17 September 1959

23rd Parliament · 1st Session

The PRESIDENT (Senator the Hon. Sir Alister McMullin) took the chair at 1 1 a.m., and read prayers.

page 613



Senator LAUGHT:

– I direct a question to the Minister for National Development. It has been reported to me that both rainfall and snowfalls in the catchment area of the Murray River are very much below normal this year. Can the Minister say whether this is a fact? If it is, can he say to what extent these falls are below normal? Can he say whether the flows of the Murrumbidgee and the Murray will be lessened this summer as the result of reduced storage in the Hume reservoir to the extent that the flow in the Murray, after it enters South Australia, will be so reduced as to cause great concern to South Australian horticulture and industry?

Senator SPOONER:
Minister for National Development · NEW SOUTH WALES · LP

Senator Laught directs attention to what is, without doubt, a very serious situation indeed. The River Murray Waters Commission has already given a good deal of thought and attention to it, and is very concerned indeed at the likelihood that there will not be sufficient water in the Murray River in the forthcoming irrigation season to serve all irrigators. As the honorable senator says, the trouble is due basically to the light snowfalls and low rainfall in the catchment area this winter. Honorable senators may know that there has been some alleviation of the position by quite good rainfalls in the catchment area this week, but even they will not provide a solution to the difficulty.

This year, the inflow into the Hume reservoir, and the flows in all tributaries of the Murray below it, are very much less than the average. The seriousness of the position can be gauged by the fact that whereas last year the greatest volume of water in the Hume reservoir was approximately 2,000,000 acre feet, so far this year the greatest volume of water in it has not exceeded 1,400,000 acre feet. That position is common to all rivers. I have here some figures regarding the average flow of certain rivers. For the months from May to August, the average flow of the Murray

River at the Hume Weir is 1,238,000 acre feet. The actual flow this year is only 473,000 acre feet. The average flow of the Kiewa River at Kiewa is 140,800 acre feet; this year it is 64,500 acre feet. The average flow of the Ovens River at Wangaratta is 582,000 acre feet; this year it is 164,000 acre feet. The average flow of the Goulburn River at Eildon is 722,000 acre feet; this year it is 197,000 acre feet.

South Australia, under the terms of the River Murray Agreement, is protected to the extent of 1,250,000 acre feet, expressing it in round terms. That is a first charge on the waters of the river Murray, the balance being distributed between New South Wales and Victoria. That arrangement continues unless the commissioners, under the River Murray Agreement, declare a period of restriction in the terms of the agreement. I can only give the senator an assurance that, in such a serious set of circumstances, the River Murray Waters Commission is watching developments closely. Indeed, there will be a special meeting of commissioners on 25th September to see whether the commission can at that stage lay down a policy for the coming irrigation season.

Senator WRIGHT:

– I direct to the Minister for National Development a supplementary question to that which he has just answered. When the Minister was giving the figures for this year, was he referring to a full period of twelve months, and if so, to which period of twelve months? If he was not referring to a period of twelve months, was he referring to the period from January to September, 19597

Senator SPOONER:

– I was giving figures of the average flow in various rivers, the average having been taken over a long period of years, and contrasting them with the actual flow averaged over the months from May to August of this year. The average, I think, is spread over a very lengthy period.

page 613



Senator BROWN:

– I wish to ask the Leader of the Government in the Senate a question that arises from a statement made by Senator Armstrong in this chamber yesterday, that much delay was experienced by seekers after finance to build homes through the War Service Homes Division, that twelve months or more elapsed before they were obliged to borrow money elsewhere at interest rates of 10 per cent., 15 per cent, and 20 per cent. While Senator Armstrong was speaking, there was an interjection from the Government side of the chamber to the effect that that was not they received financial assistance, and that true. I ask the Minister: What is the position to-day? Has the time-lag disappeared, or do returned soldiers who apply to the War Service Homes Division for finance still have to wait twelve months or more before they receive financial assistance to build a home?

Senator SPOONER:

– I did not hear Senator Armstrong’s statement. I shall try to recapitulate the position briefly, from memory. There are many extravagant statements made about the rate of interest that is paid for temporary finance in war service homes transactions. The War Service Homes Division has made an investigation covering a great number of transactions. That investigation showed that the great majority of those who obtain temporary finance obtain it at bank rates of interest. Speaking from memory, I think that over 60 per cent, of this finance is obtained at a rate of interest of 8 per cent, or lower. It is a pity that extravagant statements are made which put the position in a false way, because there are great advantages in being able to go ahead with a transaction even though the finance is not available in the ordinary way.

T come now to the matter of the waiting time for war service homes. I hope that I remember the position correctly. If the applicant is building his own home he has to wait only three months. In other words, an applicant who asks the War Service Homes Division to build a home for him waits three months. Then the transaction proceeds and the building is financed as it goes along. Let me put it this way. A home is to be built by the War Service Homes Division. The man is in the house and the house is paid for within twelve months of his making the application. That includes the time of building the house.

As to the other categories, they are all lengthier - fifteen months for the purchase of a new home, and running up to twenty months for the purchase of an old home, the fact being, of course, that war service homes finance is so popular and has such attractive terms that the demand for it is being substantially maintained.

page 614



Senator BRANSON:

– My question is directed to the Minister for Shipping and Transport, who is also the Minister for Civil Aviation. Has the Minister seen the recent reference to the development of hovercars in the United States of America and hovercraft in the United Kingdom? Has he had any inquiries made by either of the departments he administers as to the possibilities of this form of transportation - whether the production in the near future will be of commercial value, and the part that these vehicles will play in the general pattern of the Australian transport system? In the event of these vehicles being produced in sufficient numbers to be of commercial value, does the Minister anticipate that they will have any effect on the rail standardization proposals?

Minister for Civil Aviation · WESTERN AUSTRALIA · LP

– This very interesting transport development, which at present is in a very early stage of research, is receiving the attention of both the Department of Civil Aviation and the Department of Shipping and Transport. The British vehicle is the hovercraft, which is designed for over-water transport - at least, in its early stages. The Americans appear to be concentrating on the hovercar, which, as the name implies, is for transport over land. Both vehicles have the same system of propulsion. It is a system of air thrust forced down on to the surface creating a pad between the vehicle and the surface over which the vehicle is moving, either land or water.

Senator Scott:

– It would be good on dusty roads!


– The honorable senator has raised a very interesting point - one to which 1 want to refer. Incidentally, both vehicles operate at a height of only a few feet. The hovercraft, which is designed for over-water transport, is encountering, as will be seen, some pretty difficult technical problems. There is the size of the vehicle in relation to the expected height of the wave which can, as the Senate will immediately see, create problems as to how the entire craft can be lifted over a big wave without some part of it dipping into the water. Possibly further research will show that it will be best to use the craft over lakes or other inland and protected waters rather than over the ocean. I am grateful to Senator Scott for reminding me that, if it is not to cause extensive soil erosion, the hovercar may have to fly over permanent highways only. The dust and debris that would be thrown up when the craft was flying near populated areas, and other problems, must be kept in mind. From what I have said, I think that honorable senators will see that both departments are watching developments closely. It is much too early to say what part this craft might play in transport, or to what extent it might affect rail standardization and similar matters.

page 615



Senator SHEEHAN:

– My question of the Leader of the Government refers to the recent developments in the treatment of wool initiated by the Commonwealth Scientific and Industrial Research Organization. In view of the effect that the C.S.I.R.O. wash-and-wear process will have on the demand for wool throughout the world, as well as on employment in this country’s textile industry, can the Minister indicate the stage its development has reached and the conditions under which it will be made available to textile manufacturers?

Senator SPOONER:

Senator Sheehan was good enough to mention his interest in this matter and 1 was able to obtain a brief note upon it from the C.S.I.R.O. I think that it will interest honorable senators. The process referred to produces washable, noniron properties in pure wool fabric. The Australian textile industry was given full technical information about the process on Friday, 4th September. It consists of two steps. First, the fabric is shrink-proofed. It is then stabilized, or “ set “, as it is termed in the trade. Garments made from fabric so treated can be laundered without the need for special precautions being taken and, when dry, can be worn without ironing. The trade mark, “ Sironized “ will be used te identify wash-and-wear materials treated by the C.S.I.R.O. process, which many Australian textile manufacturers are planning to use as soon as possible. The C.S.I.R.O. is providing every assistance but in large-scale production some delay in introducing a new product is inevitable. However, it is expected that sironized garments will be available in the retail stores by the end of the year. The Australian Wool Bureau is actively behind the process, and will promote its use as soon as commercial production commences. Plans have also been made for the early release of the process to textile manufacturers in all overseas countries.

page 615



Senator SCOTT:

– My question of the Minister for Civil Aviation refers to his recent announcement that the firm of MacRobertson Miller was about to purchase a Fokker Friendship plane for its West Australian service. When is it expected that this plane will come into service? Will it be used on the Perth-Darwin run only? If not, will it be used to provide a service to inland and coastal airports?


– The chairman of the company recently announced publicly that the aircraft referred to would be in service before the end of the year. It is anticipated that it will be in operation in late November or early December. He also stated specifically that it would be used on the Perth-Darwin run, but I do not know whether he had in mind the exclusive use of the aircraft on that run. He did not refer to any other routes.

page 615



Senator O’BYRNE:

– My question is directed to the Leader of the Government in the Senate. In view of the decision of the Full Bench of the High Court that the 10s. levy imposed by the Tasmanian branch of the Waterside Workers Federation on its members was valid, and in view of the great hardship that was endured by members of the federation as a result of the action taken by the Australian Stevedoring Industry Authority, will the Minister inform the Senate whether the Government will give early consideration to the payment of full compensation for the loss of wages suffered by hundreds of waterside workers who were illegally suspended during the period from January to June, 1958?

Senator SPOONER:

– The answer is, “No”.

page 616




– Has the Minister for Customs and Excise seen an article in the Sydney “Sun” of 15th September which directed attention to the unhappy circumstance that, although the censorship authorities regarded the film “ Room at the Top “, which is now showing in one Sydney and thirteen suburban theatres, as being suitable only for adults, at one theatre nearly half of the audience consisted of children? Cannot something be done to ensure that censorship is effectively implemented?

Senator HENTY:
Minister for Customs and Excise · TASMANIA · LP

– I read the article in question with a great deal of interest. I think it contains a great deal of merit. The Commonwealth Film Censorship Board goes to’ a great deal of trouble to classify films. This particular film’ was classified as fit for adults only. I had inquiries made by the Department of Customs and Excise and I found that, in spite of the classification of the Film Censorship Board, one theatre was admitting children at half price to view this film. The position is that we have no constitutional power to enforce Commonwealth censorship within the States. In both England and New Zealand the responsibility is placed directly upon the picture theatres themselves by law, but that is not the position in Australia. Unless the State governments are prepared to take up the matter and pass laws which provide that the classifications of the Film Censorship Board shall be observed, our hands will remain tied - most regrettably, I feel.

page 616



Senator HANNAN:

– I direct to the Minister representing the PostmasterGeneral a question with reference to the forthcoming hearings for the granting of country television licences. Can the Minister inform the Senate whether the Australian Broadcasting Control Board will conduct its inquiries in the localities affected, or whether the evidence will be taken in Sydney or Melbourne? Does the Minister agree that grave financial hardship would be imposed upon genuinely independent applicants if they had to take many witnesses to capital cities and maintain them there for the duration of a hearing?


– 1 understand that the Australian Broadcasting Control Board will be visiting the areas, or parts of the areas, that have been named by the Postmaster-General. I shall make quite sure of that and get further information on the subject from the PostmasterGeneral and then let the honorable senator know.

page 616



Senator McMANUS:

asked the Minister representing the Postmaster-General, upon notice -

In view of the reported intention of the Victorian Government to introduce large scale offcourse betting by post and telephone, will the Postmaster-General give instructions that provision of telephones for this purpose receive no priority over the needs of businessmen, primary producers and private citizens, who in many cases have been waiting long periods for telephone facilities?


– The

Postmaster-General has furnished the following reply: -

The priority to be accorded applications for telephone services for off-course betting, if introduced by the Victorian Government, would not be higher than that accorded a registered business and would receive attention within its own priority grouping according to the date of lodgement.

page 616



Basic Wage Increase

Senator WRIGHT:

asked the Minister representing the Postmaster-General, upon notice -

  1. Does the recent basic wage increase, awarded by the Commonwealth Conciliation and Arbitration Commission, apply automatically to postal employees?
  2. If not, has an application for an increase been made by any agency representing such employees?
  3. What would be the aggregate annual cost to the Post Office of such an increase?

– The

Postmaster-General has furnished the following replies: -

  1. No.
  2. Steps were taken by the Public Service Board and the Post Office to increase the salaries and wages of Post Office staff by the same amounts as were approved by the Conciliation and Arbitration Commission, and these increases have been paid.
  3. The additional cost to the Post Office in salaries and wages is expected to be £3,650,000 in 1939-60. The costs of materials and services supplied to the Post Office will also be affected.

page 617



Senator BROWN:

asked the Minister representing the Treasurer, upon notice - r

  1. Is it a fact that in Queensland a widow often suffers hardship because the pension she draws as a result of her husband’s thrift in paying into a superannuation fund is capitalized on the basis of the widow’s expectation of life and the amount arrived at is added to the estate for probate?
  2. Does this procedure apply in all States?
  3. Is the federal parliamentary retiring allowance subject to the same treatment as far as widows are concerned?

– The Acting Treasurer has furnished the following replies: -

  1. I am advised that, in Queensland, the capitalized value of such a pension is taken into account for State death duty purposes in determining the rate of duty which is to be applied to the estate of a deceased contributor to a super, animation fund. The capitalized value of the pension is, however, not dutiable, and is excluded from the amount to which that rate is applied in calculating the duty payable.
  2. No. In all other States, such pensions are completely disregarded in the calculation of death duties. This is also the case with regard to Commonwealth estate duty.
  3. Yes.

page 617



Senator PEARSON:

asked the Minister representing the Minister for Primary Industry, upon notice -

  1. How much wheat of the 1958-1959 harvest was sold up to the end of August, 1959?
  2. How much remains to be sold?
  3. How much wheat from previous pools remains unsold?
  4. What is likely to be the carryover of wheat in Australia on 30th October, 1959?
Senator GORTON:
Minister for the Navy · VICTORIA · LP

– The Minister for Primary Industry has supplied the following answers: -

  1. Sales to 5th September, 1959, were 110,000,000 bushels.
  2. 88,300,000 bushels.
  3. There is no wheat remaining unsold from previous pools.
  4. The present estimate of the end of season carryover at 30th November, 1959, is about 66,000,000 bushels.

page 617



Senator COOKE:

asked the Minister representing the Minister for Primary Industry, upon notice -

  1. Is it a fact, as stated in the report of the South Johnstone mills, that this year “as it is anticipated that only up to peak sugar will be taken by the Sugar Board, a substantial tonnage of cane, possibly 50,000 tons, will have to be left unharvested”?
  2. Will the Minister inform the Senate what quantity of sugar cane grown in Queensland was left unharvested and untreated during the last three years?
  3. Will the Minister arrange for an investigation to be made to determine- whether the destruction of immense quantities of this primary product can be prevented so as to ensure that sugar cane that would otherwise be ploughed back could be utilized to the advantage of the fruit and other Australian industries dependent upon sugar?
Senator GORTON:

– The Minister tor Primary Industry has supplied the following answers: -

  1. Yes. This is a reasonable estimate for the district concerned.
  2. 1956 and 1957, mills accepted all cane offered; 1958, approximately 900,000 tons of cane were not harvested; 1959, about 1,500,000 tons of cane are expected to be unharvested.
  3. Production control is a matter for the State Government. Continuous investigation is in progress to find new uses for sugar; and all present needs of fruit and other industries are satisfied. Australia’s adherence to the International Sugar Agreement is designed to facilitate organized world marketing of the maximum quantities of sugar.

page 617



I direct a question to the Minister representing the Postmaster-General. In view of the progressively late issue of the Tasmanian telephone directory, will the Minister give favorable consideration to issuing a supplementary telephone directory early in each year to assist telephone users by providing them with up-to-date information on new and altered telephone numbers?

The Postmaster-General has now furnished me with the following information in reply: -

There have been only three occasions in the past ten years when, due to unavoidable circumstances, distribution of the Tasmanian directory has not been effected during the scheduled month of August. In no instance did the delay extend beyond two weeks. The question of issuing supplementary telephone lists during the currency of main directories has been examined on several occasions and it has been found that any likely benefits would not justify the substantial expenditure involved. Experience gained some years ago with supplementary lists showed that they were rarely consulted and that, in many cases, subscribers did not bother to retain them. The major telephone administrations overseas, which publish their telephone directories once each year, do not issue supplementary lists.

page 618



Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

– by leave - In the adjournment debate on 3rd September, Senator Cole asked a number of questions concerning literature censorship particularly in respect of the possibility of the increased importation of American paperback publications following the easing of import licensing controls on these goods.

My officers have advised me that rumours of fears of dumping of old stocks of American paperback novels are circulating, but the easement of the import licensing controls on books has not been operating for a sufficiently long period for the effect on imports to become evident.

Certain publishers have been in touch with me on this question and I have advised them that it is possible that importations of the kind referred to could come within the scope of one or other of the provisions of the Customs Tariff (Industries Preservation) Act, which provides remedies against the dumping of goods into Australia. Of course any action under that legislation could not normally be taken until importations are made into Australia, as only then would the necessary evidence normally be available.

I can assure the honorable senator that should importations take place they will be subjected to the normal review by Customs officers to ensure that they do not infringe the import prohibitions of the Customs Act relating to undesirable literature. All books now being imported are subject to review and if increased imports of paperbacks from the United States of America could not be dealt with by existing staff, the staffing position would be adjusted to meet the increased demand for service.

The honorable senator referred to the amount of undesirable literature at present circulating in Australia and produced copies of publications which, he said, were obtained from bookstalls in Sydney. I am not aware of the titles of the books which were produced in this chamber; I understand “Tobacco Road”, by Erskine Caldwell, was one of them. I cannot comment on the other books, but in respect of “ Tobacco Road “ I point out that this novel was reviewed by the Literature Censorship Board in 194i and the then Minister for Trade and Customs approved of the recommendation of the board that the book should be released.

The honorable senator should not overlook the fact that obscenity is not defined in the customs law and the question of whether a book is, or is not, obscene offers difficulty in determination. Some books may appear to be obscene to some sections of the community and not to others. It is for this reason there is a Literature Censorship Board and an Appeal Censor, whose judgment I have found to be sound. I can assure the honorable senator that there will be no relaxation of control from the censorship angle should large consignments of American paperbacks arrive in this country.

page 618


Message received from the House of Representatives requesting the concurrence of the Senate in a resolution that the Joint Committee on the Australian Capital Territory or any sub-committee thereof, when considering certain matters relating to an all-weather road between Canberra and Tumut which were referred to the committee on the 14th May, 1959, have power to adjourn from place to place.

Minister for Repatriation · Queensland · CP

[11.39]. - by leave - I move -

  1. That the Senate concurs in the resolution transmitted to the Senate by message No. 65 of the House of Representatives, namely -

That the Joint Committee on the Australain Capital Territory or any sub-committee thereof, when considering certain matters relating to an all-weather road between Canberra and Tumut which were referred to the committee on 14th May, 1959, have power to adjourn from place to place.

  1. That the foregoing resolution be communicated to the House of Representatives by message.

From time to time over the years, representations have been made to the Commonwealth Government seeking the construction of a direct all-weather road between Tumut and Canberra, primarily for the reason that such a road would make it possible for the Tumut district to supply farm produce to Canberra, but also for the reason that it would be an attractive tourist route connecting the Australian Capital Territory with parts of New South Wales.

The Commonwealth Government has control over and responsibility for only the roads in this area that lie within the boundaries of the Australian Capital Territory. However, in order to obtain proper background information, the Joint Committee on the Australian Capital Territory has been asked to investigate and report not on the proposal in its entirety, but on a number of aspects of it.

Sittings of the committee in its earlier inquiries have been limited to Canberra. In order to conduct its present investigations satisfactorily, the committee will require to take a considerable portion of its evidence in the Tumut area. This motion is designed simply to obtain the approval of the Parliament for the committee to move from place to place.

Senator McCALLUM:
New South Wales

– I should like to support the motion. The Minister for Repatriation (Senator Sir Walter Cooper) has plainly stated the reasons why this resolution is necessary. As all honorable senators know, this committee, representative of both sides of the Parliament, undertook to go into this matter. It was greatly interested in it and intended to sit in the period between the first and second periods of this session. Unfortunately, technicalities prevent our hearing evidence except at Canberra. As some of the witnesses live in New South Wales, and as we think it is advisable to see the actual route, we believe that the resolution is necessary. I hope it will be carried.

Question resolved in the affirmative.

page 619


Tariff Board Report

Debate resumed from 15th September (vide page 562), on motion by Senator Wright-

That the Senate takes note of the Report of the Tariff Board on the Petroleum Refining Industry, tabled in the Senate on 12th August, 1959.

Senator McKENNA:
Leader of the Opposition · Tasmania

– The Senate, 1 think, must feel indebted to Senator Wright for launching the motion which has given us the opportunity to address our minds to the very interesting and informative report of the Tariff Board relating to the petroleum refining industry in Australia.

The matter was originated by a reference from the Minister for Trade (Mr. McEwen) in May, 1957, and is the subject of a report dated 26th March, 1959. The board made its usual thorough investigation, and has given one of the most comprehensive reports that I recall in relation to this new and very important industry in Australia. The board encountered a number of difficulties. It pointed out, for instance, that the refining companies in Australia are really of an international character in that they are associates, if not direct subsidiaries, of the international oil companies. It develops that theme and points out the difficulty in which it was placed by reason of that fact. On page 8 of its report, the board states -

Normally, in examining requests for protection, one avenue investigated by the Tariff Board involves considering the costs of production in Australia and in competing countries and comparing the prices at which imports can be landed, duty free, in Australia with the ex-factory selling prices of Australian-produced goods. However, the international character of the oil industry and the overseas affiliations to most Australian oil companies makes such an approach difficult, if not impossible, in this inquiry. One company presented an estimate of the operating costs of a refinery in the Middle East . . . However, no company was willing or able to give actual overseas costs of erecting and operating a refinery.

The board does not say whether the companies were unwilling to do so or were unable to do so, but the report continues -

The Board cannot easily accept the fact that considerable relevant information could not have been supplied by parent companies or affiliates.

So the mind of the board was on the side of the proposition that the companies were not willing to co-operate with it by giving it this very important basis of comparison.

Under the heading “ Profitability of the Australian Industry “, also at page 8, the board returns to the international aspect, and I propose to read the following brief extract: -

In examining the profitability of oil refining operations in Australia it is essential to appreciate the international character of the operation of oil companies. With the exception of two distributing companies (in one of which it is reported that there is a large investment by overseas oil interests connected with an Australian refinery) all the oil companies in Australia are affiliated with overseas principals and with a minor exception, the refineries are owned by overseas interests. The Australian refining companies purchase their requirements of crude oil in various oil-producing countries throughout the world, but obtain their requirements from companies which are also affiliated with them. The crude oil is shipped to Australia in tankers which are owned in many cases by other affiliated companies overseas.

These international relationships mean that the ci.f. prices charged to Australian refineries for their crudes need not necessarily reflect either operations in an open market or the costs of producing and shipping crude feedstocks to Australia.

When that information is not readily available to the board it is in a difficulty. I suggest that the board - it obviously having in mind that that information, with goodwill, could have been procured - might have indicated to the petroleum refining industry in this country that it was not prepared to make a recommendation until it got the information. However, it proceeded on the basis of the information that was available to it, although I think there is the clearest implication in what the board has said that the refining industry kept from it vital information in this matter and prevented its inquiry being carried to a proper point.

The major portion of the cost of producing petrol lies in the cost of crude; that is the basic material. Later, in connexion with another aspect of the report, I propose to show how relatively low are the labour and operating costs in turning out refined petrol. Perhaps the Senate will recall that in 1954 I dealt at length with the position of the international oil companies. I then made very extensive reference to the report to the Federal Trade Commission on the international petroleum cartel, submitted in 1952 to the United States Senate Sub-committee on Monopoly. The report was published, soon after its presentation, by authority of the then President of the United States, President Truman. That report dealt with the operations of the seven major oil companies, five of them American and two nonAmerican. The companies I listed were the Anglo-Iranian Oil Company Limited, as it was then known, Gulf Oil Corporation, Royal Dutch-Shell, the Standard Oil Company (New Jersey), the Standard Oil Company of California, the Socony Vacuum Oil Company Incorporated, and the Texas Company.

Those companies have the most colossal resources of petroleum. Their oil production at the time of the report was 4,661,000 barrels a day. There being 35 imperial gallons in a barrel, and 42 American gallons, one can imagine the magnitude of the production of crude oil that they control. They control far more than one-half of the world’s crude oil production. They also control the whole of the major pipelines outside America. Their refining capacity, of course, is tremendous. At that time, in tankerage they had some 12,400,000 dead-weight tons and they owned far more than one-half of the world’s shipping used in connexion with the transport of crude oil and refined oil.

I agree with the Tariff Board that one cannot approach the consideration of a request for support and protection without adverting to the facts to which attention is directed in this report. I find the position summarized rather adequately in two paragraphs at page 349. I shall take the liberty of reading those two paragraphs to the Senate as a fair summary of the report. The board states -

The preceding chapters have described the degree of control over the world petroleum industry held by the seven major international oil companies, their participation in joint-ownership ventures, as in the Middle East, their control over sources of supply through contracts among themselves for the purchase and sale of crude oil, as in the Middle East and Venezuela; their development of world-wide production and marketing agreements, and the application of these agreements in specific countries. Moreover, it has been shown that these major oil companies, through the high degree of concentration of control, through direct ownership, through joint ownership, through purchase and sales contracts, and through production and marketing agreements, have been able to limit production, divide up markets, share territories, and carry on other activities designed to stabilize markets and control production.

In addition, the international petroleum companies have followed a system of pricing which has had the effect of eliminating price differences among themselves to any buyer at any given destination point. Under this system the delivered price to any given buyer is exactly the same regardless of whether he purchases from a nearby, lowcost source or from a distant high-cost source.

While the delivered price from all sellers will be different at one destination point as compared with another, reflecting largely differences in freight costs, their delivered price at any given destination point will be exactly the same.

This systematic elimination of price differences has been achieved through the establishment and observance of an international basing-point system, generally referred to as “ Gulf-plus “. In recent years the system has undergone a number of minor modifications. Nonetheless, since each of the major companies has usually observed those modifications, the system’s ultimate effect upon any given buyer has remained the same - the elimination of price differences as among the various sellers.

I shall return to that point as I thread my way through this very interesting report.

One can see that the Tariff Board, in considering the claim of the refining industry in Australia to protection, would need to have regard to the biggest element in the industry’s cost of production, namely, the cost of crude oil. As the report proceeds, it indicates that there are big differences. It points out that those differences arise between parent companies overseas and their children or subsidiaries in Australia, and the fluctuations in the price of crude oil are really very substantial. It is quite obvious from the report that the overseas companies are not regarding what was their international agreement when they are dealing with their own subsidiaries in a country like Australia and that they supply crude oil at a price to suit their world purposes. They are no doubt activated by the desire to get the best of all worlds from a taxation viewpoint as between the country of production and the country of sale.

We find - I think it is a fair comment to make, in view of the report of the board - that the cost of crude oil to Australia and to the different companies has nothing to do with the broad market price of oil. That is a matter that is concerned with the international set-up of the companies. They adjust it to suit their position from all kinds of angles - freight, income tax and the rest. We are relatively a small pawn in the game of the large international companies.

That was a major difficulty the board ran into. It encountered a second difficulty due to the limited terms of its reference. The terms of its reference were to inquire into the need for protection of the petroleum refining industry in Australia. The terms confined the board to a consideration of the refining industry. At page 15 of the report the board adverts to its difficulty -

The Board wishes to point out that, since the overall profitability of the industry and the extent of competition from imports is closely tied up with the activities of the petroleum marketing companies,-

In Australia, the retail organizations is meant - it would seem desirable that the next inquiry should embrace the operations of the marketing companies as well as the refineries.

So with those two limitations - absence of necessary information from overseas parents of our refining companies, and inability to investigate the retail end of refining in Australia - the board proceeded with its task. One cannot help but feel, when reading a report of this type, that here is a demonstration of the fact that the Australian economy is now so complex and the parts so closely integrated that it is impossible to touch one aspect of it without causing disturbances in many other phases. One has merely to look at the type of person or organization that gave evidence to this board to appreciate what I have just stated. The Department of National Development was interested, and tendered evidence. Those representing the petroleum’ refining industry were, of course, in favour of increased protection. There was an importer of refined petroleum products with an adverse interest - an interest in importation. And the coal industry was vitally interested. The Joint Coal Board gave evidence. The coal owners and the miners’ federation were particularly interested. The transport industry was gravely concerned about costs and the effect of higher costs being passed into transport, thereby reducing the use of transport and preventing passenger movement. The report sets out the cases that were put for each of these bodies.

The refining industry asked that primage duty constituting protection to the extent of lid. per gallon, which was removed in 1956, should be reimposed - if not in that form, in some other form. It asked for additional protection of Hd. per gallon, making the net protection 3d. per gallon. The Joint Coal Board drew attention to a very important thing - that it would be better to encourage the industry to produce a higher proportion of the lighter ends - the lighter oils, the octanes and motor spirit and aviation spirit - and less of the heavy oils - the heavy oils, of course, constituting very severe competition with coal in industry and in transport.

I might mention that in determining the degree of protection that is afforded to the petroleum industry, the board looks at the duty imposed; it deducts from that the excise duties that have to be met on the production inside, and any other factor that comes into the matter. The net protection, at the moment, according to the report, is lid. per gallon on refined petrol and the refined products. This is the major matter.

I have already referred to the interests of the transport bodies and the importer. The importer thought that the refining industry in this country ought to be helped by some other way than by protection against imported motor spirit. The report then proceeds, as Senator Wright indicated on Tuesday night, to deal with the very special features of the industry. I think I shall take a moment to mention some of the facts the board found. It is interesting to know that the refineries in Australia are now capable of producing 10,000,000 tons of aviation spirit and motor spirit per annum. They are really in full production, and expansion is going on continually. The refineries at present supply 90 per cent, of the total Australian market of refined petroleum products in this country; only a small proportion of Australia’s requirements is imported. These consist mainly of the lighter grade oils. The value of sales of refined petroleum products by refining companies during 1957-58 amounted to as much as £146,000,000. Their investment in plant and buildings amounted to £116,000,000, and the board indicates that by far the largest part of this represents investments by overseas interests.

Earlier, I adverted to the fact that the actual cost of production lies mainly in the cost of importation of crude oil - the raw material. The operating costs - taking the total operating costs as 100 per cent. - are divided in this way: - materials other than crude oils, 20 per cent, and labour, only 6 per cent. It is quite obviously an industry that gets by with a minimum of man-power. I think it employs only some 4,000 people to get this colossal production. It is one of the amazing features of the industry that the labour content of its costs is so low. The overhead costs are, in respect of depreciation, 42 per cent, and other than depreciation, 32 per cent. But the truth is that all those costs, wrapped up together, represent, according to the board, not more than one-fifth of the total refining cost of the refined products sold. So the major cost lies in the crude oil - its importation and getting it into production. The really heavy cost lies there. That comment adds point to what the board said about the difficulty it experienced in finding out what would be a truly competitive market price for this all-important crude, which is the substantial element of costs in the production of the refined products here.

The board dealt, in its report, with the change in the pattern of imports and exports, and, at a later stage, with the question of the saving in our balance of payments position that is effected by the fact that we have refineries in Australia. I will let that fall into its place just a little later. The board carefully examined all the reasons offered by the refining industry in support of the granting of increased protection. 1 think that I am fairly, if not completely, accurate in saying that the board rejected the arguments one by one. Some it demolished with great ruthlessness and effect. By and large it held that the refining industry of this country had made out no case whatever for increased protection.

The board also reviewed the profitability of the Australian industry. Having directed attention to the fact that there were large overseas elements in the picture, it referred to the selling prices to the various marketing organizations in Australia. The industry claimed that it had to sell at prices equivalent to the Persian Gulf posted prices, plus freight to Australia - based on what is termed “ A.F.R.A.” The board, in a very convenient glossary, explains that this means “ Average freight rate assessment “, which is a standard of freight charges that is followed throughout the world. I repeat, the board was told that the refineries sold at Gulf prices f.o.b. plus freight charges based on A.F.R.A., but it did not accept that contention as correct. It found that the refinery prices were simply not that high. This, in turn, should have enabled the refineries to compete with the imported product. At page 9 of the report the board states that it was not in a position to examine the operations of the marketing companies but concluded, from the financial and trading details submitted, that the net prices obtained were not always as they would have been if based on the formula. This was especially true of heavier grad. oils - what might be termed fuel oils - for industry and production. The board then pointed out that the most important factor seemed to be that production of heavier grade oils by the Australian refining industry exceeded the overall demand for such oils in Australia. The report continues: -

As will be shown later, the board believes that, despite the variations in the qualities and the properties of crudes available to Australia, it would have been possible - and in the interests of profitability desirable - for most of the refineries to plan their operations to produce end products in roughly the proportion which the Australian market requires.

It concludes its examination of this aspect with these words: -

To the extent that the industry sells such oils at less than the formula price the lower level of profitability which thereby results cannot be attributed even to potential competition from imports and does not support claims for tariff protection.

The board was told that it was impossible to cost individually each refined product. At page 10 the board reports that it reached the conclusion that a comparison of operating costs was possible, and that such a comparison indicated wide variations in efficiency. It then went on to mention overhead costs, materials and the like.

I want to pass now to a very important heading on page 11, related to the landed costs of crude oil. At the risk of wearying the Senate I propose to read a few extracts because they make the point much clearer than I could hope to do - lt seems clear to the board that the prices of crude oil vary considerably, depending on the arrangements made between the over:eas supplying companies and the local refining companies, both of which are often affiliated in some form or other.

The board points out that crude oils coming from various sources in the Persian Gulf range in price from £6 2s. 7d. a ton to £7 17s. 5d. a ton. The report continues -

The board referred earlier in this report to the claims made by refining companies that there were no restrictions on the types of crude they could use, the source of crudes or the prices to be paid. If this were so and if variations in freight rates did not offset f.o.b price variations it would appear that there is at present available to the industry the opportunity to improve its profitability by purchasing available crudes at lower f.o.b. prices.

The board can only conclude that the variations in f.o.b. prices charged for crudes do not appeal to be related to any intrinsic quality variations so much as to the supply position and the policies of the oil companies.

There, the board is referring to the overseas oil companies, which really control the refineries. This, the board said, had an important bearing on the differences that it found in the overall profitability of individual refining companies in Australia.

The board deals then with freight, and again runs into difficulties so far as obtaining information is concerned. The report continues -

Freight is a large element in the total costs if Australian refineries. While freight charges wet’s made available to the board it was not possible to obtain comprehensive information of the actual cost of shipping crude oil to Australia. The companies . . .

The reference there is to refining companies - . . did not themselves submit detailed evidence to establish the relationship between freight actually paid and freights based on A.F.R.A The board’s analysis of the available information, however, suggests that in important cases Australian refinery companies paid more to freight their crude oils than would have been the case had the freight rates been based on A.F.R.A.

Indeed, the board estimates that costs would have been reduced by about £3,000,000 in 1957-58. The report continues: -

Expressed as a percentage of the funds employed in the industry, this amount is equivalent to about 2.5 per cent. - a significant percentage in relationship to the profit rate in the industry. It also has some importance in relation to the foreign exchange usage by the industry.

I might quote now from page Iia comment on this question of the cost of crude oil -

The board calculated that, on the basis of a crude throughout of 9,200.000 tons as in 1957-58 a reduction of £1 per ton in the prices paid by the industry for crude oil feedstocks would have increased overall profits in the industry from about 15 per cent, of funds employed to somewhere in the vicinity of 23 per cent.

It seems obvious, from what the board has said all the way through, that if matters were put on a truly commercial basis between the overseas oil companies and their subsidiaries in this country the £1 reduction could have been obtained with ease. It must come as a shock to find that a return of IS per cent, upon the funds invested is immediately available and that if this arrangement in relation to crude oil were put into operation - as the board believes it could - the range of profits would rise from IS per cent, to 23 per cent. By any standard, that must be regarded as an excellent profit.

The board proceeded to summarize the whole position. It took the arguments of the refining companies point by point, analysed them and discarded them. At page 12 of its report, the board said -

An analysis of the financial documents presented by each refining company revealed that the Australian refining industry’s rate of profit during 1957-58, when expressed as a percentage of funds employed, was 14.8 per cent. With the exception of one company, which in 1957-58 showed a loss compared with a small profit in the previous year’s operation, the profits of each- of the other refineries ranged from 8 per cent, to 22 per cent. ;On that basis - without commenting on the adequacy of the profit rate earned by the refining companies - the Board noted that some companies were achieving a rate of profit which was somewhat higher than that usually earned by companies seeking tariff assistance. il think that last statement is a real understatement. Not only does one recognize that there is a high degree of profit in the industry at the moment, but also the board ^pointed out, at page 13 -

. the evidence submitted suggested that the potential level of profits should be regarded as being much higher than the present level. Just how much higher cannot be gauged precisely, but the Board feels that it would be considerably higher than the average profit level of 14.8 per cent, referred to earlier.

The board had no hesitation in talking about the productive efficiency at the technical level; it said that it was very excellent. The board said that the fears of the companies about imports of petroleum unless they were given additional protection were just fantastic. It did not use the word “ fantastic “, but that is what it concluded in effect. The board pointed out that the retail marketing arrangements in Australia are so highly organized and the field is so well covered that it would be impossible for a competitor to break in with any ease and that, even if there were considerably more imports, the companies would not be affected. There is room for only a 10 per cent, margin in the Australian demand for lighter oils. At page 13 of its report, the board adverted to a matter which was touched upon by Senator Wright - that, whereas broadly there is a saving of £30,000,000 a year in foreign exchange, when other factors are taken into account that may well come down to £10,000,000. As far as I can see, at that stage of the report the board did not take into account the offsetting influence of our exports of petroleum.

It is perfectly clear from the report that, because in the overall pattern of production there has not been between the various refineries an adaptation to the needs of the local market, the coal industry is faced with competition from a great surplus of heavy oils coming from the refining industry. I cannot say how closely the refineries in Australia integrate their production or whether they are on a purely competitive basis, but the overall picture presented by the Tariff Board is that some companies have gone for a very low recovery of high grade petrols and that we produce far too much heavy oil. That heavy oil has either, to be exported, with consequent increased cost in the process of getting it onto the world markets, or - and this has been happening - has to be sold at a low price on the Australian market.

More and more of our industries, railway systems and other transport systems are turning from coal to oil. Ignoring the economics of the matter for the moment, one cannot help but be a little concerned at that development, especially when we realize that we have to import every gallon of crude oil that we need and that a transposition of the power unit from oil to coal cannot be done very easily at short notice. If anything happens to disturb the flow of oil to this country and we are thrown back upon coal, many of our transport systems and industries will be in dire straits. They are completely dependent upon overseas people for supplies of oil, and that is an aspect of the matter that has always worried me. When the refining industry, uneconomically from its own viewpoint, produces too much of the heavy oils and sells the surplus at a low cost, thus cutting into the use of coal, it does more than disrupt the important coal industry; it really renders our position as a nation more vulnerable. I am not arguing that it may not be more economical to use heavy oils and such fuels than to use coal, but we must look at the question from the viewpoint of national security. There is a danger to the country in having our transport systems and industry too heavily dependent upon oils when we have indigenous coal.

Of course, it is not the purpose of the Tariff Board to adjust the position of the coal industry; but it has thought that its ultimate recommendation, urging the refining companies to produce more of the lighter and less of the heavy fuels, will have a happier effect so far as the coal industry is concerned. However, it has not directed its mind to that point in particular.

Senator Scott:

– But there is a reference to it in the report.

Senator McKENNA:

– That is so. It is rather interesting to note, at page 14 of the report, the figures that were supplied by the Joint Coal Board for the consumption of coal for the four years from 1954-55 to 1957-58. They show that black coal constituted 64.8 per cent, of the total fuel consumption in 1954-55. The figure fell in the next year to 60.1 per cent., in the following year to 58.4 per cent., and in 1957-58 to 57.7 per cent. Over the same period, the consumption of petroleum products rose from 17.8 per cent, to 20.9 per cent, in 1955-56, to 22.6 per cent, in 1956-57 and to 23 per cent, in 1957-58. Those figures show very plainly the increase in the use of petroleum products and the decline in the use of coal. As to whether there would be a greater importation of petrol if protective duties were lowered, the Tariff Board concludes its commentary with this statement -

It should be soon enough for the petroleum industry to seek protection when, as would normally be the case, the serious effects of competition existing or probable are reasonably demonstrable. In this case, the industry was not even able to point out gathering clouds on the horizon.

In other words, the board says that what the industry put to it was quite fantastic. The board acknowledged the importance of the industry in every way, but it said, at page 15 of the report -

In view of all the circumstances the board considers that it has no alternative but to conclude that tariff protection for the petroleum refining industry has not been justified.

That was the board’s first proposition in summing up the position. But it proceeded to qualify its statement and added -

This conclusion does not mean, however, that it would be in the best interests of either the refineries or the Australian economy as a whole to abolish the entire protection immediately. It is important to give due weight to the fact that the industry has entered into a very large capital investment under circumstances where protection has been accorded it.

As, I think, Senator Wright pointed out, the board in the 1956 report said that the companies were told by the Government that they would not be guaranteed protection. They had to take the risk and be prepared to submit to the conclusions of the Government from time to time based on the recommendations of the board. So the refining industry cannot claim that it came in with any assurance of continued protection. There happened to be some protection at the time. In the intervening period it has been reduced, and it is now proposed to be reduced further very slightly. The qualification expressed by the board reads -

Moreover, considerable time and further investment will be necessary before certain refineries could adapt their plant to produce more in accordance with the pattern of demand the market requires. Indeed, even if the change in the pattern of production could take place immediately, the overall limitations of the present market would produce a surplus of lighter grade oils.

The board concludes that the companies ought to be given a little time and that the present protective margin of Hd. a gallon should not be abolished immediately but that it should, as a first step, be reduced to Id. a gallon. Further reductions would appear to be appropriate at a later date and the board proposes that there be a further review by it in 1962 to enable the various companies to adjust their patterns of production. The attitude of the Australian Labour Party is this: We think that the board has made out the clearest possible case for the proposition that this industry does not need any protection at all.

Senator Scott:

– The board did not make that recommendation.

Senator McKENNA:

– That is not the recommendation, but I am suggesting that it is a clear finding. The board says in express terms that the industry needs no protection, but that because it came in under protection and has a faulty pattern of production it should be given time to sort itself out and the protection should not be lifted immediately. We think, with very great respect to the board, that it is mistaken. Senator Wright did not express a viewpoint on whether the board was right or wrong. 1 do not take him to task for that. That is a matter upon which one wants a lot of time to think and to weigh up the proposition. The board says that it was under difficulties in getting information. lt strongly implies that the price of crude to the local companies is put up by their parent organizations, that that price could be lowered and that their profitability - already very good, averaging 14.8 per cent. - could be improved enormously. The board says that the industry in actual fact does not need protection at the moment. I would say that the qualification that the board puts upon the proposition that the industry does not need protection is based more upon gratitude to it for coming to this country and a sentimental feeling arising from, that gratitude than upon the hardheaded considerations that we would expect to flow from the board. It is completely clear that these refineries came into Australia without any promise of protection. They were warned not to expect it or to reckon on it. They have made excellent profits. The board says that their potential for greatly increased profits is exceedingly high.

Senator Scott:

– One company showed a loss.

Senator McKENNA:

– In one year, yes. The obvious inference from the whole of the report is that they are doing exceedingly well and that if they had a true accounting basis with their principals overseas they would be making really surprising profits. That is the conclusion I draw from my examination of the report. The Australian Labour Party has given consideration to the matter. On mature thought, it feels that it agrees with the board’s first proposition, that is, that this industry does not need further protection. We join with the board in applauding the advent of these companies and the contribution they have made in various ways to this country. We have no ill-will towards them. But looking objectively at the report, and not relying on anything other than its contents, we are entitled to draw the conclusion that I draw, namely, that there should be no protection.

The second point we make is that if protective duties are removed the benefit of that removal should be passed straight on to the consumers, because if one thing is needed in this country it is the keeping down of costs.

Senator Scott:

– Do you think that we need to find oil?

Senator McKENNA:

– I do not know of any greater need. I think the honorable senator will recall my talking on that subject from this place time and again, taking the Government to task for the fact that it was not making a big enough effort in the matter of finding oil. I do not know of anything of more importance from a domestic viewpoint and from the viewpoint of our economy than to find oil here. The Minister for National Development (Senator Spooner) quite recently made a happy forecast that we would find oil within ten years. I hope that he will be speaking in this debate shortly, when I should like him to say why, if he can make that forecast with some degree of confidence, there is not a doubling of effort to cut the period down to five years or three years. I realize that he was entering the realm of prophecy, which is always risky. I hope that somebody will mention that I ask why he does not take steps to cut the ten-year period to five by making more effort.

Senator HENTY:

– He will make another guess for you.

Senator McKENNA:

– That might well be. I feel that it is a guess, and a hopeful one. I am prepared to be optimistic about the ultimate outcome. That is what maddens me. I, and the Australian Labour Party generally, feel that an adequate, fullblooded effort is not being made by the Government. Private industry has done pretty well. We have complained about the lack of leadership and really enthusiastic effort by the Government in the search for oil. However, that is not the subject-matter at the moment. Senator Scott must accept the blame for diverting me and inviting me into that field.

I finish with the two propositions. After giving full praise for the very interesting report that the board has produced, we say that there is no case for any further protection and that it should be discontinued. Secondly, the benefit of any reduction that can be brought about should be passed on to the consumers of Australia.

Senator SCOTT:
Western Australia

– 1 have perused this document carefully several times. It is one of the most interesting reports that I have read. It has been canvassed thoroughly by Senator Wright and the Leader of the Opposition (Senator McKenna). They covered most of the printed material, so, with few exceptions, I do not propose to refer to its contents. I want to say only one or two things, and consequently my speech will be very short. I did prepare some figures showing what I thought the refining companies were getting from a gallon of refined petrol sold in Australia. Let us assume that the retail price of petrol in the capital cities is 3s. 7d. a gallon. We can then ascertain its cost to the oil companies and find what they are making on the sale of a gallon of petrol. For the purposes of the argument we will assume that the retail price of a gallon of petrol in the capital cities is 3s. 7d., and also that the retailer is allowed a profit of 6d. a gallon, lt is either 5id. or 6d. a gallon at present. The excise duty on a gallon of petrol is ll£d. We can get from this document the cost of a ton of imported crude oil. Bringing it down to a gallonage basis, the figure there is 9d. The figure for freight has not been disclosed, so we can only make a guess, but I think it would be in the vicinity of £3 or £4 a ton. Let us say that freight accounts for 4id. a gallon. If we add those figures, we get a total of 2s. 7d., which leaves a margin of ls. a gallon for the refinery.

The refining company has to erect plant and provide equipment and shore installations. It has to provide for depreciation on plant and equipment and for the distribution of the refined oil to the selling stations within the metropolitan area. The Tariff Board, in its report, stated -

The provision for depreciation which in the industry as a whole constitutes about 42 per cent, of operating costs represents an important cost per unit of crude throughput, particularly in the four recently erected refineries. The depreciation charged by each of these refineries represented from S per cent, to 7 per cent, of the total costs of its refined products produced during 1957-58.

I have worked out that depreciation accounts for roughly 2d. a gallon. I have assumed that the cost of distribution within the metropolitan areas is about 2d. a gallon also. The figure for distribution is given just off the cuff; I have no information with which to verify it. So we have accounted for another 4d. a gallon, leaving the refinery to keep for itself 8d. for every gallon of petrol refined. From that there must also be deducted an amount representing wages and other incidental expenses involved in operating the refinery.

A large amount of capital has been Invested in oil refineries within Australia. The investment so far is £116,000,000, and the refineries are capable of treating some 9,000,000 tons of oil a year. In view of that, and in view of the need to find oil fields in Australia - a matter that I took up with the Leader of the Opposition - I do not believe that the profits of these companies are abnormal. Some of the oil companies operating in Australia are spending some of their money in the search for oil.

Senator Ormonde:

– Not much.

Senator SCOTT:

– All I can say in reply to that interjection is that £55,000,000 or £60,000,000 has been spent in the search for oil in Australia.

Senator Ormonde:

– Over what period?

Senator SCOTT:

– Ninety per cent, of that money has been spent since the war. In Western Australia alone, £15,000,000 has been spent since the end of the war. Of that amount, I suppose that more than 80 per cent, has been found by oil companies - not necessarily by oil companies in Australia, but by foreign companies as well. . I think that both Senator Wright and Senator McKenna mentioned that the oil companies in Australia were off-shoots or subsidiaries of overseas companies. Oil is a big business. It is one of the biggest businesses in the world. The companies have to take into consideration the available supplies of oil. I remember hearing before the last war that the world’s supplies of oil would run out within a period of less than 25 years. However, the estimate now is that we have more than 30 years’ supply of oil, and more oil is being found all the time. Discoveries of oil are taking place because of the efforts being made by the operating companies. These companies need to make a profit on the sale of their product wherever it is being used so that they can continue the search for this important commodity.

I agree with the Leader of the Opposition that some of the information that was vitally needed by the Tariff Board was not supplied by the oil companies. I am not going to try to protect the oil companies. I should have thought that it would have been quite easy for an overseas company to supply the details that were requested by the Tariff Board and thus give the board a true assessment of the position. On the other hand, I have no doubt that some figures have been given to the Tariff Board which are not given in this report. Mention was made of freight rates and of the fact that some companies pay different freight rates from others. Some companies have their own ships.

Sitting suspended from 12.45 to 2.15 p.m.

Senator SCOTT:

– I was saying that the Tariff Board could not get from the refining companies the information it desired to establish the true freight rates that were operating. It appears that there is operating throughout the world what is known as A.F.R.A. - the average freight rate assessment - under which companies can charter ships at a fair freight rate. Evidently, if we are to judge from the report, in some instances the refineries are paying higher than the average freight rate assessment because the oil companies own the ships they use. The report states that the refining companies in Australia say that in no case have they paid more than the A.F.R.A. rates, but, after examining the documents available to it. the board came to the conclusion that in some instances the refineries do pay a higher rate.

The board has calculated that if the companies had paid A.F.R.A. rates they would have saved in the vicinity of £3,000,000 a year, which would have meant an increase of 2i per cent, in their profits for the year 1957-58. Further, if the refineries had purchased bulk fuel oil, which is the cheapest oil available, they would have been able to save another £1 a ton. The disclosed profits of the refineries for 1957-58 ranged between 8 per cent, and 23 per cent. - an average of 14.8 per cent, on the capital invested. If we add to that the 2i per- cent, they could have earned had they paid only A.F.R.A. rates, plus the further margin of between 7 per cent. and 8 per cent, that they would have obtained if they had bought the cheap bulk fuel oil, then, instead of averaging 14.8 per cent., their profit would have been something between 23 per cent, and 24 per cent, on the capital employed. Therefore, the Tariff Board has recommended that, instead of being increased, the tariff protection should be decreased from lid. to Id. a gallon.

In summing up the position, the board gives reasons for not recommending the abolition of the protection. It says that there is no doubt that the companies were encouraged to come to Australia with huge sums of capital to erect refineries and that, having enticed them to come here, we should not at this stage abolish the protection we offered them. It is good to have these companies here and the Government is proud of their establishment. We had only one refinery operating in Australia in 1950; now we have seven, and T understand that another refinery will be erected very soon in South Australia. At the present time, we are refining 90 per cent, of our fuel oil requirements. Bulk fuel oil is costing us £68,000,000 a year. Our sales of refined fuel amount to £146,000,000. If we deduct from that £146,000,000 the amount of freight paid and the cost of the bulk fuel oil, we arrive at the savings effected in our overseas funds.

On the whole, I should say, the Tariff Board’s report is quite fair. I should have liked to see a recommendation that the protection be abolished but, as the board has recommended that another review be undertaken in 1962, perhaps it is safe to say, judging by the tone of the report, that if substantial evidence is not brought forward by the companies to support a continuance of the protection, the board will recommend its abolition. The board heard evidence from the transport people, the coal people and the shale oil people, and I should say that its inquiry was most comprehensive. The report is well worth reading. I am certainly enlightened by it, and I do hope that in 1962 we shall see the end of tariff protection for the oil refining companies in Australia.

I have no doubt that the Government will be bringing down legislation to implement the recommendations of the Tariff

Board and I see no reason why I should alter my view that we should adopt those recommendations.

Senator SPOONER:
New South WalesVicePresident of the Executive Council and Minister for National Development · LP

– At the outset, I express my thanks to the Opposition for giving me the opportunity to take part in this debate out of my turn because of other commitments. I thank Senator Ormonde in particular, for he was entitled to the call.

I should like to make some contribution to the debate because I have been on the fringe of the oil-refining programme since I have held the portfolio of National Development by reason of the fact that within the Department of National Development is the Fuel Division which deals largely with the technical problems that arise. I also administer the Joint Coal Board which is at the receiving end of the refining development programme. Although I am glad to have the opportunity to take part in the debate, I hasten to say that I do not feel that I can make any profound contribution to it. The subject is a very big one, and I do not contemplate that what I will say will be earth-shattering in its consequences. I think it is a useful exercise for the Senate to have a look at and examine a report as important as this one. In my opinion, the right way to go about an examination of the Tariff Board report is to get our bearings first of all. In order to do that, I shall attempt a short description of the industry based on the refineries and try to show the important contribution that it makes to the national economy and the advantages that follow.

In the oil-refining industry there is now a capital investment of £120,000,000. The employees total approximately 4,000. The industry has the capacity to treat 11,000,000 tons of crude oil, providing about 83 per cent, of the Australian market’s requirement for petroleum products. At the present time, it is exporting 1,000,000 tons of its products per annum, yielding an export income of some £15,000,000. It is now not only a great Australian industry, but it is also a very rapidly growing industry. In 1958-59, the demand for petroleum products was 8,750,000 tons and in 1953-54 it was 5,730,000 tons, so that in a period of five years there has been an increase of demand of not less than 52 per cent. The industry is rapidly expanding, due basically to the fact that Australia has such good opportunities for motoring and such a need for motoring facilities.

Having spoken of this increase of 52 per cent, in the output of the industry over a period of five years, I go on to make the next point, which is that the story is still in its telling. The figures that I have given to show the present size of the industry should be considered in the light of the fact that shortly a new refinery is to be built in South Australia with a capacity of 1,500,000 tons, requiring a capital investment of £16,000,000, and that expansion is contemplated in New South Wales involving a further capital expenditure of £12,000,000. It is anticipated that those two projects will be completed by about the end of 1962 and that they will raise the output capacity of Australian refineries from 11,000,000 tons of crude oil, the .present level, to 14,000,000 tons.

I tura from the refineries proper to the subsidiary industries. Recently, plans were announced for the local manufacture of petro-chemicals, with an estimated capital investment of not less than £30,000,000 in that new industry. From these subsidiary industries will come a series of products entirely new to Australia, such as polyethylene, polystyrene, synthetic rubber, detergents and carbon black. Most of those are new products in a world-wide sense, in that they have come into commercial importance only during recent years. We in Australia are fortunate, because the signs and indications are that we are in the forefront of the development of these new industries which flow from the refineries. Synthetic rubber, for instance, is now a partner with natural rubber. There is little doubt that soon it will be possible to produce in Australia tyres made from synthetic rubber and carbon black. We will have a real “ made-in-Australia “ tyre industry as a result of these developments.

Even more important than the existing development is the planned development in the subsidiary industries, and the prospects of still further development, because the chemicals that will be produced by what I call the subsidiary industries are really the building blocks of the chemical industry proper. When they become available in quantity, as they will, they will provide scope for even greater expansion than we are witnessing at the present time.

Let me look at the industry from another angle. Despite the fact that we have Australian production, imports of refined ore are running at the rate of £135,000,000 per annum. They are offset by exports worth £15,000,000, leaving a net charge on our balance of payments trading account of approximately £120,000,000 a year. I repeat what has been said almost ad nauseam, that petroleum products constitute the largest single item in our imports bill. They account for approximately 12 per cent, of our total imports bill.

Another angle that should not be overlooked is that these refineries have been installed by subsidiaries of overseas companies and, therefore, the great sums that have been invested in them have been provided by overseas capital coming into Australia, representing quite an appreciable proportion of the inflow of overseas capital. I refer to “ overseas capital “ in its widest sense, being either retained profits or retained earnings, or direct cash investments.

Another point that we must not overlook is the Tariff Board’s assessment that there will be a saving of overseas exchange of the order of £30,000,000 as a result of refinery operations, although the board made the significant qualification that, if various adjustments are made, the £30,000,000 might be reducible to £10,000,000. Honorable senators know that the calculation of the overseas exchange component is a pretty difficult matter to assess.

I have outlined the importance of the industry. I remind the Senate that there have been four Tariff Board inquiries - one in 1931, one in 1953, one in 1956, and the most recent one in 1959- The report of the Tariff Board on the last inquiry terminates on the note that it recommends that a further inquiry be held three years hence. I propose to give a little further background and to point out that the development of the programme commenced in about 1953. We had had an oil refining industry in Australia from 1924. The 1931 report of the Tariff Board recommended that the level of excise on locally produced motor spirit be set at lid. a gallon lower than the corre sponding duty on imported motor spirit. The differential margin of lid. a gallon waa in existence for 26 years - from 1931 to 1957. For 26 years the oil refining industry had had that protective margin of lid. a gallon.

When this refinery programme was first mooted, the oil refining companies concerned suggested at various stages that they might reasonably receive some assurance that that level of protection would be continued, having regard to the vast capital investment that was involved in the inauguration of a new industry, but the Government’s view on that matter was always clear. The Government consistently refused to agree to those representations, maintaining that it wanted to see new industries established, but not on conditions different from those that applied to other Australian manufacturers. They had to make their election as to whether they would go ahead with their programme and subsequently rely upon the Tariff Board’s findings. Tt was on this basis that the big capital inflow commenced and the big industrial development programme occurred. There have been no arrangements made with the refining companies any different from those that are made with all other Australian manufacturers. While I say that, I think it would be less than just not to acknowledge the very great contribution to Australian development that this programme has made, and more particularly it is sometimes overlooked that at the time at which these early plans were advanced we in Australia were desperately short of fuel. At the time when these programmes were commenced, there was a crisis in the coal-mining industry. Australia was importing coal, and South Australia and Victoria were developing their local coal resources because the supply of coal from New South Wales was unreliable.

The next point to remember is that in addition to the protection of lid. per gallon the refineries also had the benefit of protection from primage duty. There was a primage duty of 1.3d. per gallon. So, up till 1956 motor spirit in Australia had an effective protection of 2.8d. per gallon, being 1.3d. per gallon primage and 1.5d. per gallon customs duty. The first move forward was made by the Tariff Board, which in 1956 recommended the deletion of primage. It was in 1956 that the margin of protection was reduced by 1.3d. per gallon on motor spirit, reducing the margin from 2.8d. to 1.5d. per gallon, and the report now under consideration reduces the margin from 1.5d. to Id. per gallon. Between 1956 and 1959 the protective margin has been reduced from 2.8d. to Id. per gallon. This is a pretty big step forward.

The oil industry itself has consistently maintained the policy of selling its products at a price equivalent to the landed cost of imported products. That applies to all products with the exception of heavy oils, which I shall come to later. The oil industry has always maintained a policy of selling its local products at a price equivalent to the landed cost of imported products, so that on the two occasions on which the duty has been reduced there has been a corresponding reduction in the selling price of petroleum products.

The board, in an inquiry into such a large industry, as would be expected, has referred to a number of matters. I do not think it is possible in any reasonable time to cover all the ground, but I do think that some of the points the board has made are worthy of mention. The board referred to the point that the profitability of the refineries could be improved by the installation of additional plant so as to alter the pattern of production. That has been a view that has been followed consistently by my department. As matters now stand, a refinery in a State produces by and large for the market available to it. If the refineries were to merge their operations and produce for the national market there would be more economic production, greater profitability and less competition with other fuels.

The board draws attention to the fact that surplus oils - heavier oils - are being sold at uneconomic prices, and points out that the refining industry is assisted in selling these heavier oils at uneconomic prices because of the level of protection which the industry is now obtaining. This is a major matter for the coal-mining industry and I do not think I would do justice to the debate unless I made it clear that the board made its findings and submitted its recommendations after it had heard the views in the cases that were submitted to it by the Joint Coal Board, the Colliery Proprietors’ Association and the State Electricity Commission of Victoria Those bodies, which were producing or using competing fuels, went to the board and put their cases so that the refining industry would not have that level of protection, and they made a request to the Tariff Board that assistance to the petroleum refining industry should take such a form as to encourage the industry to produce a higher proportion of essential petroleum products, that is, the lighter ends, and to discourage the production of heavy oil such as fuel oil.

The Miners’ Federation also appeared before the Tariff Board. The federation went a stage further and submitted that the petroleum refining industry in Australia should not be accorded any assistance, and that the importation of crude oil into Australia should be limited. I think it is important to make that point, because these recommendations of the Tari -IT Board are admittedly, in some ways, provocative. It is necessary to keep carefully in mind that they were made by the Tariff Board after hearing the cases - the views - of the fiercely competitive interests when they appeared before it and put contrary points of view.

Perhaps the most provocative view of all is the Tariff Board’s view that on the evidence, it had no alternative but to conclude that tariff protection for the petroleum refining industry had not been justified. The board immediately goes on to say that, in its opinion, a conclusion such as that does not mean that it would be in the best interests of either the refineries or the Australian economy as a whole to abolish the entire protection immediately. The Tariff Board reminds us that this industry has very heavy capital commitments, that it has tremendous potential advantages for Australia, and that it started its operations, admittedly under no agreement or arrangement with the Government but in circumstances under which it had to seek that high level of protection of 2.8d. per gallon and retain it for a period of some 26 years up to 1957. Therefore, the board recommended, the protective margin should be reduced from lid. to Id. and another inquiry into the industry should be held in 1962. This has been one of the most important industrial inquiries held by the board. Although it was not satisfied as to the nature and quantity of the information made available to it, it has conducted three inquiries into the industry in recent years - one quite recently - and really understands it. I think that it is fair to say that the board’s comment that it did not get all the information that it required puts the industry on notice that, unless it establishes its case to the hilt next time, other views may be taken.

I think Senator Wright directed attention to the board’s comment that the marketing of petroleum products was not included in its reference, and that consideration might be given to its inclusion on the next occasion. I make bold to suggest that that recommendation will not be overlooked by whoever may be Minister for Trade when the industry is next examined by the Tariff Board.

I think it will be agreed that the Government gave very careful consideration to the board’s report. It did not ignore the interests of the coal-mining industry, or other industries, and felt that the proper course for it to follow was to adopt the board’s recommendation, except in one important respect. The board had recommended that a further inquiry should take place three years hence, in 1962, but the Government felt that it should take place a year earlier, in 1961. Thus, the oil refining industry will enjoy this margin of Id. a gallon for two years, instead of three years - subject, of course, to any views the board may have after making its further inquiry.

I want to make one or two other points about the board’s recommendations, which were made after a most complicated and extensive inquiry, during which the conflicting views of the fiercely competitive interests were heard. The board felt that the efficiency of the Australian transport, power and manufacturing industries could be seriously affected by the use of the tariff to enforce the employment of local fuels, irrespective of costs and other factors. The board, after considering representations for a variegated form of protection which would encourage the production of light rather than heavy products, expressed the view that transport, power and manufactur ing were of such consequence to Australia that it would be a grave step indeed to employ the tariff to enforce the use of one particular fuel. The board put the broader view that the industry needed some time in which to adjust the pattern of its production and achieve the degree of efficiency and profitability of which it should eventually be capable - that the removal of protection should be a gradual process.

Senator Wright:

– Why did it not take the view that it was really giving tariff protection against the coal industry, producing a competing fuel?

Senator SPOONER:

– I do not quite understand the point that the honorable senator is trying to make. A very full case was put before the board on behalf of the coal-mining industry by the proprietors, the unions and the Joint Coal Board. There is, of course, a close association between the coal-mining industry and the refining industry. I would remind honorable senators of the vast difference between the coal-mining industry of to-day and the industry of the early ‘fifties, when these refineries were still being planned. In those days industrial relations were bad, coal was of poor quality, prices were high and deliveries were unreliable. It can be fairly said that the very stability of the coal-mining industry was threatened. To-day we have a completely different picture. The refineries have come to fruition and, very largely, the coalmining industry has put its house in order; it is now a vigorous industry. Mechanization is proceeding apace; pillar extraction is accepted practice; the quality of coal has improved out of sight; and productivity per man-shift has increased, and is still increasing. In a world of rising prices these improvements are reflected in the fact that the price of coal, one of our principal, basic products is falling and, for the same reasons, will yet fall still further. To-day, New South Wales coal can be sold in Melbourne at prices that are keenly competitive with those applicable to brown coal briquettes and raw brown coal from the Latrobe Valley.

Senator Kennelly:

– But we do not want it now.

Senator SPOONER:

– And it can bc sold in South Australia at prices which are keenly competitive with that for Leigh

Creek coal. So the wheel has turned, and New South Wales coal is back in the situation in which it was placed in days gone by, the price of that coal landed in Melbourne and Adelaide being the yardstick by which the price for local fuel oil is measured. The price for the local product has to be reduced in order for it to be Competitive with that for New South Wales coal. Senator Kennelly said, by way of interjection, “ We do not want it now “. 1 think it is correct to say that no industry has been so heavily penalized as the result of bad leadership as has the New South Wales black coal industry.

Senator Kennelly:

– There were other reasons, too.

Senator SPOONER:

– I think they all go back to the question of leadership. The honorable senator will note that I have referred only to leadership. However, I think we must be careful to avoid becoming pessimistic about the black coal industry. The fact that the output of brown coal has increased slightly year by year and that the black coal industry has lost markets to locally produced fuel oil will without doubt be more than offset by increased demands from the steel and power generating industries.

When I commenced to speak I said that I did not think I had anything profound lo offer to the Senate but that what I would say would be a reasoned assessment of the pros and cons of the situation. The development of the petroleum refining industry is one of the greatest - perhaps the greatest - of the industrial programmes that have been undertaken in Australia in the post-war era. Great though the growth of the industry has been, it is far from having reached its climax. Not only is the demand for motor spirit and other petroleum products increasing greatly year by year, and not only will the various subsidiary industries develop and lead to further expansion, but also there lies before us the whole field of the expansion of chemical industries.

I read the Tariff Board’s report with a great deal of interest. I came to the firm conclusion that it was a good and wise report. It did not jump to conclusions. It took into account not only the immediate position but what the industry had done in establishing itself without any assurances about continuing to have an umbrella over its head, how in those circumstances it had continued to develop, and the fact that its protection was very greatly reduced from 2.8d. to Id. a gallon. That was a substantial reduction in the margin of preference.

The board concluded its report by saying that, despite all it had said, it would like to have another look at the industry three years hence. The Government has since said, in effect, “ We prohibited the importation of fuel oil back in 1956 because our requirements could be produced in Australia. This is a sound and wise report. We will make only one alteration to the recommendation - that is, instead of reviewing the industry three years hence we will review it two years hence.”

Senator Kennelly:

– Is there any significance in reducing the period to two years, seeing that will bring the review forward to 1961,

Senator SPOONER:

– Not that I am aware of.

Senator ORMONDE:
New South Wales

– Naturally, I take up the cudgels on behalf not of a section of the coal industry, but of the industry as a national unit. Of course, I could not stand here and speak without paying some regard to the part that has been played by the Minister for National Development (Senator Spooner) in the fight for the stabilization of the coal industry. I have sat on dozens of committees with him. I have seen him in the chair, with miners’ leaders on one side of him and the coal mine owners on the other. It has always seemed to me in the committee room that the problem’s have arisen from the continuing crisis caused by the existence of capitalism. I have always found, with due respect to Senator Spooner, that the more money one had then the better was his chance of winning. What I mean is that the oil companies and the big coal owners always seem to win, and that the little ones go by the board. That may b because of the very nature of things, and I do not intend to hold it against Senator Spooner or the Government. I do say that the Government has endeavoured to do something for the coal industry, but it has not been able to hold off the petroleum refining industry.

A strange aspect of the matter we are now discussing is that the Joint Coal Board, through its representative, appeared before the Tariff Board and gave certain evidence to show that the coal industry was in danger because of the increased use of fuel oil. That is what it meant. The Joint Coal Board stated before the Tariff Board the case that it was in great danger from competition. As the Joint Coal Board is an instrumentality of this Government, I assume - in fact, I think I know - that it had the authority of the Government to go to the Tariff Board and state a case for the coal industry. It stated that case and it lost, so I can only assume that the Government is taking its directions from the Tariff Board. I thought that the Government had considered there was a case to be stated and that was why it agreed to send the Joint Coal Board to the Tariff Board to talk on the Government’s behalf. The coal owners were there too, and I had something to do with the coal miners being there, because I realized, as most people in the coal industry, Senator Spooner, and the Labour Party realized, that in order for the coal industry to live as we want it to live it must have unity between employers and employees. Senator Spooner spoke of leadership, but he should have gone further and said, “ Leadership from’ both sides “. Undoubtedly, the record of the industry has something to do with the straits in which it is to-day. Senator Spooner in his quieter moments would agree that if the leadership was bad on one side it was also bad on the other side.

Now we are getting somewhere. One has only to look at the increased rate of production to appreciate that. Senator Spooner told us about machine extraction of pillar coal, which allowed us to get more coal from the northern coal-fields. I had a lot to do with that as I was on the board at the time. We had the historic fight of the workers against machines. Now the machines are in the pillars, and I think it is good for the industry. Mechanization is playing a very important part in allowing the coal industry to meet its competitors. There is that to be said for the Government, and for the previous government which established the machinery that made these things possible. The industry that we as a party inherited was a pick-and-shovel industry. It had nothing. It was an industry that was substantially moribund, and the morale of those engaged in it could not have been lower. To-day it is a machine industry. The work is easier and more regular. The employers, as well as the employees, can look forward to regular work, which is something they could not do before. I can only assume that the industry will be better able to meet its competitors as a result of being able to plan ahead. I think both sides are entitled to congratulations for that.

But there are other important aspects of this subject, some political and some economic. The coal industry is in danger. There is no limit to the competition the oil companies can exert on it unless they are controlled. The Government sees this danger, because it says that in two years it will have another look at the oil-refining industry. I would say that it would have to do so, because while a lot of money is invested in oil, much more money is invested in coal, including the money invested in homes, other industries and towns on the coal-fields. Probably the most important investment is the social investment of the industry. I have no hesitation in saying that the oil companies have not a great deal of conscience about these social matters. I know of one instance in which the oil monopoly is not prepared to give a reasonable chance to the coal industry. There is an organization in Sydney, Petroleum and Chemical Corporation (Australia) Limited, perhaps better known as P.A.C.C.A.L., which supplies oil to people who used to use coal. These supplies are subject to a continuing contract by which the price of the oil is always kept below the price at which coal can be bought.

Why are the oil companies able to do this? Comparatively speaking, they have no investment, in the real sense of the word, in this country. Their imports total about £130.000,000 but that is nothing when we consider the great power of the oil monopoly throughout the world. It represents only about 1 per cent, of the total oil influence. What does that matter? T know that we must have oil and I do not say that we should not recognize what the oil industry means to us, but if this industry continues to fight with the coal industry it can exterminate the coal industry. I say advisedly that oil companies producing oil gas to take the place of coal gas have granted contracts which allow a fluctuating price to keep the price of their product continuously below the price of coal This means that whatever the coal industry does, the oil industry will beat it. Everywhere inroads are being made on the coal trade. The coal industry is able to continue only because we have been able, fortunately, to export coal. If, because of overseas conditions, we had not been able to export, the coal industry would have been in the midst of a depression to-day, because the oil companies are reducing its markets by about 2,500,000 tons a year.

The oil companies, of course, have not as yet entered the steel industry. We could put the position in this way: The steel industry is looking after itself. It has its own captive mines and it will not lay itself open to the vagaries of the international oil cartel, or the oil situation in any part of the world. The steel industry is getting its coal from its own mines. The gas companies largely provide a regular trade, but they are switching to oil. I put it to the Government that this position must be watched continuously. It is all very well to say that everything is all right in the coal industry, lt is interesting to note that the price of coal is coming down while the price of oil is rising. The price of coal is coming down every year in an economy where all other prices are rising. That is a tribute to the coal industry, which I believe is entitled to some sort of protection.

There is another facet that the Government must examine. The coal industry is an Australian industry. I know that there is a strong economic argument in favour of importing capital. We on this side of the chamber are not foolish. We know that that is the position, but we must accept our responsibility to protect our own industries, especially if they are giving good service. In New South Wales, nine of our coalmines are owned by the State Government or its authority. They produce 2,250,000 tons of coal. Sixteen of the mines, which produce over 3,500,000 tons of coal, are owned and operated on behalf of the steel and cement companies. Almost 6,000,000 tons of coal come from 40 mines owned by public companies. The balance of 3,250,000 tons comes from 52 mines owned by private companies and by individuals. Only one company is a subsidiary of an overseas company. Tn Queensland there are two State mines, one open cut operated by a public company, and 70 small mines which are privately owned. The coal industries of Tasmania and Western Australia are small.

The Labour Party would nationalize the coal industry if it had the power to do so. I say that advisedly. In order to carry out the Coal Industry Act properly, I think the industry should be nationalized. I cannot see how we could conserve the assets of the industry in any other way, but that is another matter.

Senator Anderson:

– -Do you think the price of coal would keep coming down in that event?

Senator ORMONDE:

– I think so. You have semi-nationalization in the industry at present. The price of coal is controlled. Nobody would dare to suggest that the price of coal ought to be de-controlled. Even this Government does not admit that it can grant a completely free hand to the coalowners. Control of the price of coal remains, and I assume that this Government is very happy that it is a State Government that is administering that control.

If we had to choose to assist either the oil companies or the coal companies, then, everything being equal regarding service to the community and service to industry, I have no hesitation in saying that the Government ought to come in on the side of the Australian companies. The coal industry uses Australian material. Of course, the industry had to go outside Australia for some of its machines, but most of its mechanical apparatus is produced in Australia by Australian workers and Australian industrialists. It is completely an Australian industry. By no stretch of the imagination could that be said about the oil companies. The oil companies operating in this country represent about 1 per cent, of the total world oil monopoly interests. The oil companies have no responsibility to Australia. They have no direct interest in the way that we have, in what happens to Australia. That is a point that the Government should consider.

I realize that a good deal of government intervention would be necessary before it was possible to produce oil from coal in this country. The Government is, I think, making a few mistakes in its approach to the coal industry. I know that Senator

Spooner is terribly wrapped up in a committee that is considering the industry. I do not want to be critical of that committee, because I know that a number of men on it are trying to do many things for the coal industry. The probity of the people on that committee may be quite all right, but, to my mind, the people who should be seeking to find a solution to the problem of the coal-mining industry are those who have an interest in maintaining the industry. The personnel of Senator Spooner’s committee includes a consumers’ representative. Why would a consumer be interested in maintaining the coal industry?

Senator Maher:

– The consumers have to keep on paying for it.

Senator ORMONDE:

– That may be so. but if the consumers find that oil is better for their purposes, they will use oil. Why should they be called to produce a solution for the problems of the coal industry?

Senator Maher:

– Time will solve that.

Senator Brown:

– Time will solve all things.

Senator ORMONDE:

– I have heard it said that time will solve many problems. The problem here is a diminishing coal industry. The industry may be holding its position in terms of production, but as far as man-power is concerned it is going down. This Government will have to do a few revolutionary things if it really wants to solve the coal problem. It will have to become a little socialist in its outlook. It has gone a little way along that road, but it will have to go a little further.

The Greta coal seam was supposed to be - and probably still is - the greatest seam of gas-making coal in the world. I do not think there is any doubt about that. However, the mines in that area are fast dying out. I should like honorable senators to visualize the northern coal-field, extending 25 miles in one direction and 25 miles in another. The whole of the area is honeycombed with mines. Some of those mines are worked out and some are half-worked out. There are other mines that would have been worked out by now if they had been used properly. Probably fifteen companies are working in this field, all with different interests, although they all have the interest of keeping their industry going.

If this were a socialist country such as Russia, the industry would be run on different lines. I do not say that Russia is my idea of a socialist country, and I am only using it for the sake of argument. I could use England for the purpose of my argument. In a socialist country, these companies would be exterminated. I do not suggest that that should be done here, but they should be brought together and told what to do. In the Greta field you have 40 mines competing with one another, each mine hauling coal underground for distances of up to 4 or 5 miles. If the industry were rationalized and new exits established, thus reducing the cost of underground haulage, you could possibly reduce the cost of South Maitland coal by £1 a ton. That is just one approach to the matter, but it would call, of course, for a bold stroke by this Government. The Government would have to call together the representatives of the J. and A. Brown, the Abermain and the Caledonian companies and say, “ Listen, boys; we will have to have a little bit of socialist planning. This is necessary in the interests of the coal industry, because otherwise you are going to lose your market for gas coal to P.A.C.C.AX.” I have heard the experts say that costs could be reduced considerably by building new exits and new shafts to serve three or four mines, instead of each mine having its own exit, as at present. We could in that way make an effective reduction in the costs of production of coal and so help to hold the market for coal.

Senator Hannan:

– What is the technical condition of the gasification plants using this coal? Are they not obsolescent?

Senator ORMONDE:

– I do not think so.

Senator Hannan:

– There is nothing there like the modern Lurgi plant, is there?

Senator ORMONDE:

– No, that is true. Coal-owners have said to me, “ We produce raw coal. It is not our business to go into the merchandising business, or to become York-street merchants.” If we want to find new markets for coal, I think the Government must come into the matter, because we cannot expect the coal-owners to do it all. What was the cause of the ruination of the old coal industry? The ruination of the old coal industry was brought about by the fact that coal-owners produced for the day.

Every mine manager operated his mine, not in the national interest, not to conserve coal, but to produce profits.

Senator McKellar:

– What about the darg?

Senator ORMONDE:

– That is another matter. I could talk to you privately about that. Lots of people put on a darg

Senator McKellar:

– I understand the results of it.

Senator ORMONDE:

– I do not want to go into that subject, but I will say that I have met many coal-owners who have said that the introduction of the darg by the mineworkers, notwithstanding its early motive, was the first attempt at planning in the coal industry. I am not saying anything about the original intention of it, but the darg has had the effect of evening out the development of the mines. I do hope that, as Senator Spooner has suggested, the board will have another look at this matter because I do not think this national asset can be preserved from the oil industry unless we impress upon the oil industry that it must refrain from unfair competition with coal. We must hold a market for coal. I have stated before that the export market is in great danger, and that it could collapse overnight, because the best information in the world leads me to believe that harbour facilities in New South Wales are incapable of handling the Japanese order for 5,000,000 tons. These harbours have been able to handle overseas trade up to date, but we cannot hope to supply a guaranteed market if, every time a southerly wind blows, ships hive to move out into the ocean, as they do at Port Kembla.

Senator McKellar:

– What is the State Government doing,

Senator ORMONDE:

– The Cahill Government has plans for building a new harbour internally.

Senator McKellar:

– Out at the back of Bourke?

Senator ORMONDE:

– In from the actual coastline. Water will be pumped in, and the harbour made.

Senator Dittmer:

– On the land?

Senator ORMONDE:

– Yes. It sounds extraordinary, but that is the fact. The Commonwealth Government is the only government with sufficient finance to carry out this urgent job. At Newcastle, £2,000,000 is spent every year on dredging the harbour to enable ships to move in and out.

Senator Maher:

– Why does not the State Government build a railway up to Port Stephens?

Senator Dittmer:

– Or out to Mount Isa?

Senator ORMONDE:

– I am sorry that I have stirred up these interstate jealousies. What this country needs more than anything is a great national plan for power and development. There might be all sorts of constitutional difficulties in the way of the Commonwealth Government’s taking action, but many constitutional difficulties were overcome when the Labour Government went to work on the Snowy Mountains scheme.

The ACTING DEPUTY PRESIDENT (Senator Anderson). - Order! I ask the honorable senator to relate his remarks to the Tariff Board’s report.

Senator ORMONDE:

– I am sorry I have been sidetracked, but constitutional difficulties were overcome in America when the federal government sought to do something about the Tennessee Valley. Just as the-Americans got over their difficulties, so we must get over our difficulties.

Reverting to the Tariff Board’s report, I believe that it is good that this inquiry took place. All honorable senators, Senator Wright in particular, to whom we are indebted for the opportunity to discuss this matter, ought to read the evidence presented by the Joint Coal Board, which is an instrumentality of this Government. If they read it, they will realize that everything is not so rosy as Senator Spooner said it is, and that much remains to be done if we are to maintain stability in the coal industry. And that stability must be maintained if Australia’s future is to be secure!

Senator HENTY:
Minister for Customs and Excise · Tasmania · LP

– This is the fourth report submitted by the Tariff Board on the oil industry and we are indebted to those honorable senators who have addressed themselves to it for the interesting debate we have had. I pay tribute to Senator Wright, in particular, for initiating the discussion because, without doubt, it has led to an interesting survey of all the problems associated with the oil industry and the recommendations made by the Tariff Board.

One fact that emerges clearly from the debate is that the Tariff Board is now getting a very sound knowledge of the problems of the oil industry. If this report indicates anything, it illustrates that the board knows what it is seeking and where to look for evidence before submitting recommendations.

Another great thing that emerges from the debate is the fact that the oil industry is being made aware that the people’s representatives are studying these matters and keeping their eyes on what is one of the most important industries in the Commonwealth.

We cannot overlook some of the steps that have been taken. I shall not traverse those mentioned by Senator Spooner, but it must be remembered that Australia is taking some very necessary steps to help the industry, especially in connexion with freight. I refer to the construction of the largest oil tanker to be built in Australia with a Commonwealth Government subsidy. This will be a great step forward in providing transport for bulk oil in the future. I repeat that Australia is looking to this problem of freights which are a tremendous item in the costs of this industry.

I listened with keen interest to Senator Ormonde’s plea for the coal industry. I remind him that this matter was investigated by the Tariff Board, which is looked upon by all sections of Australian public life as a completely impartial board. It made certain recommendations after hearing all the evidence submitted by the coal industry. I point out to the Senate that the coal industry already enjoys an advantage in that every gallon of benzol produced from coal is free of excise, which gives the industry the benefit of an advantage of 1 lid. a gallon. Benzol is produced from coal at, I think, three places in Australia. 1 understand that such production represents about .6 per cent, of our total production of refined oil. Therefore, the coal industry has been receiving considerable assistance. If it cannot live alongside a more modern industry, it might find itself - I am not an authority on this subject - in the position of the horse and buggy in relation to the motor car. Surely nobody will say that our great automotive industry should not have been started because a few horses were put off the road. I do not believe that that will be the case with the coal industry, but it might well be. However, there is one thing that I am pretty sure about, and that concerns the suggestion made by Senator Ormonde that the coal industry be nationalized. I am sure that if that were to happen the coal industry horses would go to the wall very smartly, because a nationalized coal industry under government control would never live alongside a modern oil industry.

Senator Dittmer:

– The coal industry in England was collapsing before it was taken over and nationalized.

Senator HENTY:

– I agree that the coal industry was nationalized in England, and 1 think that probably it would be de-nationalized now if that were possible. However, it is probably a case of not being able to unscramble scrambled eggs. I do not want to introduce party politics into this discussion. I am merely making a passing comment on Senator Ormonde’s suggestion.

Out of this debate have come points that I think are worthy of notice. I refer particularly to the three points made by Senator Wright. The honorable senator suggested that the Senate might revive its interest in reports of the Tariff Board. I am all for that. It would be a great step forward if the Senate were to devote more time to reports of the board, because, after all, they have a great bearing on Australian secondary industries. We should see to it that the protective wall that is built up around secondary industries in Australia is looked at from time to time. That is why I rather like the report of the Tariff Board that is now before the Senate. It recommends that we have another look at the petroleum industry within a certain period. The board has made, one might say, a sort of interim recommendation, which is not an uncommon practice with it. That has been done previously in reports that have been accepted by the Senate.

I wish now to refer to one or two m’atters which the board suggested and in respect of which the Government felt that alterations should be made. One of the main matters, of course, was the suggestion that the 10 per cent, primage should be continued as a protective tariff in the miscellaneous section of the industry. The Government took the view that no government in this country had ever accepted primage as a protection. Governments have always regarded it as a revenue duty. Consequently, the existing 10 per cent, primage that applied to the miscellaneous section has been removed by the Department of Customs and Excise and integrated with a new tariff duty, which includes both tariff and primage.

Senator Wright:

– When did that take place?

Senator HENTY:

– It is taking place now, following this report of the board. The recommendation of the board that the 10 per cent, primage should be kept on as a protective measure meant adopting a principle which has not been accepted by any government, of whatever political colour, in the history of Australian tariff reports. Another thing that we have taken the opportunity to do is to bring tariff classifications into line with the petro-chemical industry to which Senator Spooner referred, and which is going to be one of the great industrial developments in this country. There are within that industry a number of classifications which will be brought within the general tariff categories, thereby bringing the position up to date.

Secondly, Senator Wright said that he would like to hear further argument - I think that a great deal has been advanced during the course of this debate - to justify the retention of the Id. a gallon protection which is recommended by the board. T think that it has been made pretty clear during the debate just what the Tariff Board had in mind. The position of the Australian industry has been mentioned, and it has been stated that we are not producing economically from the point of view of national consumption. I wish to give the Senate some figures in this respect. Total Australian production of gasoline is 34. b million gallons, and our consumption 41.1 million gallons. We produce 2.2 million gallons of kerosene, while our consumption is 6.4 million gallons. We produce 22 million gallons of diesel oil and consume 18 million gallons. We produce 300,000 gallons of lubricating oil and our consumption is 2.6 million gallons. We produce 40.9 million gallons of fuel oil, and our consumption is 31.8 million gallons. It is this imbalance in the industry which has led to inefficiency in production overall in Australia. Because the industry will be given an opportunity during the next twelve months or so to rectify that position, particularly in relation to some of the smaller refineries, I believe that the Tariff Board was wise in suggesting that the matter should be dealt with in stages and that there should be a review of the position within another two or three years. Actually, the Government has shortened the period before review to probably a little over eighteen months, thus bringing the review a year or so ahead.

I think it possible for some people who have read the report to reach different conclusions from those arrived at. Senator McKenna suggested that there was room for argument in this respect. However, I agree with those honorable senators who have said that, by and large, this is a very balanced report. The board has given conflicting interests in Australia the opportunity to present evidence to it. The result is a balanced report. As I have said, I think it is wise, in the interests of the Australian economy, to do in steps the things that the Government has undertaken to do.

Several honorable senators have referred to marketing, a matter that has been dealt with by Senator Spooner. I agree that the aspect of marketing should not be overlooked by any government which makes a reference to the Tariff Board in the future. During a period of almost two years now I have had an opportunity to have quite a close look at the oil industry throughout Australia. There have been some administrative changes brewing in the Department of Customs and Excise, and those changes are now taking firm shape. I felt that I should go and have a close look at all aspects of the industry in order to get a complete picture of what the oil industry means to Australia. Wherever T visited sections of the oil industry in this country I found that steps were being taken to develop them and to increase their efficiency by the adoption of modern technical improvements from overseas, I think that that is all to the good. A great deal still remains to be done in this connexion. In many instances, because of the growth of cities around original oil industry installations, it has become necessary to re-site them. Wherever it is possible to do so, the oil industry is moving its installations out_of the cities to new sites where adequate space is available for future development, because the industry realizes that it will continue to expand as the Australian economy grows.

In conclusion, I should like to say that I think the more the Senate devotes itself to debates of this kind the more interesting our work will become and the better informed we will become on every aspect of public life in Australia. I think that as reports come forward from the Tariff Board the Senate should devote some little time to every one of them so that we will have a better balanced picture of the growing industrial life of Australia, and as a Senate we will be able to give a more balanced judgment on the reports and the work of the Tariff Board, which means so much, and plays such a great part in secondary industry in Australia.

Question resolved in the affirmative.

page 640


Debate resumed from 27th August (vide page 342), on motion by Senator Spooner -

That the following paper -

Communist China - Speech by the Minister for External Affairs, 13th August, 1959 - be printed.

India’s Northern Frontier - statement by the acting Minister for External Affairs, dated 2nd September, 1959.

A motion for the printing of that paper was submitted by Senator Spooner on 3rd September. With the concurrence of the Senate, that course might be followed with advantage.

The ACTING DEPUTY PRESIDENT. - Is there any objection to the adoption of that procedure? There being no dissentient voice, leave is granted.

Senator TOOHEY:
South Australia

– I wish to direct my attention to the two ministerial statements that have been made in relation to the border incident in India and the position in China. I propose first to say something about the border disagreement between India and China.

In my study of the debates that take place in this Parliament on international affairs - and there is a very troubled climate throughout the world to-day - I find that there seems to be an ever-increasing amount of intolerance of other people’s viewpoints creeping into our consideration of these matters. By that statement I mean that if our thoughts take a slight turn to the left we are classed as Communists, but if our thoughts turn slightly to the right the tendency is to say that we are reactionary. A lot of the objectivity of these debates is lost inevitably in this degree of intolerance that is shown in both Houses of this Parliament. I hope that in consideration of these matters in future a greater degree of tolerance of the views of other persons will be shown.

Both ministerial statements deal with problems in the East, of which there seem to be an increasing number. In addition to the situation mentioned in the statements, the position in Laos has caused a good deal of concern, but according to the latest reports there are promising signs of an easing of tension.

What I have to say with respect to these matters is based on my humble attempt to make an objective survey of the situation. In common with most honorable senators, I am in the position of having to look at these things from thousands of miles away, and in these circumstances it is very difficult indeed to give a completely accurate summary of what is happening. We have to rely on statements that are placed before this chamber on behalf of the Minister for External Affairs (Mr. Casey), and we have to form conclusions in respect to them. In the formation of these conclusions we often find, regretfully, that when strong feelings manifest themselves, objectivity is lost.

The ministerial statement dealing with the border dispute existing between India and China declared that the basis of this matter goes back to 1951. In the somewhat limited research I have undertaken in this matter, I have found that it goes back much further than that. As a matter of fact, as long ago as 1847 there were references to border disputes between the two countries that were never settled. According to the ministerial statement, and the protestations that have been made by Mr. Nehru, the Prime Minister of India, the borders as defined by India are the correct borders, and they have been violated by the Chinese. Having studied the history of this dispute to some extent, I am not convinced that either side is right in its assumption of where the two borders lie. Mr. Nehru thinks that he knows the borders beyond any shadow of doubt and that those borders have been violated by the Communists.

Leaving aside the opinion of Mr. Nehru or Chou En-lai as to where the correct borders lie, one must condemn the action of the Chinese in building roads in what at the best can be considered only as disputed territory. To that extent, I feel that China has not contributed to the peaceful solution of this situation. Some authority should have determined exactly where these borders begin and end before any road-building activity in the area was undertaken. To that extent, I consider that there is some justification for the complaint of the Indian Prime Minister that China has violated Indian territory. One of the unfortunate things about this dispute is that only one of the nations concerned belongs to the United Nations Organization. That is, of course, India. Had both countries been members of this organization - in which we all believe, and to whose aims we all subscribe - perhaps the chances of resolving the position would have been much better than they appear to be at present.

Senator Gorton:

– Why?

Senator TOOHEY:

– At least the Chinese representatives could have been questioned by the representatives of other nations, and the organization could have informed its mind much more completely than is possible when it hears virtually only one side of the story. That is surely a reasonable assumption.

That brings us back to the old and vexed question which is inherent in both of these reports - the diplomatic recognition of red China by this country, and the advisability or otherwise of permitting China to become a constituent part of the United Nations organization. It is difficult indeed to arrive at a solution of this problem. I propose to make brief reference to the remarks of the Minister for External Affairs (Mr. Casey), on the subject of recognition -

In itself, recognition merely indicates a readiness on the part of the recognizing government to enter into diplomatic relations with the recognized State. Conditions have been laid down by the Peking regime for countries which, having recognized it, wish to negotiate for the establishment of diplomatic relations with the Government of the Republic of China - the Nationalist Chinese Government in Formosa. This requirement by the Peking regime has been in force since 1949, and it has been frequently and authoritatively and recently reasserted. Compliance would require the Australian Government to terminate the Nationalist Chinese mission in Australia.

If that statement is true it opens up a very vexed question indeed, because Nationalist China, or Formosa as it is called, is already a constituent part of the United Nations organization and recognized, on a diplomatic level, by this Government. I would go so far as to say that if, in the course of any negotiations between this country and China on the question of diplomatic recognition, it were declared that we must cease to have diplomatic relations with Formosa that should not be acceptable. However, I have yet to be convinced that China would lay it down as an absolute condition.

Senator Hannan:

– It has been stated categorically by Chou En-lai, as a condition precedent to recognition.

Senator TOOHEY:

– The report of a statement is not something to which one can give complete credence.

Senator Hannan:

– The statement was made on Peking Radio.

Senator TOOHEY:

– Until the whole of the background to the statement is understood we must acknowledge the possibility of error. I have yet to be convinced that if China were given the opportunity of establishing diplomatic relations with this country it would not forget about that alleged condition. I would go so far as to say that if it did forget the alleged condition some justification might exist for not establishing diplomatic relations.

Senator Gorton:

– Justification might exist or would exist?

Senator TOOHEY:

– I would go so far as to say that in the present state of world affairs, it would exist. As I have said before, subject to that condition being removed, it would be a good thing if we could establish diplomatic relations with China; indeed, we should with all nations, if we are to reach any degree of understanding in regard to these problems. While serious consideration must be given to the Minister’s statement concerning the condition allegedly laid down by Chou Enlai, it should not be regarded as completely closing the door in this matter of establishing relationships with red China.

Returning now to the dispute between India and China, I notice that the Prime Minister of India has frequently been reported as saying that there is no possibility that that country will resist the Chinese whatever aggression might take place on the borders of India. However, Mr. Nehru is reported in the London “ Times “ of very recent date as having said that both countries were digging their toes in, and as having agreed that there were perhaps the seeds of trouble in that situation; that when people dug their toes in they must, at some later stage, dig them out. I think honorable senators generally will agree that there is a strong possibility that the dispute between China and India will worsen.

In the concluding paragraph of his statement on this subject the Attorney-General (Sir Garfield Barwick) said - honorable members will form their own judgments of the conduct and behaviour of Chinese Communists in these matters and the relationship of these border pressures on India to the well remembered events in Tibet. Having regard to the importance and gravity of these issues for our great Commonwealth neighbour, which no doubt has them under most serious consideration, it would not be appropriate for the Australian Government to enter into the substance of them at this stage.

Inherent in that are two very important considerations. The first is that we could allow our prejudice and hostility towards China to override our judgment of the real issues. The second is that we should decide which country has justice on its side and come out in support of it. It is significant that the Minister should say that we should not enter the substance of these issues at this stage. That indicates clearly that there is a strong possibility that this country could be involved in some way at another stage. If there is any possibility that Australia will be involved in any way it is the duty of . the Minister for External Affairs to find out from the= Prime Minister of India - not from newspapers or reports of statements in theIndian Parliament - just what the real’ position is. If that were done, we, whomight have to make a decision at a later date, would be completely informed.

I wish to return to the statement on. China. That statement deals at length with, some of the industrial conditions which, obtain in that country, and it advancesreasons for and against the recognition of China at the international level by admitting; her to the United Nations Organization. The argument advanced by the Minister in a somewhat ambiguous way is that nojustification exists for bringing China within the compass of the United Nations. I am aware of the fact that not only Australia has resisted the admission to the United Nations Organization of countries that wish to belong to it. It is well known that Russia has used the power of veto to exclude at least twelve countries and that we, simply because of our political prejudices, have been responsible for the exclusion of six others. I make no attempt to excuse Russia’s attitude in exercising the power of veto to exclude nations from the United Nations Organization, nor do 1 applaud the attitude of the people with whom we have been associated.

Senator Gorton:

– But what we have done was not done by veto; it was done by a vote.

Senator TOOHEY:

– I admit that, but it does not alter the fact that our attitude and the reasons for it were the same. We will not be able to arrive at any unanimity of thought or purpose that will assist to alleviate the cold war if we continue to take that stand. The whole purpose behind the United Nations and the whole spirit of its charter and everything associated with it was that it should encompass all nations for the purpose of having proper discussion and a proper conduct of international affairs in the interests of world peace and prosperity. We violate that charter immediately we take part in any attempt to exclude nations from membership of the United Nations. We are just as guilty as is the Soviet Union of attempting to exclude countries from participating in the activities of the United Nations, and we are just as guilty of violating its charter.

Having dealt with the recognition of red China at the diplomatic level and the possible admission of that country to the United Nations, 1 think we should give some thought to her future. We can only speculate, and perhaps never be right, about the ultimate result of the dispute between mainland China and the nationalist Chinese in Formosa. We may even visualize the dispute being resolved by armed force. That is a possibility. Remote as it may seem, it is not beyond the bounds of possibility that some understanding will be reached between the two groups of Chinese people. If such a possibility exists, we should be working towards that end. But as long as there is a separation of the two groups with different kinds of government, so long will Formosa and China represent a threat to world peace. These people have complete community of interest and belong to the same race, but they are separated by a few miles of sea. Of course, on the mainland there is a vastly different form of government.

Although there is a Communist regime in China, that country has made remarkable progress over the last fifteen years, and the indications are that it will continue to make progress. It is impossible to forecast whether China can harness the tremendous man-power she has available in her population of 600,000,000 to the machines she is producing in ever-increasing numbers. Perhaps we tend to overestimate the growth of China; but regardless of whether, for political propaganda purposes or other reasons, China seeks to give the impression that she is emerging as a giant amongst the nations of the world, and regardless of the fact that she may overemphasize her achievements and perhaps does not give an accurate assessment of what she has done, we must regard her as emerging, perhaps within the next 25 years, as one of the three great nations of the world. If we recognize that possibility, we must, because of our geographical situation, consider what our future attitude to and relations with that country shall be.

Senator Pearson:

– Did the honorable senator say that she is emerging as one of the three great nations of the world?

Senator TOOHEY:

– Yes.

Senator Pearson:

– What are the other two?

Senator TOOHEY:

– The Union of Soviet Socialist Republics and the United States of America.

Senator Wade:

– Where does the British Commonwealth of Nations come into the picture?

Senator TOOHEY:

– I am not seeking to belittle the British Commonwealth of Nations, but we are discussing matters of an international character and of cold hard fact. I am not suggesting that the British Commonwealth has declined rapidly; probably it is still as strong as it ever was. But, in the light of the extensive development of the resources of the U.S.S.R. over the last two decades, the great industrial achievements and potential of the United States and the whittling away of British colonies throughout the world, Britain does not rank - I am not saying in regard to world importance, but in regard to world potential - with the former two countries. I do not say that in any derogatory sense, because I have a deep admiration not only of the British people, but also of their achievements.

One thing is certain, and it is this: Whatever our attitude to China may be, we will not get her people to change their form of government and throw off what are called the shackles of totalitarian communism simply because from some thousands of miles away we hurl abuse at them and refuse to recognize the fact that they exist. To adopt that attitude is, in my opinion, utter folly. As I see the situation, we can do one of two things. We can say, “ We do not agree with your government and will never agree with it. We do not agree with your political system because it is against everything that we stand for. But we would be fools not to recognize that you exist.” On the other hand, we can say, “ We visualize that in the future the relations between our country and yours will be those of complete and total war “. It is not illogical to suggest those alternatives. We must face up to the realities of the situation. If we say that we cannot possibly reconcile ourselves to having anything to do with China at the diplomatic level or at the trade level, and that our attitude to her is one of uncompromising hostility - not because we are hostile to her people but because we are hostile to her form of government - that attitude has in it the seeds of war.

While we are debating these two papers this afternoon, in Washington the two great world figures - that is how they are regarded - are discussing the future of the world. I refer to Mr. Eisenhower and Mr. Khrushchev. The thought occurred to me this morning whether these two men are the great influences in world affairs to-day. I doubt whether they are. I think a new and greater aristocracy has superseded them. A day or two ago I listened attentively to a very thoughtful speech by Senator McCallum on some aspects of international affairs. He spoke of the new aristrocracy in the Soviet Union, the aristocracy of science. I have a belief - it is almost a conviction - that because of the great destructive forces which have emerged the scientists are the real leaders of the world of to-day. They are the men who have in their hands the power to determine whether we live or be destroyed. Their influence is growing every day. We speak of Khrushchev being the leader in Russia and Eisenhower being the leader in the United States of America, but we must look behind them to the men who really rule the world and who have in their hands the power to do all sorts of destructive things.

When we consider international relations, we can think in terms of only two things. One is whether we can learn to live together, in relation to which the term “ coexistence “ comes into the discussion. Because the Russians have used the word extensively, to many people the inference from one’s use of it is that he is a Communist, otherwise he would not use it. But the word “ co-existence “, or at least a word to convey its meaning, was in use before the Soviet Union was formed. It still describes the same thing as it always described. We face a future in which we must learn to live with each other. The alternative is that we will surely die with each other. There is no half-way house. The fact that one of the great powers has been able to hit the moon with a rocket must bring sharply to the mind of every one of us that such a weapon aimed at one of the great capital cities and carrying a hydrogen warhead could wreak tremendous devastation. Of course, in push-button warfare, retaliation could take place, and cities and towns all over the world would be destroyed, with millions of people being involved in the holocaust. That is what the future holds, if we accept the inevitability of war. The power exists for the destruction of civilization, and this fact is brought into sharper relief by the Russians’ success in hitting the moon.

There must be some middle course for the world to take between the two extremes that appear in global relations to-day. On the one hand is a system of totalitarianism, exemplified by the Soviet Union and other Communist countries. On the other hand we have what is called, for want of a better name, capitalism. This is certainly not reasserting itself in such a way that one can say it will be able to continue. In the last twenty years signs that the system we know as capitalism is declining in favour have been clearly manifested. We are faced with the choice of the other extreme, unless we can find a middle course to follow, a middle path to tread. We must find a middle way to enable the world to travel between the extremes which cause so much conflict and trouble and to say to them, “ A plague on both your houses! “ Unless we succeed in doing that, the end that I described a moment or two ago is inevitable.

Nothing is more important in our considerations than the field of international affairs, and in that field there has never been anything more deadly than what we see to-day. In our future considerations we should say to the other fellow, “ You can have a viewpoint without being called a Com. You can advance a theory without it being said of you that you have some sympathy with Russia or with the Communist philosophy. “ Let us bring into the Senate points of view expressed sincerely, which may contribute towards better understanding between the nations. If we travelled that path we would be better employed than in standing on either side of the chamber describing each other as Corns or reactionaries, according to the way our mood of intolerance takes us. If we did that, perhaps in our consideration we might reach a more objective level.

Finally, I leave with the Senate the thought that we live to-day in a world where mass communications are such that, in only a matter of moments, thousands of miles may be traversed. We in this country are to a great extent isolated from the countries of Asia. Regardless of whether the types of government in those countries conform with what we think is right or whether they are of a totalitarian or other character, if we are to speak with authority in world affairs we ought to be prepared to exchange visits with the people of those countries. When we rise in the Senate we are handicapped in trying to project our thoughts over those thousands of miles in order to arrive at a proper conclusion about what is happening in those countries. We talk of China, but very few honorable senators have ever seen China. We are told that the people there are dissatisfied with the regime and hostile to it. There are people in China who are supposed to be - and may be - enslaved, but we have not been there. If one does go there, it is always suggested that that is an absolute sign of his sympathy with the type of government that the country suffers or enjoys. We ought to enlighten our minds by going to these countries. I do not think any senator would be subverted from the path of democratic thought by spending a month in China, Formosa, or some other country of Asia, where there is so much trouble to-day. If we alter our approach a little and give ourselves the credit of acknowledging that we will not be subverted by looking objectively at the ways of life of other people, we will bring to debates on international affairs in the Senate a refreshing new outlook.

Senator MAHER:

.- There are many sincere and honest, but misguided people in our midst, who call for closer diplomatic and economic relations with Communist China. There is also constant pressure to this end from local Communists and fellow travellers. I regret to say that the Australian Labour Party also supports this course, as indicated by Senator Toohey.

Senator Toohey:

– This is what I meant when I spoke about intolerance.

Senator MAHER:

– There is no intolerance in stating the fact that it is part of his political policy. Senator Toohey indicated that he favoured the recognition of Communist China. He could not deny it, because that is part of the political policy of the party to which he belongs.

At the 1957 conference of the Australian Labour Party, which was held in Brisbane, it was declared that -

The immediate recognition of continental China must be, and its admission to the United N tions Organization is, an integral part of the Australian Labour Party’s policy in the Pacific.

It is of no use to dodge the issue. Senator Toohey and Opposition senators generally are committed to that policy. It would be far better for them to come out in the open and stand up for what the conference of their party declared. That is the attitude of the Australian Labour Party, and I think Senator Toohey maintained it. People of this type generally believe that the present Communist regime is in permanent control of mainland China and that recognition of it is more or less inevitable. I shall submit various reasons against the recognition of Communist China. I do so as a result of my study of the actions of the Government at Peking since the time when I spoke on the bill ratifying the agreement which brought the Seato organization into being several years ago. I have observed and studied the position since then and have been confirmed in my view that it would be wrong for Australia to stand in with those countries which wish to recognize continental China.

A basic reason why Australia should not give official recognition is that Communist China is involved in a long-range struggle to subvert, infiltrate, overrun and dominate non-Communist countries which stand in the way of its expansion. The countries of East and South-East Asia are particularly vulnerable, because they stand in close proximity to Communist China. The most recent obstacle to recognition is Communist China’s aggression against the peaceful state of Tibet - its violent subjugation of that: country and the suppression of Tibetan freedom. Surely that is enough in itself, without any other reason, for refusing: recognition.

Senator Kennelly:

– It is most interesting to hear you speak of the freedom of the people of Tibet.

Senator MAHER:

– If Senator Kennelly does not perceive that the Tibetans lived in freedom and ran their own affairs in their own way, he is hopelessly out of touch with the situation in that part of the world.

In 1950, Communist China informed India that it had no intention of incorporating Tibet into the Chinese political system, by force or otherwise. Instead, Chou-En-lai said that China wished only to negotiate with Tibet regarding the future relationships of the two countries. Despite this assurance, a few weeks later - on 7th October, 1 950, to be precise - Chinese troops invaded Tibet and captured Chamdo in eastern Tibet. Before the end of that month Peking announced that the Chinese troops -would march further into Tibet, with the intention, to use Chou-En-lai’s own words, “to free 3,000,000 Tibetans from imperialistic aggression “. We might well ask which power was the imperialistic aggressor. The Tibetans, as I just informed Senator Kennelly, were running their own State in their own way, but no longer is this the case. As all the world knows, the Dalai Lama, accompanied by his leading officials, has gone into exile in India.

Reliable political intelligence reports say that 5,000,000 Chinese have been already settled in Tibet, and that plans are in progress to move another 4,030,000 Chinese into that country. It can be said, therefore, that since 1950 Chinese aggression has forced Tibet - a country in no way able to match the massive military strength of China - to become a province of China.

Senator Arnold:

– Nine million Chinese going into Tibet!

Senator MAHER:

– That is according to a document which is in my possession. Already 5,000,000 have moved in and another 4,000,000 are being prepared, back in China, to go in. As there are only 3,000,000 Tibetans, it is obvious that the Chinese intend to absorb these people into a new Chinese province.

Senator Arnold:

– From where did you get those facts?

Senator MAHER:

– I have got them; that is sufficient. There has been a deliberate violation, in the case of Tibet, of fundamental human rights. A systematic policy has been pursued by the red Chinese of killing, imprisoning and deporting patriotic Tibetans who resist. The number of people involved is colossal, and what is happening constitutes, in the opinion of a body of jurists who have investigated it, the crime of genocide.

Flushed with their successful suppression of Tibet, the Chinese are now probing the Indian frontiers in certain districts - as was stated by Senator Toohey this afternoon - and are causing grave disquiet to the Indian Prime Minister and his people. They have been responsible for the division of Korea and Viet Nam, and for attacks on the islands of Quemoy and Matsu in the Formosa Straits. There has been also a constant threat of military invasion of Formosa by the Chinese Red Army.

Then, of course, there is the Communist insurrection in Laos, which, according to reliable Hong Kong reports, had been planned for some time between the North Viet Nam leader, Ho Chi Minh, and the Communist Government at Peking. Ho went to Peking with Kanti Sibandon, a general of the Communist Pathet Laos army, and a representative of the Laotian Resistance and Patriotic Party - which is the Communist Party - to secure economic and military aid whereby the rebellion against the Royal Laotian Government could be bolstered and strengthened. Ho did not come back empty-handed.

If there were a widespread feeling amongst the various peoples of the world that Communist China should be recognized - and there is no such evidence - it would not necessarily follow that it would be admitted to the United Nations. The Charter of the United Nations does not provide for universal membership. States which have a bad record, which have been guilty of bad behaviour internally and in respect of their neighbours, can be outlawed by the United Nations. United Nations membership, according to the rules, is restricted to peace-loving peoples and States. There is no certainly that red China could be admitted, even if every country in the world wished to recognize it. A fair indication of world opinion on the subject of recognition and of admission to the United Nations can be gained by assessing the number of countries which have recognized red China and the number of countries which have not. No less than 53 countries of the world have not recognized Peking, while 33 countries have done so. Against that, it must be remembered that 44 countries have recognized the Republic of China at Formosa.

If Australia were to officially recognize Communist China, this country would be entirely out of step with general opinion throughout the world to-day, especially amongst the nations that are seated at the United Nations.

Senator Cooke:

– What is Great Britain’s position?

Senator MAHER:

– I will come to that. In determining their attitude to this matter, Australians must have regard to their own limitations. The island of Formosa has a population equal to, if not greater than, the population of Australia. We must take such actions as will ensure our own security. We must, therefore, look for support and help, if ever we are attacked in the South Pacific zone, from powerful friends. Britain is far away in the northern hemisphere, and if war commenced in that zone Britain would become heavily involved and might not be in a position to accord any assistance to us, no matter how willing she was and how good the British spirit to do so. We must therefore rely on our friends and allies of the last war - the United States - if Communist China should decide to make a thrust against the islands south of the China Sea. The United States stands as solid as the Rock of Gibraltar against the recognition of red China. If there were no other reason but that, it should be enough in itself for us to stand against the recognition of red China and support those to whom we look for help if ever we are involved in trouble with this powerful military country, red China. The United States’ attitude must necessarily be our attitude. There is no escaping that position.

If we were to recognize Communist China, it would also amount to a terrible betrayal of the free China government in Formosa. The abandonment of Formosa would have the effect of either crippling or destroying that government. On Formosa to-day stand the largest military forces in the free world, and the mere existence of this great defensive force has acted as a tremendous deterrent to further Communist Chinese aggression. On a point of honour and national morality, we cannot deliver over to the Communists the Formosan people against their will. We cannot do such a thing.

Formosa is a great strategic bastion in the China Sea against Communist Chinese aggression in almost any direction, but particularly in the direction of the Philippines, New Guinea, Indonesia and our own country and, while that military bastion stands there, red China has got to think twice about any move southward and has also to bear in mind the fact that a flank is open on that point against military ventures into South-East Asia. It is highly important that we continue to maintain our recognition of the nationalist government of Formosa.

Recognition of red China would also have an adverse effect on the other free governments of Asia and we could not blame those countries which are connected with us through our Seato organization, and other countries which look to us for help if they are attacked, for thinking that we lack reliability if we were to let Formosa down. If we want to hold the goodwill of those countries to the south-east of China, we must stand in good faith behind Formosa. By so doing we shall hold the confidence of those other countries which look to us to maintain our stand in that connexion. I say, therefore, that we must keep faith with Formosa and the other countries of South-East Asia.

In addition, recognition of red China would have a very serious effect on the large and influential Chinese communities living in most countries of South-East Asia. They are a very important body of people. They are influential throughout South-East Asia, and I think we can say that to-day we have the goodwill and support of this powerful counter to the power of the Communist Chinese on the mainland. People in our own country, who desire to see red China recognized by Australia, suggest a two-China solution by which the Communist regime on the mainland would be recognized by us as the government of the mainland whilst the government of Formosa, would be recognized by us as the legal government of that island. There is good reason for believing that this suggestion would not be acceptable to either the government in Peking or the government inTaipeh. Some optimistic people in our midst hold the view that Australia’s recognition of mainland China might help tolure Peking away from Soviet Russia. This, in my view, is the feeblest reason of all for recognizing red China. China has given strong support to Russia on such matters as Hungary, the execution of Nagy and the attack on Yugoslavia. I may be completely wrong, but my own view is that the present alliance between Soviet Russia and red China will break eventually because their interests can clash very severely in the future. Although it may take quite a number of years yet for those differences to reach the surface, nevertheless I am satisfied that they will emerge eventually, and that if we can continue to avoid war with Soviet Russia the time will come when there will be a definite breach of the present relationship between those two great Communist powers - Soviet Russia and China.

Recognition is also urged by some because the Communist regime is stated to be in full control of, and has shown the capacity to govern, China. It is wellestablished international practice that capacity to govern is not the only test for recognition by other governments. I agree that it is a primary requirement, but it is not the only one. In the final analysis, the national interest of the countries immediately concerned must be taken into account. To support this point of view, I have already shown that 53 world states have not recognized Communist China despite the power and control which the Communists exercise on the Chinese mainland. Indeed, I heard it stated in a broadcast over the Australian Broadcasting Commission network this morning that once again the United Nations had rejected an application by Communist China for a seat on the United Nations. So at this point of time, the United Nations organization, whose members come from all parts of the world, is still not prepared to accept Communist China because she is an aggressor nation pursuing aggressive policies against her neighbours and other states and countries. Mr. President, I ask for leave to continue any remarks at a later date.

Leave granted; debate adjourned.

page 648


Newspaper Report

Motion (by Senator Spooner) proposed -

That the Senate do now adjourn.

Senator AYLETT:

.- All day to-day I have been inundated by pressmen with relation to a statement that appeared in the “ Daily Telegraph “, I think. I did not want to call the pressmen in one by one, and I notice that they have assembled in the press gallery now. They are a bright-looking lot of boys who are eager for some news. All I can say is that 98 per cent. of that statement in the newspaper was a complete fabrication. It reminds me of a story which appeared in the “ Courier-Mail “ in the latter part of 1952, or early in 1953, just after a small bunch in my State had succeeded temporarily - I emphasize “ temporarily “ - in having my endorsement stopped. The statement published in the “ Courier-Mail “ referred to me as a “ fellow-traveller “ of the Communists, made some reference to ex-Senator Morrow and said I was more cunning. They said it had been engineered by the shrewd and wily old politician, Robert Cosgrove.

To chase that up, we got the pressman down and he informed me in front of one of my Tasmanian colleagues that one of my own colleagues had issued the statement to the press here in Parliament House. I should say that the statement that Mr. Reid has published - I do not blame Mr. Reid as a pressman, although he should have checked with me before printing the whole thing as he did - probably came from the same colleague who gave the statement published in 1952 or 1953. And it is just as far off the mark! The one regret I have is that the position is not more factual for, if it were I could turn to whoever has given the information and say, “ Sour grapes “!

Question resolved in the affirmative.

Senate adjourned at 4.45 p.m.

Cite as: Australia, Senate, Debates, 17 September 1959, viewed 22 October 2017, <>.