply in the case of these soldiers. How then-
– So, it appears from the Minister’s own words that what he is saying cannot be relevant to the question that he was asked. He himself admits that he does not know whether it applies.
– I take a point of order. Some of these matters are presently before the court. The matter is sub judice. The Minister is attempting to give reasons which may influence the court.
– Do you expect them to be put on trial?
– I raise a point of order. I know, Mr Speaker, that you have applied a fairly rigid rule when members of the Opposition have quoted newspaper articles. They have had to vouch for the accuracy of the report. The Attorney-General has not done this. He has proceeded to quote from this article as though it were a record of fact. I think the rule applied to members of the Opposition should apply also to him.
– I raise a point of order. Mr Speaker, in answer to what the AttorneyGeneral continued to say when you were calling for order, it would be out of order for the honourable member for Lalor, who was challenged, to make a denial at this stage. The Attorney-General is able to make a statement on this matter, or on any other matter, at any time and it can then be the subject of debate. The point of order I was putting is this: Even if the Attorney paraphrases or otherwise asserts the accuracy of the newspaper report, this would not make it relevant to the question. The Attorney already has proceeded far enough to show that he is about to embark upon a subject which is not relevant to the question asked of him. The question related solely to the conduct of people, not to anything that was said or alleged to have been said on another occasion by an honourable member of this House.
– Mr Speaker, in order to clarify my mind, will these remarks be deleted from Hansard?
– Mr Speaker, the statement is not true. There were flags of all nations.
– So it does not have to be true.
– I ask for leave to make a personal explanation arising out of what the honourable member has just said.
– It is on the same subject, yes.
– I have listened to the honourable member’s explanation. I am speaking from memory now but what I say is correct. If the honourable member checks Hansard he will see that 1 did not say that he listed Mr John Ryan but that he mentioned that everybody supporting the Moratorium was either a Communist or a Communist sympathiser. I posed the question: Does the honourable member include Mr John Ryan, the Melbourne “ Catholic Worker “ and a number of other members?’ In other words, my statement was that he inferred that Mr John Ryan also was a supporter of the Communist cause, not that he listed him in his speech but that he was including him with me and other members who supported the Moratorium as Communist sympathisers. That is totally different to what he has just said.
– No - yes, further misrepresented certainly. I was intending to reiterate what I said previously.
– I most definitely claim to have been misrepresented. It seems to me that the honourable member for Grayndler does not read his copies of Hansard at all. I suggest that he read them because I have been seriously misrepresented. I repeat, without going through it all, what I have just said.
Debate resumed from 19 March (vide page 647), on motion by Mr McEwen:
That the Bill be now read a second time.
– The Opposition does not oppose this Bill which makes certain amendments to the Export Payments Insurance Corporation Act. The Bill will enable EPIC, as it is called, to cover the external Territories of the Commonwealth, in particular Papua and New Guinea. It seeks to increase the maximum contingent liability - that is, the total amount for which it is liable, in certain circumstances, under its various policies - by SI 00m in respect of contracts of payments, insurance and other guarantees. The Bill also seeks to increase by $60m the contingent liability on insurance of Australian investments overseas. As a fourth proposition it seeks to increase the maximum staff salary that can be paid without ministerial authority.
As I have indicated, the Opposition regards these as necessary enough improvements to this quite significant legislation. In introducing it the Minister for Trade and Industry (Mr McEwen) made what was in some respects a rather peculiar speech. Not only did he extol the virtues of the Export Payments Insurance Corporation but he very kindly branded in advance a measure that had not even come before the House, that is, the Australian Industry Development Corporation Bill. In this debate 1 do not want to proceed upon the second line. I said to the Minister at the time that I felt he should have moved the adjournment on both debates. At least we will have an opportunity next week to talk about the merits of the Australian Industry Development Corporation which can now be judged by everybody. I do not want to say anything further about that at this stage. The Opposition at least has always looked favourably upon the institution about which we are talking, the Export Payments Insurance Corporation. Again the Minister for Trade and Industry was at great pains to underline that before this institution had been born some 14 years ago there had been considerable resistance in certain quarters to its formation. I would like to place on record the fact that those objections did not come from this side of the House. Candidly we would have liked the Export Payments Insurance Corporation to have gone even further than it did. Since it began a considerable number of amendments have been made to the legislation that established it, mainly increasing the amounts of contingent liability.
I would like to take some figures from the 1969 annual report of this Corporation. The Corporation was created by legislation in 1956: so it is almost 14 years now since it began. The number of policies taken out in the course of the year is still relatively small, lt is a fairly select band of people that has recourse to the Corporation and later I will say something about extending its ambit. On page 6 of its 1969 annual report the face values and number of policies are shown. For the year ended June 1969 there were in total 740 policies. Of these. 367 - slightly less than half - were for amounts under $100,000; 224 were for amounts between $100,000 and $400,000; 122 were for amounts between $400,000 and $2m; and 27 were for amounts exceeding $2m.
When we look at the face value of the operations we see that although there were 367 policies - nearly one-half of the total transactions - in the first group I mentioned, they accounted for only $12,686,000 out of a total face value of $298m or near enough to S300m. They were a very minor part of the total. But when we lake the contracts for amounts over $2m - there are only 27 of them - we see that they accounted for a face value of $13 Im or almost half of the value of all contracts that were undertaken during the year. So at least to some exporters these contracts are of considerable significance. On page 7 of the report there is a break-down of the nature of the exports that are insured. Of a total face value of $298.8m, $84. lm, or more than a quarter of the amount, is for greasy wool, $43.9m is for processed wool and $20. 6m is for dairy products. So in aggregate half of the contracts that arc insured are in respect of (he handling of those prime items of export trade, wool and dairy products.
In an article headed ‘Finance for Exports’, appearing on page 424 of the December 1969 volume of the Bank of England Quarterly Bulletin’ - the most recent available - a very comprehensive history of export payments insurance is given, lt is conducted in Great Britain by an organisation known as the Export Credits Guarantee Department. The article says:
Because most export contracts are won in the face of international competition, including competition on credit terms, post-shipment finance may have to be provided by the exporting country.
That is the situation that brings these organisations into being. We can get a lot of trade overseas provided wc make the arrangements for our own self-finance, at least internal, rather than expecting to bc paid immediately by the person to whom we sell. The article continues:
If the United Kingdom’s experience can be taken as n guide, most of this finance is of a short term nature but the United Kingdom, like other countries exporting capita! goods, has in recent years provided an increasing amount of medium and long-term finance.
I would suggest that the experience of the United Kingdom is also becoming the experience of Australia in this field. It is not so much that finance is required for the majority of our exports. If one takes into account that last year Australia’s total export trade was in the region of $3,400m - certainly over $3,000m - and the value of contracts covered by export insurance was in the region of S300m or about onetenth, it is seen that only a marginal amount of trade is covered in this way. Nevertheless that marginal amount is significant.
If Australia in the years ahead is to strengthen its internal economy and play its part in world economy it has to diversify its export trade. The fields that perhaps have been neglected up to date include exports of capital goods as distinct from what might be called consumer goods and raw materials. Some years ago there was created in Australia an organisation known as the Australian Banks Export Refinance Corporation Ltd. It has been in operation now for 5 years. I want to quote one or two passages from the fourth and fifth annual reports of that body - a consortium I suppose it is called these days - which was formed among the banks. The proprietor members of it are the Australian and New Zealand Bank Limited, the Bank of Adelaide, the Bank of New South Wales, the Commercial Bank of Australia Limited, the Commerical Banking Company of Sydney Limited, the Commonwealth Trading Bank, the English Scottish and Australian Bank Limited and the National Bank of Australasia Limited. All of what are called the private trading banks and the Commonwealth Trading Bank are members of this Corporation. In its fourth annual report on page 10 under the heading ‘Credit Terms in International Trade’, the Corporation notes:
In some circumstances, the banks, . . .
That is, the proprietor members: with the backing of the Australian Banks’ Export Re-Finance Corporation, have in fact agreed to provide post-shipment credits for periods of up to 10 years.
That is long term finance as against short term finance. We all know that banks by and large regard themselves as providers of short-term credit rather than long-term credit. I am sure that my colleague, the former banker, will agree with me that banking science can no longer be summed up in the simple proposition that the mark of a good banker is that he can tell the difference between a mortgage and a bill of exchange. It is a much more sophisticated and complicated proposition nowadays. The article continues:
The level of exports which rests on the provision of medium- or long-term credit to overseas buyers is a relatively small part of the total Australian export structure. However, as more Australian manufacturers are attracted into this field by the export facilities and incentives provided, requirements for this type of finance will undoubtedly increase.
In the last available annual report that organisation underlines that point even more:
At the end of nearly 5 years of the Corporation’s operation, it is apparent that use of its facilities is quickening, which points to increasing success of exporters in the highly competitive overseas markets for capital goods.
The resources of the Corporation are available to banks which are providing medium to longterm finance for exports of a capital nature, and ensures that finance is not a limiting factor in the development of that field.
The level of exports which requires provision of medium or long-term credit to foreign buyers is a relatively small part . . .
That repeats what was said in the annual report of the previous year. The report continues:
However, as more manufacturers are attracted into this area by the facilities and incentives provided, requirements for this type of finance should increase, although any expansion in the scale of exports of capital goods is likely to be intermittent due to lack of continuous opportunities in individual export markets.
Perhaps this points to a need to widen the scope and also to increase the technical and know-how resources that are available to the Export Payments Insurance Corporation. I read an interesting article the other day in a Canadian publication, the Bank of Montreal’s ‘Business Review’ issue of 27th June 1969. It stated that it had been decided to replace ECIC - that is, the Export Credit Insurance Corporation - by a new organisation to be called the Export Development Corporation - the EDC - which has been given a far wider scope and flexibility to enable it to respond effectively to the changing needs of exporters. I suggest that that is the kind of development which is necessary also in Australia. The proposition of creating the Industry Development Corporation is an interesting one but I submit that there may equally be a need to graft something on to EPIC in Australia as was done to EC1C in (be case of Canada to turn it into an export development corporation that will have available to it wider statistical information and resources of skill, knowhow and experience to explore this very significant development which has to be expanded by Australia in the years that lie ahead.
We heard this afternoon from the Minister for Trade and Industry during question time an implied indication that there was no doubt that the buyers of Australian wool were far better organised than the sellers of Australian wool. I think that equally sometimes the exporters of Australia are not as well organised as they can be. In fact, in some respects of course there is no direct incentive for most firms to export at all; at least not yet. That may be a circumstance that is ahead of us and 1 do not want to overlook the very important role that has been played in Australia over the years by that body known as the Export Development Council. That is an organisation of commercial and business people for the promotion of Australian trade overseas. Nevertheless, there is not much doubt at the moment that as long as there is an assured market at home there will not be any great enthusiasm on the part of people who might be able to export to seek export markets.
It is true, I suppose, that on balance Australia does have to export to survive, but we have tended to rely in the past upon certain staples. One example is wool but they are basically primary products. In recent times we have gone into the field of minerals. Using the field of minerals as an example it does seem that instead of the problem being treated as a whole there is a tendency for individual exporters to get into the hands of fairly well organised buying groups overseas. It seems in some respects that Australia is still at a great disadvantage in this matter, particularly in its trade with Japan. If one reads - as I think one has to these days - something about the structure of the Japanese economy, one sees that there is not any doubt that the Ministry of Trade in that country plays a very much stronger role in co-ordinating the activities of its importers than does the Australian Department of Trade and Industry in coordinating the activities of our exporters. I do not know how long that situation can continue to exist. It may be that the Minister for Trade and Industry thinks that this is one of the roles that might well be taken under the wing of the Industry Development Corporation, and wc will have an opportunity to look at that later on. But I do commend to the Minister and to the Minister for Shipping and Transport (Mr Sinclair) the experience in Canada where instead of just looking at this matter from the point of view of an insurance corporation, there has been a tendency to look at it in terms of expanding the exports that it is hoped to insure. The Bank of Montreal’s Business Review’ states:
One of the most interesting new developments is the creation of facilities to insure Canadian investments. . . .
We have that already in this country and one of the purposes of this measure is to increase the contingent liability backing that. The article continues: . . in lesser-developed countries against such political risks as war, insurrection or revolution, expropriation or confiscation, and prohibitions against the repatriation of earnings or capital . . .
To some extent some of those measures, if not all of them, are covered by the special risks insurance that is transacted by EPIC. As the Minister indicated when introducing this Bill, one of the principal things he has in mind is to allow the Corporation’s writ to run as far as trade with Papua and New Guinea is concerned and, in particular, the development of the copper proposition in Bougainville. Again, I would imagine that there is in mind the export of capital machinery from Australia to assist in that venture. I suggest that that is a worthy objective. It should also be increasingly pursued in respect of our other near neighbour, Indonesia. I am one who always believes th:tt I effective form of defence of a country is to build better relations with neighbours and we are more likely to have better relations with our neighbours if they feel that we are assisting them with know-how and other facilities which we have but they have not. This is particularly true of Indonesia which is at a stage where it must have large sums of money invested in capital undertakings. It may well be that Australian business is in the position to supply many of these capital needs. No longer can we think of our export trade only in terms of primary production and the great new hope - minerals. I think we should also be expanding our export of manufactures, particularly our export of manufactured capital equipment that will enable the countries to which it goes to diversify their economies. We are well placed in this part of the world from the point of view of numbers of customers except that in banker’s terms those customers do not yet have enough money in their pockets to be good propositions. They will get more money in their pockets only as the levels of their economies are lifted, and we are in a very good position to help them.
As I have indicated, we offer no objection to the passage of this measure. I congratulate EPIC on the work it has performed from year to year. Each year its annual report has been a record of greater success than in the preceding year. That this should be so is a tribute to the management and to the skill of the staff. I would hope that we take a longer term view in the decade now beginning and diversify the nature of our exports. Perhaps we should think in teems of financing items the payment for which might take as long as 10 years. The banking mechanism may have to be adapted to allow this to be done. For instance, in the United Kingdom model certain funds are not counted in considering the liquidity of the banks if they are lent on a long term basis to encourage export trade. I would commend that sort of expansion to the Government. The body in Great Britain is the Export Credits Guarantee Department. There is wide co-operation in the United Kingdom between that Department and the Board of Trade, which is the equivalent of our Department of Trade and Industry. I have no doubt that there are very happy and fruitful relations in Australia between EPIC and the Department of Trade and Industry but it seems to me that as yet we do not have as much enthusiasm in this country for exports as such as seems to exist in some of the older economies, particularly those of Europe and that of the United States. But if Australia is to survive as an expanding economy this is the way in which our trade must improve in the years ahead.
– The Export Payments Insurance Corporation has been a resounding success. In the 11 years of its existence it has provided cover against loss for $ 1,064m exports. As the honourable member for Melbourne Ports (Mr Crean) said, in the year ended December 1969 EPIC issued 780 policies covering exports worth $330m. The Corporation has demonstrated in practice its effectiveness. Its operation has convincingly answered those criticisms made by members of the Opposition during the debates in 1956 when the Bill setting up EPIC was introduced.
In introducing this Bill on 19th March last the Minister for Trade and Industry (Mr McEwen) covered fully its provisions, with detailed reference to the operations of EPIC since it was formed. So completely did he deal with these aspects that I do not intend to embellish his remarks but I would like to address a few comments to the principle of the Bill and the Corporation. Before I do so, however, perhaps I should take the opportunity to refer to one or two matters raised by the honourable member for Melbourne Ports. If I may say so with respect, his tone was very mild. He employed none of the strong language which he and his colleagues introduced into the debate on the original Bill in 1956. He said that Labor always looked favourably on the Corporation and would like the Bill to go further than it does. To his credit he concluded his remarks by congratulating the Government on introducing this measure. A close reading of the debates in 1956 shows rather more stringent criticism by the Opposition of the proposals then announced. However, the honourable member for Melbourne Ports today made a number of points which I think it is only fair to say were anticipated in 1956 by the Minister who introduced the Bill. Perhaps the major point of the honourable member’s remarks was the need which he sees to provide credit facilities of some kind. I think I am correct when I say that this was a matter raised by the honourable member in the original debate.
Of course, to adopt as policy the suggestions made by the honourable member would lead the Government to provide what would amount to an export of capital because at any one time very large sums would be involved if this fund of export credit were to grow, and presumably the honourable member sees it in fairly large terms and not a small term. This would require the provision of large funds from savings and the import of capital into this country. In other words, the money would come from funds, which we require for investment. Thus far Australia has been a capital importing country. We have been able to put imported capital to very good use. In considering the honourable member’s proposal for ‘ the provision of credit a government would have to balance the need to expand and diversify exports as much as possible with the need for importing as much capital as we can get into this country to build up our strength and develop our huge natural resources which we are now trying to develop with our relatively tiny resources of labour and capital.
In the debate on the original Bill Opposition members raised issues involving deep party principles and policies for the Liberal Party. I would think, although I cannot speak for it, that the Country Party also was involved. In introducing the present legislation on 19th March last the Minister for Trade and Industry touched on these matters of party principles in referring to EPIC and the Australian Industry Development Corporation. He referred to the earlier criticism that these bodies were Socialist in concept. It is not uncommon for Liberal governments to be challenged by the statement that a certain proposal is Socialist. The underlying principles of EPIC and AIDC should be examined with this criticism in mind. I believe that the problem confronting this Government - it should be a problem of all governments and all members of Parliament - is to balance the freedom of the individual with the rights of the individual and the public interest. It is a nicety of judgment to interpret that principle. The decision as to when that principle is involved requires the active consideration of all who are resolved to maintain a private enterprise economy; all who really believe in allowing individuals freedom to live and work as they wish; all who strive to create a climate for the encouragement of initiative and resourcefulness, leading to productive efficiency, high output and a fair share of the nation’s wealth. Thus the principle applied here involves firstly the setting of an economic climate to achieve international trade and secondly the justification of the need to act if competition or testriction of private enterprise is involved. In this, EPIC is a good example. Indeed, it is fundamental Liberal policy that some controls in Government administration are necessary to maintain greater freedom for others - that is, the public interest - for freedom and not licence is the aim. But also Liberal principle conceives controls which are not controls for their own sake, which are theoretical and truly Socialist or, as the great Burke said, ‘Liberty too must be limited in order to be possessed’.
A strong case must be made for the real justification that such legislative methods are for the public good. For Liberals favour to err, if indeed there is a need to err, on the side of the individual and to leave things to be done in the private way. Our belief in private rights giving preference to the private way of economic development has proved right and desirable for all the community. I believe in private enterprise because of its respect for individual freedoms - freedom of choice tempered by considerations of the public interest - for out of that in the long term will come the correct way to proceed. I believe that the broad economic practice of resource allocation in our free private enterprise economy has proved the best for the community of Australians. It is an important element of the justification in this Bill in clause 4, which seeks to amend section 13 of the Act, that the Export Payments Insurance Corporation does not enter into contracts of insurance against risks normally insured within commercial insurance.
This Government and the Parties which comprise it are the significant force in our country to strike a just balance between the freedom of individual citizens and the rights and claims of public interest. This is a continuing problem of judgment. It is no problem to Socialists because everything is in the public interest and the individual is just a cog in the State machine. Indeed, the senior Labor speaker in the debates in 1956, to which I have referred, himself advocated a nationalised insurance scheme. That surely serves to remind us of Labor’s objectives. I believe that the principle underlying this Bill has been justified by the Minister in every way, including justification within the principle that I have stated, and that a most substantial case has been made out for the Australian Industry Corporation Bill too. Further, it is consistent with Liberal principles and with practical common sense. 1 believe that the Minister has shown that, to use his own words, it is not:
The record of achievement of EPIC shows its value in promoting export expansion and diversification in the interests of private enterprise and of the nation. Private enterprise is the backbone of economic wellbeing in Australia. The justification of industry is the sharing of our increased wealth fairly, our real wealth being production. Statistics prove absolutely the increased and increasing wellbeing of our citizens. No abuse or propaganda can take away from that fact. There are a few timid people who fear progress and who try to give strange names for what the Government is doing. To some it is Fascism, to some Socialism, to some bureaucracy. But in so doing they are trying to make very complex and theoretical something which is really very simple and very practical. 1 believe in practical explanations and practical policies. I believe that what the Government is doing today is a fulfilment of what Australians have always been doing, a fulfilment of old and tested ideals.
– I rise in this debate particularly to direct attention to the activities of the Export Payments Insurance Corporation in relation to our nearest neighbour. Indonesia. When we look at the activities of the Corporation during the last 10 years we find that the coverage given by the Corporation has varied considerably. It has ranged from $3. 5m - that is the value of goods covered in 1963-64 - to $8m in 1960-61: or, putting it another way, the value of these goods has fallen from 36.3% of total Australian exports to Indonesia to 0.1 % - in effect, to zero.
I wish to direct attention to the fact that although great fluctuations have occurred in the political, economic - and, for that matter - the sociological aspects of Indonesia and its development since independence, there has been truly a continuing interest by Australia. I would hope at least that. If we say this, I doubt very much whether we mean it in any significant sphere. Certainly the sphere covered by this Corporation does not indicate that we have that interest in our nearest neighbour, and potentially our most important neighbour if we look into the future.
It is true that the amount of trade as a whole - not only the amount of trade covered by a number of or percentage of exports insured by the Corporation, but the total amount originating in Australia - is not very significant. The honourable member for Melbourne Ports (Mr Crean) gave us 2 very significant figures to think about. He always does that. I am grateful for them. He said that of $3,000m in exports from Australia possibly one-tenth was covered by the Corporation.
When we consider our nearest neighbour, the Republic of Indonesia, we find that the export performance of Australia is something less than notable. We rind that we are seventh on the list. Honourable members may say: ‘Oh, well, of course there are bound to be some of the great trading nations of the world that would do better than we would do, even with our nearest neighbour, which is on our own doorstep’. If we look at the countries which make up that list of 7, we find that, over the years, despite all the political fluctuations, Japan has retained its pre-eminence in exports to Indonesia. The Japanese, surely, started a long way behind scratch not only because of their own disasters in war but also because of the attitude of many of their neighbours in Asia following the Second World War. So the Japanese started a long way behind Australia which began in Indonesia as the helpmate at the birth of that new nation and was in an ideal position to cement an early relationship with trade in the best, I might say on that occasion, of English traditions, because if the English have taught us anything they have taught us that trade is an essential ingredient in binding nations together.
However, let us look again at the nations and their participation in Indonesia in comparison with our own efforts in the export field. Second to the Japanese is the United Kingdom. The United States of America is third. Next comes Germany, then Italy. The next nation - of course, we might except this - is Holland. Holland had a tremendous part to play in Indonesia for a very long time. Australia follows in seventh position, a long way Gown the list. The list begins with exports in 1967 of S176m for Japan and comes down to $6m for Australia.
It is interesting to look at the total Australian exports to Indonesia and to see what they have amounted to. According to the figures that I have, in 1968-69 Australian exports to Indonesia rose to approximately S20m. This is an effort, but what an effort compared with those of Japan, the United Kingdom, Germany, Italy and so on. These are countries on the other side of the world, countries that are far removed from our nearest neighbour. So the figures at least cause us to ask: ‘Are we doing enough in trade with the great nation that is on our doorstep and to which we helped to bring independence?’ Obviously the answer given to us by the figures is no. Then we come to the role played by the Corporation. We find that in 1968-69 the percentage of exports insured was 0.8% - hardly significant at all.
As I understood the purpose of the Corporation, it was to enter a sphere where there was some adventure, some stepping outside the normal lines of business and some special effort above and beyond normal commercial enterprise. To encourage Australian business to be adventurous we established this Corporation, yet it is obvious from the data that we have received that the Corporation ceased to function in Indonesia, that Australian business ceased to be adventurous in Indonesia, and nothing very much happened. All sorts of alibis can be used - there were difficulties, there was confrontation and there was political upheaval. All of these things are true, but how is it that the enterprising Italians, Germans, Englishmen, Japanese and Americans can do so much better in a nation where we were once the most favoured? It seems to me that there was little adventure and little enterprise in this nation closest to us. This is the point I have sought to make.
I question also why the activities of the Corporation came to a halt. It has been suggested - I cannot vouch for this but I raise it here in the hope that the Minister for Trade and Industry (Mr McEwen) will apply himself to the query - that the Corporation ceased to underwrite business with
Indonesia at one stage because it was just too risky. In other words, while our competitors were underwriting business we were not as a country, or in this instance as a corporation, prepared to be that adventurous or that enterprising. The record calls for an examination and a review because it is in our interests, not only our commercial and trading interests, as a good neighbour seeking the stability of South East Asia to develop in every way our links with the Republic of Indonesia, our nearest neighbour. I have referred to its nearness 7 times, as you may have marked. Mr Deputy Speaker. How little this fact would be realised would bc discovered if we went into most Australian schools and posed the question: Which is the nation that is closest to us; which is the nation which is our nearest neighbour? I would venture to say that 9 times out of 10 the answer would be New Zealand. Knowing, of course, that New Zealand was once part of the spreading State of New South Wales administratively perhaps people should be forgiven for thinking that that relationship continues in some way or other, but the answer betrays this general lack of awareness of the nation next door. I have risen particularly to draw attention to this aspect of our nonparticipation in the developing life of Indonesia.
A statement was made in this House by the Minister for External Affairs (Mr McMahon) in which he reviewed the whole of the foreign policy matters with which, in theory, we are concerned. It was a statement which covered many pages and which, I seem to remember, lasted for an hour. He devoted 25 words of that statement to Indonesia, a nation of 120 million people, one of the richest archipelagos in the world and a nation rich in resources that inevitably with the march of history and progress will become a powerful factor for stability in the whole of South East Asia. When there comes before the House a matter such as this, with such little display of interest in our nearest neighbour, we can perhaps understand why that disinterest is reflected in the activities of the trading people of our nation and by the Export Payments Insurance Corporation.
I ask the Minister for Trade and Industry to examine and review the operation of the Corporation in relation to what has happened in Indonesia in the last 10 years and to the efforts that were being made by some Australian enterprises. I personally know of many Australian enterprises which have been happy to try. to adventure but which did not find much support for their effort. So I ask the Minister to examine this matter to see whether he can be satisfied, firstly, with the trading relations of. Australia and Indonesia; secondly, with the lack of enterprise we have shown as a nation; and, thirdly, that the policy of the Corporation or the policy of the Government dictated to the Corporation prevented it from acting in a way to promote greater, stronger and .more enduring trade links with our nearest neighbour.
– As has been said, this debate revolves around changes in the legislation related to the Exports Payments Insurance Corporation. The Minister for Trade and Industry (Mr McEwen) has told us that 3 major amendments are proposed in the Bill. These are supported not only by Government members but by members of the Opposition as well. I support the amendments, as I have supported the Export Payments Insurance Corporation since its inception in 1956. The first amendment relates to the extension of the activities of the Corporation so that it can carry out its work in New Guinea and other Territories of Australia with the same facility and efficiency as do other countries. I. am surprised that the original legislation and the amendments that have been made over the years have not included provision that insurance of goods exported from Australia to Papua and New Guinea should be on the same basis as Japan’s arrangements for looking after its traders and manufacturers. I should think that the proposed amendments relate more particularly to requests by industry in Australia to make certain that they do trade in Papua and New Guinea on equal terms with Japanese manufacturers, German manufacturers and the like. I am pleased that the Minister has seen fit to plug this loophole. In fact, I was unaware that the tariff procedures available in the Territory gave no preference to Australian production whether for goods or for services.
If we are to maintain our trusteeship over the Territory of Papua and New Guinea - and I see no reason why we should not do so for a good many years - then Australian private enterprise must be encouraged, coerced and exhorted to do more business in the Territory. I refer honourable members to an editorial in an engineering publication titled Australasian Manufacturer’ dated 4th April 1970. The editorial mentions that representatives of the Australasian Manufacturer have talked to Mr Ashton, New Guinea’s Minister for Works, and states:
In an exclusive interview published in the national trade paper. ‘Daily Commercial News’, Mr Ashton said Australia’s inefficiency and poor marketing techniques were losing the Territory’s expanding market to West German and Japanese exporters.
These are pretty high sounding words and I believe that not only the Minister and members on this side of the House but all Australians, and certainly all traders, should take notice of what Mr Ashton is reported to have said. The editorial continues:
He said it was a catastrophe that Australia was spending so much in Government grants (SI 20m this year alone) to develop the area only to have foreign exporters grab the market.
How true this is. The Australian taxpayer is subsidising the economy of Papua and New Guinea and Australian manufacturers and commercial houses should be operating in that area on equal terms with Japan, Germany and other countries. The editorial went on to state:
In 1962-63 Australia supplied 5»fr of all Papua and New Guinea’s imports. Five years later this had dropped to 54.5%. Other major suppliers were the United States (13.7%) and Japan (!()%). There is little doubt that the Territory’s 2.3 million people represent an attractive market, particularly in view of the enormous development now taking place, especially in mining.
Honourable members who have been to the Territory of Papua and New Guinea would realise how fierce is the competition, particularly for what we call white goods - domestic appliances. One quick look at the shops at Rabaul, Lae and Port Moresby indicates that the Japanese are leaving no stone unturned to obtain the business available in the Territory. I find it difficult to believe thai ‘he Australian Government has left it for so many years before ensuring that Australian commercial houses and manufacturers can operate on the same basis as Japanese exporters. Japanese and German products are well to the fore, particularly in Rabaul and Lae. As T said, those honourable members who have been to these ports find presented for sale Japanese transistor radios, tape recorders and the like. I believe that Australian manufacturers should have these business facilities put before them.
I believe that EPIC should make certain that this change is brought to the notice of ali Australian manufacturers. As the honourable member for Melbourne Ports (Mr Crean) said, the stimulus to the economy in Papua and New Guinea resulting from the copper find at Bougainville, certainly will mean that capital goods will be required in ever increasing amounts. There have also been copper finds in the western part of Papua and New Guinea and millions of dollars will be spent by the company concerned. The spending power and standard of liv ng of the people in those areas will be reflected throughout the Territory. Australian manufacturers should have some advantage to ensure that they export to those areas.
It is obvious from reading the second reading speech by the Minister for Trade and Industry that some part of industry in Australia approached him requesting that Australian industry be given the same level terms of export as are available to Japanese and German manufacturers. Australian companies believe that they can compete with the overseas manufacturers. I agree with that belief. But they must have the same facilities available to them as are available to manufacturers in other countries. This Bill fills a much needed want not only for Papua and New Guinea but also for those other territories in which we are interested, such as Christmas Island, Cocos Islands and Norfolk Island. I believe that we have some problems with Norfolk Island but they have little connection with this legislation.
The other 2 considerable alterations to the Export Payments Insurance Corporation Act also call for approbation. EPIC must improve its position to cope with the demands of exporters. All honourable members on both sides of the Parliament have used the cliche that ‘Australia must export to survive’. Therefore a facility such as EPIC should be increased in stature so that we can export more and more goods. For instance, most honourable members realise that Great Britain is making every effort to join the European Economic Community. Good assessments have been made which indicate that Australia could lose easily 12i% of its export income when Great Britain does enter the European Common Market. I ask the Government: What plans are we making to ensure that this 12i% of Australian exports is made up not only in Papua and New Guinea but elsewhere? Australia’s standard of living must decrease considerably when this move by Great Britain and by the European Economic Community is accomplished. There could be prime trouble for Australia if this move is accomplished in a time of stress. This would decrease our standard of living. I ask the Government to look into the need to build up our exports by at least 12£% in the very near future, if it has not already done so. I sincerely trust it has. I was referring to other sections of the Act which are being altered. The figures show that the current liabilities of EPIC total SI 92m. Its ceiling for liabilities at the moment is a maximum of S200m. EPIC has practically reached its limit. Therefore the clause in this Bill which increases the limit from $200m to $300m is well worth while.
The Minister’s second reading speech appears at page 645 of Hansard. Because of what he said in the last part I want to make some comments about the origin of this legislation in 1956. The principal speakers in the debate in 1956 were the Minister for Trade and Industry, speaking for the Government side of the House, and Mr Pollard, then the honourable member for Lalor, speaking for the Opposition. In his second reading speech in 1956 the Minister explained that the purpose of the legislation was to promote Australia’s export trade. He reiterated that purpose when introducing this Bill. He indicated that the Corporation would enable exporters to insure against certain risks which were not normally insured by business houses. Then, as now, this legislation filled a much needed want. I agree with the honourable member for Melbourne Ports that EPIC has done this with expertise and I offer my congratulations. As in 1956, commercial houses and exporters in Australia in 1970 must be in a position to compete with manufacturers from other countries.
The report of EPIC is quite illuminating. Some sections were mentioned by the honourable member for Melbourne Ports.
The report for 1969 states, in part:
Buyers in world trade have, over the last decade, been progressively successful in obtaining more favourable terms of payment for settlement of their purchases. The shift from cash payment to credit terms has gained momentum in both developed and developing countries alike.
Later on it states:
In consequence, there has been a marked expansion in the business growth and number of export credit insurance institutions throughout the world. When the Corporation commenced business in 1957 there were only 18 countries with such organisations- at 30th June 1969 there were 33 and others in the planning stage.
It is quite evident that early in the piece the Australian Government saw that this type of corporation to insure Australia’s exports was needed. As I have said, and as other honourable members have said, it fills a much needed want. The report went on to state:
A further 133 policies were issued during the year resulting in a net gain of 54 after allowing for the expiry of specific type policies at the completion of insured transactions, and the nonrenewal of policies where export business did not eventuate as anticipated.
The total number of policies current at 30th June 1969 was 740. In addition some six unconditional guarantees to banks as additional security for export finance were operative.
So it is evident that the Corporation has been very active during its life of 14 years. It has covered a wide range of production from Australia. Looking at page 7 of the Corporation’s report, I find, as did the honourable member for Melbourne Ports that 50% of insurable turnover is in 3 items alone - greasy wool $84. lm, processed wool $43.9m. and dairy produce $20.6m. All of the major items insured by the Corporation appear to come from the rural sector. I am wondering, as is the honourable member for Riverina (Mr Grassby), whether the Department of Trade and Industry cannot do more to ensure that manufacturers and other producers in Australia participate in EPIC to make certain that the goods exported are insured in a rational way. Incidentally, the total amount of turnover was $298. 8m.
The fourth item on the list of insurable turnover is ‘aluminium, zinc, steel, etc.’. This item amounts to $22.2m for this year. For the year ending 1968 it was $24.5m. In other words, there has been a drop in insurable turnover of this type of produc tion from Australia. I am wondering why this is so. When one looks down a list of 12 or 14 items insured by the Corporation, one sees there is a reduction in turnover in 1969 compared with the 1968 figures. There are one or two minor exceptions, but it does appear that rural production insurance is increasing and manufacturing or commercial production insurance is decreasing. I think that the Department of Trade and Industry in particular should have a look at this situation to see whether manufacturers and commercial houses are using EPIC to advantage or whether it is a facility that they really need. As I have said before, exporting is the life blood of the future of Australia. The Minister mentioned this in his second reading speech in 1956 and reiterated much the same comments in his speech in March this year. On the latter occasion he offered some criticism about what had happened in the 14 years since the Corporation was first founded. In other words, he indicated to the Parliament - this can be found at page 645 of Hansard of 19th March this year - that on the part of industry, and certainly on the part of Government members, there was a tremendous amount of antipathy to or disinterest in the initiation of this facility in 1956. In fact, he said this:
The birth of EPIC was delayed many years - at least 4 - by the barrage of criticism and opposition raised against it from inside and outside government. Interests representing private institutions such as banks, insurance companies, associations, and elements even within the governmental structure, attacked, criticised and blocked the provision of this new facility by a Government corporation for at least 4 years.
That is what the Minister said on 19th March of this year when he introduced the amendments to this legislation. I have had a look at the second reading speech and other speeches made in 1956 but I cannot find any evidence which would support what the Minister said this year. At page 1761 of Hansard of 3rd May 1956 the Minister is recorded as saying:
In arriving at its decision to establish an export payments insurance arrangement, the Government has been influenced by the undoubted advantages such an arrangement will give to export It has also been impressed by the case for such an arrangement that has been placed before it by a wide spread of commercial and industry interests. Many countries abroad operate arrangements of this kind.
Then the Minister went on to explain the reasons for the establishment of this Corporation. I find these words a good deal different from what he said on 19th March this year. In fact, in 1956, he went on to say, as reported at page 1761 of Hansard:
For some time past the Government has received representations from Australian exporters and manufacturers who have claimed that export payments insurance would greatly help them in building up export trade.
Before these proposals were finally adopted, however, all important points were discussed with representatives of exporters, manufacturers, primary producers, commodity marketing boards, and commercial, banking and insurance interests.
I find the contradiction between the opinion expressed on 3rd May 1956 and that expressed on 3rd March 1970 indecipherable I just cannot understand it. So 1 went a little further and had a look at the remarks of some of the speakers on this side of the House and one or two of the speakers on the other side of the House in the 1956 debate. I found that the honourable member for Fawkner, who is now the honourable member for Casey (Mr Howson), in his opening remarks supported the legislation. He rose at 8.41 p.m. and said:
I rise to support the Bill. Indeed, Mr Deputy Speaker, I welcome it, because I believe that it is a really constructive measure which has been designed to encourage trade with other countries.
The whole tenor of the honourable member’s speech indicated that he supported the Bill. He was the first speaker from this side of the House to take part in the second reading debate. Another proponent of free enterprise in those days was the honourable member for Mitchell, Mr Roy Wheeler, whom many of us know. At page 2062 of Hansard of 15th May 1956 he is reported to have said:
From the inquiries I have made I find that the type of risk to be covered under the Bill is normally not undertaken by private insurance companies. The Bill, therefore, seeks, I hope, to provide cover by the Government only of risks that would not normally be covered by private enterprise.
So it seems that we agreed then, as we agree now, that this Corporation was a necessity for Australia. Therefore I find it difficult to understand the remark the Minister made in his second reading speech, that the facility was held up for 4 years, not only by Government members but also by insurance companies, banks, and general pressure from outside interests. At that time, as is the position now, Australia had a pressing balance of payments problem. Although the position is not so significant now so far as percentages are concerned, it is still a problem and will remain a problem for Australia.
We are a small country in terms of population and yet we are one of the great trading nations of the world. We need to give all the help that we can to exporters, commercial houses, rural producers and others to ensure that our exports are maintained and perhaps increased. One way of increasing them, of course, is to produce competitively. I believe we are doing this, although we may be reaching the line ball stage so far as competition is concerned. In reviewing the Minister’s speech - particularly the one he made this year - I see that he was flying a kite for his Australian Industry Development Corporation. He wanted to make certain that some of us, anyway, would not look back on EPIC when it was first instituted, because the evidence disproves what he said this year about EPIC. I am hoping that what he said about the Australian Industry Development Corporation will be disproved also. As I have said, I can find no evidence in Hansard. I have also looked at some newspaper cuttings. I found that because when EPIC was set up with a contingent liability of £25m or $50m the newspapers thought that Australia’s exports would be increased by at least that amount each year. That contingent liability has been increased from $50m in 1956 to $200m today, and when this Bill is passed it will be increased to $300m.
As I said, I was wondering whether the Minister’s remarks had some relation to the Industry Development Corporation and I was wondering whether he was endeavouring to confuse me - and I am speaking for nobody else - about EPIC on the one hand and IDC on the other hand. The only contradiction to what I have already said about the speeches in 1956 is that the honourable member for Melbourne Ports and the then honourable member for Yarra, who is now the honourable member for Lalor (Dr J. F. Cairns), did say a few derogatory things about the introduction of EPIC in those days, but nothing to indicate that it should not be established.
Their only criticism was that it was too timid and did not go far enough. In fact, the honourable member for Lalor wanted it to be a Socialist weapon, and he virtually said so in 1956. He said, as reported on page 2073 of Hansard of 15th May 1956:
In comparison, the situation here is that the Australian legislation, brought down by a doctrinaire private enterprise government, does prevent the projected Australian corporation from entering into that field.
He had referred in the previous paragraph to the democratic socialisation of corporations that existed throughout the world. He went on to say:
This legislation provides for only very limited measures.
So there was a little criticism. The only criticism was that it was too timid and that it was not the democratic socialism that the honourable member for Lalor would like. The Minister in his second reading speech was obviously referring to the Industry Development Corporation. As I see it from reading Hansard, the only support that he has had for his Industry Development Corporation is the very voluble support given by the Leader of the Opposition (Mr Whitlam) when he was speaking in the debate on the AddressinReply to the Governor-General’s Speech. In fact, the Leader of the Opposition said that the facility ‘should be specifically active in the area of resource development and the rationalisation of industry’. They are lovely words, but to a private enterprise operator they are very frightening. Rationalisation of industry is what the British Government has done and is continuing to do. I can say as a Liberal that I am very scared by what the Leader of the Opposition said. He rejoiced in the announcement in the Governor-General’s Speech of the implementation of a facility to be known as the Australian Industry Development Corporation. I can only say that 1 have no such rejoicing thoughts.
I have gone away from the tenor of the Bill, as did the Minister who introduced it into the House; but I say now that I support the Bill wholeheartedly. 1 believe that the Export Payments Insurance Corporation has done a worthwhile job for Australia. I would like to go so far as to say that its contingent liability could be increased from the $300m mentioned in the Bill, but no doubt the Minister, the Cabinet and the Corporation have decided on the $300m for the time being.
– This measure provides an improved arrangement for our export industries. This development is very desirable if we are to build up our export income and, in particular, to find the result of this in the improvement of our overseas balance of payments. I want to refer very briefly to the significance of this to all sections of industry. The measure, as is well known, will increase by $100m the maximum contingent liabiity of the Export Payments Insurance Corporation and also increases by S60m the maximum contingent liability under contracts of insurance on Australian investments abroad. These 2 provisions are aimed at giving us a greater opportunity to seize upon available markets and to assure those who in the commercial world have the responsibility of undertaking arrangements in the export field of a degree of security in the event of some unforeseen occurrence that could jeopardise a sizeable export arrangement.
Previous speakers have eulogised this measure and have spoken with enthusiasm about the Export Payments Insurance Corporation, but I want to refer to the comments made by 2 honourable members. Firstly, I want to refer to the honourable member for Riverina (Mr Grassby), who expressed some doubt about the success of the Government’s trade effort; in particular, he referred to Indonesia. He asked why there had been some moderation in our trade with Indonesia and put the view that this measure was perhaps the vehicle that ought to be used to correct the fall in our exports to Indonesia. I want to say straight away that it is obvious that the honourable member for Riverina does not understand trade to the extent that one might have expected he would, because this measure does not encompass arrangements that would enable us to overcome some of the difficulties that our exporters have faced in trade with Indonesia. These difficulties relate to financial arrangements and to the availability from our own manufacturing resources of the kinds of items that are required by the Indonesian market.
I can instance from my own electorate the efforts of exporters to find markets in
Indonesia. They have had to contend with very competitive trade arrangements. More affluent countries like Japan and West Germany are able to say to a comparatively poorer nation such as Indonesia: ‘We will give you terms over 10 years. We will waive interest. We will do all sorts of things if you buy our goods.’ Unfortunately, Australian exporters are not able to offer such lucrative terms, and the only way we can remedy this is to provide greater opportunities for Australian manufacturers and the exporters who attempt to sell our manufactured goods in countries like Indonesia. We do this, first, by endeavouring to meet the cost problems in this nation. I put it to the honourable member for Riverina that he ought to have a word with some of the people he is close to in the trade union movement to see whether they recognise the demands that are being made on industry today for increased wages and improved conditions in the manufacturing sector and put to them that if we are to build up our export industries and if we are to have a better balance in our trade there has to be some effort on the part of the employees if the employer, who after all is the manufacturer, is to meet this stiff competition from other very affluent nations.
This measure assists only specific trade arrangements and does not deal with the competitive costs facing our manufacturing industries. We find too that some of our primary industries are beset by the same problems. They are placed in a very difficult position. We find that Australian producers who are facing great difficulties and falling returns could sell on some of these markets, but at give away prices. Other affluent nations can afford to subsidise their primary producers to an enormous extent. This applies to dairy produce in particular. lt applies to many other fields, and it is the problem that we face today. I hope that the honourable member for Riverina will take the trouble to study this side of the trading situation around the world before he tells this Parliament that the Government is not doing enough in this direction. If he is honest he will discover that our efforts far transcend those of many other nations. We have achieved great results for the dairy industry by arranging for the construction of plants in Eastern countries for the reconstitution of milk products. As a result we can meet competition and can offer the customer more attractive terms in the price that he is able to pay and the quantity that he is able to consume. This measure is of tremendous assistance in this kind of activity. It assists a major primary industry that faces difficulties in disposing of its produce. It is to the credit of this Government that we are able to see success in this direction and to see it backed by the kind of legislation that is before the House today.
I pay a tribute to the Minister for Trade and Industry (Mr McEwen) whose tremendous drive and enthusiasm was the motivating factor that brought the legislation into operation in 1956. Since that time he has taken great care to see the legislation expanded to serve the export industries in a very effective and practical way. lt was the same drive and enthusiasm that occasioned the decision of the Government to bring to this House the Bill which we have before us to extend the work of the Export Payments Insurance Corporation. I am surprised at the doubt expressed by the honourable member for Balaclava (Mr Whittorn) as to the substance of the comments made by the Minister in his second reading speech. I could not quite detect what the honourable member for Balaclava was driving at when he said that the Minister had suggested that there was some reluctance to accept the original proposals in 1956 but that research in Hansard and the newspapers seemed to contradict this view. I put it to the honourable member for Balaclava that his final comments, when he said that he had doubts about the Industry Development Corporation, sum the matter up. T remind him that similar comments were undoubtedly made in 1956 regarding the Export Payments Insurance Corporation, which today is seen as evidence of the success of a practical approach in a matter of great importance for our trade arrangements. The Industry Development Corporation will be seen to be no less spectacular when we deal with it in the very near future. I hope that the honourable member for Balaclava will not see any reason for confusion in what the Minister has said but that he will very carefully analyse details of the broad spectrum of our trading arrangements, and the related factors, which are important if we are to see an expansion of our international trade.
International. trade is a 2-way operation. We cannot achieve a build-up of the significance that we want to see in this country without at the same time giving encouragement to both our primary and secondary industries, in particular to manufacturing enterprises which produce the great bulk of our export commodities. That is the purpose of this measure; it is the purpose of the other measure that has been referred to in this debate, the Australian Industry Development Corporation Bill. I venture to say that in the next decade Australia’s economy will depend very much on the success of measures of this kind. Unless we are able to strengthen our economy in the face of very stiff world competition then we will be the poorer.
I referred earlier to some of the comments of the honourable member for Riverina. I want to return to the rural sector for a moment, because I believe there has not been sufficient realisation of the importance of this measure to our rural industries. The value of trade iri wool covered by the Export Payments Insurance Corporation this year is $84. lm compared with $69.3m last year. Similar increases have occurred in some of our other primary industries. This shows that we are endeavouring to get markets in more difficult areas where there are greater risks and where there is a need for the kind of protection that is offered by the Export Payments Insurance Corporation, lt shows, too, that notwithstanding the great importance of secondary and manufacturing industries, primary industry still plays a vital role in our exports and the returns that come from them and which contribute so largely to our balance of payments. Without this we could not attempt to sustain our primary industries.
It will be vital in the next decade and undoubtedly in the immediate short term that there be greater Government support for primary industry. This can be achieved only if we Have buoyancy in our general economy. We oan achieve buoyancy only if the broad spectrum of manufacturing and commercial activities are given the opportunity to participate in world markets that will produce an economic return for enterprise and industry. To do this we need a very clear relationship between the flow of capital, firstly, for developmental purposes and for the building up of export industries, and secondly, for that very important element of the export trade, the direct financing of exports. A very desirable and useful adjunct would be our ability to finance purchases by other nations. We are limited greatly in what we can do in this direction. Certainly, we can go further if there is security for the exporter of the kind provided in this measure. This is the only answer to the difficult task of opening up trade opportunities in competition with other nations which have greater resources than we have.
Any suggestion that a measure of this kind is, to a degree, Government intrusion in free enterprise or a form of socialisation is to place a wrong construction on the objectives of the measure. It is a very desirable and very useful medium of Government backing for free enterprise to do the job of work that only free enterprise can undertake. I commend speakers on both sides of the House who have clearly recognised that important factor in the debate. Unless that is the basis upon which a matter of this kind is to be recognised we are not able in this Parliament to understand effectively the importance to the nation of what we are doing by way of legislation.
No matter how large or how small may be the enterprise of the individual trader who seeks protection under this measure, it is a contribution to the progress of Australia because every time we open an individual market or sustain an existing market we have taken a step forward in building up and consolidating the economic strength and capacity of this Commonwealth. Despite the difficulties and the problems of trying to increase the scope of our activities, particularly in the underdeveloped nations, this is a medium that will at least give us an opportunity to attempt to compete with others and to attempt to make useful trade arrangements with a vast range of markets varying in many ways. The variation will depend on whether the trade is direct with a recognised company, perhaps of world repute, or with some small trader who is virtually unknown to the Australian market scene and whose position in terms of credit worthiness and of substance cannot be taken for granted but where there is wisdom in taking a risk in order to participate in the furthering of our export trade. This measure gives a degree of protection to those who negotiate in this difficult field. The protection it offers will encourage people to face this type of difficulty and to do a job of work that will benefit every Australian. I commend the measure and I hope there will be similar recognition in the later debate of the significance and importance of the Industrial Development Corporation
- Mr Deputy Speaker, much has been written and quite a deal has been said about the Export Payments Insurance Corporation since it was first established in 19S6. Nobody would deny that this Corporation has been a success not only in achieving its original goal of promoting and facilitating trade with overseas countries by providing insurance against certain commercial and political risks of loss, but in establishing an important aspect of the Australian financial scene which had been sadly lacking such facilities previously. As the Minister for Trade and Industry (Mr McEvven) mentioned in his second reading speech, its establishment was not without problems or criticism. I do not know whether it is fair to say that the establishment of EPIC was delayed at least 4 years for I am only aware of the delay between October 1954, when the then Prime Minister, Mr Menzies, received a deputation from the Associated Chambers of Manufactures, urging the establishment of such an export credit insurance scheme, and its introduction into the House in May 1956 by the Minister for Trade and Industry. Admittedly, no contracts were entered into by 30th June 1957 but this was surely the period of establishing the Corporation. Yet a year later there were 43 policy holders whose policies had a current face value of $22. 2m and premium income for that year was $37,406.
Of course, there was hesitation on the part of certain manufacturers and from one’s own experience there can be no denying the cautious nature in which the Australian trading banks, including the Government owned and directed Commonwealth Trading Bank, moved into accepting the insurance paper of EPIC as collateral security. This was clearly understandable.
The mid-1950s was a time when the Government, and the trading banks, were encouraging Australian industries and interests to look beyond the Australian domestic market and think of servicing and supplying overseas markets, particularly South East Asian ones. It should not be forgotten that when EPIC was established, Australian exporters and traders could only avail themselves of insurance against marine risk, which insurance was available commercially, bank letters of credit and forward exchange cover from the Australian trading banks which was a short term protection against variations in exchange rates, vis a vis Australian currency. Forward exchange cover was, and still is, only available for specific export transactions. It required, and still requires, Australian exchange control approval and involved, and still involves, a slightly different exchange rate to the rate used for current transactions. Forward exchange cover, (hough well worth the stability it gives to the exporter for little extra cost, has never been popular with Australian traders. Yet up to 1957. it represented perhaps the only form of protection that was available to a manufacturer who was interested in seeking out markets in non-traditional areas. It remains the only practical form of protection against variations in exchange rates.
Fifteen years ago individuals were shy in venturing forth into new overseas markets. The giants of Britain, the United States of America, France and Japan seemed invincible in the markets of Asia and Africa - and perhaps they would have remained so if the Australian Government, and particularly the Minister for Trade and Industry, had not taken such bold initiatives in encouraging incentives and rewards to those who wanted to move or, rather, those who should move forward into developing Australia into an important exporter of manufactured goods. Not the least of the actions taken by the Government was the establishment of the Export Payments Insurance Corporation 14 years ago. The mammoth role of the Minister for Trade and Industry in directing, influencing and moulding Australia into a significant international trader in all fields can never be adequately described and one can only wish that his personal achievement over a lifetime of public service will never be understated by any Australian of whatever political persuasion.
Contrary to what some honourable members opposite may suggest, Australia’s development as a significant international trader just did not happen. It came about as a result of a Government policy of encouragement and guidance. I must confess to being somewhat surprised to hear the Minister for Trade and Industry refer to the barrage of criticisms and opposition raised against EPIC from inside and outside government. I have researched the printed record of the mid-1950s and cannot find much public evidence of the attacks and blockages that were described by the Minister in his second reading speech. I must assume that most of this evidence is on departmental files and within the secrecy of Cabinet. From my own experience there was considerable caution by all financial institutions including, as I have already stated, the Commonwealth Government’s own trading bank, but in view of prevailing opportunities, in view of a manufacturing structure which was enjoying the remarkable yet necessary protection of import control with protected and captured domestic markets, I believe there was need for caution and slow haste in relating such new devices as EPIC to individual companies and customers. Perhaps there was too much caution by some; perhaps there was too little appreciation by others of the needs of business to be sure rather than sorry After all, it is one thing to believe that all manufacturers should export for the good of the country. It is quite another matter when the well being of a manufacturer is being considered in isolation “and his banker has to consider what volume pf credit and what degree of risk should be encouraged and allowed.
But, Mr Deputy Speaker, no matter what initial caution may have surrounded the establishment of EPIC, 2 points should Bow be taken. In 1970 the scheme has succeeded up to and beyond the greatest hopes of its architects. Of course, the scheme has undergone substantial amend- ments since the initiating Act of 1 956 and shall briefly talk on these later. However, e second poult to be noted is that those who have 6een named among the early critics of the scheme - namely, the Australian trading banks - have now come around to suggesting to the Government that EPIC cover, as it now is offered, was a fundamental prerequisite, to use the Minister’s words, before the banks would agree to extending credit to those Australian industries which, having the willingness and ability to supply the capital equipment required for the Bougainville project, were looking for Australian-generated credit which would allow them to hold their own with their international competitors. There can be no denying that the Bougainville project is of such magnitude and the international competition to supply equipment so keen, that all possible avenues to assist Australian industry should be opened. But what is the competition? We know that Euro-dollar loans have been negotiated by American financial interests. Long-term credits have been arranged for Japanese suppliers while there is a constant line of credit available to American manufacturers from the Export-Import Bank of the USA. There is evidence, then, that the Bougainville project, which is expected to cost, overall, about $400m, has most certainly attracted international notice.
As members will be aware, Papua-New Guinea is outside the Australian customs area and so, contrary to what may have been thought by many, Australian suppliers enjoy no preferential treatment. Exporting from Australia to the Territory has been, in a competitive sense, just like exporting to any foreign country. In the sense that EPIC cover has been available to Australian suppliers in foreign markets, the suppliers to New Guinea have been at a disadvantage when one considers that longterm credit facilities have been available to Japanese interests, for example, who have come into the Territories’ markets with such advantages over their Australian competition. Now why should we be extending EPIC facilities into Australian Territories now? The answer is simple. To date, most exports to Papua-New Guinea have been sold for cash or on very short term credit and this has presented no real problems - at least no greater problem than any member of this House would encounter when he goes to see how his own personal credit rating stands with his bank manager. But the market that is being opened by the Conzinc Rio-tinto of Australia Ltd copper development on Bougainville, presents a series of new factors. The credit required for housing, mining and transport equipment has to be offered on long-term suppliers’ credit and as I have already mentioned, this form of credit is readily available and has, in fact, been made available to Australia’s competitiors for this huge market.
The Australian trading banks have announced their intention to assist in the sense that the Australian Banks’ Export He-finance Corporation will make finance available to cover long-term credit sales by Australian interests to the Territories. However, such are the rigours of bank practices in Australia that collateral security is required especially when terms of 5 years and more are specified. It is here that EPIC paper proves its worth and it is in this context that the trading banks have suggested the need to secure EPIC guarantees so that the maximum credit can be extended. Quite obviously, unlimited credit will not secure, in itself, any market. But without sufficient credit, markets will be most certainly lost. Already there is reason to believe that Queensland suppliers have negotiated forward stiles estimated I believe at $20m, in the expectation of EPIC support. If these suppliers can be assisted and no other, then 1 believe the current amendment to the Act has been well worth while. But 1 have no doubt that many more contracts will be negotiated with other Australian suppliers and that the amendments currently before the House will bc seen, among other things, us one of the significant milestones in the development of the Territory of Papua and New Guinea. Should Australian interests secure a major share of these attractive markets in Papua-New Guinea, then it could be an incentive to even more Australian-based companies to gear their production for export to overseas markets.
In conclusion, I would like to commend EPIC on its financial administration. We have seen it stick to the requirement that it should endeavour to develop its business in such a way as to cover costs without coming to a profit. In its 13th Annual Report, the Commissioners have reported that since 1957, after insuring some $906m worth of exports, the Corporation has had a trading surplus of $35,510 only. In addition, it has been able to cut its premium rates without infringing the provisions of Article .16 of the General Agreement on Tariffs and Trade which does noi allow hidden subsidies through charging uneconomic rates. This has not been achieved without intelligent management and there would be few, if any, who would challenge EPIC on these grounds. EPIC is also to be congratulated on the amendments it has recommended during its 14 years of operation. Most of the points on which some hesitation was evident in the days of establishment have been progressively removed. Members win recall that several technical alterations have been made hut perhaps the most substantial alterations were made in 1964 when the Corporation was empowered to provide unconditional guarantees to lending institutions which finance exports of capital and semi-capital goods. Again, in 1965, when the Corporation was empowered to ensure on behalf of the Commonwealth, certain Australian investments abroad against the noncommercial risks of war, expropriation and exchange control restrictions.
These extensions of protection have resulted in an increasing use being made by Australian exporters, albeit by rural industries, and if must be admitted that the Export Payments Insurance Corporation has made a worthwhile contribution to Australia’s exporting programme to move, as provided Australian exporters with the large degree of security which has been necessary for the penetration of new markets. Now, if EPIC can continue with the same capacity to amend its operations as it has shown over the past 14 years and as has been indicated in the amending Bill before the House, then we surely can expect Australia’s exporting programme to move, as progressively as financial encouragement will permit, well into the future. As the honourable member for Cowper (Mr Robinson) has already said in this debate, Australia’s efforts in promoting exports far transcends those of any other country and this Government deserves the congratulations of all including those on the Opposition benches, and I am pleased that we have received such plaudits from the Opposition on this Bill.
Question resolved in the affirmative.
Bill read a second time.
– 1 want to move a routine amendment to clause 9 which reads:
Section 28 of the Principal Act is amended -
Insert before paragraph (a) the following paragraph: (aa) by inserting in sub-section (1.), after the word “thirteen”, the words “or section thirteen AA”;’.
Amendment agreed to.
Bill, as amended, agreed to.
Bill reported with an amendment; report - by leave - adopted.
Bill (on motion by Mr Barnes) - by leave - read a third time.
Debate resumed from 14 April (vide page 1046), on motion by Mr Gorton:
That the Bill be now read a second time.
– On 26th September 1969, after the Prime Minister (Mr Gorton) had made a statement announcing the Government’s decision to lend S80m to Queensland towards the cost of a power station in central Queensland, the Leader of “the Opposition (Mr Whitlam) said:
Naturally the Australian Labor Party welcomes the Commonwealth’s participation in the provision of electricity in central Queensland, which is an area where power ‘lias been hardest to come by and is the most expensive in Australia. I should think that it would be quite clear to honourable members . . . that power was the determining factor in the development of the natural resources in the area and the attraction of greater human resources to the area.
The only misgiving I have about the announcement is that the advance - it is nol a grant - seems to be on much less favourable terms than the Commonwealth has hitherto made for its advances for similar purposes in other places. … the financing of the project causes misgivings to my Party in t’ at the advance is for a shorter period and at a higher rate of interest than is applied to railway and other projects outlined in the Budget document entitled ‘Commonwealth Payments to or for the Stales 1969-70’. The project is, of course, an admirable one and should’ help to achieve without delay the objectives, material and human, that the Prime Minister very properly expressed.
Those sentiments are still the sentiments of members of the Australian Labor Party. I intend to outline the general attitude of our Party towards the financing of major developmental works in the States of the Commonwealth. In his policy speech for the 1969 Federal elections the Leader of the Opposition said:
To place financing of new development projects on a continuing basis a’nd to take projects cut of the realm of electioneering, we will establish a Development Revolving Fund. This fund will apply revenue from existing projects to new ones. Within 4 years the Snowy Mountains projects alone will be making $42m net each year from electricity users in Victoria and New South Wales. By then another $10m will be coming back to the Commonwealth each year from railway projects it has hitherto financed in Western Australia, South Australia, Victoria and New South Wales and water projects in New South Wales, Tasmania and Victoria. The fund will allow the Commonwealth to assist in such rail, power and water projects as I have mentioned.
We will establish a Ministry for Northern Development. Mr Chifley regularly conferred with the Premiers of Queensland and Western Australia on northern development. Sir Robert Menzies, Mr Holt and Mr Gorton never did. I shall.
The new department will accept responsibility for the conservation of the unique national assets and tourist attractions of central Australia and north Queensland.
While the Opposition welcomes the Agreement it is far from satisfied with the amount of information given by the Prime Minister or contained in the Agreement. We feel that before the Parliament is requested to ratify an agreement paying out more than S80m of taxpayers money, far more information should be made available. The Prime Minister’s first statement in September 1969 took approximately 5 minutes to deliver. His second reading speech on this Bill took 11 minutes. The Agreement signed by the Prime Minister and the Premier of Queensland deals solely with the terms and conditions under which the loan is made. The Parliament has not been told what companies are expected to use the 600 megawatts of electricity for export oriented industries. We have no knowledge of the ownership and control of these companies, lt would be a safe bet that most will be foreign owned and controlled and that the profits from their activities will be sent away from Australia. The Parliament has been given no information about the charges for the electricity. In his second reading speech on 14th April this year the Prime Minister said:
Naturally the negotiations between the Queensland Government and the companies concerned arc confidential.
The Opposition thinks that the Parliament is entitled to have this information before being requested to ratify the Agreement. The average charge per kilowatt hour for electricity in Queensland in 1966-67 was: Residential rate - 2.05c; commercial rate - 3.12c; industrial rate - 1.79c. Queensland’s industrial rate for electricity is the highest of any State. Its residential and commercial rates are the second highest of any State. The Opposition would like to know whether the arrangements with the unknown company or companies offer a lower price for electricity than is being offered to industries in other parts of the State.
Another matter that concerns us is the indefinite scope of works to which this loan will apply. The construction of the power station is rather definite but associated facilities and transmission are tacked on and these are significantly indefinite and costly. After electricity has been generated it must be transmitted. At what voltage will the electricity from the Gladstone power station be generated - 66 kilovolt, 132 kilovolt or 330 kilovolt? How far will the electricity be transmitted for the favoured companies? Will the Queensland electricity authority transmit the power to a company no matter how far it is established away from the power station? Will the electricity authority construct the necessary substations and transform the electricity down to a usable voltage? In summary, will the Government transmit the power to the front doorstep of the companies or will it tell the companies that the power is at Gladstone and they should come and get it?
What is the break-up of charges? We have been given absolutely no information on this aspect. How much will generation cost? How much will transmission and distribution cost? How will the favoured companies get their power? Another significant point arises: The Bill refers to transmission whereas the Prime Minister referred in his speech to local reticulation. These terms, 1 am informed, mean different things to electrical engineers. Transmission refers to the transmitting of bulk power at high voltage. Local reticulation can be taken to embrace not only transmission but also distribution of power at lower voltages to company townships or even throughout company properties. What arrangements have been made or will be made by the Queensland Government for transmission and reticulation? The Prime Minister gave no explanation for the preferential treatment which is being extended to the unknown companies in this case. What does this development possess which makes it different from other industrial and mining developments in other remote areas of Australia? Some of the companies developing in those remote areas have been expected to provide their own power, but in this instance more than $155m of Commonwealth and State money is being used, lt is as good as a loan to the companies concerned. This raises another point: Has the Commonwealth Government or the State Government requested any concessions from the favoured companies for an equity in the ownership in those companies? Has cither government requested or been granted any other concession by the companies or are all of the advantages to go in the one direction with only the intangibles going to the governments and the people of Queensland?
There are further queries which 1 wish to raise. I note that the State Electricity Commission of Queensland has authority to own and operate generating stations but does not do so. fs the Commonwealth Government satisfied that the generation, transmission and reticulation of electricity in Queensland is being operated as efficiently and economically as possible. What generating authority in Queensland will control this new power station? Is this station being provided as part of a co-ordinating group in. the State of Queensland? I request the
Minister for National Development (Mr Swartz), who is at the table, to answer the queries that I have raised or, at least, to guarantee that all of them were considered by the Government before the signing of this agreement.
I now make some comments on the agreement. In his second reading speech, the Prime Minister announced that the amount of the original loan would be S80m and that the loan could now be exceeded if the estimated cost for the power station of S155m, made in 1968, be exceeded. It seems reasonable to assume that this price will now be greater than we have been given. But we have been given no up to date estimate of the anticipated cost, only a formula that die Commonwealth Government will advance 80/155ths of the total cost. The Opposition would like to see something far more definitive. The cost of the Chowilla Dam has been estimated when the agreement relating to that project had been signed. But the project had to be discarded or, at least, postponed because of escalating costs. The Opposition would like to be assured that this will not be the case with this power station at Gladstone.
The loan originally was to have been made available over a 6-year period. But we now find that the period is to date from 16th September 1969 to 30th June 1977, a total of 7 years 9 months. This seems to indicate that the construction of the power station is estimated now to take longer than was at first anticipated. The longer the construction rates the greater will be the cost. I do not suggest that the Commonwealth Government needs to be too strict on time limits for construction. But I do believe that the House should be given an assurance that the work will be carried out as expeditiously and economically as possible.
Clause 3 of the agreement appears to load everything in favour of the Commonwealth. This clause reads:
I appreciate that both the Commonwealth and Queensland governments are confident that the 600 megawatts will be required by industrial organisations. But the delays or failure to reach agreement could place the Queensland Government in an invidious and embarrassing position. It seems to me that this clause also weakens the negotiating position of the Queensland Government in its dealings with the industrial enterprises which might be interested in establishing an industry in central Queensland. It could easily force the Queensland Government to give better terms on price of power and conditions to the companies to ensure that the 600 megawatt reserve is reached. In this event the return to the Queensland Government would not be nearly as high as anticipated and the ordinary Queensland taxpayer could be forced to shoulder an added responsibility.
As I said, I appreciate that both governments are confident that industry will come to the area as soon as low cost power is provided. The Queensland Government is so confident that already it has sought an assurance on the availability of additional finance to enlarge the capacity of the power station should this be necessary. On behalf of the Opposition I give an assurance that if either tough negotiating on the part of industrial enterprises for better terms and conditions or influx of major power-using industries faster than anticipated causes embarrassment to the Queensland Government, a Federal Labor government would grant immediate financial assistance to the Queensland Government. The Australian Labor Party believes in the development of Australia even if, in some instances, the facilities have to be provided before the demand appears.
I now have some general comments on interest charges on loans from the Commonwealth to the States for the development of this and similar projects. I am indebted to the honourable member for Melbourne Ports (Mr Crean), who will be the Treasurer of the Commonwealth after the next election, for the preparation of these notes. In Australia the various State governments own all the electric power resources, either directly operated as government departments or more usually organised as statutory corporations or commissions, or in a series of regional boards. The proposed power house construction at Gladstone, to have a capacity of 1,100 megawatts, is to be a State undertaking. The capital construction of such undertakings is substantial. For instance, at 30th June 1969 the State Electricity Commission of Victoria had fixed assets, on a depreciation basis, of approximately $ 1,000m. The project envisaged here involves capital expenditure over an approximate 8 years of SI 55m.
The capital raising problems of electrical undertakings are well expressed in this extract from the ‘Jubilee History of the State Electricity Commission of Victoria’:
And the Commission was estimating in 1955/56 that it would have to spend at least $570 million in the next nine years, more than it had spent in its whole thirty-six years ot existence.
In fact, it did, and also met about $80 million of loan redemption.
In this, it was aided by an improved loan market which provided nearly $320 million; it received over $S0 million in loans from the State Government, and higher tariffs brought in $140 million.
At the end of that nine year period it was producing nearly 20 per cent more power than was originally planned.
Today, despite actual competition from oil and the potential rivalry of natural gas, discovered in 1965, the Commission expects to stabilise within a few years, at a rate of increase somewhat less than that to which it has been accustomed.
This means a doubled electricity demand every ten years - with expenditure to match.
This passage indicates that capital money became available in Victoria from 3 sources. The position is broadly similar elsewhere. The 3 sources are: Firstly, direct borrowing in the market by the authority; secondly, advances from State funds; and, thirdly, the excess of revenue over expenditure in the running of the undertaking.
The first 2 of course involve an interest component which becomes part of the cost of operating. The third source involves charging more to electricity users than actual production costs. In some respects the first 2 sources are akin to debenture finance in a private undertaking. Money is borrowed from outside the business and interest is paid on it. This interest is a cost’ to the business. The third source is akin to the profit element in business. There is some difference in that, since the electrical undertaking is a government concern and some of the borrowing is directly from government sources as against direct public raisings, there is therefore some element of ‘internal bookkeeping’ or a transfer from 1 government pocket to another. This sort of argument is advanced by those who see some justice in the transfer to the States of money which the Commonwealth derives from surplus revenues. The transfers are called loans to the States and bear interest. Also, in regard to the third source which has been likened to the profit element in a private business, the practice in private enterprise is to charge prices high enough not only to cover taxes and profits but also to provide a surplus sufficient to cover the costs of the capital expansion of the business.
The particular example which we have before us concerning the Gladstone power station comprises a mixture of finance from Commonwealth sources and State sources and, whether or not the Commonwealth funds are surplus revenues or loan funds, interest is to be charged at 6.4%. There is no doubt that if no interest were charged on these funds or if the funds were advanced at a lower rate, the cost of generating electricity could be considerably less. The interest bill on $155m at 6.4% would be in excess of $10m when amortisation is considered. It is difficult, of course, without some projection of costs at the time of production, to determine how significant an element in total cost interest would be. On the other hand, as the only customer at this stage seems to be Comalco, it. is equally difficult to determine where the benefits of lower cost electricity would finally rest. If Comalco could only be induced to Gladstone on a subsidised basis and the benefits of decentralistion were thought to outweigh this cost, then a case could perhaps be made out for subsidy, although it is not really as simple as this because an unwitting advantage could be given to this firm at the expense of somebody else somewhere else, and the fairer method might well be to charge for power at its proper economic price and to pay the equivalent of the interest component, say to the Gladstone municipal authority, to provide community amenities.
However, in practice the issues are not even as clear cut as this and some other relevant aspects are brought out in the following extract from a British White Paper on ‘The Financial and Economic Obligations of the Nationalised Industries’, which was issued by Her Majesty’s Stationery Office in 1961:
If the profitability of capital development is assessed on different (and easier) financial criteria from those adopted in industry generally, there is a risk that too much of the nation’s savings will be diverted into the nationalised industries.
Again, if the prices of the goods and services which the nationalised industries provide are uneconomical^ low, demand for them (and for investment to produce more of them) may be artificially stimulated.
Thus, the operation of the nationalised industries, with an unduly low rate of return on capital is sooner or later damaging to the economy as a whole.
A recent book entitled ‘Technology, Engineering and Economies’, by Philip sporn makes these observations which are relevant:
A sound economic evaluation of any major capital project is independent of the social, political or other motivations, and is independent of the particular economic system on which a society is organised.
If a given society is not to be led astray, and if it is not to make a mess of the indispensible business in the proper allocation of its limited total resources, it is important that the proper - and this means total - costs be used in the evaluation.
Having done this, the society is then in an excellent position to assign priorities.
This does not prevent it from upgrading the priority of any socially desirable project at the expense of another less costly.
But the intelligence and sound judgment with which this will finally be done will always be materially enhanced by having properly determined values and costs.
Subsidies, desirable and granted, do not change cost.
A government can, in fact, make money available at no rate of interest - even below zero rate - a low rate of interest or a high rate of interest, but whether it does one rather than the other is not in itself good or better social policy. Good social policy involves a considered examination of many factors, economic as well as social. That, generally, is the attitude that the Labor Opposition will take to financing developmental projects of this type. They will be considered in a priority field and in the interests of the community generally. It will not be done on an electioneering basis, as this Government has done so many times in the years that it has been in office.
The Parliament has not been given nearly enough information on this project to enable anyone to know whether the interest charges are too high or too low. I repeat that the Parliament should not be expected to approve of an agreement to lend over $80m without having a total cost evaluation before it. The Prime Minister in his second reading speech referred to Queensland as a sleeping giant. The Labor Party believes it is time that that sleeping giant was awakened. The extract from the policy speech of the Labor Party which I quoted earlier in my speech is an indication of the approach we would take. We have every confidence that central Queensland will surpass the most optimistic estimates of its developmental potential. The Prime Minister admitted that the establishment of an aluminium smelter at Gladstone could produce, in a few years, 320,000 tons of aluminium per annum with an export value, at present prices, of approximately SI 65m. The advent of a chemical industry would further enhance the export potential of the area.
Central Queensland has a vast area of natural resources which are exciting in their magnitude and variety. A look at the report on the resources and industries of centra] Queensland by the Department of National Development and the Queensland Department of Industrial Development shows that this is the case. Central Queensland has a large potential for water conservation schemes and offers good ports and harbours. It can accommodate whatever population is needed to run its industrial complex, support industries and commerce. In raw materials alone it offers coking and non-coking coal, beach sands, salt, pyrites, limestone, copper, nickel, gold, silver, natural gas and several others. Its coal reserves alone are estimated to be in excess of 2,000 million tons and this coal can be used to provide the low cost power to supply power intensive industries. From these industries will come subsidiary industries forming part of an industrial complex almost too great to imagine.
In the next decade the transport facilities and other services in the area will be under great strain, and the Queensland Government will need to plan with imagination and foresight. Finance will, undoubtedly, be one of its problems, and the Commonwealth
Government will be called upon for further loans. These must be forthcoming. Australia cannot stand still. It is on the verge of great expansion and all State governments must be in a position to know the terms and conditions under which financial assistance will be granted by the Commonwealth.
I have given the guidelines of Labor’s policy in this direction. It is a policy which shows confidence in Australia and Australians. It is a policy which will gain great returns for both Federal and State governments. Under a Federal Labor government loans for developmental works similar to the Gladstone power station will be a feature of government. We support the agreement, after allowing for the qualifications and criticisms I have outlined.
– The honourable member for Lang (Mr Stewart) has given us an interesting treatise upon the Gladstone power station agreement and as part of his treatise he has developed the philosphy of the Australian Labor Party concerning development. A little later I shall deal with some of the propositions he put concerning the revolving development fund and the support of that fund. I shall have something to say concerning the Labor Party’s attitude to interest rates. The honourable member read lengthy quotations from some economic journals concerning development, which quotations I suggest he did not quite understand. If he read again the quotations which he gave he would come to the conclusion that they do not mean quite what he would like them to mean. 1 suggest that if somebody helps him with a speech in the future, he should make sure that that person goes to the authorities which would be most helpful. As the honourable member for Lang now sits on the front bench opposite, that may be a significant line for him to follow in future.
The Gladstone Power Station Agreement Bill is concerned with the giant power station to be erected in the vicinity of Gladstone and for which the Commonwealth has pledged up to nearly 50% of the finance by way of loans. It has pledged 80/155ths of the finance, which is near enough to 50%. This money has been provided under certain conditions. We ought to direct our minds to these conditions a little later. Before doing so all of us must appreciate, above all, that this power station will become part of the economic complex in Australia. It will become part of the developmental and industrial complex of Australia. I suggest that we ought to ask these questions: Firstly, what are the economic principles involved which enable this project to proceed? Secondly, what is the aim of this project? Thirdly, will this project accomplish the aims which we seek?
I suggest that these 3 questions are appropriate to this debate. Of all the power stations developed in this country in recent years this one is concerned rather preeminently with 2 of the vital supports of the Australian economy. They are the development of the balance of trade in our favour and the maintenance of a high rate of appropriate capital inflow in Australia’s favour. 1 would like to direct attention to these 2 aspects. As we know from looking at the most recent balance of payment statistics, in recent quarters the balance of trade has been in Australia’s favour. In September last it was $56m in our favour; in December it was $77m in our favour; for the March quarter it was in our favour to the extent of SI 64m. But we know that over an entire series of quarters in previous years the balance of trade has not always been in our favour. Therefore any project designed to enable exports to occur, which would not otherwise have been possible, is beneficial to the country. Therefore this power station, more than any other power station which has received Commonwealth support in recent years, is going to benefit Australia.
Everybody is delighted about this but we must go a little further. We see from the balance of payments statistics that Australia has run into some difficulties with capital inflow. Over those same quarters capital inflow has decreased very markedly. People must appreciate that the present level of capital inflow is not adequate. This applies particularly to members of the Opposition who have sought always to place strictures upon capital inflow. What do we do about this? What relationship have these factors to the power station being developed in the Gladstone region? They have a great deal of relationship. The development of a power station in that region will act as an attraction to overseas capital and this will bring about a capital inflow which would not have occurred otherwise. If this power station is to generate power at a cost of between .3c and 4c per unit this can come about only with the involvement of a high load factor. Demand for power and the high load factor arise only as a result of a high rate of overseas capital investment in industries such as the alkali industry and the aluminium industry. Such industries will make it possible to achieve that load factor.
This is where we come to the basic difference between the philosophy of the Opposition and that of the Government. Without this high rate of capital inflow it would not be possible to establish this power station.
– You are talking through your hat.
– I would have liked the honourable member for Lilley (Mr Kevin Cairns) to deal more with some of the points which the honourable member for Lang (Mr Stewart) made, particularly in regard to the rate of interest. The honourable member for Lilley said that because this was the interest rate applicable to similar projects in other parts of Australia we have nothing to growl about. Just because this rate of interest has applied to projects in other areas it does not necessarily follow that it should apply to this one.
In fact it has become very clear over the years that the Federal Government in financing development projects is adopting the role of some back alley money lender. For example, it is recognised that the Commonwealth loan for the reconstruction of the Mount Isa railway line had the toughest conditions of any loan negotiated between the Federal Government and a State. The interest bill on that capital loan of $34m is $23m, so Queensland’s industry and taxpayers will have to pay to the Commonwealth a total of $57m. This was the point that the honourable member for Lang was making when talking about a revolving fund. If the Commonwealth Government charges a very high rate of interest, that money, when repaid by a State, should come back into the coffers and at least be put into a revolving fund so that it can be earmarked for use in further development. I think that most people will agree with this. There was a very large interest component in the Commonwealth loan for the development of the brigalow country. When assistance for beef roads was first negotiated and the Commonwealth first financed their construction there was an interest component with respect to the sealing. Some of this money - and I think the honourable member for Lilley would recognise this - comes from revenue.
I am not arguing, and will not argue, about the specific level of interest rates, because one knows full well that in working out a benefit cost analysis the rate of interest is tremendously important in the economic justification of a project. With respect to the Ord River project, for example, by taking a high rate of interest as the discount factor one can get a completely different evaluation result than one gets by taking a low rate of interest. I think the honourable member for Lilley would agree with that. It is important in a benefit cost analysis in the determination of priorities to know what is the best rate of interest. I agree with him about priorities. In fact, it is quite interesting to hear an honourable member opposite suggesting that not enough thought is being given to priorities. I agree. I have been arguing on this line for some time. We should have a list of alternatives. If we had had before us, with respect to water, the Ord River project, the Nogoa project and the Bundaberg scheme together instead of having only one at a time - an ad hoc approach - perhaps there would have been a better measure of priorities with respect to investment. The same thing applies to other projects.
As has been stated, interest rates are extremely important not only to the final cost of reticulated power, brigalow development or whatever the project may be. The interest rate charged by the Commonwealth to the States is most important to the amount of the repayments by the States to the Commonwealth. The honourable member for Lilley talked about the method cmployed by the World Bank to determine priorities. I believe also - and I have hammered this point - that the Federal Government can learn a lot from the techniques employed by the highly successful development teams of the World Bank. In Australia development projects are evaluated by experts from various government departments. Those people meet and formulate a report which is usually analysed by an interdepartmental committee, and after a lot of backfilling the report is finally formulated into a Cabinet submission. It was suggested by the Vernon Committee of Economic Inquiry that we should develop highly specialised teams to concentrate on development alone. In these teams would be people whose principal job was to evaluate development proposals and compare alternatives and give the Government the facts about the alternatives so that the Government could make up its mind which was the best proposition in which to invest funds on behalf of the people of Australia and in the best interests of Australia, taking into account of course the welfare of Australia and the commercial principles involved. If we did this we would have a better order of priorities than exists today.
The ad hoc approach of the Federal Government to development in this country for over 20 years has not resulted in the best use of resources. There can be no doubt that in the allocation of Federal funds to the States for development the 2 most important criteria are the contribution that will be made to our balance of payments and the development of a region. The Federal Government must consider the ability of the project to earn export income and its ability to decentralise development. These criteria have been the backbone of practically every development project that has been financed by the Federal Government. After the credit squeeze in 1961 the Commonwealth financed the coal ports, beef roads and brigalow projects. Basic to these 3 projects was a consideration of export income earning capacity as weil as development or resources. This approach has flowed on in the various forms of Commonwealth assistance to the States for development projects.
The same considerations apply to the power house at Gladstone. Export income is of vital importance to the Federal Government but of little real importance to the State of Queensland. As far as the Queensland Government is concerned, the great benefit of development there is that, firstly, it will bring in additional revenues and, secondly, it will promote development itself. This in turn, through the multiplier theory, will generate further development and further revenues. The estimated cost of the power house together with reticulation to the town of Gladstone is approximately
SI 55m. That estimate, J understand, is based on 1968 prices, so the real cost today would probably be somewhat higher. The power house will have an approximate total installed generating capacity of 1,100 megawatts, and approximately 600 megawatts will be reserved by the Queensland Government for specific development in central Queensland. The amount of the Commonwealth financial assistance will of course depend on the total cost of the construction of the power house at Gladstone under the agreement entered into between the Commonwealth and Queensland. The agreement provides for a variation in the amount of financial assistance above or below $80m according to any variation which occurs in the total cost above or below $80m. This means therefore, that th: amount of financial assistance to the State of Queensland can be expressed as approximately 80/155ths of the total cost of the project. Tt is admitted that this can vary. lt is well known that before plans were made to develop a giant power house in central Queensland the Government of that State was giving serious consideration to the establishment of more thermal power stations in the area. It was recognised that the toy power houses - as I have called them many times - were simply not attract ing heavy industrialisation processes to that State. The so-called toy power houses did a good job for rural services and light industry but the greatest retarding factor in the development of heavy industry in central and north Queensland was the complete absence of abundant and relatively cheap power. That was the missing link.
The development of the Weipa-Gladstone bauxite-alumina complex was the initial shock which triggered off a chain of development throughout Queensland. Until that point of time Queensland had various complexes such as Mount Isa and the copper refinery at Townsville, but it was not. until the integration of the huge bauxite deposits at Weipa and the alumina complex at Gladstone that the State received the initial shock which set off the chain reaction in development. The integration of the basic natural resources of Queensland and the northern part of Western Australia could result in Queensland’s becoming the most industrialsed State in the Commonwealth within 50 years. It is simply a marrying of the coal, water, limestone and iron ore. This, with the tremendous infrastructure of the deep sea ports, provides the format of major development. The giant power house at Gladstone will be the nerve centre of concentrated mineral and chemical processing which will bring imense wealth to northern Australia as well as Australia generally in the earning of export income. The paucity of large scale, relatively cheap power has been the greatest retarding factor in the industrialisation of Queensland. This was seen quite clearly in a positive case several years ago when Queensland lost an aluminium smelter to New South Wales. Queensland lost the project because it simply could not provide large amounts of relatively cheap power unless it was heavily subsidised by either the Commonwealth or the State. The companies concerned with aluminium production had no alternative but to go to New South Wales and also to have some processing done in Tasmania.
The conditions for the industrialisation of an area include, firstly, the evolution of an industrial nucleus which has the effect of catalysing or generating future growth. Although the missing link was power, we knew for many years that major industries wanted to go to Queensland. Now that missing link has been provided. For successful export industrialisation there is a pressing need for low cost raw materials. We now have low cost raw materials in the north of Australia. Most geologists and professional people will agree with me when I say that as regards mineral discoveries and development the surface of Australia has not yet been scratched. In the short time since mineral development and exploration have become concentrated tremendous deposits of iron ore, and steaming and coking coal have been found. This availability of these raw materials is something which most other countries envy.
Japan is sending huge bulk carriers to Western Australia for iron ore, and she is now developing large carriers for the coal trade between Australia and Japan. Japan is coming down to Western Australia and Queensland, carting back the raw product to Japan and then exporting the steel to markets such as the United States of America. If Japan can do it why can Australia not do it? It would seem that this is the next stage of development. In addition to the low cost raw materials which we know we have. Queensland has an abundance of water. The next requirement is low cost power, which is now to be provided. Another necessary condition is for low cost steam and some method of effluent disposal. Until the last few years effluent disposal was looked upon as not a very important factor; effluent was just turned out into the sea or into the rivers. One has only to go to my own area of Mackay to see what pollution from the disposal from factories has done to organic matter. The position has to be rectified. No responsible government in the future can allow any major industrial complex to be developed unless the plans contain a proposal for the successful disposal of effluent. Another condition necessary for the successful industrialisation of an area is the location of ports. It is not much good finding tremendous quantities of coal, for example, in the middle of the Simpson Desert. One of the great problems with the valuable phosphate rock deposits in Queensland is their distance from the sea. Of course that project will be developed in time. Broken Hill South Ltd is doing a feasibility study now. The great benefit of the iron ore in Western Australia and the coal in Queensland is their proximity to the coast and to deep sea ports. Australia is very fortunate in having natural deposits of such magnitudelocated close to ports.
There we have the conditions for industrialisation on a scale such as that contemplated at Gladstone. But there must be low cost raw materials, the necessary integration between coal and iron ore, low cost power, low cost water to generate steam, and effluent disposal. Then there is the necessity to co-ordinate the deep sea ports with the industrial complexes. I ask for leave to continue my remarks at a later stage.
Leave granted; debate adjourned.
Sitting suspended from 6 to 8 p.m.
Operational and Technical Status
These weaknesses would never have become an issue but for the technical problems and shortfalls in manufacturing performance that are plaguing the project. These problems are generally fairly well known to you, but I will mention them briefly. I should first remind honourable members that although the Australian aircraft designated FI 1 1 C differs from the USAF FI IIA in having longer wings and a strengthened undercarriage, it is otherwise identical. By far the greater part of the whole FI 11 fleet is still grounded for safety reasons following the disastrous accident that occurred on 22nd December last year when a wing broke off a USAF FI IIA in flight during rocketry training. The only aircraft flying now are engaged on experimental work and they are flying to restricted stress manoeuvres.
There are 3 main problem areas. The first concerns the question of getting the aircraft to the full 100% flight envelope required by Australia. Until the structural integrity programme of static and fatigue tests due for completion about mid- 1 971 demonstrates that the strength of the aircraft is adequate to sustain full flight manoeuvre loads with the required fatigue life expectancy, the flight envelope will be restricted so as not to exceed 80% of full performance. With this restriction, the performance is inadequate to meet our requirements. The second problem arises from continuing difficulties with the design and proving of the wing carry through box. Thirdly, there are the difficulties being experienced in the use of D6ac steel. The D6ac steel problem, which overshadows all others at this time, was brought to the fore as a result of the December crash. The D6ac steel is used in 15 critical components of the aircraft and in many others which are subject to less stress. Unless these problems are solved, the aircraft will be unacceptable to Australia as a result of the present shortfalls in performance and doubts about structural reliability. The aircraft is at the moment quite unacceptable to Australia and to the Royal Australian Air Force.
The United States Air Force experts proposed a limited recovery or rehabilitation programme for our aircraft, aimed at an early date for the aircraft to be flown to Australia. This required a decision by 1st May 1970. with commencement of the programme on 1st July 1970. However, our own scientific and technical advisers are firmly of the opinion that the proof and non-destructive testing techniques proposed are not yet sufficiently advanced to enable recovery proposals to be accepted by us as a basis for a firm acceptance commitment. J have every confidence in their judgment and indeed, after the discussions which I and my mission conducted it was determined that there were strong, arguments for our Fill C’s remaining in the United States, not only until the problems of the D6ac steel are overcome, but until all static, fatigue and flight tests and modifications resulting therefrom have been completed. In summary then, there are major technical problems associated with the FI11C aircraft which are as yet unresolved, and for which there was little possibility of financial redress under the conditions established in the Memorandum of Understanding and the Technical Arrangement.
Need for Strike Aircraft
Before proceeding further, 1 want to remind the House about the role of this aircraft and the philosophy lying behind its purchase. There have been some who have said that as there is no obvious and immediate threat, an aircraft of this kind is no longer needed. I think this is a naive view. The whole purpose of defence preparedness is to establish circumstances in which you will not have to go to war; to provide a capability which will do much to help achieve stability in your own region. You do not wait until you have a specific target before you equip your air force with a strike bomber capability. It is the Government’s view, and this is strongly supported bv the Chiefs of Staff Committee, that an air strike and reconnaissance capability is an essential element of a balanced defence force for Australia. Firstly, counter air operations are a critical element of any air defence capability; they counter the threat at its source by attacks on air bases, aircraft on the ground, and support installations. This reduces the task of the defensive elements of the air defence system.
Secondly, a strike capability allows us to wrest the initiative in the air war from the enemy, and forces him to divert resources from offensive to defensive operations. Thirdly, the ability of modern strike aircraft to deliver significant weapon loads on deep penetration missions, with relative immunity from even the most sophisticated defences, gives them the offensive capability which is an essential requirement of effective deterrent forces. Any sustained attack against Australia or its Territories would have to be supported over sea lines of communication and through ports and base areas. The possibility that ports and base areas could be interdicted by a strike force would be a significant deterrent to any foreign power considering such an attack. In addition to their ability to attack enemy forces on land or at sea. strike aircraft can carry heavy weapon loads over short ranges. This makes them a valuable adjunct to the capability of the RAAF to carry out tactical air operations such as air interdiction in support of the land battle. The last decade has demonstrated the rapidity with which threats can change. The lead time involved in acquisition of aircraft and in re-establishing the skills inherent in bomber operations is such that we cannot wait until the threat arises before we act to meet it. We have to anticipate it as far as we can. Furthermore the British withdrawal from South East Asia, and the US reappraisal, give added weight to our need for a strike force which would also enable us to make a greater contribution to our regional security strategy should this be necessary.
The lead-time involved in re-introducing such a force, assuming suitable aircraft are available, is such that its provision cannot be left until the threat arises. The last decade has as I have indicated demonstrated the rapidity with which threats can change, and it will be obvious that the withdrawal of the United Kingdom forces from South East Asia will do nothing to improve the stability and security in the region. It is also less likely that a UK bomber force would be stationed in Singapore in the future.
Against this background, my three main objectives were:
Firstly, to persuade the United States that there were minimum performance criteria below which the aircraft would not be acceptable to Australia; secondly, to have it accepted by the United States that in the event of the aircraft not reaching these performance criteria, Australia should not lose its full investment in the project; and thirdly, to open options for the Australian Government concerning our need to equip the RAAF with a strike bomber capability.
Minimum Performance Criteria
Speaking to the first objective, acceptance of the minimum performance criteria, I sought to persuade the United States Administration that Australia needed for strategic reasons an aircraft with a strike capability which was related to our physical environment; that we had no alternative capacity as had the United States; that what was good enough for the United States Air Force could well be unacceptable to Australia because of our particular requirements. We needed the right combination of range and carrying and penetration capacity. I reminded the United States that when we originally ordered this aircraft, the British had a significant strike capability stationed in Singapore. It is a capability that will no longer be committed to the region and I argued that this made it all the more important for this gap in Australia’s weapon systems to be adequately overcome. Persistent argument along these lines by the Mission during the visit to Washington has now, I am pleased to report, for the first time achieved agreement on the operational and technical assurances that will be required on delivery of the F111C aircraft to the Royal’ Australian Air Force. If the aircraft do not reach these minimum operational and technical criteria, the aircraft will be unacceptable to Australia and the United States has accepted this.
The United States Defense Department now understands that to meet our strategic need, it is essential that we have an aircraft that meets a minimum range requirement with a specified weapons load and with performance and operational systems that ensure penetration to targets; an aircraft that has structural integrity and proven strength for all required manoeuvres and that before delivery will be brought up to date with all1 agreed changes to equipment. These assurances include the need for a solution to the current D6ac steel problem and replacement of the wing carry through box with a new design. These understandings have been incorporated in the newly achieved agreement with the United States to which I have already referred, and it is fundamental in our subsequent negotiations on the project, lt is an agreement that provides protection to our Air Force; it provides a guarantee that if we ultimately do get delivery of the FI 11C it will be an aircraft that fully meets our requirements. This agreement is thus a major advance, a protection and improvement on the original! Memorandum of Understanding and its associated Technical Arrangement.
Let me now deal with our second objective regarding financial responsibility in the event that the F111C does not meet our agreed performance criteria. As I have already indicated, the United States position has been that Australia and the United States went into this project together as partners and that we must share the con sequences, good or bad, of the project. 1 could not accept this proposition nor the proposition that the limit of the responsibility of each partner extended only to its own respective investment and to its agreed obligations. I reminded the United States Government of our acute dissatisfaction in Australia with the project, and said that Australia did not consider that our order of 24 aircraft created a joint project in any real sense; that, on the contrary, this was essentially a United States project in design, in management, supervision of standards of fabrications and construction and contractual arrangements. In addition, I put the view that the Memorandum of Understanding and Technical Arrangement have not been fulfilled as would have been reasonably expected by two allied governments with acknowledged common interests and engaged in mutual defence assistance. I said, that the reduction in the US purchases from 1,500 to a little over 500 had had a significant impact on the total programme and on the price of the aircraft and could produce in the event of the collapse of the project through failure to solve design and manufacturing problems, financial consequences of major importance requiring special consideration between the governments. The reduction in the programme had also a significant impact on the price and availability of F11C to meet attrition and reconnaissance purposes if Australia so required.
In the result, it was agreed with the US Administration that we could cancel our order within 3 months and receive a partial reimbursement, but this would be subject to the approval of Congress because special legislation would be required. Mare importantly, however, it was also agreed that should we not cancel at this stage and proceed, but the aircraft does not eventually achieve our now agreed performance criteria, the United States will be prepared to buy back the Fl 1 1Cs subject to two conditions. These are that the FI 1 1 scries aircraft are being used actively in the United States Air Force inventory, and that the approval of Congress is obtained. If we do not cancel now, and if it is later demonstrated that the F111C aircraft meets our operational and technical criteria, we should be obliged to accept them, and this of course we would be most willing to do. These agreements, which are included in the Agreed Minute, constitute an obligation by the United States Administration under certain circumstances to buy back the aircraft.
There was no agreement on the financial arrangements that would ensue if the total project failed and the Fill is of no use to either government, and we agreed to differ cm that point. My advisers, however, told me that they think it unlikely that the aircraft will not be actively used by the United States Air Force. Thus, 2 specific alternatives have been opened for the Australian Government. Firstly, the United States has given us the absolute right to cancel the F111C aircraft within 3 months and secondly we may cancel the F11IC aircraft in the event that the agreed technical and performance criteria needed by the Royal Australian Air Force are not achieved.
If the Government takes either of these alternatives the buy-back figure would be between $US130m and $US150m. Now, honourable members may argue that this figure should be higher, but we need to have regard to the realities of the situation. We need to have regard to the fact that the Original Memorandum of Understanding and the associated Technical Arrangement, tabled in this House, did not give us a right to get a single dollar back if the aircraft did not meet our requirements. We have in the place of nothing arranged a sum negotiable between $US130m and $US150m. This is a significant advance. 1 should say something about how this figure was reached, and this aspect is important in assessing United States Department of Defence expectancy in getting a measure of this kind through the United States Congress. We were advised that if the United States had to buy these aircraft back, it would probably want to convert them to the new FU IF model. It has taken the cost of buying back our aircraft and the cost of conversion to the F model, and this works out at roughly the figure that it would have to pay in buying new FU IF aircraft. This means that the total cost of conversion of our 24 F111Cs to American FI II Fs, would be about the same to th? United States as if it bought the aircraft originally ordered as F models.
Finance and Recovery Programme
I have so far mentioned to the House the circumstances in which the United States Administration would be prepared to buy back F111Cs. Before mentioning in detail the options available to the Australian Government concerning this and other aircraft in accordance with my third objective, I want to mention other factors. These concern finance, the recovery or rehabilitation programme and the achievement of 100% flight envelope for our aircraft.
In November 1969 Cabinet approved a total of $US300m for the strike version of the 24 F111Cs. On all the information so far available to us, if we do ultimately get delivery of these aircraft the cost should be within that upper limit. Of this total, work involving $US252m has so far been formally authorised. We would, however, have some additional obligations beyond that. To the maximum extent possible, further authorisations will be withheld until we are in a position to make firm decisions whether or not the aircraft will meet our requirements. Thus, in the event of cancellation, the full commitment could be somewhat less than the $US300m, but I am not able to give the House a precise calculation as to how much less than that total figure. It would be against this sum that we would receive a reimbursement of between $US130M and $US150m from the agreed buy-back arrangements.
I want to indicate in greater detail some of the problems involved in the recovery programmes for this aircraft. I have already mentioned that there are 3 basic problems. The first concerns the question of getting our aircraft to 100% of our now agreed flight envelope. The second concerns the wing carry through box - of which you have heard much on previous occasions - and the third concerns the D6ac steel. T want now to deal in more depth with the first and third of these problems. 100% Flight Envelope
I have already mentioned that the successful completion of static, fatigue and flight tests scheduled at this stage to be completed by the middle of 1971 will be crucial in demonstrating whether or not th<aircraft will ever reach 100% flight envelope with the required fatigue life. In consequence, it will be about the end of 1971 before we will be able to establish some confidence that the aircraft will perform as we require. However, it could be significantly later than that. It is our opinion that it will be only after our aircraft have been through the United States Air Force Inspection and Repair as Necessary or IRAN programme in the United States that we can expect them to be capable of 100% flight envelope and ready for full operational use. We would need to be confident that the IRAN programme was going to achieve this objective before entering our aircraft. The process is one of dis-assembly, detailed inspection and testing, including non-destructive testing of structural members and then re-conditioning and refurbishing. In particular this programme for the F111C would need to include the installation of such new parts and modifications which the various test programmes have shown to be necessary to bring the aircraft to the required performance. The function of the IRAN programme is to ensure that the aircraft is in an airworthy condition in its operational role.
Let me now detail the problems concerning the D6ac steel. The present USAF plan for the recovery of its aircraft combines a low temperature proof loading test with non-destructive inspection, or ND1. Of the aircraft concerned about 100 will have been through this process by September 1970. The first aircraft will enter or will have entered the programme in May 1970 and the last should be returned to the USAF by August 1971. It is expected that USAF aircraft surviving this programme will be released for a restricted period flying in conditions up to 80% of the full flight envelope. It should be noted that there are marked differences in interpretation of the scientific data between the United States and Australian scientific advisers. In short, the differences concern the methods of inspection and of evaluation of the D6ac steel. To have any certainty concerning the structural integrity of this aircraft, it will be necessary to measure under field conditions cracks in the D6ac steel of the order of less than l/20th of an inch. Even cracks of less than i of an inch could lead to a catastrophic failure. 1 would like to suggest that the House keep in mind the following points:
Detail of Options Available to Australian Government
Having dealt with a number of important subsidiary factors, I now return to my third main objective, which was to establish the specific options open to the Australian Government. Cost figures shown in these options are broad brush only, and were obtained from the USAF in good faith as a basis for negotiating. They are adequate for comparative purposes, but will require further negotiation and refinement before they can be taken as absolute. However, they have provided an adequate basis for the Government to take certain broad decisions.
Cancel F111C purchase within 3 months and do not replace it with another strike aircraft
I would like to restate and emphasise that it is the Government’s view, strongly supported by the Chiefs of Staff Committee, that an air strike force is an essential element of a balanced defence force for Australia. Without a strike force, we could not carry out effective counter air operations against aircraft on the ground, air bases and supporting installations. Counter air operations are a critical element in any air defence capability. An air strike force has deterrent value. The United Kingdom deterrent force will have gone from South East Asia. The last decade demonstrated as I have already indicated the rapidity with which threats can change. The leadtime involved in reintroducing an aircraft assuming one is available, into actual operational readiness could be several years from the decision date. If we chose to cancel now, we could expect, under the terms of the Agreed Minute, to be paid for our aircraft and spares something between $US130m and $US150m. We would cut our risk of loss. But our 24 aircraft sold to the United States and representing a financial loss might later be proved capable of our full performance requirement and we would have no strike aircraft. The Government has decided against this course of action for two specific reasons. We need the strike bomber capability in the Australian Force Structure. Without it our policies will lack credibility. Secondly, if the F111 is ultimately proved, the RAAF continue to say that it best meets Australian requirements.
Cancel F111C purchase within 3 months under buy-back and replace it with Phantom F4E aircraft plus reconnaissance and tanker aircraft
The Government does not believe that the possibility of the F111 failing to achieve our flight envelope is so remote that we should adopt this course at this time. If such a decision was taken, we would be saying that the likely delay in getting the F111C, that is a minimum delay of about 3 years and possibly more, is unacceptable; that the chances of the F111 coming good are remote and that we must have a different strike aircraft. This course would enable us to get an effective strike bomber capability into the RAAF inventory in about a year. We would, however, again face the possibility, as in Option 1, that F111 aircraft might later be proved capable of flying to our full performance requirement, while we had acquired at a higher price an inferior aircraft to the F111C. Financially we could under this option, expect to get back again between $US130m and$US150m. However, the total cost of a force of 40 F4Es, 8 RF4Es and 8 tankers, which the RAAF estimate to be a force broadly equivalent to the F111C force having in mind the superior capability of the F111 if it is proved, would be to the order of $US414m. To this would have to be added the loss of the F111. It is clear that for this option we would have to pay substantially more than to stay on our present course, even though some part of the tanker cost could be atttributed to the later need to replace Hercules transports.
Cancel F111C purchase within 3 months under buy-back and wait to purchase the F111F
The FI11F is the latest of the family with delivery planned for 1972-73. A firm United States order has been placed for 58 and there is a probability af a further 40, but the additional order is subject to certain financial restrictions. The F111F design has significant improvements and modifications over the FlllC and performance is assumed as likely to be better. It will be produced under better quality control. The F111F will probably have the new design wing carry through box installed at manufacture. The 2 major problems with the FlllC remain as problems for the F111F and these are:
The total cost of this option including six reconnaissance conversions would be $404m which must be added to the loss on the FlllCs. The Government does not regard this as a tenable course for two reasons:
Storage of F111Cs and awaiting IRAN
We could put the FlllCs into long term storage and await the results of the investigations into the D6ac steel and the results of the static, fatigue and proof testing which alone will indicate whether our aircraft will reach 100% of our required flight envelope. The advantages of leaving our aircraft in the United States until after they had been through the IRAN programme are in the Government’s view overwhelming. In the first place we cannot for many engineering reasons connected with the use of D6ac steel accept the aircraft until the proof testing and the NDI testing have been completed. The earliest that there may be better understanding of these problems is in September this year. It is likely to be later. More significant, however, is the fact that it is not until December 1971 at the earliest that we would be able to make a decision concerning the likely ability of our aircraft to reach 100% of our required performance. I have again indicated it could be much later.
If we made a decision to accept the aircraft before we knew that they would reach 100% of the flight envelope, we would have sold the pass on a major advance achieved by the mission, namely acceptance by the United States of minimum performance for the Australian aircraft, giving us a right to cancel the aircraft under buyback arrangements if it does not reach that performance. This right must be preserved. It can only be preserved if we refuse to accept the aircraft until we know that it will reach Australian strategic requirements. There is this other subsidiary factor: If we did make a decision to accept the aircraft later this year presuming that the D6ac steel problems had been overcome we would still be taking the aircraft in the faith that they would reach their full performance envelope. We would get delivery of them in the latter part of 1971, but because they would not have been through the IRAN programme they would not be able to fly to their full flight envelope. They would not be fully operational. It would be necessary, therefore, to begin returning them to the United States in late 1972 for the IRAN programme which includes the fitting of new parts and modifications to enable them to achieve fully operational status.
The Government believes it would be quite unsatisfactory and unacceptable to have new aircraft in Australia for such a short time and have to return them to the United States for a major modification programme; especially so, since for that short time the aircraft would not be fully operational. The approach of storing our FI 1 IC and awaiting IRAN as outlined in this option has the potential of providing (he cheapest solution to our problems. Also this approach has the potential of providing the Royal Australian Air Force with the opportunity to acquire aircraft which it firmly believes will still be the best one for our particular role.
It is, however, a course that involves a very considerable delay and, as a result of this, it is one that leads to other problems which the Government has had to examine. In talking of delay we need to have in mind that all the dates which have been mentioned concerning the possible time of decision and concerning the IRAN programme and ultimate delivery are subject to slippage. But at the best it would look like getting F111C aircraft fully operational some time in 1974. And we at the same time need to have in mind the possibility that the aircraft may be demonstrated to fail within that time frame. We would be unlikely to be able to make that judgment before late 1971.
The Government is clearly concerned about this delay, but if we are ultimately to take delivery of the F111C aircraft, in view of all the facts, there is no alternative but to accept it. And thus it has made the decision to leave our aircraft in the United States until all the technical and scientific problems have been overcome and until we know that our aircraft will reach their full flight envelope. I reiterate that this decision has been made possible because of 2 of the advances achieved by the mission: First, the agreed performance envelope which gives us the option of cancelling if the aircraft do not meet that envelope; and, secondly, because the buy-back arrangements apply not only to present cancellation but to cancellation at a later date if our performance is not reached.
Storage and Awaiting IRAN and Acquiring an Interim Aircraft
Because of the delay, however, I felt it necessary to probe the United States on the possibility of leasing an interim aircraft. The United States has offered us up to 24 new F4E aircraft to fill the gap. While the Government is disposed to accept this offer, its decision will depend very largely on the time during which the Phantom F4E could be in operation in Australia and be effective as a strike force. On the basis of information given us by the United States Air Force we could take delivery of the F4E aircraft towards the latter part of this year and they would become operational between March and July 1971.
The Government has therefore asked the Royal Australian Air Force as a matter of urgency to send an expert evaluation team to the United States to examine the offer of an interim force of F4Es in greater detail, and 1 am pleased to report that the team, headed by the Deputy Chief of the Air Staff, Air Vice-Marshal Read, left on Sunday, 10th May. The Royal Australian Air Force evaluation team will concentrate on matters of substance associated with the interim force of 18 to 24 F4Es. Its task would include a careful examination and refinement by negotiation of all costs; the likely date of delivery and the time when they will become operational; detailed arrangements for air crew and ground staff training including initial and continuation in-flight refuelling and the availability of spare parts and special equipment on loan from the United States Air Force. 1 mentioned the time scale in which we might be able to get an interim force into operation. I would like to draw the House’s attention to the other end of the time scale, when the Phantom force might be phased out and replaced by the F111C aircraft and this will be a matter also for further investigation by the Royal Australian Air Force. Providing the Fill programme goes well - and this means without further slippage - we should be able to make a judgement by the end of next year at the earliest whether or not the aircraft will ultimately be suitable to us. Since we believe it is desirable that some United States Air Force aircraft go through the IRAN programme before ours, we could envisage ours entering the
IRAN programme in January 1973 at the earliest. We would get delivery of the last aircraft late in 1973 and they would become operational in 1974. There would be a phase in period in which some Phantoms would be operating while the F111C force was was building up. If this time scale prevailed Phantoms would be operating up to about July 1973, which would be for over 2 years at the minimum. Of course, if the F111C aircraft failed to meet our permormance criteria, we would need to keep the Phantoms and convert them to the permanent force. The United States Air Force estimates that the cost of leasing 24 F4Es for 2 years would be a total of $US39m. This is the preliminary estimate provided to us by the United States Air Force. It is one of the significant matters to be examined in detail by the RAAF evaluation team now in the US.
In summary, therefore, before making a firm and final decision on the suitability of the Phantom, we want the Royal Australian Air Force evaluation team to examine in greater detail and advise us on all the matters above which I have roughly outlined on the basis of United States Air Force advice to us. I will also be pursuing with the United States, arrangements which might be necessary if more permanent tanker support is required. We would also need to be convinced that the Phantom force could be rapidly expanded to the full requirement of 48 aircraft if the F111Cs finally fail.
Phantom F4E as an Interim Aircraft
It should be noted that the Phantom F4E is the aircraft recommended by the Royal Australian Air Force as an interim force and it is also the aircraft recommended by the Royal Australian Air Force if the F111C ultimately fails to reach our performance criteria. However, the Royal Australian Air Force would much prefer the F111C if that aircraft is ultimately proved, because of its much greater range, its independence of tanker support and its ability to drop its weapon load accurately in daylight, in night, or in cloud. This attitude of the Royal Australian Air Force was reinforced in strong terms by the Air Board this week. The Phantom can drop its weapon load with comparable accuracy if it can see the target, but its blind performance is markedly inferior to that of the Fill. In addition, of course, its range is much less than that of the Fill. And if it were restricted to the use of airfields in Australia, tanker support would be essentia!1. The aircraft, however, would be capable of deployment to and operational from airfields in Singapore and Malaysia and with the availability of those airfields, would have a most useful range.
While 1 make no great point of it, I should indicate that the United States has undertaken to provide tanker support for training purposes and in other circumstances if appropriate. This aspect is covered in the agreed Minute which will be tabled and which, I hope, will be incorporated in Hansard. The United States Department of Defence has also assured us that it will assist us in the acquisition of additional quantities of F4E aircraft and tankers should these ultimately be required. In short, much greater range without tanker support and a superior blind bombing capability originally Icd the Royal Australian Air Force to select the Fill over the F4C which was the Phantom model then current. lt should not be overlooked however that while there are many points in favour of the F111C compared to the F4E the latter aircraft is a proven machine and much valuable experience has been established in its favour.
I summarise the foregoing as follows: First, my negotiations with the United States Secretary of Defense have produced a more saisfactory distribution of responsibility between Australia and the United States in this project; and they have given us assurances that we did not previously have. These assurances are as follows: 1 The Minute agreed between us provides us with operational and technical assurances which will meet our Chiefs of Staff requirements for Australia’s strike aircraft. 2 A failure to work the aircraft up to this specification would be grounds for Australia to decline to take delivery of the 24 F111C aircraft. 3 In the event of such a refusal, and provided these aircraft can be used in the United States Air Force active inventory, reimbursement to the order of $US130m to $USl50m, will be made for our aircraft and spares. As I said earlier, this is subject to Congressional approval.
Secondly, it is now confirmed that the United States Government will be in a position to sell Australia attrition and reconnaissance F111C aircraft. However, it is to be noted that the ceiling price arrangements applying to the 24 F111C strike aircraft do not apply to extra aircraft if purchased later for attrition or reconnaissance purposes.
Thirdly, my inquiries have satisfied me that the United States Administration is mobilising impressive scientific and technical resources to the task of overcoming the difficult metallurgical and other problems which have emerged during the development of the Fill series.
Fourthly, the Government has decided that, while awaiting the results of these efforts, the most suitable course of action, having regard to the uncertainties remaining and the cost of alternatives to the F111C, is to store the F111C aircraft until completion of tests mentioned above and the IRAN programme.
Fifthly, the United States has offered to lease up to 24 Phantom F4E aircraft as an interim force. While the Government is disposed to accept this offer, its decision will depend largely on the time during which a Phantom force could be in operation in Australia.
Sixthly, the Government has asked the Royal Australian Air Force as a matter of urgency to send an expert evaluation team to the United States to examine all aspects of the interim force offer and the implications of converting and expanding it to make a permanent arrangement. That mission is already in the United States undertaking this task.
Seventhly, the Government will make a further statement on the question of the interim force after the RAAF reports and the United States offer have been fully elucidated.
There is one final point I wish to add. I think that members of my own Department, the Department of Air and the RAAF have, before, during and since the mission went to the United States, worked particularly hard and long to make sure that the
Government was served as best it could be and in trying to reach a solution to these problems and thereby enable the Government to make a decision. On behalf of the Government I would like to thank all those who have been involved. With the concurrence of honourable members I incorporate in Hansard the Agreed Minute with Secretary of Defence Laird.
April 14, 1970
Note: Details of classified operational and technical data have been excluded.
ALTERNATIVE 1. Store the F-111Cs until Australian technical and operational objectives are achieved, presently planned for mid-1972, and lease up to 24 F-4E Aircraft for the interim period, starting as early as mid-1970. In the event such operational and technical criteria or any mutually agreed modification thereof are not achieved and F-111 aircraft are in the USAF inventory as described in paragraph 5, the Government of Australia can cancel under conditions no less favourable than paragraphs 5 and 6.
ALTERNATIVE 2. Procure F-111Fs instead of F-111Cs and lease up to 24 F-4Es until the F-111Fs can be made available. The U.S. would provide an equitable reimbursement for F-111C assets in accordance with paragraph 6 of this Minute.
ALTERNATIVE 3. Cancel the F-111C programme and replace the F-111Cs with F-4Es on a permanent basis. Equitable reimbursemen would be made for F-111C assets in acordance with the terms of paragraph 6 of this Minute.
I present the following papers:
Royal Australian Air Force - Procurement of strike bomber capability -
Ministerial Statement, 12 May 1970.
Agreed minute between United States Secretary of Defense and the Australian Minister for Defence, dated 14 April 1970.
Motion (by Mr Snedden) proposed:
That the House take note of the papers.
Suspension of Standing Orders
Motion (by Mr Snedden) - by leave - agreed to:
That so much of the Standing Orders be suspended as would prevent the Deputy Leader of the Opposition speaking without limitation of time.
– The Minister for Defence (Mr Malcolm Fraser) has made to the House a highly complex statement with many ramifications. I appreciate the fact that the Minister was good enough to make the statement available to me approximately 5 hours before he delivered it. I appreciate the consideration of the Minister in this respect. I also would like to express my appreciation to the Leader of the House, the Minister for Labour and National Service (Mr Snedden), for moving the motion which enables me to speak without limitation of time. Even with the leeway which the Minister for Defence gave me it has not been possible for me to assess fully the significance of all aspects of his statement. Therefore the comments I make are somewhat general in nature and I hope they will be a prelude to a fuller debate at a later stage.
The whole statement represents a devastating indictment of the course of the F111 aircraft deal over the past 7 years. The Minister did not waste any pity on his predecessors who negotiated the original arrangements. Nor did he spare the military experts who advised them. His remarks about the original arrangements are as damning a criticism in their own way as the denunciation of the Prime Minister (Mr Gorton) last week by the honourable member for Farrer (Mr Fairbairn). The Minister said that those arrangements gave the United States of America overriding authority to modify or down-grade the aircraft specifications if this became necessary or unavoidable. Australia was given no say about this. It had to accept what the Minister aptly called degradation of this nature. However, when it came to sharing the consequences of such degradation the Australian Government was given, the liability of a full partner.
In 1963 a total programme of some l,500 aircraft was envisaged. Australia was to get 24 aircraft - about 1 in 60. However, it was not given even a l/60th share of the control of the project. It was given a zero share. With regard to the sharing of liabilities the allocation was rather different. The split was straight down the middle - 30/30. If anything went wrong Australia lost everything. This was the agreement which the Minister outlined as flowing from the original Memorandum of Understanding and the Technical Arrangement. Two strangers who met casually on a street corner would not strike up a partnership to run a pie stall on such a basis.
The Minister said that when these documents were first signed the Royal Australian Air Force felt that there was a negligible risk in saying that planes suitable for the United States Air Force would be suitable for Australia. What was a negligible risk in 1963 has become almost an accomplished fact in 1970. The 100 to 1 shot 7 years ago is now an odds on proposition. This is a dramatic change which has accompanied the progress of the Fill from the drawing board, through the combat zone to the testing laboratories where it is now and where it looks like staying for at least 18 months. The Minister has admitted that it has taken 7 years for his Government to secure even basic safeguards for Australia. I refer to clause 2 of the Agreed Minute which states that the ‘special Australian position in relation to defence within the South East Asian region calls for a strike aircraft’. It is pathetic, after many years of ANZUS partnership and 5 years of Government commitment to Vietnam, that such an acknowledgment has to be written into an agreement between Australia and the United States. From 1963 to 1970 there was no recognition by the United States Government that Australia could insist on its specifications being met. The only right that this Government had before was the right of accepting whatever the contractor turned out. If the project failed through no fault of the Australian Government then Australia lost everything.
The Minister at least, and at last, has confirmed what his predecessors have always denied and that is that the Fill agreement was entered into willy-nilly by the Government without forethought and without any attempt to project the implications of the programme over a period of years. The Minister seems to have put the last 7 years into perspective and at last to emphasise his own achievement in securing a partial re-negotiation. There may be some personal consolation in this for the Minister but there can be none for a government which consistently has reaffirmed the initial agreement. And no-one has been more adamant in the House on the question of the Fill and its capability and in denying that there was an agreement in existence which would prevent the Australian Government and the Australian people from being able to reach a satisfactory solution to the problem than was the Minister for Defence when he was Minister for the Army. One need only refer to the Hansard record to accept the proposition that the Minister for Defence, together with his colleagues, the then Ministers for Defence, Navy and Air, who were all honourable members of this House at that time, accepted the Fill as being the best aircraft available in the world and that it would be soon flying in Australia. We heard that from 1963 onwards.
Now, in 1970, we are told by this new Minister for Defence, who has taken the opportunity, of course, to tip the bucket over the previous Minister for Defence and his predecessor, that we may be able to get the aircraft in 18 months time; but he is not certain. So we have a number of options. Mr Speaker, 1 think there is something to be said for the statement made by the Leader of the Opposition (Mr Whitlam) back in October 1969. He said that it sounded very much like the proposition: Take the money or the box. But having listened to the Minister for Defence tonight one could hardly blame those who happen to be sitting in the gallery if they delayed in getting any advice about taking either the money or the box. The Minister has confirmed tonight that the FI 1 1 aircraft is still in doubt. We may get it; we may not. lt may be in Australia by 1973. He is not able to say. Yet the Minister for Defence, if one could accept the statements that he made after he returned from the United States of America, had been able to secure a deal which would be satisfactory not only to the Government and to this Parliament but also to the people of Australia
The Minister seems to have put the last 7 years into perspective. The value of the new agreement contained in the minute tabled by the Minister cannot be assessed at this stage. The whole deal is at a completely hypothetical stage as the Minister acknowledges in his resort to outlining a series of alternatives. One of these may come off; none of them may come off. A completely new set of circumstances may arise to determine the Fill deal. But even on the hypothesis put by the Minister, there is no chance that the Government can emerge with honour from this whole wretched business. The first alternative put by the Minister gives Australia the option of cancelling the contract within 3 months of the date of signing the minute - that is, 14th April. In this event the United States would buy back Australia’s Fills and give Australia an equitable reimbursement. This buy-back arrangement also applies to other alternatives not contingent on cancellation within 3 months. For this reason it is of vital significance to the whole set of contingency alternatives that the Minister has outlined.
The first thing to be noted about this buy-back offer is that it is heavily provisional. The first proviso is that the Fill be still part of the active United States Air Force inventory. This may be a fair gamble. It seems that the United States Air Force still wants its FI 11 As and that it is willing to accept lower standards than the Royal Australian Air Force. But it is by no means certain. The American Air Force attitude could change completely with advancing technology. The second proviso is even more uncertain - the approval of Congress. There is a long tradition of congressional paring of the United States defence vote. This was illustrated most recently in its consideration of the 1970 Budget. It is unlikely that Congress would look sympathetically at what it would regard as a substantial handout to Australia. Certainly this would depend on the political climate when the measure was put to Congress. Again one would have to consider all of the evidence that had been gathered on this question by the committee headed by Senator Mcclellan in the United States of America. All honourable members in this House can recall the statements that have been issued from time to time by the Senate Committee in the United States. It has been highly critical of the United States expenditure in this field and of the performance of the aircraft itself. Yet we are told by the Minister that this will depend on a decision of the Congress.
Such an absorption by the United States of $US130m to $US150m would get pretty short shrift in a period of economic constraint. No American industries or jobs would be involved in rejecting such an arrangement; it could be done by Congress as a painless economy. Further, even if such a buy-back arrangement was completed, there is no guarantee of the amount involved. All that is stipulated is an equitable reimbursement. At the moment this is estimated to be from $US130m to $US150m. There is nothing to stop Mr Laird or his successors from reassessing this equitable reimbursement. In a project where already there has been considerable downgrading, there is nothing to stop the
United States Government from scaling down this credit to $US100m or $US60m or $US30m. Even if the buy-back is passed and paid on the most favourable terms, the loss to Australia will still be considerable. On the figures given by the Minister the minimum loss to Australia would be S US 102m. This could be obtained only if the full reimbursement was paid and all Fill obligations ceased immediately. Unless these conditions are met - and this is very unlikely - the amount Australia would have to write off would be considerably more. It would not be unfair to put the total write-off for Australia at around SUS 15Om. A loss of this magnitude would flow from any of the alternatives put by the Minister tonight. The Government’s only hope, and this is a slender one, is that the Fill will be Cleared completely of its flaws and be cleared for flying within 2 years.
I intend to look in detail at only one of the alternatives put by the Minister, and that is the cancellation now of the Fill and its replacement by the Phantom F4E. The Minister put the cost of such a replacement at $US414m. In addition, the cancellation would add at least another $US100m. Unfortunately, the Minister did not give a breakdown of the cost of the Phantom programme he outlined, ft was based on replacing the 24 Fills with 40 Phantoms, 8 reconnaissance Phantoms and 8 tankers. I do not intend to get involved in any wrangle over the relative merits of the Fill and the Phantom. This is not the occasion to do that, but the Minister should have explained in greater detail the logic of such a replacement. No Government spokesman has ever explained why we arc getting 24 Fills and why this number and not 16 or 32 or 40 is considered to be a viable force. Would 24 Phantoms be any less a viable force than 24 Fills? Alternatively, would not an Air Force which needed 40 F4Es need 40 Fills as well? Even if the Fill comes through triumphantly, it has never been proved logically that we need only 24 of them. There is a volume of informed opinion in this country that insists we will need more. In addition, the Fill will need a reconnaissance capability just as much as the Phantom. The cost of providing this will be comparable to the purchase of 8 reconnaisance Phantoms. There is no reconnaissance capability of the 24 Fills on order.
Also it is too early for the Minister to state firmly that the F111 will not require tanker support. There is a strong probability that it will need such support. The F111 may substantially exceed the Phantom in range but it also requires many times the volume of fuel. Until much more is known about the performance of the F111, it cannot be said with any certainty that the F111 will not need tanker support. There is every chance that it will. Bearing in mind that more F111s might be needed, that reconnaissance planes would certainly be needed and that tankers would probably be needed, it is difficult to put a figure at less than $500m on a successfully completed F111 programme. At this level the cost is comparable to that of the Phantom purchase put by the Minister, even allowing for the cost of cancellation of the F111. 1 would like to refer briefly to the Minister’s concept of the role envisaged for whatever strike bomber the Royal Australian Air Force gets. This has a prime requirement of being a strategic deterrent, a long range bomber whose mere presence in Australia would ward off aggressors. The Opposition regards this sort of thinking as of doubtful validity. It is unlikely that any country capable of invading Australia would be deterred by the presence of F111s. The deterrent value of strategic bombing has been exposed by the Vietnam war as a myth. The heaviest concentration of bombs in history failed to diminish in any way the capacity of North Vietnam to sustain the war. If hundreds of B52s, Phantoms and other aircraft have failed in Vietnam it seems completely illusory to expect a powerful deterrent capability from 24 F111s with conventional armaments and bomb loads. This emphasis on a strategic bomber as a deterrent has distorted the whole pattern of the Government’s concept of a strike bomber. It has made it focus on this one aspect, to the exclusion of all others. The Opposition has consistently maintained that a more versatile plane with effective performance of a variety of roles is much more relevant to Australia’s needs.
In summary, the Minister’s visit to the United States has opened up a Pandora’s box of possibilities. A full assessment of the value of what he has achieved must await the further statement on the interim force foreshadowed in the present state ment. On the face of it, what the Minister seems to have done has been to move the F111 project out of the woods and into the quicksands. We will still have to await the evaluation carried out by the latest team - and one would hope the final team - to visit the United States of America on the possibility of replacing the F111 with the Phantom as an interim aircraft for this country. So whichever way one looks at the statement, and construes and examines the statement made by the Minister for Defence tonight, it is a complete apology for a Government which set out in 1963 to purchase the F111 without any consideration for the country, without any consideration in terms of protection to be gained in return for the cost of the F111, and without having been able to accept as positive proof that the F111 aircraft which this country will finally receive, if it does receive it - the Minister expressed his doubt tonight - would be able to reach the performance in terms of range, bomb carrying capacity and all the other conditions set down by the United States of America in 1963 when the plane was on the drawing board.
The whole story of the F111 reads like a saga from Grimm’s fairy tales. The statement made by the Minister for Defence tonight can be accepted by honourable members on this side of the House only as a complete apology for the mistakes made by the Government and the Minister for Defence of 1963 and which have been accepted by those who succeeded the then Minister for Defence in his responsibility. The Opposition said more than 3 years ago that the circumstances outlined by the Minister tonight should have been investigated. But on what we have been told tonight, whatever happens, even if we do not get the F111, this country may lose as much as $150m. On this basis the Government deserves to be severely censured.
Debate (on motion by Mr Giles) adjourned.
Debate resumed (vide page 1985).
– Before the suspension of the sitting for dinner I was discussing what type of industry might flow from the construction of a major power house at Gladstone. I made the point that the northern part of Australia was blessed with the 4 major criteria essential for large scale industry, namely, the availability of cheap raw material, particuarly in the form of coking and steaming coal, the availability of iron ore, the availability of power - which was the missing link which is now to be provided - and the availability of ample supplies of water, which of course is necessary in any large scale processing works for the provision of steam. These were the main reasons for building at Gladstone a major power house that will have a generating capacity of 1,100 megawatts.
One of the main advantages of a power house at Gladstone, as I said before, is that in association with Weipa, which has the greatest deposit of bauxite in the world, the alumina works at Gladstone has been the springboard which has triggered off a remarkable series of chain reactions of development activity throughout Queensland. We have seen tremendous steps in the development and export of our coal, lt needs only the marriage of Queensland coal and Western Australian iron ore to develop a major steel complex in the north. Ever since the Commonwealth scrapped the plan for a massive multi-purpose hydroelectric power scheme for the Burdekin Valley just after the Second World War the northern and central areas of Queensland have had no chance in the competition for attracting large scale industries. They simply have not been in the race because they have not had access to relatively cheap power, lt seems clear that large scale aluminium works, aluminium being the next stage from alumina, and a chemicals plant will form the economic backbone of the area following the construction of the super power house at Gladstone. In other words, the first stage of development will be based on the processing oi aluminium and chemicals. The next stage could well be the establishment of a major export steel works utilising Western Australian iron ore and Queensland coal.
This does not necessarily mean that Gladstone would be the logical centre for a steel works in Queensland. Many technical studies, such as those carried out by Dr Buchanan, Mr Menzies and others, have shown that Bowen, for example, like Gladstone has excellent environmental physical conditions which would be suitable for the establishment of an export steel complex. One of the requirements for large scale metallurgical and chemical processing is the abundance of water. This is one thing that centra] Queensland and north Queensland have. The largest undeveloped resources of water are contained in the Fitzroy and Burdekin basins which are located close to the coastal ports and coastal towns and are in close proximity to Gladstone in particular. The abundance of water, coking and steaming coal, limestone, iron ore and salt in the northern parts of Australia and the existence of a populated infrastructure in the coastal towns could well justify the establishment of high capacity plants despite the fact that a high cost may be involved. If the plants are of high capacity and their capacity is fully utilised the operating costs could be extremely low. Sufficient technical evidence is now available to suggest that perhaps the best integration of the physical resources of the north - that is coking and steaming coal, and iron ore - would be the production of pig iron in Western Australia and the product:on of steel in Queensland with ships travelling between Western Australia and Queensland carrying coal in one direction and iron ore in the other.
Australia’s main competitor in her expanded steel production is Japan which transports its steel mainly to the United States. Japan transports its raw materials such as iron ore from the west coast of Australia and coal from the eastern paris of Queensland. An export steel works in Queensland would have significant freight advantages over Japan, in that the complex would be located on or close to the coal fields and the processed material, steel, could be exported directly from the deep sea ports on the east coast.
One of the charges often levelled against the Opposition is that it is opposed to foreign investment. This is not true. We have always argued that there should be a higher rate of Australian equity where possible in Australian developmental projects, particularly mineral projects. The development of the We:pa-Comalco complex is one example where the Labor Party would agree that there is a case for foreign management in marketing. If one studies the whole complex of the export of aluminium one finds that the free market for aluminium is relatively small, that it is virtually a captive market. If one looks at the trade in aluminium one finds that 5 companies dominate the production and export of aluminium in the Western world. These companies arc Alcoa, Reynolds, Kaiser in the United States. Alcan in Canada and Pechiney in France. I suppose it can be argued to Australia’s advantage in this particular case that 3 of the world companies in association with Comalco have been able to establish the Weipa-Comalco bauxitealumina processing works in Australia. This does not mean that the Opposition believes that there should not be more Australian equity. In order to break into the world market, this world cartel, the Labor Party would argue that this is one specific case where foreign management has been justified. It would be extremely difficult for an Australian company to break into the world trade in aluminium in competition with Alcoa, Reynolds, Kaiser, Alcan and Pechiney. Comalco, for example, is achieving major advantages in Gladstone.
It is well recognised that many process industries need electricity in large blocks and they need it cheaply. We have not received any information on this subject, but if the super-powerhouses can provide cheap electricity at less than 0.5c a kilowatt hour then Queensland is on the right road to major development in the chemicalmetallurgical field. As a second stage we hope to see the construction of a steel complex in the north utilising Western Australian iron ore and Queensland coking coal.
– The debate on this important Bill, the Gladstone Power Station Agreement Bill, has been a constructive one. Each speaker has brought out a number of points which are of vital importance. Earlier in the debate a number of questions were asked by the honourable member for Lang (Mr Stewart). He referred to the lack of information about the charges for electricity supplied in the region from the Gladstone power house. It was pointed out in the speech by the Prime Minister (Mr Gorton) when he introduced the Bill that such information is confidential to the
Queensland Government and the operators concerned. 1 can only repeat that, whilst I appreciate the interest shown in the matter, we have all that information in a report which was prepared by the Snowy Mountains Hydro-electric Authority for the Commonwealth for an interdepartmental committee. The information was available to the Commonwealth but, in view of its confidential nature as far as the Queensland Gevernment is concerned, we cannot disclose it here. The only comment I can make is that, because of the confidential nature of the information asked for by the honourable member, we cannot provide it.
The honourable member for Lang asked: How far will the local transmission be? In other words, he asked what area it would cover. It will be purely local transmission. It will cover an area which is visualised in the present circumstances as having a diameter of a few miles. I have had the opportunity fairly recently of inspecting the site. It is ideally situated for industrial development. The whole of the industrial complex visualised can be in close proximity to the power station, and the transmission which is visualised will be purely on a local basis. We cannot visualise how far it will continue in the future. In the foreseeable future it will certainly be purely local transmission. A question was raised about the voltage which will be carried over the lines in the local transmission. I cannot answer that question offhand. It is a technical matter. The voltage will probably vary in accordance with the specific requirements of the plants concerned. If the honourable member requires additional information on this matter at a later stage when the power house is under way and when we know more about the plants that will be established there, we will certainly be able to get that information for him.
He asked also why preferential treatment was being given to unnamed companies and I think this was based on the belief that there could be some concession in relation to power charges. We cannot provide the information in relation to power charges but I can give an assurance that no preferential treatment is being given to the 2 companies that have been suggested will go into production in that region. The same charges will apply to everyone in similar circumstances. The honourable member also asked whether any requests had been made to the Government for special concessions in relation to power charges. No such applications have been made to the Commonwealth and I do not know of any that have been made to the State.
There was a request also for particulars to be provided regarding cost escalation. lt is not possible to provide information on this over a long term period because we cannot visualise what the changes would be in the cost structure over a period of some years. However in the short term it will be possible to obtain some early information after the power house goes into operation - it would be difficult to provide it before. So if at that point of time the information is still required we can obtain it then. The question was also raised regarding the period of the loan. Originally the 6-year period had been mentioned and, in accordance with the announcement of the Prime Minister, that has been extended, as the honourable member for Lang quite rightly said, to 7 years 9 months. There was an inference that this meant there wouk be a longer construction period. This is nol so. The date was changed to conform to the original announcement because during this period there have been some preliminary costs to the Queensland Government. We wanted to make sure they would be covered and that is the reason why the change was made in that respect.
The honourable member for Lilley (Mr Kevin Cairns) made a constructive contribution, as usual, to the debate. One point he raised I would like to clear up. He asked that there be some form of continuing evaluation. I am happy to tell him that this can and certainly will be done. In clause 12 of the Bill the State is empowered to and will furnish the Minister for National Development with certain information as required in relation to planning, design and execution of the works and so on and also, at a later stage, full particulars of the consumption of electricity from the works. In other words, at the request of the Commonwealth the State can and will provide, because it has agreed to do so, information which will be the basis of a continuing evaluation, as we anticipate there will be further expansion taking place in this region.
The honourable member for Dawson (Dr Patterson), with his background of previous interest in northern development, made a sound contribution to the debate. He referred to the critical importance of the interest rate involved. Of course, we quite agree with him on that matter. 1 do not know whether he clearly brought out the point that the interest charges, which at the present time are agreed to be at the rate of 6.4% - the local authority borrowing rate throughout Australia - under a provision in an arrangement quoted by the Prime Minister will not be payable during the early stages of the construction of the project thus reducing the overall interest cost to something below 6.4%. This is entirely acceptable to the Queensland Government and will certainly be of great value over the period of the loan in the cost factor to the Government.
The central Queensland region possesses great development potential. The region contains an imposing array of natural resources; it possesses great scope for agricultural and pastoral expansion; it contains extensive mineral resources, notably large deposits of coal including cheaply available good grade steaming coal; there is potential for large water conservation schemes for industrial development purposes and there are good ports and harbours. Current industrial expansion in the Gladstone area of central Queensland is already impressive and in particular the alumina plant at Gladstone has expanded at a rate exceeding most expectations. Apart from this current industrial expansion in the area, the factors which I have mentioned present favourable prospects for the establishment of other basic manufacturing industries, together with associated industries. These prospects hinge in the main on the provision of a lowcost power supply. Low-cost power, coupled with the other advantages in this area, will enable the establishment of large scale industries, low cost by world standards, and able to compete successfully on world markets.
In recognition of the development potential of the central Queensland area, the Queensland Government approached the Commonwealth for capital assistance in order that a power station could be built at Gladstone to provide the high load factor, low-cost supply required to attract major export oriented industries to the area. As the Prime Minister indicated in the second reading speech on this Biil, these proposals were closely examined by both the Commonwealth and the State and under the agreement the State will be provided with a loan of S80m to assist in bringing the power station into being, lt is important to realise that the significance of the project goes far beyond the proposal to erect a power station. As I have already said, one of the major purposes is to attract large-scale industry and the State has already proceeded a substantial distance towards finalising negotiations for the establishment of such industries. The project itself and the industries it will attract will require development of considerable infrastructure by way of transport facilities, housing, community services, industrial water supply and effluent disposal and other matters. Many service and ancillary industries will be set up.
As the Prime Minister stated in his second reading speech the negotiations between the State and individual companies naturally are confidential. I can say, however, that we are aware that the State and representatives of industries are progressing very vigorously and successfully towards arrangements for utilising large blocks of power for major export oriented industries. The maior industries which seem likely in the short term are an aluminium industry and a major chemical industry using the extensive salt resources in the area and we are confident that operations in this field will commence in 2 or 3 years time. These two major industries, we are sure, will he only the start of large scale industrial development in the area and. together with the Queensland Government, we look forward to the impetus which will be provided by the power station. I believe that this impetus will result in a major step forward in decentralisation with self-sustaining growth and strong industrial expansion, with numerous consequential and cumulative effects being generated speedily and effectively.
A study of the resources and industry of the central Queensland region and an outline of the development possibilities and resources potential of the region are set out in a report of the resources and industry of central Queensland prepared jointly by my Department and the Queensland
Department of Industrial Development. Copies of this report were made available to honourable members last year and I commend this publication to those who wish to look more deeply into the possibilities of this northern region. While the major and real significance of this project lies in the development which flows as a result of it in the future we should not overlook the fact that the power station in itself is a project of major dimensions. The estimated cost of the station, together with local reticulation at Gladstone, at 1963 prices, is $155m, of which the Commonwealth will contribute $80m on the terms and conditions set out in the Bill. This will enable a power station with a capacity of the order of 1,100 megawatts to be built, a station comparable in size to the largest power station existing in Australia today and which when completed will still be amongst the largest. To complete the project the railway from Blackwater which will bring coal to the proposed power station will be upgraded. The State has already commenced construction of an interconnecting transmission line between the central Queensland and the southern Queensland grids. This interconnection will enable the new special industries to be initiated and operating in Gladstone, using southern power while the new power station is being built. Also, it will enable the use of larger generators because of the availability, with the integrated grid, of larger blocks of stand-by power and thus giving complementary benefits to power stations within both grids.
In some of the central Queensland coalfields, as at Blackwater, coking coal is overlain by steaming coal. In open-cut mining of these deposits it is necessary to mine the steaming coal to obtain access to the coking coal. There is a ready export market for coking coal which is in short supply throughout the world. At present there is only a limited market for steaming coal in central Queensland or elsewhere. The Gladstone power station will provide a ready market for this surplus steaming coal which would otherwise be stockpiled. The State, under its agreements, has ensured that this coal will be available for the Gladstone power station. It will also be in a position to draw steaming coal from a number of other mines in central Queensland, thereby making certain a continuing supply at competitive prices. I would point out that the Commonwealth loan is not intended to assist the State with the normal development of the electricity supply system in Queensland. This is a normal State function and not a matter into which we would wish to intrude. The purpose of the Commonwealth loan is to meet the additional outlay involved in providing low cost power to attract export oriented industries to Central Queensland. These industries will be large continuous consumers of bulk power and will produce commodities for export, or to replace imports and are industries that might otherwise be lost to Australia.
The Commonwealth Government, in conjunction with the State Government, has done a great deal for central Queensland. One has only to think of the Commonwealth assistance with the brigalow land scheme, the beef roads programme and the Emerald irrigation project as well as assistance for port facilities to assist the development of the coal export industry, to realise how wide ranging and effective this assistance has been. Much of this investment is now beginning to repay handsomely or has already given substantial indication of the return which it will make in the future. I am sure that the additional Commonwealth investment in the Gladstone power station project will be one of the most rewarding developments yet seen in this potentially rich region.
– In the 1967 by-election which brought me to this House the then Prime Minister’s wife, Mrs Zara Holt, said in my home town: ‘Queenslanders have a wonderful potential but they will not wake up to it and sometimes I feel like shaking them’. One of the Government speakers who preceded me in this debate said that Queensland is a sleeping giant. I suggest that it is not for want of asking that Queensland has been kept asleep for so long. It is noi because the people in that State do not realise the potential up there, but you cannot pull yourself up by the bootstraps. This project will benefit Australia as a whole and not just Queensland. Queensland was left pretty much at the end of the queue for this type of development and it is the only State which has up to this time nol had any assistance from the Commonwealth for power development. We might be a
Gulliver but we are not gullible. On 24th October 1968, not 18 months ago, the then Minister for National Development, the honourable member for Farrer (Mr Fairbairn), assured me that there were no figures available on the shipments from Gladstone and there were no figures available on the relative prices of bauxite or coal or power or freights; these were confidential to the Commonwealth Bureau of Census and Statistics. Yet he could give me in the same answer what it cost New Zealand to produce electricity which was then extracting aluminium from Queensland bauxite. He said that the cost in New Zealand was 0.02c. In Tasmania the cost was 0.05c.
Referring to the Capricornia Regional Electricity Board which at the moment supplies the electricity for Gladstone, he said that the average industrial cost per unit per kilowatt hour was 1.2c to 30th June 1968, but the actual rates charged to any one of these industries in Gladstone was a matter of confidential agreement between the Board and the industries. He also said that the means used to raise loan money for development funds by the State or by this Regional Board were purely a State matter. What a turnabout this Bill is. lt was, according to the Minister not 18 months ago, purely a State matter. The Commonwealth would not come into it. We protested vigorously about this at the byelection, as we have at every election since. Queensland did not take this lying down. At the last Federal election the campaign in Capricornia was fought largely on this issue, and one of the results was this promise, just before the election, of up to $80m for Queensland at 6.4% interest, provided Queensland would be able to show that it would attract export industry. Apparently Dame Zara was way ahead of her late husband’s successor because she was already well convinced. She thought that it was Queensland holding up development and not the Government of which her then husband was the leader.
However, by 14th April this year the present Prime Minister (Mr Gorton) was still not convinced. It seems he has taken this long to draw up this 4-page agreement - not greatly different from other agreements for capital projects - which forms a schedule to the Bill. He promises nothing until the State can guarantee contracts to buy more than half the power to be produced. He wants 2 bob each way. He is a bit like the banks when you go for an overdraft these days. They want your mortgage to guarantee up to the hilt a little bit more than the amount of the overdraft and they want all your insurance policies to make sure they can pay for it by immediately cashing in the insurance policies if the bottom falls out of the housing market. Just to be sure they will like a guarantee from your grandfather so that he will have to pay if you cannot. This is the sort of agreement that is offered to Queensland. We cannot knock it. We cannot reject it. It is there ready for signature. There is no way we can amend it here in this Parliament to make it more equitable. We either take it as it is or leave it. Therefore we have to vote for the Bill. It is the best that we can get.
The State has to carry half the cost of building this project before any return is obtained. It has to find half of that cost from whatever loan sharks it can persuade to lend the money. It has to pay back every cent of the other half with this interest. Admittedly the rate has been watered down a bit because we protested. When the Prime Minister made this statement we protested that it was an unreasonable rate of interest. The Commonwealth proposes to lend the taxpayers’ money - money from all the taxpayers in Australia - back to the taxpayers of Queensland and make them pay interest on it again. That is just about double what is being loaned to them. Queensland has to take all of the risks. The Commonwealth will not be in it until the State has a guarantee of customers to buy the power. The Commonwealth gets all the interest and all the revenue from the income tax that will be created by these new industries. The State will not get any taxes out of them. It is Australia as a whole which will benefit financially from this investment. The Minister for National Development (Mr Swartz) said that this investment is not to benefit the electorate of Capricornia, the town of Gladstone or the State of Queensland; it is to help Australia’s balance of payments. Queensland already carries more than its share of this task. Although New South Wales and Victoria have a debit balance of payments, Queensland has a credit balance, notwithstanding that the people of Queensland have a lower standard of living and a lower average potential income than the people of New South Wales and Victoria. The people of Queensland also get a worse deal by way of development capital from the Commonwealth than do the people of New South Wales and Victoria.
The Commonwealth commits itself to not one cent for the increasingly urgent needs of this area. Not one cent comes from the Commonwealth for harbour development in the fast growing town of Gladstone. It must find finance for harbour development from harbour dues, which fortunately arc very reasonable because of the large tonnages of bulk cargoes being shipped through the port. These are equal to the tonnages being shipped through Brisbane and other ports of Queensland combined. We had to put forward a very strong case before the Commonwealth would build an incinerator in Gladstone, and this is a Commonwealth quarantine responsibility. There is still in Gladstone no adequate control of venereal disease, a matter which I have brought to the attention of the Minister for Health (Dr Forbes). This is a Commonwealth responsibility and a matter for concern in this growing port. The control of venereal disease is left to State and local authorities, which have limited facilities for this purpose.
The Commonwealth has committed not one cent for road and rail facilities which are part and parcel of these new industries. The Minister for National Development referred in his rambling summary to beef roads, but these have nothing to do with the new industries which the power station will bring to Queensland. Not a cent is to come from the Commonwealth for the housing that will be required in the vicinity of these new industries. The industries which will benefit from the new power station - the alumina industry and its subsidiaries - have done nothing to improve the housing situation. It has been left to the employees to find places on which to park their caravans. Housing has been left to the private development firms which are there to make a profit out of the people who cannot provide their own housing. The Commonwealth has provided not one cent for housing, schools or hospitals, all of which ate run down and inadequate in this area.
Not 1 cent has been provided for parks and other amenities. These things have been left to local and State authorities. We get sick and tired of hearing about these shortcomings on the part of the Commonwealth. Not 1 cent has been provided for water, sewerage and drainage works, which are completely choked in the area. The local authority has been swamped by the rapid growth of industry in Gladstone. There is no way in which it can catch up in the time required to develop the new power station. The Commonwealth has provided not 1 cent to overcome the growing pollution problems, and there has been bitter complaint about air pollution and the large numbers of midges in the area. Midge control is left to some amateur organisation - some scientist who has taken the initiative to get rid of the biting midges or sand Hies that abound in the growing residential area of Gladstone. Not 1 cent has been provided by the Commonwealth for the conservation of marine life, which will be menaced by the effluvia from these new industries. The water supply had to be augmented by the alumina works so that it could hold a work force in the town and so that it might have enough water to run the works. But what of the extra water that will be required when there is an alkali works there producing caustic soda and when we have, as we have been told we will have, the biggest aluminium extraction plant in the world? After all this neglect we are supposed to acclaim the Government for coming forward magnanimously in the role of usurer and demanding its pound of flesh before it pays anything.
Let us examine the statements made today by the honourable member for Lilley (Mr Kevin Cairns). Like the Minister for National Development, the honourable member said that it is all a matter of balance of payments: To earn export income we must have an inflow of capital. Let us see how much export income these industries will earn for Australia. In a speech delivered on 10th April this year to the West Australian Chamber of Manufacturers the Prime Minister referred to the percentage of foreign ownership in Australian industries. In the case of the motor vehicle industry, 90% is foreign owned. In the case of the chemicals industry, which is one of the major industries coming to Gladstone, 75% is foreign owned. More than 50% of the electrical and electronics industry is owned and controlled by overseas capital. The alumina and aluminium industry, based on deposits of bauxite which may be the largest in the world and which is the key to Gladstone’s future economic development, is almost 100% in the hands of overseas capital. If the industry is owned 100% by overseas interests obviously 100% of profits go overseas. How, then, can such an industry increase our export earnings? How does Australia benefit if all the investment is in the hands of overseas interests? The Prime Minister knows the answer. He said: ‘You and I are 50% partners in all these enterprises because of the company tax that you and I collect’. That would be all right if we collected any company tax but 3 companies have first opportunity to buy the alumina that is produced in Gladstone. They are the 3 companies that own the alumina works and would you believe that the price they set for selling this alumina to themselves is the cost of production. They do not make any profit. They are doing this out of the goodness of their hearts - producing alumina at no profit, all for the benefit of Australia. The people of Gladstone should thank them humbly for not taking any profit out of the town. As a result of all this no company tax is paid and 50% of nothing is nothing. It is that 50% to which the Prime Minister referred when he said: ‘You and I are 50% partners in all these enterprises’.
Let us examine the Prime Minister’s speech to see the trends. Firms with fewer than 50 employees are 26% owned by overseas capital. Firms with more than 50 employees are 34% owned by overseas capital. Firms with more than 100 employees are 37% owned by overseas capital and firms with more than 500 employees are 43% owned by overseas capital. So the larger the firm the more likely it is that it will be controlled by overseas interests. That is the trend confronting Gladstone. Already the aluminium industry is 100% in the hands of overseas ownership. The partnership to which the Prime Minister referred is not worth the paper on which it is written.
The honourable member for Lilley had a lot to say about the high load factor necessary to get cheap power. He said that
Tasmania and South Australia had been required to pay interest on loans made for similar purposes to the one under discussion. He said that export income is essential in a development of this kind. For how long are we to be guaranteed this export income? Well, he does not say this. We have no guarantee. He asks: ‘How could we possibly have started such an industry if it were not for private enterprise?’ I asked the honourable member for Lilley by way of interjection whether he had heard of Bell Bay. The honourable member said that we are not talking about Bell Bay. I am going to talk briefly about it.
Bell Bay was set up as a CommonwealthState partnership in Tasmania to produce aluminium, not bauxite. Bauxite is refined in New Zealand and in the United States of America as well as other places. This is what is happening today. Some of our bauxite is now being refined in Gladstone. We produced our own alumina in Australia.. This was a little bit of Government enterprise. Capital was just as tight then as it is now. In fact, it was tighter. We had problems associated with the war. But we found the capital. We had a very profitable Government concern. I have heard an honourable member opposite praising the Government and giving it a pat on the back because it disposed of this concern to private industry. He said: ‘Look at the remarkable results that this has produced and look at the wonderful benefits that it has brought to Australia’. He continued: ‘If this had not happened, there would not have been a search for new bauxite deposits. We never would have discovered bauxite at Weipa in North Queensland and we would not have our Gladstone alumina industry today.’
Unfortunately, the fact is that Weipa bauxite was discovered by the Bureau of Mineral Resources, carrying out socialised activity which falls within the responsibility of the Minister for National Development who is sitting at the table. It was public enterprise that discovered Weipa bauxite. If public enterprise can produce alumina in Tasmania at a time of austerity, if it can find bauxite, if it has foresight and if it is willing to take a risk - this Commonwealth Government is not willing to take any risk in the project under consideration - it can produce alumina in Gladstone and it can produce cheap power for that city. This idea that we must attract overseas capital inflow and put ourselves on the chopping block for those who wish to cut off our heads at any time is nonsense. It is poppycock.
The honourable member for Lilley contends that Weipa, Moura, Goonyella and Gladstone would never have developed under a Labor philosophy. Let me look to a little bit of history. Let me look to the fact that we are giving now $50Om a year - approximately 5 times this loan money to be provided by this Bill to Queensland - as a present - as an absolute subsidy - to oil firms, if you please, in order to get from them dearer petrol than we had before. This is the sort of nonsense that we hear when we say that a shortage of oil exists in this country. Why could not some of that money be put towards developing power that is a little bit cheaper instead of being used to develop dearer petrol?
The honourable member for Lilley tells us that an interest holiday is to take place which, in effect, will reduce this 6.4% interest on the money to be provided by way of a loan to Queensland. So it is. But let me assure this House that if it had not been for the vigorous protests that the Leader of the Opposition and I made when the Prime Minister made his statement this concession would never have come about. This concession was not offered in the original agreement before the last federal election.
The honourable member for Dawson (Dr Patterson) spoke of putting priorities into this business. I think that this is the whole crux of the matter. What are the priorities? We have heard a terrible lot about earning export income and attracting overseas capital in order to give us more holes in the ground, more headaches with sewerage problems in Gladstone and so on. Certainly more prosperity will not follow. This industry will attract a few more people to Gladstone and, eventually, by struggling and by cheeseparing on the part of the State, this industry somehow will attract other surrounding industries which will bring a measure of profit to the town. The alumina works will not. The alumina industry will take the profit overseas. But eventually a little bit of prosperity will come out of this development.
Then we will find that the interest holiday will have done something. It will have achieved a little bit in decentralising that State and this country. But decentralisation was put very low on the list of priorities stated by the Prime Minister and by all Government speakers. They were more interested in what capital they could attract to Australia and what exports they could push out without getting anything back for those exports. I suggest that decentralisation is not putting up some smokestacks out in the bush. It is not polluting new harbours here and there. Decentralisation is not making people work at half a dozen different places instead of at the one big place. Decentralisation is establishing a quality of life by getting people out of these huge diseased structures that we call cities, which are concrete conglomerates of people and industry. Cities suffer from hardening of the arteries. They cannot cope with the traffic generated by people going to and returning from work. They cannot cope with the traffic of children getting to school and back home or even the traffic of housewives going shopping.
Decentralisation is improving the quality of life by dispersing these huge conglomerates. Unless the Government makes some of its plans with the quality of life in mind, and not the figures of its export budgets, its balance of payments position and the figures contained in its loan interest papers, it will never achieve the confidence of the Australian people. It will never convince the Australian people that it is concerned more about people than profits and more about people than production figures. Alumina cannot be eaten. Aluminium cannot be eaten. What we need is a total plan which will encourage private enterprise and assist private enterprise but which will, above all, use a little bit of public imagination and initiative in order to bring a variety of activities and industries to these places.
Rockhampton, my home town, is a prosperous and a very nice town to come into. As one comes into the airport there, one sees that the area surrounding it is covered with trees. One finds that it has a tempo of life which helps people to live into their eighties in a graceful way, still be human and still have time to speak to somebody who comes to visit them from the rat race of the south. One will find that in Rockhampton no jobs are available for the
unskilled man past 40 years of age if he has the slightest disability which prevents him from doing heavy work. No jobs exist for the teenage girls. They leave the town and go to the big cities for jobs. No jobs are available for the widows or housewives who need to earn something to help their, families. Rockhampton has a concentration of a few heavy industries.
No planning exists in this country for the quality of life. Industries grow like Topsy where the will of the profit seeker puts them. A man finds a place to put his industry, and that is where it will be. No incentive is provided to a man who wishes to establish, for instance, an electronics factory or a lingerie factory to put his factory in one of these areas. Any number of light industries that I could mention come to mind which could solve this unemployment problem. The development of these industries in areas such as Rockhampton would save the Government thousands of dollars a year in payments in respect of unemployment problems and other social problems. But no planning is done in this direction because the Government does not see its role as that of helping the quality of life. It sees its role as making things easier for private enterprise.
Leave granted for third reading to be moved forthwith.
Bill (on motion by Mr Swartz) read a third time.
Debate resumed from 19 March (vide page 651), on motion by Mr N. H. Bowen:
That the Bill be now read a second time.
-The Metric Conversion Bill is described by its title:
To facilitate the adoption in Australia and in certain Territories of the Commonwealth of the Metric System of Measurement, and for that purpose to establish a Metric Conversion Board.
The Minister for Education and Science (Mr N. H. Bowen) in introducing the Bill said:
This Bill is the first of a number of legislative and administrative steps which will be needed to facilitate and encourage orderly and efficient conversion to the metric system.
He said that he proposed shortly to hold meetings of representative State Ministers. Clause 5 of the Bill states:
The object of this Act is to bring about progressively the use of the metric system of measurement in Australia as the sole system of measurement of physical quantities.
In other words, it will substitute for what might be described as the foot, pound and gallon system . the metre, kilogramme and litre system. The introduction of the measure follows a recommendation of the Senate Select Committee on the Metric System of Weights and Measures which agreed to the system. I understand, from reading about these measures, that New Zealand, Australia, Canada and the United States of America are the only countries that have not adopted the metric system. Almost simultaneously with Australia, Canada and New Zealand have decided to convert to the metric system.
All that the Bill proposes to do is to set up a board which will investigate the system over a long period of time. The Minister suggested that it may be as long as 6 to 10 years before there is a complete conversion to the metric system. In some respects it is a different sort of proposition from the great change that took place in Australia in 1966 from the £ s. d. system to the dollars and cents system. I must confess that when the decimal currency system was mooted I was sceptical. I still am sceptical, candidly, about the advantages that are supposed to have flowed from the changeover. I doubt whether Australia, as an operative economy, would have been any worse off if it were using pounds, shillings and pence instead of dollars and cents. However this act has taken place and it is not much good suggesting reversion.
There are a great deal fewer complications involved in changing our currency to the decimal system than are involved in converting weights, lengths and quantities to the metric system. The scales of conversion are very much more complicated than was the case in respect of currency. The only real difficulty involved in the currency conversion was changing from the unit of 12 pennies equalled 1 shilling to 10c equalled 1 shilling. I refer the House to the Manufacturers Bulletin’ of 16th March 1970 in which is published the equivalents of the British to the metric and the metric to the British for mass, length and area. It will not be quite as easy for the general public to become aware of the equivalents in the case of metrication, as it is called, as it was in the currency conversion I shall refer to the equivalents for British to metric rather than the reverse, from metric to British. Such odd units as a grain and a dram are used. I doubt whether people other than chemists know what a grain and a dram are. When we get down to the one unit we do recognise, the ounce, according to this document 1 ounce is equivalent to 28.3495231 grammes. This is not very easy to understand. In the case of conversion from 1 penny to 1 cent it was 5 over 6 or 6 over 5, whichever way you were looking at the problem. But in the case of 1 ounce the conversion represents near enough to 28i grammes. In the case of 1 lb the equivalent is 453.59237 grammes. The equivalent of the British ton is 1.0160469088 tonne. Certainly these figures represent a great degree of exactness but it is more difficult to convert 1 ton than to use a formula like 5 over 6. One ton is equivalent to 1.0160469088 tonne- which is taking the decimal point to 10 places. A short ton - which I take it is 2,000 lb - is equivalent to 907.18474 kilogrammes.
So far as length is concerned, by reason of participation in events such as the Olympic Games, I think we are all aware that 1 yard is equivalent to 39.37 inches. We in Australia know that a person is doing very well if he can run 100 yards in something under 10 seconds. The world record for running 100 metres is, at the moment, I think, something less than 10 seconds. You have to run pretty fast to achieve this because 100 metres is about 109 yards.
According to this bulletin 1 yard is equivalent to .9144 metre. Looking at it from the other direction, 1 metre is 1.09361 yards.
Similarly, when we come to area measurements, we are used to thinking in terms of acres. The acre is our basic measurement. One acre is equivalent to 0.404686 hectare. I suppose this is near enough to saying that 1 acre is equivalent to 4/ 10ths hectare. But the figure is not quite so exact if we want to sell a parcel of land of 1,000 acres. The equivalent for 1 square mile is 2.589988 square kilometres. I do not want to mention the equivalents for metric to British because the position gets even worse.
I refer now to measurements of volume. In this respect we are concerned about what we get in the daily bottle of milk or with what some people consume at certain times in terms of pints of certain well known liquors. One gallon, which is 277.42 cubic inches, is equivalent to 4.54609 litres. One pint, which is 34.6774 cubic inches, is equivalment to .56826125 litre.
I am suggesting that there will be many more educational problems involved in the conversion to the metric system than was the case when we made the relatively simple conversion in our currency. The Opposition is not opposing this measure because it seems that there is universal agreement in this respect. I have with me a number of quotations from documents such as ‘Canberra Comments’ of January 1970 which contains an article headed ‘Metric conversion welcomed by business’. The ‘Metal Trades Journal’ of March 1970 contains an article headed ‘Australia to adopt metric system of weights and measures’, and seems to suggest approval.
The Minister for Education and Science mentioned in the course of his second reading speech that this conversion would be a relatively long term process. He suggested that there would not be a special day, as there was a ‘D’ for conversion to decimal currency, when suddenly we would change from the old system to the new. He said that this conversion would take place over a long period of time. I think quite a number of anticipations of the change already have taken place. Most honourable members know that medicine glasses are now calibrated in gramme and milligrammes rather than ounces. I think most of us still adopt the rough measure of a teaspoon or a tablespoon. Recently the Government released ‘Statutory Rules - 1970 - No. 40’ relating to Regulations. Under the Weights and Measures (National Standards) Act 1960-66 in which was quoted the table of related values of temperatures on the 1948 scale. I think most honourable members who did physics or chemistry, or whatever the subject was called in those very neutral days of 20 years ago before atomic physics loomed on the horizon, used the formula 5/9ths minus 32 or 5/9ths plus 32 to convert from centigrade to fahrenheit. At least all these things will be simplified for the students of the future.
Nevertheless 1 do envisage that a lot more difficulties will be involved in the process of conversion to the metric system of weights and measures. Probably it is a fait accompli in other countries with the exception of the United States of America. I understand that the United States is tending to bow to the inevitable and is setting up a committee of inquiry with a view to converting from the old foot-pound-gallon, as I describe it, to the metric system. 1 have with me another document entitled ‘Australian Commercial Fishing and Marketing’ of March 1970 which contains an article headed ‘Metres take over from fathoms and feet’. So even the tide tables will include a staff card book carrying conversion tables from fathoms to metres and metres to fathoms. It seems that this sort of thing is inevitable. It is regarded as a sign of progress. 1 am one who believes that the more unity we can get into international relations the better it will be. I hope that some day we will even have uniformity of language. This would be pretty difficult to achieve, but at least at present we can talk in common terms in relation to currencies that can be converted on a decimal basis. It is also accepted that we travel so many kilometres instead of miles between Melbourne and Sydney. When we go to Europe I think most of us use the rough conversion of 5 over 8, a kilometre being five-eighths of a mile. To convert miles into kilometres one multiplies 8 over 5. To convert kilometres to miles one mulitplies 5 over 8. It is not long before one begins to understand.
Nevertheless, I think the Government has a much more difficult educational programme in front of it, in regard to metric conversion, or metrication, as it is called, than was the case with the currency conversion. One other difference, of course, is that whereas compensation was paid to people in respect of the changes to decimal currency, no compensation is being paid in respect of conversion to the metric system. I cannot say that I am against that policy. If the system is supposed to have advantages those who receive the advantages should be willing to pay for them. As the Minister said, in terms of conversion, I think a lot of it will be covered by depreciation and obsolescence. If it is known that the plant at a particular place has to be converted over a period of 6 to 8 years - that is, converting from pounds to kilogrammes or from gallons to litres - at least it is possible to plan ahead accordingly. I do not think there is much more that I need say about this subject, except that at this stage it is merely to be considered by a board. I doubt whether there will be any retracing of steps. I think the decision has been made to convert to the metric system. I find* it hard to believe that the Board when it meets will decide that on balance it is better to leave things as they stand. However, I suppose technically it is within the competence of the Board so to determine. But it seems to me that the die is cast, as it were, and we will move forward to this new system.
One example usually given and which my friend, the honourable member for Hughes (Mr Les Johnson), quoted against me recently, is that arithmetic will be much more easily taught under the metric system or under the decimal system than previously. Candidly, I still have doubts about that. An arithmetical problem still has to be calculated whether it is expressed in terms of decimals or duo-decimals. I do not think it matters what the system is. In this great advanced age that we are supposed to be living in - the age of the computer - the computer does not calculate in decimals. It operates on what is called a binary system, a system which operates on the basis of additions of two. Some advanced American scientists claim - and I do not know who will prove them wrong until about the year 2050 - that ultimately the whole world will revert to the duo-decimal system rather than to the decimal system by reason of the mechanisation of the computer. I mention that only as a kind of cautionary tale to show that we can all be wise in 1970 when looking ahead to 1980. But nobody can look forward from 1980 to 2050. However, in terms of our limited knowledge at this stage we of the Opposition offer no objection to setting up the Metric Conversion Board.
– I congratulate the Government on taking this big step forward. Having regard to the fact that so many countries today have adopted the metric system I think it is right and proper that we should take our place among that majority of countries which, over a period of time now, either have been implementing or have fully implemented the metric system.
I should like to pay tribute also to the Senate Select Committee on the Metric System of Weights and Measures for the splendid work that it did under the chairmanship of the late Senator Keith Laught. I have in my hand a copy of the Committee’s report. It is quite a voluminous document. No doubt it has been read by other honourable members as it has been by me. I am sure we all have been greatly impressed by the amount of care and thought that has been put into it. I know that the late Senator Laught was very keen for the Government to adopt the metric system and my only -regret is that he did not live for another 10 or 12 months to see this actually take place.
On pages 117 and 118 of the Senate Select Committee’s report are listed the countries which have adopted the metric system and those which have not yet adopted it. It will be seen from a quick glance at the list that there are 126 countries today, containing about 90% of the world’s population, which are using the metric system. As the honourable member for Melbourne Ports (Mr Crean) said a few minutes ago, the introduction of the metric system in Australia undoubtedly will be relatively slow. There will be no M Day, or Metrication Day, like D Day was associated with the introduction of decimal currency. Nevertheless I am sure that once it has been officially recognised and adopted the system will be implemented and will proceed with reasonable speed.
The Government has indicated that metric conversion board will be established. I am sure that this will be equally successful as the Decimal Currency Board was a few years ago. To take an example, Great Britain plans to be fully metric by the end of 1975. We probably will not be fully metric until about 1980 according to the plan which has been outlined to us by the Minister for Education and Science (Mr N. H. Bowen).
I understand that in some industrial sectors in Britain metrication is already well under way, as it is in South Africa. For some time India and Japan have had the metric system. The United States Congress not long ago authorised an official inquiry into the metric system with the implication of ultimate conversion to it. The New Zealand Government has accepted the necessity of assisting metrication in that country and has set up an advisory board to encourage, assist and advise on the progressive voluntary adoption of the metric system, lt is logical to assume that the process of change to the metric system in Britain will progressively affect Australia and New Zealand, if only for trade reasons. That is pretty obvious. I think it is also reasonable to suggest that the pace in Britain will affect to some extent the pace in Australia and New Zealand.
Considerable planning and co-ordination undoubtedly will be required so that each sector within the community, as it becomes ready to do so, will move over to the new metric system from the old imperial system gradually and in line with and related to other sectors of the economy. Obviously conversion here cannot be achieved all in 1 step as was the case with the conversion to decimal currency. The changes to be made, as the honourable member for Melbourne Ports has indicated, will be many and varied, and obviously it will take some years for them all to be implemented. Undoubtedly there will also be some growing pains or perhaps should I say some transitional problems that will have to be coped with, and I am sure they will be met as they arise.
The Minister in New Zealand who was responsible for handling this matter there indicated in his Parliament that the means for deriving maximum advantage at minimum cost lie in the development of pro grammes, the phasing of changes with external events, and the replacement of plant and practices when, these become obsolete. As was the case in New Zealand, I have no doubt that in our country individual sectors such as manufacturing, agriculture, retailing and transport will best be able to plan their own programmes for metrication through some special sector committee system established from amongst their own members. This has been done in a number of other countries and apparently it has worked well. These sector groups will be able to determine their own timing, depending on their own individual problems, but hearing in mind the overall national timetable, which in. our case will be approximately 10 years. This of course will be the ultimate responsibility of the Metric Conversion Board and of the Commonwealth Government.
Some of the sectors may well find that metrication presents special problems for them, and the change may take .longer to achieve. These sectors will no doubt be able to work at their own pace. No doubt they will be provided wilh what assistance can be given to them either by the Government or by the Metric Conversion Board, and it may of course not be possible for them to reach full metric conversion until some years after other sectors have completed the change. There is no suggestion, of course, of a crash programme of change for any sector or in the overall picture. The entire process, as has been indicated by the Minister and as was commented also by the honourable member for Melbourne Ports who preceded me tonight, is seen to be gradual, voluntary and co-operative, with timing to secure the maximum benefits at the least cost.
In collaboration with the Board, it will be the task of all sections of the community to ascertain what is involved for them in metrication and to achieve harmonious conversion with advantage to all. I believe that this will almost certainly be achieved. As costs in the country are continually increasing, maximum speed and efficiency in conversion from the old system to the metric system are clearly desirable. The Senate Select Committee emphasised that delays in conversion could increase the ultimate cost by approximately 7% per annum, and I am sure that the Government has this in mind. We are not starting from scratch, because in this country in the pharmaceutical and scientific fields and for electrical measurement the metric system is already being used almost exclusively. Almost without exception education authorities in this country favour the early adoption of the metric system because it would simplify and unify the teaching of mathematics and science. One writer says:
The metric system of weights and measures will make living easier, simpler, more efficient and may be even cheaper. Industry will benefit, school children will benefit, trade will increase, Australia will benefit.
Whatever the costs of conversion may be, I am positive that the ultimate benefits will in every way be to our advantage. It is interesting to note that a gallup poll taken about 18 months ago showed that an overwhelming majority of the Australian people approved the change. I have much pleasure in supporting the Bill.
– This debate relates to a decision made recently by the Government to convert to the metric system of measurement of length, area and weight. It is called the Metric Conversion Bill 1970. It seems from what has been said already that there is no dissent by the Opposition from that decision. The Bill does but one thing; that is, it sets up a Metric Conversion Board. The Government hopes that the Board will set out as its object to ensure progressively that Australians use the metric system of measurement.
I hope that the Metric Conversion Board that is established by the Government will operate in much the same way as the Decimal Currency Board operated. But it is possible, as has been said by the Minister for Education and Science (Mr N. H. Bowen) and other speakers, that the time factor could be important in this conversion to the metric system. Times of from 6 to 10 years have been mentioned. I hope that the Government will make certain that the Board speeds up the time factor because 6 years is a long time and 10 years is too long a time in which to carry out this conversion from the imperial system to the metric system.
I hope, too, that the Minister will set up the Board immediately. In my view, the first thing the Board should do is establish target dates for the various sectors of industry - retailing, rural and so on - and ensure that those target dates are met by those sectors of industry. This would follow the practice adopted by the British Metrication Board. It allowed 10 years in which to operate the programme from its inception in 1967. The programme was initiated in that year and the British Board hoped to have it completed in full by 1977.
I should say at this stage - I have said this before in this chamber for fairly obvious reasons - that I am a chartered engineer and I realise some of the problems connected with engineering in the conversion from the imperial system of measurement to the metric system. But at the same time my colleagues in the profession have felt for many years that this decision should have been made certainly 10 years ago or even before that. In other words, 1 am suggesting that Australia should have been one of the first, not one of the last, countries to convert to the metric system. As has been said by the honourable member for Ryan (Mr Drury), the British Government has made its decision and is practically half way through the conversion and the New Zealand Government has made its decision and hopes to convert very shortly.
The effect on commerce and trade will be quite important to Australia. Therefore we should speed up this conversion as much as possible. It has also been said, but I repeat it, that 90% of the world’s population now operate under the metric system. It is a simple system, and that is why these people use it as a measurement of length, area and weight. Also, 75% of the world’s trade is carried out under the metric system. I can appreciate some of the problems that beset Australian exporters when they have to convert from the imperial system and make certain that their customers receive the right weight and the right measurement.
One criticism that I will make of this decision refers to my belief that it should have been this chamber that initiated this decision. It was left to the Senate - the senior House of the Parliament - firstly to set up a select committee and secondly to propose, through that select committe’s report that this conversion be made as soon as possible.
I believe that we have been long enough in this House to have initiated the conversion and that we should not have left it to the Senate to show us the way. The Committee’s report was a fulsome one. People from many sections of industry and commerce were interrogated. The Committee carried out wide investigations and submitted its report to Parliament in May 1968. The first part of the report indicated that a metric conversion board should be established. The board would cover diverse ramifications in industry, commerce, retailing and rural production. From what the Minister and other speakers have said it seems that too many years will elapse before the final conversion to metrication takes place. Industry should be advised now to start writing off equipment which is gauged on the imperial system so that very little compensation will be needed as the years go by. Taxation concessions and depreciation allowances should be made available. The people who will be affected should be advised as soon as possible so that they may ensure that their replacement equipment is gauged on the metric system and not on the imperial- system.
I hope, too, that school curriculums are placing a great deal more emphasis today than even 2 or 3 years ago on teaching pupils how to use the metric system for measurements of length, area and weights. The children who will be adults in 10 years time should have more than a working knowledge of the metric system. The switch to metrication will offer Australia ample opportunities for technological advancement and economic advantages. I know a good deal more than most honourable members about the manufacturing industry and I am surprised that that industry in years gone by has not insisted that the Government do something about changing to the metric system. Before us are the experiences of many other countries in making the conversion, particularly the British attempt at conversion which was initiated in 1967 and is well on the way to completion. I sincerely trust that Australia has had observers in Britain to assess just how the British have made their conversion, the effects of it, and what criticism has been levelled at the Government on some of its aspects. The reports from such observers would be invaluable for our conversion efforts.
We will need to have sound co-ordination and planning so that various industries and various sections of industry dovetail their conversion with other industries. We have very little information about the costs of the conversion. It has been assessed that it will cost more than the $50m that the decimal currency conversion cost, but this is purely speculative. It could cost a lot more; it could cost a lot less. At this stage the Bill endeavours to establish a metric conversion board. Although the Minister said in his second reading speech that there is no thought of compensation at this time and I would have expected that except in very special cases, where there is a high technological aspect and a small company is involved, very little compensation should be required. Industries should be given many years to write off their equipment and obtain the tax concessions that are available. A number of concessions are available for such things as obsolescence and depreciation of plant. As an engineer 1 can cite only one or two cases where easy conversion can take place. One is the lead screw on a lathe. It may be ordered in either the Imperial or metric standard. A quick changeover from the British standard to the metric standard can be effected with a lathe. Indicators or dials on equipment can easily be changed for weights and measures purposes.
I hope that government departments will be pace setters for industry. In other words, government departments should now when ordering equipment for their use make certain that quick conversion can take place to the metric system. This is a simple matter to specify when ordering new equipment. I hope that all departments controlled by the Commonwealth, State and local government authorities will make sure that their specifications cover that aspect. This Bill is a step in the right direction and with other speakers in this debate I support it.
Leave granted for third reading to be moved forthwith.
Bill (on motion by Mr N. H. Bowen) read a third time.
– I require that the question be put forthwith.
Question resolved in the affirmative.
House adjourned at 11.1 p.m.
The following answers to questions upon notice were circulated:
asked the Minister for Trade and Industry, upon notice:
– The answer to the honourable member’s question is as follows:
asked the Minister for Trade and Industry, upon notice:
– The answer to the honourable member’s question is as follows:
Shipping: Torres Strait (Question No 640)
asked the Minister for Shipping and Transport, upon notice:
– The answer to the honourable member’s question is as follows:
Statistics are not collected in relation to the number of ships passing through the Torres Strait nor is it practicable to obtain the more detailed information sought in the question, particularly in relation to ships on international voyages not involving a call at any port in Australia. However, some information relating to the year 1966-67 is available from a study undertaken in 1968 by (he Department of Shipping and Transport with the assistance of the Queensland Coast and Torres Strait Pilot Service. The figures obtained, which relate only to ships piloted through the Strait in that year (pilotage is not compulsory), give an indication of the number of ships passing in pilotage, their deadweight tonnage and tonnages of some of the bulk commodities carried.
Available figures for 1966-67 are:
SELECTED BULK COMMODITIES CARRIED IN TONS
Iron ore . . 2,500,000
Crude oil and petroleum .. 3,000,000
Sugar .. .. .. 530,000
Steel and steel products . . . . 280,000
asked the Minister for Primary Industry, upon notice:
– The answer to the honourable member’s question is as follows:
From 1948-49: Commonwealth Bureau of Census and Statistics.
asked the Minister for Shipping and Transport, upon notice:
Is the design of the bulk carriers ‘Darling River’, Iron Hunter’, ‘Bogong’ and other ships of similar size built in Australia in the last S years in any way similar to the Japanese-owned bulk carriers Bolivar Maru’ of 54,000 DWT lost on 5 January 1970, and the ‘California Maru’ of 62,000 DWT lost on 10 February 1970.
– The answer to the honourable member’s question is as follows: 1 am advised that there is some similarity between the ‘Darling River’, ‘Iron Hunter’, ‘Bogong’, Yarra River’ and the ‘Bolivar Maru’ as the basic design of the Australian ships was prepared by the Ishikawajima-Harima Heavy Industries Co., Tokyo, the builder of the ‘Bolivar Maru’. The Australian ships were however constructed at the Whyalla Shipbuilding and Engineering Works, Whyalla.
The ‘California Maru’ and the ‘Bolivar Maru’ are of about the same size and were built in the same year to Nippon Kaiji Kyokai requirements. However I am unable to say whether their basic designs were (he same as ‘California Maru’ was built by Mitsubishi Heavy Industries another Japanese yard.
asked the Minister for Primary Industry, upon notice:
– The answer to the honourable member’s question is as follows:
The Association was informed of this decision on the 12th September 1968, and (he decision’s applicability to the prune industry case was confirmed by letter to the Association of the 21st October 1968. The Association informed all packers and agents by circular of the 28th October 1968.
The Government gave further consideration to devaluation compensation in respect of goods held up in the Suez Canal, but decided that devaluation losses in this regard were not eligible for compensation, as forward exchange cover would also have been available against this kind of loss. This decision was announced in December 1968 and the Association specifically informed of it on the 19th December 1968.
asked the PostmasterGeneral, upon notice:
What changes in (a) the beneficial ownership of the shares in television companies and (b) the memoranda or articles of association of television companies has he (i) been asked to approve and (ii) approved since his reply to me on 27th September 1968. (Hansard, page 1622.)
– The answer to the honourable member’s question is as follows:
The attached statement contains details ot the applications made to the Minister since 1st September 1969 for approval of changes in the beneficial ownership of shares in companies holding licences for commercial television stations and changes in the memoranda and articles of association of such licensee companies.
Cite as: Australia, House of Representatives, Debates, 12 May 1970, viewed 22 October 2017, <http://historichansard.net/hofreps/1970/19700512_reps_27_hor67/>.