25th Parliament · 1st Session
The PRESIDENT (Senator the Hon. Sir Alister McMullin) took the chair at 3 p.m., and read prayers.
– I wish to direct a question to the Minister representing the Minister for Labour and National Service. 1 preface my question by stating that recently a steel firm in America known as Cleveland Cliffs secured a large order in Japan for pelletised iron ore, which will mean several separate iron ore projects in the north of Western Australia this year all requiring new towns, railways and ports, &c. In view of the fact that Western Australia is already suffering because of an acute shortage of skilled labour, can the Minister assure me that the Government will arrange for the introduction of sufficient skilled labour and personnel to construct these tremendous development projects so that the companies involved can begin production on schedule?
– I am aware, of course, of the recent developments in the Pilbara area of Western Australia to which the honorable senator refers. I am aware also of the quite dramatic progress which should flow from the establishment in the area by the companies he mentions of iron ore projects covering a whole range of activities and which, over a period of years, will culminate ultimately in the establishment of an integrated steel industry in the Pilbara district. I think the honorable senator states no more than what is well known when he refers to the shortage of labour that may occur. I have seen newspaper references to the effect that approaches may be made to both the Government of Western Australia and the Commonwealth Government to get labour by migration from certain countries for the period required. To the best of my knowledge, however, no official approach has been made. I am sure that when such an approach has been made the Commonwealth Government will take a realistic and sympathetic view of the particular needs which will arise from, this vast development.
– I have to advise the Senate that the Right Honorable Arthur Bottomley, O.B.E., M.P., Secretary of State for Commonwealth Relations in the Government of the United Kingdom, is within the precincts. With the concurrence of honorable senators, I propose to invite him to take a seat on the floor of the Senate.
Honorable Senators. - Hear, hear! (Mr. Bottomley thereupon entered the chamber, and was seated accordingly.)
– I ask the Minister representing the Minister for Health whether it is true that the Medical Fees Stabilisation Agreement between the Australian Medical Association and the Commonwealth Government is due to expire shortly. Can the Minister inform me of the date? I ask him further what arrangements, if any, were made to meet any possible increase in doctors’ fees when the Commonwealth Government granted permission to medical benefits funds to increase the weekly contributions payable by the public. If no provision was then made for the organisations to meet any higher charges made by doctors, will they be eligible to ask again for increased weekly contributions?
– The answer to the first part of the honorable senator’s question is: “ Yes “. I ask him to place the remainder of the question on the notice paper in order to give me an opportunity to secure an answer for him from the Minister for Health.
– I ask the Leader of the Government in the Senate: Is it a fact that a suggestion has been put forward by a member of the House of Assembly of the Territory of Papua and New Guinea that the name of that Territory should be changed to Paradisia? Can he tell me whether the Government has considered accepting this proposal and, if it has, whether there is a chance that we might change the rather unpleasant name now given to the people of the Territory, namely, indigenes, and call them something much more flattering, such as “heavenly bodies “?
– I was not aware of this suggestion from Papua and New Guinea. I think the best 1 can do is to refer the matter to my colleague, the Minister for Territories, who might have a look at it. 1 greatly appreciate his sense of humour, but I doubt that it would carry him to the point where he would be prepared to call indigenes “ heavenly bodies “.
– I direct a question to the Minister for Civil Aviation. Is he in a position authoritatively to answer or to give some information about a claim made in reports appearing in today’s Australian Press that Boeing 727 and DC9 aircraft can develop hazardous flight behaviour during turbulence?
-With the permission of the Senate, I propose to make a statement on this matter at the proper time.
– I direct my question to the Minister representing the Acting Minister for Immigration. 1 refer to three Russian delegates who were refused visas to attend the Eureka conference in Australia. Were they refused visas because of their political party membership, because of their political views, because of their nationality or because of the type of organisation whose conference they intended to attend?
– I have been advised by the Minister for Immigration that the decision to refuse these visas was based on Government policy. I cannot say any more.
– I direct a question to the Minister representing the Minister for the Army. Over a month ago I raised in the Senate a matter relating to anomalies in the rates of pay of female members of the defence forces. The Minister then announced that a report had been submitted to the Minister for the Army and was at that time under review. I now ask: Has any decision been reached concerning the rates of pay for female members of the defence forces? What period will elapse before a statement is made on the raising of female rates from 59 per cent., as at present, to at least 75 per cent. of the male rates? Will the Minister give an assurance that action will be taken in this matter before the winter recess?
– I will ask the Minister for the Army what the latest position is and will let the honorable senator know.
(Question No. 378.)
Minister representing the Minister for National Development, upon notice -
– The Minister for National Development has supplied the following answers to the honorable senator’s questions -
(Question No. 380.)
asked the Minister representing the Minister for National Development, upon notice -
– The Minister for National Development has provided the following answers to the honorable senator’s questions -
(Question No. 387.)
asked the Minister representing the Minister for Trade and Industry, upon notice -
– The Minister for Trade and Industry has provided the following answers to the honorable senator’s questions -
Imports for six months July-December 1964 from figures supplied by the Commonwealth Statistician - 1, 9.358 tons valued at £4,233,066 f.o.b. This includes unwrought copper, unwrought copper alloys in chief part by weight of copper, wrought bars, rods, angles, stranded wire cables, cordage, ropes and foil, etc.
Unwrought copper - blocks, ingots, billets - 6,138 tons valued at £2,783,547 f.o.b.; pipes and tubes of copper and copper alloys, 62 tons valued at £48,879 f.o.b.: unwrought copper alloy, 77 tons valued at £26.738 f.o.b.; other copper, 3,081 tons valued at £1,373,902 f.o.b.
Countries of origin of imports referred to in 1.
The names of companies which supplied the imports are not available.
(Question No. 390.)
asked the Minister rep resenting the Minister for Trade and Industry -
What percentage of each of the following Australian industries is owned overseas -
What companies in each of these industries have -
– The Minister for Trade and Industry has provided the following answers to the honorable senator’s questions - 1, 2 and 3. At present there are no official statistics nor is there any official publication, showing the extent of overseas ownership of Australian industry. The Department of Trade and
Industry, however, is currently compiling a consolidated directory of overseas investment in Australian manufacturing industry, covering all overseas countries. The directory will show details of overseas ownership in individual Australian manufacturing companies. A firm indication of the date of publication of the directory cannot be given at this early stage of its preparation. It will, however, be published during the financial year 1965-66.
(Question No. 407.)
Minister representing the Minister for Territories, upon notice -
– The Minister for Territories has now supplied the following answers -
(Question No. 411.)
asked the Minister representing the Minister for External Affairs, upon notice -
– The Minister for External Affairs has furnished the following reply -
Among the information papers which I recently placed in the Parliamentary Library is one which gives a summary of acts of aggression committed by Indonesia against Malaysia in the period from September of last year to the second week of March this year.
(Question No. 417.)
Senator TURNBULL (through Senator
O’Byrne) asked the Minister for Civil Aviation, upon notice -
How many companies tendered on a multiple basis for the right to operate a car hiring service at Australian airports, and what was the value of their tenders at each airport?
How many companies tendered on an exclusive basis, and what was the value of their tenders at each airport?
What factors influenced the Department of Civil Aviation to choose the tender on an exclusive basis rather than on a multiple basis?
– The answers to the honorable senator’s questions are as follows -
Five companies tendered on a multiple basis for car rental rights at Commonwealth airports. These respective offers covered -
(Question No. 426.)
asked the Minister representing the Minister for Territories, upon notice -
– The Minister for Territories has now supplied the following answers -
(Question No. 427.)
asked the Minister representing the Minister for Trade and Industry, upon notice -
– The Minister for Trade and Industry has supplied the following answer -
I have stated that overseas investment, with all its advantages, also carries with it the risk that its flow is not always predictable - with corresponding risks for Australia’s economic growth and balance of payments. As an example of this unpredictability, I need only mention the uncertainties for our capital inflow arising from the balance of payments programme recently adopted by President Johnson. In view of this type of risk, which is always with us, a country like Australia must make every effort to pay its way by earnings from exports. The Government’s policies are directed towards this end.
(Question No. 430.)
Minister representing the Treasurer, upon notice -
– The Treasurer has supplied the following answers -
(Question No. 438.)
asked the Minister representing the Minister for External Affairs, upon notice -
– The Minister for External Affairs has furnished the following replies -
(Question No. 445.)
Senator AYLETT (through Senator
O’Byrne) asked the Minister for Civil Aviation, upon notice -
How much, approximately, is to be spent on the Canberra airport and the Coolangatta airport, and what is the nature of the work to be undertaken by such expenditure?
– I now provide the following answer -
The proposed development at Canberra is concerned with the terminal building and terminal area. The proposed development at Coolangatta is the lengthening of the runway to take aircraft such as the Electra and the domestic jets. As I stated in the Senate on the 1st April, these two projects are being referred to a special inter-departmental committee for further investigation for possible budget consideration in the next few months. It would be inappropriate to give information about the cost of these projects at this time except to say that they each will involve some hundreds of thousands of pounds.
(Question No. 450.)
asked the Minister representing the Minister for External Affairs, upon notice -
When, and in what manner, have protests been made by the Commonwealth against nuclear tests or proposed nuclear tests by (a) France, and (b) China?
– The Minister for External Affairs has furnished the following reply -
On 10th November, 1963, the then Minister for External Affairs, Sir Garfield Barwick, in an interview with the French Minister for Foreign Affairs, conveyed to the French Government the deep regret of the Australian Government that France had decided to hold nuclear weapons tests in the Pacific.
On 4th November, 1964, during my visit to Paris, I maintained the previous protests in a personal Interview with the French Foreign Minister. On 17th October, 1964, soon after the firs’ atomic test in China, I made a statement to the Press deploring the test. I observed that other Asian nations were capable of building nuclear weapons if they chose but that they had preferred to promote the economic well-being of their people rather than divert such a large proportion of their national resources to the sterile field of nuclear armaments.
The Australian Government’s opposition to nuclear testing by France and Chinahas been expressed, in addition, on a numberof other occasions, in Ministerial statements in Parliament, in answer to parliamentary questions, and in Australian statements in the United Nations General Assembly. At the Eighteenth (1963) Session of the United Nations General Assembly, Australian cosponsored a resolution calling on all States to accept the obligation of the Nuclear Weapons Test Ban Treaty, which Australia was one of the first countries to sign. Australian diplomatic representatives overseas haw made the Government’s views on nuclear testing known to all countries with which Australia maintains diplomatic relations.
(Question No. 451.)
Senator AYLETT (through Senator
O’Byrne) asked the Minister representing the Treasurer, upon notice -
Are expenses incurred by a taxpayer attending a chiropractor for the purpose of regaining his health a deductible allowance for the taxpayer, particularly when the chiropractor has achieved outstanding results when the medical profession had failed?
– The Treasurer has supplied the following answer -
The income tax law authorises a concessional deduction for certain medical expenses. Included amongst these are payments to a legally qualified medical practitioner in respect of an illness or operation and payments for therapeutic treatment administered by direction of a legally qualified medical practitioner. Therefore, the only case in which a deduction is available for payments made for therapeutic treatment by a person not legally qualified to practise medicine is where the treatment is administered by direction of a practitioner who is legally qualified.
Assent to the following Bills reported -
Raw Cotton Bounty Bill 1965.
Pollution of the Sea by Oil Bill 1965.
Parliamentary Presiding Officers Bill 1965.
Homes Savings Grant Bill 1965.
Bill returned from the House of Representatives with a message intimating that it had agreed to the amendment made by the Senate in this Bill.
– by leave - On 1st April the Prime Minister (Sir Robert Menzies) announced in another place that he had asked the Treasurer (Mr. Harold Holt) to pay a brief visit to Washington to have talks with the United States Administration on the action being taken by that Government to improve the balance of payments position of the United States of America. I now advise honorable senators of the ministerial arrangements during his absence and also of arrangements during the absences of the Ministers for National Development, Immigration and External Affairs, each of whom is undertaking an overseas mission or will do so in the near future.
The Treasurer left for Washington on 23rd April and will be away until 4th May. Until his return, the Prime Minister will act as Treasurer.
The Minister for National Dvelopment (Mr. Fairbairn) is at present in New Zealand where, at the invitation of the New Zealand Government, he has been participating in ceremonies to commemorate the fiftieth anniversary of the Gallipoli landing. He will return on Thursday next. In the meantime, the Minister for Supply (Mr. Fairhall) is acting as Minister for National Development.
The Minister for Immigration (Mr. Opperman) also left Australia on 23rd April. He will be engaging in extensive discussions on immigration matters, mainly in Europe. He will return early in July. The Minister for Housing (Mr. Bury) will take charge of the Immigration portfolio while Mr. Opperman is away.
The tenth meeting of the Ministerial Council of the South East Asia Treaty Organisation will be held in London from 3rd to 5th May. The Australian delegation to the meeting will be led by the Minister for External Affairs (Mr. Hasluck) who will leave for overseas on 28th April. Until his return, the Prime Minister will act as Minister for External Affairs.
– by leave - I make this statement on behalf of the Minister for Civil Aviation (Senator Henty). An article which appeared in the “ Australian Financial
Review “ last Wednesday written by that newspaper’s aviation writer, made some serious allegations about the safety of Boeing 727 airliners which are now operating in Australia and also about the Douglas DC9 aircraft which have recently been ordered, subject to Government approval, by the Australian airlines. The suggestion made by the writer concern the behaviour of rear engined high tailed aircraft at wing angles relative to the air stream well beyond the normal stall. Unless they are designed to overcome the problem these aircraft can become locked in what is known as a deep stall and cannot recover, irrespective of any action taken by the pilot. This problem first achieved prominence on 22nd October 1963, when a prototype BACIII became locked in a deep stall on a test flight and crashed, killing all seven pilots and observers on board.
Although the Australian Department of Civil Aviation normally requires very little change to aircraft certificated by the American or British authorities, it always reserves the right as an independent airworthiness authority to satisfy itself completely on all the technical and operational characteristics of any aircraft before issuing an Australian certificate of airworthiness and approving its operations in Australia. Immediately following the BACIII accident, the Director-General decided to send an Australian technical mission overseas to investigate fully the stall behaviour of the new generation of airline aircraft before any of them were submitted for Australian certification. The mission was under the leadership of one of the Department’s senior Assistant Directors-General, Mr. P. S. Langford, who is the engineer in charge of its Airworthiness Branch. The other members of the mission were: Captain P. J. Gibbes, Operation Manager, Ansett-A.N.A.; Mr. F. W. Austin, Engineering Manager, Trans-Australia Airlines; and Mr. A. R. Wallis, Principal Research Officer, Aeronautical Research Laboratories. Department of Supply.
The mission visited those major manufacturers, airworthiness authorities and research centres .throughout the world whom it thought could advise on the problem. It also conducted its own flight tests in several aircraft of this type including the Boeing 727. As a result a set of stalling requirements was laid down which these aircraft must meet before being allowed to operate in Australia. I might add that the findings and recommendations of the mission were circulated to the manufacturers and airworthiness authorities visited by the mission and have not been disputed. The Boeing 727 was approved for operations in Australia because it meets the Australian requirements for its safe operation. The specified requirements will be applied lo any other aircraft brought into this country.
Mr. President, the aviation writer of he “ Australian Financial Review “ challenged the Department to issue a public statement concerning what he described as “ the specific issue of possible danger to the air travelling public in 727”s or DC9’s should turbulence be encountered or should pilots take slight overcorrective action “. He also made some other comments and suggestions which were seriously inaccurate and not justified by ne facts. I might point out that the results of the Australian technical mission’s investigations were released in July last year. A further statement on the findings and recommendations of the mission was included in the Civil Aviation Report to Parliament last September by the Minister for Civil Aviation. Finally, this month’s issue of the Australian magazine “ Aircraft “ published a full technical article by the mission leader, Mr. Langford, covering all aspects of the deep stall. Anyone concerned with this matter can obtain the detailed technical facts and arguments by reading it.
The “ Australian Financial Review “ writer claims that rear engined airliners like the Boeing 727, the DC9 and the BAC1 1 J cannot recover from a deeply stalled condition. He further suggests that these aircraft can get into this deep stall condition in turbulence but states that the British have overcome this problem with the BACIII, and other similar British aircraft, by fitting a device known as a stick pusher. He also points out that the Boeing 727 and the DC9 do not have a stick pusher. The undisputed technical fact, however, is that the 727 cannot become locked in the deep stall through turbulence or for any other reason. Whatever attitude is attained by this aircraft, it has sufficient elevator power to recover. The DC9 has also been designed with similar features. Irrespective of all that 1 have said about the ability of aircraft to recover from deep stalls, to keep this question in proper perspective, I should say that if a deep stall is attainable in an aircraft not specifically designed against it, it involves the most extreme and deliberately incorrect use of controls in the face of the very clear stall warnings provided. All known cases of deep stalls have occurred in test flights intended to explore the behaviour of the aircraft beyond the normal stall.
Mr. President, my Department’s technical experts have no brief to defend the characteristics of any particular aircraft type. In the case of the 727 they are completely satisfied that this aircraft is airworthy and is one in which the travelling public should have the fullest confidence. It would not be flying in Australia today if that were not so. I repeat my earlier statement that no aircraft will be allowed to operate in Australia unless it meets the Australian safety requirements - and I hasten to add, - lest anyone misinterprets my remarks - we are satisfied that the DC9 and the B ACI 1 1 meet the requirements specified for their behaviour during a stall. I have raised this subject because I consider it a matter of public importance and also because I have had a number of queries from members of Parliament and the public arising out of the unfounded and inaccurate suggestions made in the article in question. It will be apparent from the facts I have given and from the published documents on the subject, that the Australian Department of Civil Aviation, in accordance with its well known reputation for vigilance in all safety matters, acted with promptness and thoroughness more than a year ago to carry out a searching inquiry into the aerodynamic problems of stalling in rear engined, high tailed jet aircraft. I believe it was the only airworthiness authority in the world to carry out such a wide and independent investigation and as a result the travelling public may rest assured that any jet aircraft of the type mentioned will meet the full and characteristically high safety standards of Australian civil aviation.
– by leave - In view of their interest in the Defence Forces Retirement Bene ti ls Scheme, the Government believed that honorable senators would wish to know now that it has decided to introduce legislation to amend the Defence Forces Retirement Benefits Act in respect of those who joined the forces before 1959. The main cause of concern among these members has been that, as the Act now stands, an increase in pension entitlement shortly before retirement, resulting from a promotion or increase in pay, may mean a high rate of fortnightly contribution. This is caused by the short period within which these servicemen must meet the additional cost of their share of the higher pension entitlement.
The proposed variation is confined to the pre-1959 entrants to the scheme because the contributions of those joining the forces since that date are expressed as a uniform percentage of pay throughout service and they do not face this difficulty when their pay is increased towards the end of their service. The Government has decided that, in future, a pre-1959 entrant to the scheme whose pension entitlement is increased will have the option of electing to receive the Commonwealth’s share of the increase in that pension entitlement without having to contribute for his own share. I might here point out that whilst the share provided by the Commonwealth varies according to age on retirement it amounts, on the average, to 77i per cent, of the cost of all increases in pension entitlement. Once having made such an election, the member will then receive all subsequent increases in pension entitlement on this noncontributory basis.
The Government has also decided that, because some members’ contributions had increased substantially as a result of the June, 1964, increases in pay, this option of freezing contributions and electing to receive the Commonwealth’s share of an increase in pension entitlement without a matching contribution will be available with effect from the date immediately prior to those increases in pay. A period of three months will be available for this election in relation to the June, 1964 increases in contribution.
Motion (by Senator McKenna) - by leave - agreed to -
That leave of absence far one month be granted to Senator Arnold on the ground of ill health.
Debate resumed from 1st April (vide page 264), on motion by Senator Paltridge -
That the Senate take note of the following papers -
United States of America Balance of Payments Programme -
Letters, dated 12th and 24th March 1965, exchanged between the Prime Minister and the President of the United States of America; United States of America Balance of Payments Programme - Ministerial Statement, 1st April 1965.
– The matter now before the chamber raises questions of vital importance to Australia. It relates, primarily, to our balance of payments and the preservation of that balance at a steady and even level. Upon the achievement of that objective, of course, depend the employment position in this country, our standard of living and the rate and direction of progress in the scheme of national development. Accordingly one faces the issue with a sense of very great responsibility. As the letters exchanged between the Prime Minister (Sir Robert Menzies), and the President of the United States of America, which form the subject of this debate, have not yet been included in the records of the Senate, with the concurrence of honorable senators I now incorporate them in “ Hansard “. 12th March, 1965.
This note is designed to be direct and clear, as it should be in a communication to one whose friendship I value, and whose sympathetic understanding of Australia and her problems we have great reason to appreciate.
Since you informed Congress on 11th February, 1965, of the measures you proposed to take to improve the external payments position of the United States I have been studying, with my colleagues in the Australian Government, the likely effects of those measures upon our situation, abroad and at home.
So far as we can see, Australia does not come within the several reservations stated by you and designed to lessen the impact of your measures upon various countries such as Canada, Japan, the United Kingdom and others more generally described as developing countries. 1 feel I should say to you that while we fully and warmly understand the reasons for the action your Administration is taking to deal with its balance of payments problem, we fear that this action as it now stands could have adverse effects on Australia which we imagine it would be no part of the United States intention to inflict.
When the Interest Equalisation Tax was first announced, we pointed out to the United States Administration our interests in the matter but did not seek exemption from it. Amongst other reasons, we wanted to avoid the embarrassment this might have caused your Administration in its negotiations with certain other countries on this matter. We do not seek exemption from the Tax now, but we do wish to bring to your notice the facts of our economic situation which will be relevant to the administration of the system of voluntary restraint to which United States investors are being asked to conform in making decisions about investments abroad.
Australia is not a “ developed “ country in the sense that the mature, capital-exporting and highly industrialised countries of Europe are developed. On the contrary, we have an immense task of developing a relatively under-populated continent which, while rich in some resources, presents in other respects most formidable difficulties of climate, terrain and distance. As yet we have a population of little more than eleven million people. Like the United States in earlier years, we are endeavouring to build our numbers up by largescale immigration. But this effort necessarily adds to our capital needs. Although by now we have achieved a large and varied production of goods, and in fact generate from our own savings more than four-fifths of the capital we require, we must perforce rely heavily on export earnings and on capital inflow to obtain abroad additional resources for growth.
Australia is a free enterprise economy that has welcomed private oversea investment and treated it with exactly the same consideration that it gives to private investment of Australian origin. Moreover, Australia has joined with other Free World countries in measures to promote freer international trade and payments and, to this end, maintains an “ open “ economy with practically no quantitative restrictions on imports and no restrictions on current payments. Although subject to formal control, repatriation of capital invested in Australia is not, in practice, refused.
Being predominantly an exporter of primary products, Australia experiences large fluctuations in the amount of her export receipts and, being in a phase or rapid development, normally has a deficit in her current balance of payments. Though this varies from one year to another, it has to be covered by net capital inflow. By far the greater part of this has comprised private oversea investment in Australia. In the eight years from 1956-57 to 1963-64 the accumulated deficit on current account amounted to $2,417 million. During that period the annual inflow of private oversea investment (including undistributed income) in companies in Australia totalled $3,022 million, of which $1,147 million came from the United States and Canada - most of it from the United States.
Ordinarily Australia has a large current account deficit with the United States. In 1962-63 Australia’s exports to the United States totalled $297 million while her imports from the United States amounted to $478 million. Her net invisible payments to the United States in that year were $181.2 million giving a deficit on current account of $362.2 million. In 1963-64, with exports of $312.9 million, imports of $559.9 million and net invisible payments of $194.7 million, her current account deficit with the United States rose to $441.7 million. In the half year to December, 1964 Australia’s recorded exports to- the United States were $153.2 million compared with $180.3 million for the same period of 1963, a decline of 15 per cent, whereas Australia’s recorded imports from the United States increased as between these two periods from $273.7 million to $392 million, a rise of 43 per cent.
In this connection, we feel constrained to point to the contrast between the rapid expansion of United States exports to Australia - Australia now being the fastest-growing of the United States’ major commercial markets - and the manner in which United States policies impede Australian efforts to expand exports to the United States of some major Australia export commodities.
The United States, alone among major trading countries, maintains a very high tariff on raw wool, despite many representations and negotiations aimed at reduction or elimination of duty; quotas imposed on lead and zinc in 1958 remain unchanged despite a greatly improved world market situation; United States domestic legislation imposes limitations on. and creates uncertainties for, the Australian export trade in meat; the continuance of access for Australian sugar is uncertain and the size of the present Australian quota is not commensurate with Australia’s position as the world’s second-largest sugar exporter.
In 1963-64, these commodities accounted for 81 per cent, of total Australian exports to the United States. They are the products on which Australia must chiefly depend if a significant expansion of exports to the United States is to be achieved and if the progressive deterioration in our trade and payments balances with the United States is to be arrested and re-dressed. Yet, with respect to each of them, United States restrictions of one kind or another prevent or impede expansion.
This current account deficit with the United States has been offset in part by capital inflow from the United Stales, most of it on private account. In 1962-63, the annual inflow from the United States and Canada (by far the greater part being from the United States) of private oversea investment (including undistributed income) in companies in Australia was $201.6 million, and this increased to $220.2 million in 1963-64. In the latter year, the inflow from the United States and Canada was not far short of half of the total of $481.6 million of private oversea investment in companies in Australia.
To turn now to our immediate situation, it is a fact that in 1963-64 Australia’s export pro auction was high and for most exports reasonably good prices were received. Capital inflow was strong and our external reserves were strengthened. For the present financial year, however, the prospects are much less favourable. Export prices have fallen, local demand for imports has been strong and, although capital inflow has been fairly well sustained, it is certain that substantial drawings will be made on our’ external reserves.
These seem certain to decline over the year as a whole by appreciably more than £100 million ($224 million).
For the financial year ahead, the signs point to a continued drain on our external reserves. We have greatly enlarged our defence programmes and this will entail substantial additions to oversea payments for defence equipment and supplies. Oversea expenditure in 1965-66 and later years arising from existing defence commitments and the new three-year defence programme is estimated at about £400 million or the equivalent of about $880 million, of which about £250 million or some $550 million will relate to procurement in the United States. Although recent arrangements reached with you to phase payments of some major items over a longer period will ease the burden to some extent, it will still be considerable. At the time we undertook these commitments we had no reason to anticipate that our payments position vis-a-vis the United States would be altered for the worse by action of the kind you have since announced.
An additional consideration is that the Australian Government has commitments of nearly $200 million in the United States over the next five years in respect of debt maturities and sinking fund commitments. This figure is exclusive of instalment repayments of approximately $130 million due to the International Bank over that period.
Although a relatively large scale importer of capital, Australia is nevertheless a donor and not a recipient of international aid. Australia has, in fact, played her full part in various international aid arrangements and also provides a considerable amount of aid, both civil and military, on a bilateral basis to less-developed countries. The development of Papua and New Guinea is a prime Australian responsibility and one that is making large and increasing calls on Australia’s resources. Requests for additional aid are being received from other developing countries as well and in most cases are met to the best of our ability. Our recent gift of wheat to India worth nearly $9 million is a case in point. These all add to the pressures on our external resources.
In what at present appears to be a deteriorating balance of payments situation, any substantial falling off in capital inflow would be a matter of serious concern to the Australian Government. Furthermore, since we hold the bulk of our external reserves in sterling, any drawings we have to make on our reserves will tend to increase Britain’s balance of payments difficulties which are, of course, a matter of international concern.
In drawing attention to these facts, the Australian Government hopes that, in setting oversea investment targets for United States banks and other businesses, the Administration will take full account of the Australian situation and will not take action likely to result in any substantial reduction in the flow of private American capital to this country.
This is not to say that we would oppose the issue by United States investors of some equity capital in their subsidiaries here to finance new investment in this country; indeed it would accord with an attitude we have frequently expressed. We have made it clear on many occasions in the past that we think it desirable for oversea investors to take in Australian investors as partners in businesses established in Australia.
On the other hand, however, we would be troubled and embarrassed if United Slates investors were to begin repatriating capital, substantially increasing the proportion of profits remitted or adding largely to their fixed-interest borrowings or other forms of capital-raising in Australia which gave Australian investors no equity share in the businesses in question. Developments such as these could very well force upon us the need to reconsider the policies we have hitherto followed in these areas. This we should regard as regrettable in the extreme, especially if it resulted in conflict of policies, with subsequent confusion in, and disruption of, established and greatly valued financial and commercial relationships between our two countries.
Our own policies in these important fields have, we believe, had the encouragement and approval of successive United States’ Administrations. We should like to think that it will be possible to continue them without detriment to ourselves and without impairing the effect of the policies you find necessary to strengthen your own balance of payments and uphold the world standing of the dollar.
I am, Mr. President, and with warm personal regards,
Yours sincerely, (Sgd.) R. G. MENZIES
The Honorable Lyndon B. Johnson,
President of the United States of. America,
The White House,
We have now had a chance to give careful study to your letter of March 12 concerning the effect on Australia of our Balance of Payments Program. We fully understand the importance that your Government attaches to this matter, and appreciate the frankness with which you expressed your concern.
I am grateful, too, for your sympathetic understanding of the reasons which impelled us to take forceful action. We think it fair to claim that because of the special role of the dollar in international monetary arrangements, an early and substantial improvement in the United States’ Balance of Payments is in the interest not only of the United States, but also of the entire free world. We are determined to eliminate the United States’ international deficit, and I am happy to be able to say that the February 10 Program already appears to be taking hold.
We understand, of course, that external capital is of great importance to Australia. In terms of the high standard of living of the Australian people, and the remarkable pace of advance during the past decade, Australia must be counted one of the advanced countries of the world. But as you point out, yours is a country with a great potential for further development. As an old friend and ally, we have watched with admiration your record of achievement, and we know the importance of continued Australian success. We attach high value to the good economic relations between Australia and the United States.
In the present instance, we believe after careful review that our Balance of Payments Program is not likely to have a serious adverse effect on the Australian economy. The part of the Program supervised by the Secretary of Commerce is designed to avoid any undue disruption in the growth of sound business relationships. Indeed, I understand that certain large direct investments in the production of iron ore in Australia are planned for the near future. And in the case of loans by our banks and financial corporations, we intend to emphasize primarily the need to curb the outflow of such funds to industralized countries already rich in reserves.
We believe, therefore, that this program will not impose undue strain on Australia. But it is always possible that specific actions under a program of this sort can have consequences for a friend that outweigh their value to the general program. 1 have asked the Secretary of the Treasury and the Secretary of Commerce to give a careful hearing to Australia’s view in any particular case which might be of this sort.
On our general commercial relations, I can assure you again that a reduction in trade barriers, in agriculture as well as in industry, is a prime objective of the United States policy. As I wrote you last August, our negotiators in the Kennedy Round will bend every effort to help bring the Geneva Negotiations to a successful conclusion.
Again, let me thank you for your letter and for your forthright statement of views.
Sincerely (sgd.) Lyndon B. Johnson
I make my initial approach to consideration of this matter by a reference to President Kennedy’s legislation of July 1963, when he introduced into Congress a bill to provide for interest equalisation by way of tax. That legislation had three main purposes. Its intention was, firstly, to restrict foreign investment - in other words, to restrict the outgo of capital moneys from the United States of America - secondly, to promote the repatriation of dividends earned overseas, and thirdly, to an extent to recall capital that had already been invested overseas. The legislation current at the moment is expressed to expire on 31st December this year. There, clearly, was some warning to us, in common with the rest of the world, that capital restrictions were on the tapis for America; that no longer was there to be complete freedom for American nationals and institutions to invest abroad. Difficulties were interposed in their way.
I come now to the first of the letters referred to in the motion that is before the chamber, lt is the letter that the Prime Minister (Sir Robert Menzies) addressed to the President of the United States of America quite recently, following the President’s announcement to Congress on 10th February this year of a series of decisions that he had made. They have nol been recorded fully in the Press. I have before me the Congressional Weekly Report for the week ending 12th February of this year, in which the President’s statement and details of his proposals are set out. With the concurrence of honorable senators I incorporate the proposals in “ Hansard “.
First, to maintain and strengthen our checkrein on foreign use of United States capital markets, 1 ask the Congress to extend the Interest Equalization Tax for two years beyond December 31, 1965; to broaden its coverage to non-bank credit of one-to-three year maturity;
Second, to stem and reverse the swelling tide Of U.S. bank loans abroad, 1 have used the authority available to me under the Gore Amendment to the Act to apply the Interest Equalization Tax to bank loans of one year or more.
Third, to stop any excessive flow of funds to Canada tinder its special exemption from the Equalization Tux, 1 have sought and received firm assurance that the policies of the Canadian Government arc and will be directed towards limiting such outflows to the maintenance of a stable level of Canada’s foreign exchange reserves.
Fourth, to limit further the outflow of bank loans, I am asking the Chairman of the Board of Governors of the Federal Reserve System in co-operation with the Secretary of the Treasury to enroll the banking community in a major effort to limit their lending abroad.
Fifth, to ensure the effective co-operation of the banking community, I am requesting legislation to make voluntary co-operation by American bankers in support of our balance of payments efforts, under the Government’s auspices, exempt from the antitrust laws wherever such co-operation is essential to the national interest.
Sixth, to reduce the outflow of business capital, I am directing the Secretary of Commerce and the Secretary of the Treasury to enlist the leaders of American business in a national campaign to limit their direct investments abroad, their deposits in foreign banks, and their holding of foreign financial assets until their efforts - and those of all Americans - have restored balance in the country’s international accounts.
Seventh, to minimize the foreign exchange costs of our defense, and aid programs, I am directing the Secretary of Defense, the Administrator of AID, and other officials immediately to step up their efforts to cut overseas dollar costs to the bone.
Eighth, to narrow our tourist gap, I encourage our friends from abroad, as well as our own citizens, to “ See the U.S.A.;” and 1 request legislation further to limit the duty-free exemptions of American tourists returning to the United Slates.
Ninth, to earn more trade dollars, I am calling for a redoubling of our efforts to promote exports.
Finally, to draw more investment from abroad, 1 am requesting new tax legislation to increase the incentives for foreigners to invest in U.S. corporate securities.
If honorable senators have an opportunity, now, to locate these particular ten points, they will find that they are even more comprehensive than one would have thought from a perusal of the newspapers. We are already aware of their general effect, which is to restrict overseas investment on the part of American nationals and institutions, to encourage the repatriation of both dividends and capital from overseas, and to call upon the investing public to raise the capital necessary for overseas purposes in the countries where those purposes are being served. They would be the three broad aims of the ten steps that the President proposed should be taken. Each of them is, more or less, on a voluntary base, except for the first proposal which is to extend the interest equalisation tax for a further period of two years from the end of this year. So the very firm legislative provision is to be extended and is to be buttressed by many arrangements that are now on a purely voluntary base. I do not think that anybody in America is under any illusion as to what will happen if the President’s wishes are not voluntarily complied with.
Soon after the President made his statement on 10th February, he called together the representatives of the leading 370 companies in America with subsidiaries or investments abroad. He put his views very plainly to them. It can be assumed from a report of the proceedings that appeared in the “ Sydney Morning Herald “ of 25th February that he has very firm ideas as to what will happen. The report stated -
President Johnson and members of his Cabinet told the businessmen at last week’s session that the Government expected each company to improve its own balance of payments by 15 per cent, and preferably by 20 per cent, this year.
I take it that the words “ this year “ mean the calendar year, because so little of the current financial year remains. That unquestionably sets a very high standard to be attained by the 370 leading companies. The report continued -
The company leaders were made to understand that if these appeals, backed up by the threemonthly reporting system, did nol produce results, then the Government might have to lake direct action as it has already done with the “equalisation tax “ imposed on foreign loan raisings in the U.S.
In these circumstances, one may safely say that’ the nationals - the companies in particular concerned - will take very grave note of what the President requires. We in this country must expect that the subsidiaries of those nationals, functioning as good Americans, will listen to the President’s requests and injunctions and will obey them. So we may expect a smaller flow of direct capital from the U.S.A., an even higher repatriation of profits and perhaps some repatriation of capital moneys. One would expect those companies to do that lor their own country, which is placed in a difficulty.
The President, in his address to Congress, did not express any worries about the state of the dollar. Indeed, in his opening remarks he said -
The slate of the dollar in the world today is strong - far stronger than three or four years ago. ***
The dollar is, and will remain as good as gold, freely convertible at S35 an ounce.
That pledge is barked by our firm determination to bring an end to our balance of payments deficit.
No! in regard to the current balance of payments situation, but in other respects, the situation in America is quite grave. America has a colossal surplus on its normal trading account, but she exports about £3,000 million per annum for investment abroad. On top of that, America provides a similar amount for foreign defence, foreign aid and other matters with which we all are familiar and for which we, in common with many other countries, have cause to be grateful. A tremendous financial strain has been placed upon the United States as a result of the new role that she has assumed in world affairs. We, in common with the rest of the world, have a very live interest in ensuring that the dollar maintains its value and power because, in contributing to the financial and economic strength of the U.S.A., the dollar makes a very useful contribution to the strength of the Western alliance.
The Prime Minister of Australia, being concerned at the effect that the proposals of the President of the United States might have upon us, wrote to President Johnson on 12th March and pointed out the difficulties associated with our balance of pay ments situation. The Prime Minister stated the facts accurately and clearly. To state the position broadly, the Prime Minister pointed out that the balance of our trade with America on current account is heavily in favour of that country and that such capital inflow as we get from America makes up only about one half of the gap. So we have a chronic deficit of dollars, even taking into account the inflow of capital from America. Accordingly, the Prime Minister properly is concerned about the fact that a restriction of that flow of capital would tend to widen the already large and chronic gap in our financial dealings with the U.S.A. The President replied immediately, courteously but formally on receipt of the letter, and soon afterwards he replied on the substance of the letter. He wrote on 24th March of this year.
I think that there are two important matters contained in the letter. First, the President expressed the view that the United States balance of payments programme is not likely to have a serious adverse effect on the Australian economy. Quite clearly from that statement he is prepared to have it make some adverse impact upon our economy, but he declined to regard what will happen as being really serious. The second matter of importance is that he indicated that he has asked the Secretary of the Treasury and the Secretary of Commerce to give a careful hearing to Australia’s view in any particular case in which the consequences of the United States action to a friend might outweigh their value to the general programme that he has indicated.
The reply does not give us any cause for great hope. The most it says is that the Americans will look at special cases of hardship. As we stand on the basis of that letter, we would have to make out a case of hardship before they would even listen to us. As we were told by the Leader of the Government in the Senate (Senator Paltridge), the Treasurer (Mr. Harold Holt) has already gone to Washington and New York to discuss with the American authorities the anticipated impact of the measures on us. Before leaving he also caused the Reserve Bank of Australia to make a request to banks and other financial institutions not to provide loan moneys for overseas companies that wish to use those moneys for their own expansion or development in Australia. In other words, he has asked that everything be held pending the Government’s assessment of the situation, the receipt of his report on his return from America and the information that is being elicited from American companies here. Those companies have been asked to provide the Government with a statement of their financial intentions for the future and to indicate whether they propose to go onto the local market to compete for money and for our savings for their own purposes; whether they propose to remit capital moneys to the United States; and what their proposals are regarding the remittance of dividends.
We may confidently expect that there will be in this country a stepping up of all those activities, and that if things proceed as one can only anticipate and rather fear at the moment, our trade position or our overall financial position with America will undoubtedly take a turn for the worse. That must mean, of course, that in the absence of any other alternative we shall have to draw rather heavily upon our reserves. This matter concerns us particularly because we in this country have, as I have said on many occasions, a dependent economy. We are very vulnerable. We depend for the great bulk of our exports on primary production. We depend upon the seasons, which are untrustworthy, to determine the quantity of those products available for export. We have our periods of floods, droughts, fires and pests. We note from time to time great fluctuations in the quantity of primary produce that is available for export.
Then there is the fact that we are dependent for our proceeds upon foreign buyers. We are in no way able to condition the overseas market, or to determine the prices that our products will be able to win. We have had many unfortunate experiences of great variation and fluctuation in overseas prices for the commodities in which we are interested. At the moment we are undergoing a period of difficulty regarding some of our major items of primary production. In recent times the production of wool, wheat and sugar has provided us with difficulties. Apart altogether from anything that might arise out of the American action and the President’s directions, and despite the better position that exists for some commodities, such as meat, iron ore and other minerals, including coal, it does look as though we shall lose anything from £100 million to £150 million of our reserves this year in order to balance out the year’s transactions.
Accordingly, the prospect at the moment is not good. It would seem that the trend is likely to be projected into next year and, it may well be, for some years that lie ahead. The United Kingdom Government, in putting its Budget before the Parliament on 6th April last, also addressed itself to the problem of solving its difficulties in the matter of balance of payments on current account. There is a wide gap which it intends to close. The United Kingdom’ Government has set out the various proposals and, thanks to the office of the British High Commissioner in Canberra, I, no doubt in common with other honorable senators, have been supplied with the Treasurer’s precis of those proposals. The document is dated 7th April. It is most informative to read pages five and six which are devoted to this question of the external capital account. With the concurrence of honorable senators, I incorporate those two’ pages in “ Hansard “.
EXTERNAL CAPITAL ACCOUNT.
Over the past 13 years the total flow of new investment overseas has amounted to around £4,000 million; but our reserves have fallen and our short-term monetary position deteriorated. Our national balance sheet is badly lop-sided. Our tax arrangements give a positive bias towards overseas, as compared with domestic, investment. The time has come to do something to correct this. The return which we receive from our long-term investments overseas is moderate and nowadays frequently less, from the point of view of the national economy, than the return on home investment.
CORPORATION TAX: EXTERNAL ASPECTS.
With this as background, the Chancellor has taken the following decisions relating to the external aspects of the corporation tax:
These changes will correct a feature of our tax system which is working against our long-term interests. Their impact on the developing countries, towards whom we have special responsibilities, is not expected to be adverse to any significant degree. The Chancellor will be watching this aspect of the question with great care.
The Chancellor has carefully studied the representations about the corporation and capital gains taxes he has received. Full details of his proposals for these new taxes will be revealed when the Finance Bill is published and he has it in mind to publish at the same time a White Paper which will explain the meaning and effect of the various clauses of the Bill as simply as Possible.
Exchange control regulations will be altered in the following ways:
Before I leave the United Kingdom position, I might just say that Britain hopes to achieve its purpose in two broad ways. These are, first, by taxation measures, which are of some complexity, as one will see when one reads them and, secondly, by exchange control measures, which again, are of some complexity. The matter is summed up by the United Kingdom Chancellor of the Exchequer in this statement -
The benefit of the exchange control measures to the balance of payments is difficult to estimate, but it should be at least £100 million a year. In addition, the extra tax from companies with overseas income is likely to be also of the order of £100 million a year.
So the measures that are being undertaken are likely to restrict, as to the rest of the world, capital to the tune of some £200 million per annum. Just how far we would figure in making a contribution to that saving is a matter for experts to determine and might well have been determined if the Treasurer had first had an opportunity to confer with the United Kingdom authorities. I note today from the announcement of ministerial arrangements that the Treasurer is due back from the United States on 4th May. I would really be happier if it had been arranged for him also to visit London and come back armed with what knowledge he could glean on the spot there. because we are faced at the one time with difficulties from both sources, the United Kingdom and the United States.
We in this country certainly, for the reasons that I have already given, cannot complain about these countries addressing themselves to the solving of their balance of payments difficulties. I repeat that it is important to them and important also to us that they do so. I say with regret that this Government ignored a warning that was plainly implicit when America, under President Kennedy, adopted the interest equalisation tax back in the middle of 1963. There to us,’ on the wrong end of a trading and annual balance position, was a clear indication that something upon which we relied, already inadequate for our purpose, was to be further restricted. One might have thought that the Government would have been alerted to the need to begin to assess what effect that would have upon Australia if it were followed up by increasing restrictions of that nature. Here was the most powerful financial country in the world imposing those restrictions. That undoubtedly should have sounded a note of warning to the Government.
One cannot help but be surprised to be told in the Senate today in considered statements from the Treasurer, in reply first to Senator Cohen and next to Senator Murphy, that there are no complete official statistics in this country as to the percentage of foreign ownership in various industries, the extent to which there is Australian participation, whether many of the companies are subsidiaries of overseas companies, and other vital questions. It is clear that the Government did not take the oportunity to address itself to those matters. Otherwise, that information would be before the nation today. On the other hand, we have the spectacle of the Treasurer communicating with American firms here asking their intentions for the future, seeking to arm himself with that information before proceeding to his talks in America. I have no doubt that he would not have got many answers in a hurry from the subsidiaries in this country, that they would need to refer to their headquarters, and that while the information sought might come through the subsidiaries here, it would really be the decisions of the main American corporations.
The Government has no excuse for not being prepared in this matter, for many reasons. It has had warnings from the Opposition in both chambers for many years. I recall having addressed myself to this particular matter in a debate on the Estimates and Budget Papers on 5th September 1956, nearly nine years ago. What I said then is completely relevant today. I shall be brief in the extracts I make from that speech. Having pointed out what our deficiencies on current account had been down a period of seven years, I said -
The Government made amends to some extent by borrowing overseas and by securing the investment of overseas capital in Australia, but both these courses are highly dangerous. They are all right on short term to improve the balance of payments and to prevent too great a crash of our London sterling balances, but they have long term effects which could be disastrous for this country.
I referred to an article which had appeared in the journal of the Bureau of Agricultural Economics, written by one Dawson. From time to time I have referred to this in the Senate. This article, not necessarily approved by the Bureau but certainly appearing in its journal, “ Quarterly Review of Agricultural Economics” of 2nd April 1956, under the heading, “Direct Foreign Investment, Influence on Australia’s Balance of Payments “, particularly in relation to America, stated -
Even more striking is the fact that the total income (including undistributed profits) accruing to American companies in Australia rose, as a proportion of Australia’s dollar export income, from 10.8 per cent, in the three years ended June 1950 to 42.6 per cent, in 1953-54. This rate of increase indicates that, within a few years, a decision by American companies to repatriate profits and dividends instead of ploughing them back could absorb the whole of Australia’s dollar income and force the imposition of even more drastic restrictions upon imports of developmental equipment for Australian rural industries and manufacturers.
That was very prophetic. It certainly should have alerted the Government. It was before the Government, but it does not appear to have produced any action, or even any investigation, on all the answers to questions that we have seen which avoid or are unable to supply information with any precision. The article in question concluded on this note -
In the light of these considerations, Australia’s present . and prospective balance of payments position would appear to call for a policy of critical selectivity in . the admission of and in the granting of assistance to direct investment from overseas.
I commended the whole of that article to the Government when I spoke on 5th September 1956. 1 select another extract from that speech -
Honorable senators must remember that on all money borrowed overseas interest must be paid, and on all overseas capital invested here dividends are payable so that the Government has, in effect, been mortgaging the future. As pointed out in this very thoughtful article, circulated by the Government’s own bureau, there is a warning for the Government about the long term effects of its policies.
I spoke on this matter first in 1956 and 1 spoke on it again five years later, on 9th March 1961. On the latter occasion I quoted a finding of the Reserve Bank of Australia which contained a warning about the trend. In the debate on the motion for the adoption of the Address-in-Reply to the Administrator’s speech I said -
During the last five years an extraordinary amount of the industry of this nation has passed into the hands of foreign companies. The Reserve Bank, in its statement of November last -
That would be November 1960 - pointed out that £750 million worth of foreign capital had been invested in industries in Australia during the past five years. Approximately £450 million was used by foreign owned companies to establish or purchase industries in this country, while £300 million was invested in established Australian industries. It was stated that governments had borrowed about £100 million overseas as well. In the same period of five years, we paid out £500 million in dividends to foreign investors. Those figures give some idea of the significance of money that is coming in.
– Undoubtedly something could have been done. We urged that something be done. If time permits, at a later stage of this debate I will say what we think should be done. Some action should have been taken long before. At the moment I merely instance one point. The obvious and the most happy way to obtain the result that we want in our balance of payments is to increase exports, not only of our primary industries but also of our secondary industries.
I think I am correct in saying that it took this Government 11 years - until 1961, and we remember all the economic measures of that time - to provide real incentives to Australian manufacturers to enter the export trade. There were taxation concessions, long term credits, insurance provisions and that type of thing. The Government waited too long to take that action. The obvious and the best way of overcoming our difficulties is to increase exports. I say to the honorable senator who interjected that that is still the best and the safest way. It is much preferable to borrowing or to having foreign capital, come in to take away a permanent slice of Australian earnings. Borrowing or perhaps permitting the inflow of private capital may be unavoidable when you are facing some form of international bankruptcy if you do not balance -your accounts.
– Has the honorable senator at hand a statement of the present taxation arrangements for dividends repatriated to America?
– No, I have not the taxation agreements before me. However, I point out to the honorable senator that one of the measures which the United Kingdom Government contemplates is the re-negotiation of all double taxation agreements to which it is a party. This would have the effect of making things easy for it to tax its own corporations as it desires. We will be faced with that position in the very near future.
– I wondered whether we had restricted ourselves in the taxability of American capital and earnings here.
– That is an aspect that I would not care to talk about at the moment because I have not the facts in my mind, but I note that the American President does not appear to have in mind at present any re-writing of double taxation agreements.
So that it will not be thought that we of the Labour Party had a narrow or distorted view of the need for capital inflow I should like to read three extracts from the speech I made on 9th March 1961. They will put our view in perspective. The first is -
I recognize the need for the development of industrial activity in this country. There is a certain virtue in that, but one cannot shut one’s eyes to the great dangers, such as the danger that we shall lose control of our own industries.
The second extract ifr-
This capital inflow is a complete gamble. The Government has gambled successfully on it year after year, but the year or the day that it dries up we shall be bankrupt. We shall be bankrupt if we fail to attract about £200 million a year.
In effect, what we are doing at the moment, and what the Government has been doing during the last five years, is to leave our balance of payments position entirely to the whim of foreign capitalists - and who is not concerned about that? If they fail us, we shall be in really serious trouble. 1 think that fairly puts the position.
– One can be in trouble without being bankrupt. I have certainly been in trouble many times but I have never been bankrupt. I would not deny the seriousness of the difficulties one can get into. What are the alternatives when you are down on your balance of payments? You either borrow, permit foreign investment, increase your exports or draw on your reserves. There is an end to drawing on reserves at the rate at which the Government is at present drawing on them. If your reserves run out, you move from a position of comparative safety to one of very great danger.
I am dealing with the warnings this Government has had and I opened up this theme by referring to the Reserve Bank. Lest it be thought that we have not considered this matter in detail, I commend to the attention of honorable senators the 61 st report of the Australian Labour Party Conference. A supplemental statement set out the whole of our background thinking on this subject. We enumerated the advantages of overseas investment and we stated at very great length the dangers that have to be foreseen and provided against. I shall indicate very briefly the advantages, so that we will not be thought to have overlooked them. They are listed as an immediate gain in foreign currency, the introduction of new industrial techniques, the introduction of new managerial techniques, the introduction of new products, the introduction of new marketing techniques, access to overseas research, some import saving and the provision of employment. We had all the factors before us. I have not time to give it, and I doubt whether the Senate would want to hear the whole story, but I indicate where our broad thinking on this matter can be seen in black and white. Four years ago our views were committed to writing for all the world to see.
In 1963, as part of the economic report which we adopted, we set out our attitude to overseas borrowing - which is another element in this matter. One of the measures designed to secure economic prosperity and welfare was stated as -
Resorting to overseas borrowing only in cases where there is no alternative to doing so other than that of abandoning or curtailing essential development projects, and wilh emphasis on public rather than private borrowing.
Of course, the question of private capital inflow goes a little further than mere borrowings from abroad, and the effect is worse. You can pay off your borrowings. In the meantime you pay a clearly determined rate of interest; but when an equity is acquired in a major Australian industry - and tremendous equities are held by many overseas countries in industries vital to Australia - then, as the Deputy Prime Minister (Mr. McEwen) himself has said, you are really selling a bit of the farm each year. You do that just to achieve a balance year by year and you keep on paying dividends in perpetuity. You solve a short term balance of payments position but let yourself in for heavy and increasing payments in perpetuity as a result of the foreign money being channelled into an equity in Australia.
Down the years, the Deputy Prime Minister himself has warned against many aspects of overseas investment. He has objected to the foreign capital that does no more than take over an existing Australian industry. He has objected to limitations being imposed on the subsidiaries in Australia of foreign companies abroad in the matter of export of products from Australia. Mr. McEwen drew attention to these matters as recently as last February when he spoke at a symposium in Melbourne on the need to borrow. The Deputy Prime Minister said then -
It is my view that, generally speaking, there are compelling reasons in the national interest why foreign investors, who acquire the benefits of equity ownership here, should assume the responsibilities to bring their fixed interest capital with them from overseas.
The Government’s own Deputy Prime Minister has been stressing these and other aspects for years. Yet at this moment, faced overnight with the actions of two powerful financial countries - the United States of America and the United Kingdom - the Government itself does not know what is involved in this matter. Unquestionably, there should have been the closest scrutiny of all that was going on. 1 point out, as did my leader in another place, the honorable member for Melbourne (Mr. Calwell), that even if we escape all difficulty as a result of the actions of the United States and the United Kingdom, the problem will still remain. You cannot keep on borrowing and having foreign capital come here just to make up your balance of payments position in a given year and not build up difficulties for other years. You pay interest and dividends in perpetuity as a result. Even if the Treasurer’s trip abroad results in Australia having no adverse effects from the policy of the United States of America, we will still have the problem of not knowing how we are going to handle the situation. The Opposition believes it is inevitable that there should be some control of foreign investment; that it should be channelled into the right export producing channels and that we should prevent the simple takeover of existing businesses without contributing anything new. We believe that we should have some control of the repatriation of dividends.
– We have.
– The Government has it but does not exercise that control. The point is that the power is there.
– There is real fear in overseas companies that it will be imposed.
– That does not appear to be the case judging by the way money comes in. I want to make the point that I do not think you are going to frighten away foreign capital by imposing clearly defined restrictions.
– Does the Leader of the Opposition think we should?
– I think the Government must do so. It will have to do so. It will be forced to act in the light of existing events. The Treasurer himself rather foreshadowed that since, through the Reserve Bank of Australia, he has asked the banks to hold everything and to stop making advances to overseas companies out of Australian savings. Obviously your own Treasurer has something in mind along those lines. His attitude is, in effect, “ Hold it until I look at it.” That clearly predicates some form of control.
I do not think you will frighten capital away. As has been said by many people, the foreign investor looks to this country as one of political stability, vast resources and tremendous developmental potentiality. He knows also that so far as the National Parliament is concerned, there can be no takeover of his undertaking except upon just terms and conditions. That is one factor upon which he knows he is protected. Secondly, he knows that if his activity has an interstate aspect - and in most cases the foreign owned companies have an interstate aspect - neither the Commonwealth nor the States concerned can take him over at all. He has these safeguards written into the Constitution.
These are the factors that induce people to put capital into Australia. They do not run the risk here that obviously they run in Indonesia today of having their industries taken over without any firm assurance of compensation or continuing interest. Overseas investors have all these factors in their favour. That is one reason why Australia is singled out as a particularly happy hunting ground. Other countries impose restrictions. I have already noted Japan and Mexico in that connection. It is also rather interesting to note this among the points made by the President of the United States. His third point was -
Third, to stop any excessive flow of funds to Canada under its special exemption from the Equalisation Tax, I have sought and received firm assurance that the policies of the Canadian Government are and will be directed towards limiting such outflows to the maintenance of a stable level of Canada’s foreign exchange reserves.
Clearly Canada contemplates controls. It has entered into an absolute assurance to the United States that it will impose controls to bring about a result that the United States Government requires. I think it is fair to say that foreign investors bring their capital here primarily for the good of the foreign investors. While this has benefits for us in quite a number of directions - and I have briefly indicated some of them - that effect is merely incidental to their primary purpose and I suggest that that will continue to be the position until we impose some kind of control. I am not suggesting for one moment stopping the inflow of overseas capital; but I suggest that we have to channel it, to direct it and to regulate it to some extent I know the difficulties of laying down rules to cover proposals no two of which would be quite identical. This is a matter in which a good deal of discretion would need to be vested in somebody.
That is my answer to Senator Scott who asked whether I thought controls should be imposed. I say quite emphatically that they are long overdue and we await with great interest the report of the Vernon Committee of Economic Inquiry. 1 want to refer now to what has already happened in Australia despite the fact that the Government is not able to answer Senator Cohen or Senator Murphy. On 18th November 1 963 the “ Australian Financial Review “ published the results of an Australian survey it had made. It showed how key industries were now in the grip of foreign interests. I referred to this list at the time. It is a most imposing list. A newspaper survey team can obtain information of that type which has not been contradicted. lt is interesting to note that in Melbourne the other day - I quoted the Deputy Prime Minister, I think, in relation to this - the Minister for Works (Senator Gorton) gave some specific information, according to the Press. I am looking at a report dated 18th February 1 965 which reads -
The Federal Minister for Works, Senator J. G. Gorton, said today that overseas capital controlled 95 per cent, of Australia’s motor vehicle and petroleum industries and 97 per cent, of its pharmaceutical industry.
Overseas capital controlled an estimated 25 per cent, of all Australian industry, he said . . .
Senator Gorton said foreign ownership would continue to rise for some time but it did not seem to pose any danger.
Senator Gorton was flatly contradicted by Mr. Wilson, the General Manager of the Australian Paper Manufacturers Ltd. Mr. Wilson said that -
Mr. Wilson went on and gave a list which corresponds very largely with what appeared in the “ Australian Financial Review “.
– That is probably where he got it.
– It may well be. The newspaper report continues -
He listed the pharmaceutical industry (97 per cent, foreign-owned), petroleum refining and distribution (95 per cent.), motor-vehicle manufacture (95 per cent.), oil exploration (85 per cent.), telecommunications (83 per cent.), soap and detergents (80 per cent.), bauxite-aluminium (75 per cent.), iron ore outside B.H.P. (75 per cent.), chemicals (60 per cent.), vehicle parts (55 per cent.), food (50 per cent.), lead-zinc-copper minerals and sands (45 to 50 per cent.), and heavy engineering (30 per cent.).
What Australian is prepared to say that it is healthy that there should be foreign control in these fields which include very often key strategic materials?
– I understand the Labour Government in Tasmania is giving 100 per cent, control for west coast iron ore developments there.
– Whether the honorable senator is right or not I do not know, but I do say that it is wrong that the Australian people in relation to their own natural resources should not have a dominant say regarding their exploitation. I do not care who does it. I affirm that principle.
– Where would the honorable senator get the capital to develop these projects?
– If the project is sound and is good enough and the capital cannot be raised out of our own savings in Australia or through our own arrangements for finance in Australia, the money should be borrowed. In that way, we can pay it back and we get rid of the burden of interest. It would be relatively low as against paying dividends in perpetuity. That is the answer I give the honorable senator. I do not know any reason why a government wishing to initiate a project of that kind should not in itself move into the field as was done with aluminium in Tasmania in the early days. The factor that led to the establishment of that industry was that the Government moved in and got it started. Let us get these other projects started just as we started the Snowy Mountains project. Without certainty from the High Court of Australia that we had the constitutional power, this scheme was commenced and it is one of the greatest assets this country has ever produced.
It would seem that I should certainly not be able to cover all the matters that I hoped to talk about. But let me say very briefly in relation to the United Kingdom position in this country - the stage we have already reached - that the Australian British Trade Association in August 1964 made a submission to the Vernon Committee of Economic Inquiry following its survey of 220 Australian companies with
British affiliations and overseas capital totalling £387 million. They represent about one-half of the companies only but these 220 companies control £387 million. Onethird of those companies only has any Australian participation at all. Fifty-seven companies have Australian participation of 50 per cent, or less, and only 16 companies have Australian participation of 50 per cent, or more. So, only 7 per cent, of the 220 companies have a dominating Australian participation with the United Kingdom concerns. The other interesting fact that emerged from the submission of the Australian British Trade Association is that in 1 .1 5 of the companies British participation averages only £180,000 per company, or a total of £20.7 million. The other 105 companies have an average British participation of approximately £3.5 million per company, or a total of £366.3 million. They make up between them the £387.3 million that was comprised in the survey. That is not a position that we in Australia ought to be happy about.
I see that my time has completely run out. I would say to the Senate in conclusion that the real answer to this matter is to increase exports. Whatever the Government will do to stimulate production for export and to further the expansion of our own exports, within reason I can say the Opposition without hesitation would be prepared to join in. The deplorable thing is the lack of leadership in this important field.
The ACTING DEPUTY PRESIDENT (Senator Wood). - Order! The honorable senator’s time has expired.
– I engage in this debate because I think this is one of the most important topics which has been before the Senate for some considerable time. I listened with great interest to the remarks of the Leader of the Opposition (Senator McKenna) and particularly the last note he struck - I am sorry he was so hurried at the end - and that was the importance of increasing exports. I think that the Government has a very fine record in connection with increasing exports. I have no doubt that the Government is geared to go forward. Let me take at random some of the things the Government has done. First of all, with regard to the export of primary products, I refer to wool. The Government is in the course of dealing with this major question of wool selling. It is giving active consideration to the matter, and in particular, is taking great note of what the wool producers are saying. Take the case of manufactured goods fit for export. Here, the Government has been most diligent, granting pay-roll tax exemptions for increases in exports. I would say that the Government has been most diligent and is continuing to be so in making finance available ‘ for production which leads to export.
Now, at the moment, of course, we are discussing the question of the United States Government’s restraints on foreign investment, and, in particular, how those restraints will affect United States investment sources in Australia. As I see it, the matter should be considered step by step so that we can discover whether the action of the United States of America is fair and just, both to its own people and to the people of Australia.
The first matter that I wish to deal with commenced on 10th February of this year, when President Johnson sent a message to Congress. As honorable senators know, under the American presidential system President Johnson is not himself a member of Congress, and his wish or will is considered by Congress as the result of a message. On 10th February of this year President Johnson sent to Congress what was known as “ the balance of payments message “. I am grateful to Senator McKenna for arranging to have the statementcontained in that message incorporated in “ Hansard “. That having been done, there is no need for me to deal with it in detail. I mention, by way of emphasis, that this message was sent to Congress so that Congress would pass the necessary legislation. President Johnson said the legislation was required for the following reasons -
To sustain prosperity at home; to maintain our defences abroad; to supply private and public funds to less developed countries to build both their strength and their freedom; to avoid “ beggar thy neighbour “ restrictions on trade and to work for a successful conclusion of the Kennedy Round trade negotiations; to work with our trading partners toward a more flexible world monetary system.
Those are very high ideals, both from the standpoint of the President vis-a-vis his own people and from the standpoint of the President and his outward look towards the world. I think we can take great encouragement from them. These restraints, which will affect us in Australia, have been very deeply considered by a man of enormous power, who is, at the same time, a man of great human qualities. I think of the late President Kennedy and the current American President, Mr. Johnson, as being great world figures and great world leaders. It seems to me that the late President Kennedy had a flair for the relationships of the United States with other countries of the world. He was adept at controlling and directing the external policy of the United Stales. It appears to me that President Johnson, although not lacking, in the main, any of the great qualities of the late President Kennedy, has concentrated his energies in recent times on the domestic affairs of the United States. This may well be because of his 30 years in politics. Until President Johnson attained his present high office he was, as it were, a member of parliament. He was the Senate Majority Leader. He is an extremely well trained politician. His whole career has been in politics. I consider that in the statement contained in his message to Congress President Johnson gave great attention to the political results which would flow from implementation of the message.
Although the President realised that the United States balance of payments position was satisfactory in that the United States exported more goods than it imported, he had regard also to his country’s enormous involvement in the defence of the free world and to its economic aid programmes in practically every continent. In view of these factors, which offset the favorable trading balance, the position of the United States was virtually static, and this of course caused the President concern. As Senator McKenna reminded us, President Johnson had tried to remedy the position by a tax but the tax was not having the desired effect and the outflow of money was continuing. So he then decided to do something further, but instead of cutting down on economic aid or defence aid he decided to restrict United States investment in other parts of the world.
I think the President is to be commended for that approach. As a member of the Senate, it has been my privilege to visit other parts of the world and to see the tremendous defence effort that the United
States is making all over the world - not so much by actual fighting as by creating a position in which United States forces, Army, Navy and Air Force, preserve the peace. I passed through Turkey some years ago and at the two airports at which I stopped in Turkey I saw enormous concentrations of United States air power, which illustrated to me that the United States was there to preserve peace. 1 am glad that when he considered the matters we are now discussing the President did not think in terms of cutting down the United States defence effort or its aid programmes. When I went to South East Asia recently with a parliamentary delegation I was struck everywhere by what the United States was doing in providing aid for health, education and general social development. I am glad that that aid has not been materially cut back. President Johnson has asked people in America who lend their money to other parts of the world to restrain the outflow of capital from America. We must be very grateful to the United States for tackling the problem in this way instead of by restricting its defence effort or its foreign aid.
I come now to the subject of how the message of the President to Congress was received in Australia. I believe that all in this. House agree with what was written by the Prime Minister (Sir Robert Menzies) on 12th March in a well reasoned and appropriate letter to the President. As Senator McKenna has arranged for that letter to be incorporated in “ Hansard “ there is no need for me to refer to it in detail. I believe that the Prime Minister showed great skill in reminding the President in these words -
Like the United States in earlier years, we are endeavouring to build our numbers up by large scale immigration. But this effort necessarily adds to our capital needs.
I think the President will appreciate that the very strength of his country has been drawn from its magnificent immigration policy which has operated for the past 70 or 80 years. The United States was able to draw from the strongest European elements by attracting migrants from Europe. An opportunity was given to migrants to partake in the development of the United States. However, immigration in terms of cash is very expensive in the first instance to the country receiving the immigrants. A number of figures have been bandied about from time to time, but the figure I prefer is that each migrant costs the receiving country about £4,000 when consideration is given to housing, education and the general servicing of migrants.
Honorable senators will appreciate that the current migration programme makes great calls upon our resources. This year as many as 140,000 new settlers could come to this country from the United Kingdom and Europe. 1 think the Prime Minister was very wise in pointing out in his letter that the stream of migrants must continue to flow here if Australia is to maintain development at its present rate. It is important that the President should be made aware of the peculiar problems which face Australia as a partly developed country at present. Immigration is certainly one of those problems. With courage, I think we will win out in the end by venturing so extensively into the field of immigration. I believe that the Prime Minister was right on target with his reference to immigration. He very wisely stressed to the President the importance to Australia of the imposition by attracting migrants from Europe. An on raw wool, despite our many representations. This tariff rankles with a good many people here. The Prime Minister also referred to the imposition in 1958 of quotas on imports of lead and zinc. Those quotas remain unchanged. 1 think that the President and his advisers, as Senator McKenna said, will be wise enough to see that the way we will overcome our problems is by increasing our exports. We could be assisted in this respect by the removal by the United States of its high tariff on raw wool and its quota restrictions on lead and zinc imports. I like to think that the President got the message contained in the Prime Minister’s letter. As Senator McKenna pointed out, he quickly acknowledged the letter and 12 days later sent a considered reply. It seems to me that the important thing in the President’s considered reply was the invitation to go further into the question. The Treasurer (Mr. Harold Holt) has readily accepted that invitation. The President wrote -
I have asked the Secretary of the Treasury and the Secretary of Commerce to give a careful hearing to Australia’s view in any particular case which might be of this sort.
The President referred to a case where undue strain was placed on Australia. The ready reception given to the Treasurer’s acceptance of the invitation is a further earnest of the President’s interest in Australia’s position. At the present time the Treasurer and his delegation are in the United States. I am very pleased that the Government has asked lending institutions in Australia to pause temporarily in responding to capital requirements of overseas companies in Australia. To me it seems to be wise of the Government to take definite action on overseas investment. I feel sure it was prudent of the Government to cause information to be sought on all imminent projects involving the use of borrowed money in Australia by overseas companies and corporations. I trust that the investigation will continue and that the banks will follow the directive of the Reserve Bank. If the matter is handled resolutely it. can be of great help here as well as of great importance to the United States. It should be remembered that if things go badly in the United States, it could well be the start of an economic depression. When the United States is highly prosperous and is at the top of its form, as it were, the rest of the world can well be prosperous also. The same is true of the sterling area. The impact of conditions there is felt by the rest of the world. I was considerably cheered to read the following report in today’s edition of the “ Australian “ -
U.S. payments deficit down.
The crucial U.S. balance of payments deficit dropped sharply in the first quarter and it still is going down.
Government officials have only rough, incomplete figures but their best guess is that the deficit fell to about a 2,700 million dollar yearly rate in the first quarter from a deeply disturbing 6,100 million dollar figure in the last three months of 1964.
So, although this report is incomplete and it mentions only round figures, it does seem that the corrective measures have started to work. The report further states -
The big turn came in late February after Mr. Johnson started his voluntary campaign and after exports began moving out in volume once again.
To use the President’s own expression, his action seems to be taking hold and the payments deficit of the United States is being reduced.
Doubtless all senators of goodwill will wish Mr. Holt well in his discussions with high officials of the United Slates Administration. It is not yet certain whether he will be seeing President Johnson himself, bin interviews have been arranged with Mr. Dean Rusk, the Secretary of State. Mr. Connor, the Secretary of Commerce, and Mr. Fowler, the Secretary to the Treasury. Mr. Holt is being quite wise in speaking at a symposium that has been arranged for today and tomorrow. There he will be able to speak in his own language to American business men about the potential in Australia. 1 believe that, if the lowering of the deficit continues as is suggested in the report in the “ Australian “, the Americans will be only too ready to resume their normal interest in providing capital for many parts of the world. The capital that the United Stales has provided in the past has been of tremendous benefit to us in Australia, because, as a young country, we are not able to accumulate enough savings to provide the capital needs for development.
The firm action that has been taken by President Johnson and the fact that the position is likely to be held should encourage us to think that the present crisis - 1 use that term advisedly - will be over in the near future. I agree with the suggestion that we should take a warning from the situation that has arisen. I agree with the statement that the action of the Treasurer in investigating the whole matter of foreign investment in Australia is justified, and I hope that in the future this Parlaiment will be able to have before it much better statistics than are available at the present time. 1 welcome this opportunity to pass those few remarks about these most important letters that have been exchanged between our Prime Minister and the President of the United States of America.
.- During the brief discussion that has taken place on the letters that have been tabled by the Prime Minister (Sir Robert Menzies) it has been possible to obtain a glimpse of Australia’s financial situation in the light of the recent decision of the President of the United States of America. Australia has been receiving from overseas capital which has been invested in important industries which it is not necessary for me to enumerate. Nobody can say that Australia has not gained some benefit from that capital. Apparently the President of the United States found it necessary to take action to curtail the outflow of capital from his country. Incidentally, the Prime Minister of Great Britain, too. found it necessary to place an embargo upon the outflow of capital from that country. So not one but two of the most important exchange countries in the world have placed an embargo, however slight, upon the outflow of their capital. We know that historically the United Kingdom has been one of the great exchange countries and that the American dollar is interchangeable with the currency of every other country.
The step taken by the President of the United States of America caused alarm to the Australian Government. Naturally, the Prime Minister wrote to Mr. Johnson. In his communication he set out, I thought rather clearly, reasons why Australia should not be subjected to a curtailment of the flow of American capital. The Prime Minister’s reasons were good. One he advanced was that Australia, unlike other countries, is not highly industrialised and still faces the problem of primitive development, of trying to provide power for people in various parts of -the Commonwealth, and of trying to establish irrigation systems in areas where they are required. He could have gone further and could have painted a very black picture about the position of the rural industries as a result of the current drought. He did not do so, but stuck rather strictly to the business line. The Prime Minister asked for some relief.
The Commonwealth Government must have seen this state of affairs developing over the years. It knows how capital from overseas has been used to balance our trading position and that if there had not been an inflow of capital from other countries we would not be in the fortunate situation of having an overseas reserve of £700 million. That balance will be very helpful to us in the years that lie ahead until we adopt an effective corrective of the situation that has slowly developed. The Government must provide that corrective, whatever form it takes. It seems to me that we must not expect the inflow of capital from the United States and the United Kingdom to continue indefinitely. If those countries indicate that they require their surplus capital for their own purposes, we must abide by their decision. But. in view of the trading arrangements that exist between Australia and other countries, there may well be some hope of Australia being able to work out her own salvation. In his letter to Mr. Johnson, the. Prime Minister said that the goods that we export are exportable from other countries too. Most of our goods are highly competitive on the international market. We do not export manufactured goods which cannot be made in other countries. Perhaps it was not necessary for the Prime Minister to point out that we are not a highly industrialised country. We cannot manufacture electronic computers, highly technical electrical equipment and things of that nature.
The Prime Minister pointed out that we are reaching the stage where we are able to provide four-fifths of the capital but that we must rely upon capital inflow for additional resources to promote our growth. He mentioned also that some years ago the Commonwealth adopted a migration programme and that as a result of it our population has increased by about 2 million over the years. He pointed out that having come so far with our migration programme, it was essential to have the means of providing full employment for migrants and that it was also essential, in the interests of full employment, to have capital from the United States of America or from some other country. I suppose that there is a good deal to be said in favour of that suggestion.
The Prime Minister also dealt with the question of the import of goods. He said that there is practically no quantitative restriction placed upon imports. We know as a fact that we abolished quantitative restrictions on imports. We now depend solely upon the tariff legislation to regulate the flow of our imports. I support that proposition in a practical way. I hope that we will be able to continue to operate the tariffs in the Commonwealth so that we can rely upon the broad provisions of the tariff legislation and not be overwhelmed by goods that we do not require.
The Prime Minister mentioned also that there was no restriction on current payments, that is, payments going out of the country in the form of dividends from some of the companies in which the Americans have their capital invested. They are not subject to any restriction at all. As a matter of fact, the dividends earned by the overseas companies in the Commonwealth are paid overseas. There is a concessional rate applicable in respect of income tax. It may be that a reciprocal measure exists in respect of Australian capital invested overseas. Nevertheless, it is an- inducement to some of the organisations which invest their capital here.
The Prime Minister confessed that normally Australia has a deficit in its current balance of payments. He said that it must be covered by net capital inflow. The Prime Minister confessed, after 15 years as leader of the Government of the Commonwealth, that Australia has a deficit in its current balance of payments, lt was remarkable for him to make such a confession. I think it is worth while to read the part of his letter which deals with that matter. He said -
Being predominantly an exporter of primary products, Australia experiences large fluctuation in the amount of her export receipts and, being in a phase of rapid development, normally has a deficit in her current balance of payments. Though this varies from one year to another, it has to be covered by net capital inflow. By far the greater part of this has comprised private oversea investment in Australia. In the eight years from 1956-57 to 1963-64 the accumulated deficit on current account amounted to 2,417 million dollars. During that period, the annual inflow of private oversea investment (including undistributed income) in companies in Australia totalled 3,022 million dollars, of which 1,147 million dollars came from the United States and Canada - most of it from the United States.
This situation just has not come down suddenly from the sky like a bomb. It has been developing each year. Now that the Government is confronted with a situation that it does not like, it appears to me that it has no alternative path to tread. The Government has gone along for so long getting accustomed to the inflow of overseas capital that it is prepared to do anything and to await the inflow of capital to start again. It may be that some inflow of capital is a good thing from the people’s point of view, especially the battlers in the community such as the small traders and the wage earners. I wish to refer to a speech that was given on “ The Economic Effects of a Commercial Oilfield in Queensland “ by a prominent member of the Brisbane Stock Exchange. In the course of his address he said -
General Motors-Holden’s Ltd. and General Motors Acceptance Corporation- he referred to two companies there - are perhaps two companies worth singling out. In this respect the entire equity capital of both companies is held outside Australia and the only way in which the local investor can participate in the benefits that these companies derive from Australian trade, is to subscribe for fixed interest loan funds of G.M.A.C.- that is, General Motors Acceptance Corporation. He continued -
As everybody knows it is on borrowed capital that the really big profits are made for the benefit of the equity holder. These people come out here and take all the loan money they can raise - plus accommodation from banks and loans from life office and other institutions - but not one penny piece of equity do they offer in return.
That statement happens to be true. We know that General Motors Acceptance Corporation is the hire purchase company associated with General Motors-Holden’s Pty. Ltd. The company is not above using Australian loan money for the purposes of selling its goods on hire purchase, but it is a different matter when it comes to giving the Australian people equity in its undertakings on the business side. This was one of the things to which the leader of the Country Parly objected, I think, at a conference of the Victorian Country Party held at Lakes Entrance on Tuesday, 2nd April J 963. In the course of his address, he had this to say -
We in this room are mostly established farmers. If we earn enough annual income we can live comfortably. If we do not, we could still live comfortably by selling a bit of the farm every year, and that is pretty much the Australian situation. We are not earning enough and we are selling a bit of our heritage every year.
That was what a member of the Government, the Deputy Prime Minister (Mr. McEwen), had to say. Evidently he had examined the situation more closely than had other members of the Cabinet and found that Australia was drifting financially.
Let us have a look at the picture. Let us see what we have to pay to overseas companies. In 1962 we were required to pay £97.6 million; in 1963, £127.8 million, and in 1964, £133.2 million, a total of £358.6. Over the same years new direct investment capital came into the Commonwealth in these amounts: in 1962, £78 million; in 1963. £126.1 million; and in 1964, £131.7 million, a total of £335.8 million, which was £22.8 million less than the amount paid out- There we have the picture of capital inflow into the Commonwealth and payment in the form of dividends to overseas companies over a period of three years. We actually paid out more than we received,. so surely we were getting to the point of danger financially. If I wished, I could return to page 2 of the Prime Minister’s letter, but I do not wish to take up the time of the Senate unnecessarily.
A United States publication known as the “ Survey of Current Business “, in its issue of August 1964, disclosed that the amount of direct private investment in Australia by American firms had reached £600 million. This was the extent of American ownership of companies carrying on economic activities in the Commonwealth. The United Kingdom Board of Trade journal of 7th August 1964 stated that at the end of 1 963 the amount of direct private investment in Australia by United Kingdom undertakings was £662 million. So in August 1964 the total of United States and United Kingdom private investment in Australia was £1,250 million. Everyone knows that interest or dividends have to be paid and that capital is not invested here just for the pleasure of transferring it from the United States of America or the United Kingdom to the Commonwealth. Australia does offer a sound inducement to overseas investors, lt was pointed out this afternoon that we have a good Government here and that if it were turned out Australia would be blessed with a better Government. We are not threatened with any violence or insurrection, so we can go our way in the Commonwealth observing the rule of law. There is no urgent or extreme threat of war at the present time. Australia over the past 10 or 12 years has been a haven for overseas investors.
I come to another point, in relation to money that we have to send overseas whether we like it or not. An examination of the Budget Papers shows that at 30th June 1964 Australia owed £772 million to governments outside Australia in respect of loans raised over a long period. We also owed £1 12 million which we borrowed from the International Monetary Fund and the International Bank for Reconstruction and Development.
– We do not owe any money to the International Monetary Fund.
– There is some owing.
Senator -BENN. - If that is so, my information is wrong. I am quite prepared to be told that it is wrong. The money must have been paid quite recently. I shall check the matter during the suspension and see whether that is so. We have probably fully drawn our account. There may be nothing in kitty for the Commonwealth. We owe, in relation to those matters which I mentioned, approximately £900 million. Some of the money has not been borrowed at low rates of interest and we must continue paying the interest. The amount that we owe on government securities on issue and in other respects amounts to £2,146 million.
Now let us consider the correction of the situation that confronts the Commonwealth. What has to be done? Has the Government a firm corrective? Can it advance some proposition which can be supported? Does it say: “We will not be getting the same capital inflow from the United States of America and the United Kingdom. Therefore we shall have to do something about it. Can sufficient be done under our trading arrangements with other countries?” Let us have a brief look at these things. Bakeries have been taken over by overseas companies. Arrangements have been made to sell Australian iron ore to other countries, particularly to Japan. How Japan is going to get the funds to pay for the iron ore, I do not know; she, too, may strike the same trouble. We must look at ways and means of improving our trading position. Our financial position is bad at this point of time because the greater part of Australia has been subjected to a drought for the past six months. Some of the big meat works in Queensland are killing breeding cattle and any kind of beast that comes to them. I do not know what will happen in two or three years.
– Is that because of the drought?
– Yes. Millions of sheep are dying. It is no use blinding ourselves to these facts. We know that the price of wool is down compared with what it was last year. Next year the wool clip will be reduced and probably prices will fall again. I do not want to be a kind of mourner in the present circumstances, but something better must be done. What the United States of America and the United Kingdom’ propose to do in regard to the restriction of capital inflow to Australia and other countries will hit us at the very worst period of our rural and industrial life.
Last year sugar produced in Queensland was sold on the world market for £110 a ton. Today Queensland is lucky to be getting £24 a ton for it. Income tax revenue will be lower this year that it was last year. I remember someone saying about 12 months ago that income tax revenue was higher than the Treasury estimate. I thought at the time that if the Treasury had an official who was compiling estimates for the Parliament and who was able to say in advance how incomes, particularly private incomes, would run during the following year, that official was wasting his time in the Treasury because his place of employment was on a Stock Exchange where he would be able to induce people to buy shares in various companies. Honorable senators can take it from me that income tax revenue will be lower this year than it was last year, notwithstanding the slight increase in taxation.
A wool promotion scheme is being organised for the purpose of increasing the sale of our wool overseas. I was in a chain store the other day and I obtained a tag, which I have in my hand, from one of the commodities on sale. On the tag is: “ Blankets, article 82665, size 55” x 70”, composition 63% cotton, 37% spun rayon”. Probably the Department of Customs and Excise compelled the manufacturer to show the composition of the article. On the bottom of the tag appear the words “ Made in Poland “. These blankets come from Poland to be sold on the Australian market while the Commonwealth is spending huge sums on a wool promotion scheme. I shall leave the tag on my table for any honorable senator to inspect. Bauxite, one of our natural mineral resources, is being mined at Weipa and at Gove in the Northern Territory and being sold to overseas companies which probably will process it into alumina and then export the alumina to other countries. That seems to be the pattern that will develop in the future.
In the minute or two remaining to me let me refer to a booklet which was issued by the Department of Health two or three years ago, entitled “ Eat Better for Less “. When I read that booklet I learned for the first time that I could go into a shop and buy one pound of sticky cheese for ls. 6d. and obtain as much nutriment from it as I would from one pound of Gorgonzola cheese for which I would pay 10s. That was a bargain. The value of the cheese imported annually into the Commonwealth is £300 million.
Sitting suspended from 5.45 to 8 p.m.
– This debate has proved to be quite interesting iffor no other reason than because the line taken by the Leader of the Opposition (Senator McKenna) and Senator Benn was quite different from that taken in the other place by the Leader of the Opposition (Mr. Calwell) and the Deputy Leader of the Opposition (Mr. Whitlam). Senator McKenna delivered a reasoned speech but his approach to the problem confronting us was not as critical as the Opposition’s approach in the other place. In my opinion the foreign investment situation in relation to Australia has improved considerably in the past 24 hours. I should like to start on the note upon which Senator Laught closed. I refer to a statement published in the “ Australian “ today. I will not repeat it in full but will quote the following extracts which interested me -
The critical U.S. balance of payments deficit dropped sharply in the first quarter and it still is going down . . . The actual situation is even better than the preliminary estimate suggests
. The Government’s flash reports show that the U.S. achieved a very large payments surplus in March immediately following huge deficits in January and February . . . The most heartening thing about the March upturn is that it is continuing and is expected to continue during the weeks ahead.
That augurs well for the atmosphere in which the Treasurer (Mr. Harold Holt) will present the Australian case. The situation in the U.S.A. has taken rather a dramatic turn for the better. I was interested yesterday to read this comment by Mr. David Rockefeller, President of the Chase Manhattan Bank - i hope there will be only a temporary slowdown and then a resurgence in a period not too far distant.
If the programme is, in fact, successful - and the first quarter suggests that it is - perhaps towards the end of the year there may be a relaxation of restrictions giving recognition to particular situations - and this is important - as in Australia.
In other words there is sympathy for Australia and I shall develop that theme later. Personally, I think we are jumping too many hurdles and crossing quite a number of bridges before we come to them. I do not believe that the United States will do anything to embarrass Australia financially. Strategically, we are very important to the U.S.A. and I do not think it would want to do anything to weaken us. Australia alone in the whole of Asia is populated by Europeans. Tactically and from a defence point of view we are essential to the United States in this part of the world, and I do not agree with the pessimists who overlook that factor.
In trade we are a very good customer and buy far more from the United States than we sell to that country. This was mentioned by the Prime Minister (Sir Robert Menzies) in his letters to President Johnson. The right honorable gentleman said that in 1962-63 we sent to the United States 362 million dollars more than we received from her. In 1963-64 that credit in favour of the United States rose to 441 million dollars. That is the sort of customer we are. In the half year to December 1964 there was a decline of 15 per cent. in our trade to the U.S.A. but America had a rise of 43 per cent. This trend makes Australia a very attractive customer to the United States and 1 am quite sure it does not want to harm us in any way through the measures it has had to take.
Reports in the Press today indicated that the U.S.A. was ready and willing to listen to Mr. Harold Holt and it was thought that he would receive a sympathetic hearing. I do not believe that President Johnson’s decisions were directed against us. I appreciate why he did not specifically exclude Australia from those measures. I suppose that he had diplomatic reasons and did not want to offend others where investments were involved. But I am sure that the Treasurer will have no difficulty in convincing the Americans that we have a separate and different case to put forward and I have no doubt that our propositions will be favourably received. I began by saying that in my opinion the approach to this matter in the Senate by the Leader of the Opposition and Senator Benn was entirely different from that of their colleagues in another place. I could not understand the attitude in the other place to the use of foreign capital in Australia. The Australian Labour Party has said to the people of Australia, “We will develop Australia if given the opportunity and we do not necessarily welcome nor do we need outside assistance “. That seems to me to be like a farmer who decides he will develop a block of virgin land. He may have a heart like a lion and all the brawn in the world, but if he sets out alone to develop the land into a productive farm and equipped only with an axe, he will do the job but it will take his lifetime and the lifetime of his sons. That is what will happen if he undertakes the task without outside help. But if he goes to a bank or financial institution and borrows money, he can bring the farm into production and put it on an economic basis more quickly.
Australia as a nation is in a similar position. Certainly we can develop Australia ultimately with our own resources but we have not the time to follow that course. The sands of time are running out rapidly for Australia in relation to its development. Within the next few years - I would not like to say how many - our future and our destiny will be decided. We shall know then whether we are to be a race of free people controlling our own destiny or a nation under Communist Chinese control. The approach of the Australian Labour Party to our future, particularly in another place, is unrealistic. We have not the time to try out some Socialist experiment.
I personally welcome overseas investment and American capital. We must remember that the U.S.A. has never knocked back one penny of foreign investment. When Australia was founded, the United States had a population of some 7 million people. In the time it has taken us to grow to 12 million, the United States population has grown to 193 million. This was done through hard work. The Americans were prepared to take a chance. They had imaginative policies and a massive immigration programme and they accepted foreign capital wherever they could get it. They never knocked back a penny of foreign capital to develop the country’s resources. If we only knew for certain that we had 1 00 years, 50 years or even 25 years to develop the northern part of Queensland, the Northern Territory, or the northern part of Western Australia, then I might listen to the argument of honorable senators opposite. But wc do it through our own resources.
– We do not stay out of the wars.
– I say to you, Mr. President, and I say to the honorable senator who is interjecting at the moment, that we know and he knows as well as I do that no-one can give us that assurance that we have 25 years, 50 years or 100 years to develop this country.
– It would take 500 years with the honorable senator’s approach.
– That is how the honorable senator thinks, but the electors have not thought so for the past 16 years. Because the sands of time are running out and we have to develop rapidly, and because we cannot do this from within our own resources, we have to invite and woo risk capital from outside Australia. Where would our oil exploration activities be today if there were not overseas investors in oil here? 1 know what honorable senators opposite would do. They would have a massive campaign with a Government oil exploration scheme about as successful as the original one the rig from which was finally sold and used in Western Australia. It must be remembered that we on this side of the Senate - and I say this with great respect to my friends on the other side - approach these problems with an entirely different attitude from that of honorable senators opposite. That is why there is a Government and an Opposition - because we think differently. I have read the speeches of all the Opposition members in the other place who spoke on the subject we are discussing tonight.
– Has the honorable senator read the speech by the Minister for Trade and Industry?
– No. I did not read the Minister’s speech; no more did the honorable senator.
In every speech by Opposition members in the other place there were the words “ control “, “ direction “ and “ planning “ used by some of them ad infinitum. This is understandable because that is the proper approach of anyone who believes in the planned socialist state, which, of course, the Australian electors will not have a bar of. They have rejected it in six elections.
– And look at the mess they are in.
– That is a stupid statement coming from a mature, sensible man as the honorable senator is. Australia and Australians have never been better off and the honorable senator knows it. Sometimes I wonder whether, perhaps, the honorable senator thinks .that is a bad thing. 1 do not. I think it is a good thing. As I said, Australians will not have a bar of this policy of planned socialism. They have rejected it over the last 16 years in no uncertain way.
The honorable member for Melbourne Ports (Mr. Crean) in another place even went so far as to say, and I quote from page 784 of “ Hansard “ of 8th April 1965, that Unilever (Aust.) Pty. Ltd. - this is a private company - had decided that in future it would manufacture soap, not in Melbourne but in Sydney, whilst the Melbourne side of its activities would manufacture food. He went on to say -
The Commonwealth Government apparently is doing nothing to stop this sort of thing.
He said that the Commonwealth was doing nothing to stop a factory in Melbourne deciding to manufacture soap in Sydney and foodstuffs in Melbourne.
– The honorable senator is quoting him out of context.
– It is here. Senator Cavanagh can read it for himself. I am not quoting it out of context at all. It is in “ Hansard “ of 8th April and the honorable senator can read it. When the honorable member for Melbourne Ports said -
The Commonwealth Government apparently is doing nothing to stop this sort of thing- it is obvious to me from that statement that if Labour were in government it would control and direct where companies would operate. I have no doubt that the honorable member for Melbourne Ports would not be a backbencher in any government the Labour Party formed. I have no doubt he would be in the Ministry. I say in all seriousness to those people who are interested in commerce and manufacturing that they need to have a look at this situation because, in the words of the member for Melbourne Ports, a Commonwealth government should interfere and direct companies as to what they produce and where they produce it. I quoted his remarks from “ Hansard “ and I have given the date and the page.
I refuse to be scared or frightened by the exchange of letters between the Prime Minister and President Johnson because I do not honestly thing that the restrictive measures are directed against. Australia. I do not think this matter rates anywhere near as important as ,the events which are taking place to the north of us. I think that this matter has been taken out of its context and its order of priority and been blown up to something that is nowhere near as important as I hope time will prove. I. do not think it would matter a hoot if not one more dollar or one more pound sterling was invested in Australia if we only knew that we were safe for the next 50, 75 or 100 years. If we know that, we would have the time to go along quite slowly - and it would have to be slowly if we were going to develop from within our own resources - but I am sure there is not one honorable senator in this chamber who believes that we have the luxury of that amount of time. I do not believe it. We just cannot keep up our expansion, development and immigration programme from within our own financial resources. I am in complete agreement with the Treasurer because he said-
– The Treasurer does not agree with the honorable senator.
– I do not have to agree with the Treasurer on all things and Senator Ormonde knows that I do not. If I have an opinion of my own, I express it. I find myself in agreement with him on this matter. The Treasurer said -
Australia remains a largely underdeveloped and underpopulated continent. We do not have unlimited time in which we are left free to populate our country and exploit its resources.
This is what I am trying to substantiate in my argument.
We can speed these processes by the additional resources which come to us from overseas. Whatever risks we accept in encouraging this investment on however substantial a scale, they are of minor order when set against the risks we run if we fail to populate and develop our country as speedily as we can.
In other words, the Treasurer said what I have said: The sands of time are running out. We have a task to do. I think it is beyond our own resources to do it at the pace we want to do it. So, we have to seek some assistance. Despite all our critics, Australia as a nation is not doing too badly.
– At government level we could improve things.
– I remind Senator Ormonde that the overseas investor is not the big bad bogyman that the honorable senator would have us believe. That point is covered in “ Hansard “ of 8th April 1965 at page 779, where the Treasurer says - . it has been the Australian experience that the companies established here have ploughed back a very considerable proportion of their Australian earnings, and no group of investors has done this more than have investors from the United States.
– Those are not the honorable senators words?
– No. I am in all agreement with this statement. I think it is correct. It continues -
Taking the inflow from 1947-48 to 1963-64 by domicile of investors, we find that the undistributed income is 41.2 per cent. in the case of the United States and Canada. That is quite thehighest percentage of any of the countries listed with us and it shows that a very considerable proportion of the profits earned in Australia are ploughed back, giving additional employment and added industrial strength to the whole economy.
– They still take a lot out.
– Yes. But I am saying that these investors plough back 41.2 per cent. of their profits into expansion which has provided vast employment which both Senator Cavanagh and I would want to see.
Over the last 16 years, if we look at this matter without being biased - and I know that is practically impossible for a politician or a member of Parliament to do - we will see that we have been bringing to Australia some 150,000 migrants a year. In recent years the growth in our national income has been approximately 5 per cent. which is better than the growth in most countries of the world today. We have also established standards of living and standards of housing -
– And of employment.
– Yes, I am coming to employment in a moment. We have established standards which are much better than those of most countries in the world today. They are a source of pride to every Australian and matters of envy to most people who live outside this country. At the same time as we are continuing our immigration policy, keeping full employment and lifting our national income by 5 per cent. each year we are facing up to the gigantic task of developing one of the largest tracts of country in the world. We are doing all this and, as the Minister for
Civil Aviation (Senator Henty) has reminded me, we have the lowest unemployment figure of any country in the world today. We really have no unemployment. In fact we have - I hate to use the term, but it has become customary and I know of no other suitable term - over-full employment in many industries in Australia today. This represents a mighty effort on the part of the Australian people. They are the ones who are doing it, but they can do it only if they are receiving wise and sound guidance from their Government. The Australian Labour Party put forward in another place the argument that we should cut down on private investment. This was advocated vehemently by some Opposition speakers. I ask them seriously - indirectly through their colleagues in this chamber - to say what activities they suggest we should cut down on if we are to cut down the amount of money which makes such things possible. Is the cut to be in the field of employment? I am sure no one would want that. Is it to be in the field of social services? I do not think anybody would want that. Is it to be in the field of development or of the national growth rate, which I mentioned earlier? Are we to halt investments such as those that are maturing at this moment in the iron ore industry in Western Australia? Are we to stop the activities of the oil companies that are exploring for oil? Oil imports represent one of the biggest drains on our resources of overseas funds. Are we to stop refining oil in Australia? Finally, are we to stop the inflow of capital which assists all these activities and permits us to retain the high standard of living which we are enjoying today?
I could not sit down without referring to what the Leader of the Opposition (Mr. Calwell) said in another place. I think the honorable member for Higinbotham (Mr. Chipp) summarised it very well when he said -
We got this pearl from the Leader of the Opposition: “ We would direct “ - that is a favourite word with him - “ both foreign and local capital into the most productive of channels.” Let the business community hear these words and understand what they mean. This is direct advocacy of the re-introduction of a capital issues control board, to tell people where they might invest their money and where they might not. The honorable gentleman then said, rather amusingly: “There is no need to go to the United States of America. We could probably raise ail the capital here “. He said: “ We raise four-fifths of it here now. Why cannot we raise it all here?”.
Mr. Chipp went on to say ;
But let me quote one example, oil - and one could quote many from the evidence which the Department of National Development, through the Bureau of Mineral Resources, recently gave at a Tariff Board inquiry on crude oil. It had this to say about Australia being self-sufficient in oil or petroleum products -
The minimum reserves required to support production are commonly regarded as equal to15 years production. If Australia is to become self-sufficient in oil, therefore, reserves of at least 2,000,000,000 barrels are required now and by 1970 about 3,000,000,000 barrels.
It went on to say later -
Assuming a future discovery cost of 10s. per barrel of reserves, the cost of finding our required reserves by 1970 should therefore be about ?1,500,000,000.
That is five years hence, and ?1,500,000,000 is a fantastic figure. 1 wonder whether the Leader of the Opposition does believe that that kind of money can be found in Australia in five years.
– He may not accept the figures.
– He might not accept the figures, but I have quoted the source of these figures. This information was given in evidence by the Department of National Development, through the Commonwealth Bureau of Mineral Resources, before the Tariff Board. I do not know that I would doubt figures given by the Bureau of Mineral Resources. What reason would it have to put false figures to the Tariff Board? It would have none. On the figures I have quoted, we would need ?300 million a year over the five years for one project alone - oil exploration. I have not time to read from other publications in which we see quoted projects such as,Alcoa, ?150 million; Comalco, ?53 million; and the Gove mining organisation, ?100 million. I wonder whether anybody really seriously and honestly suggests that, with all our commitments and with all the factors involved in expanding a young and growing nation, this sort of money could be found in Australia. I cannot believe that it is available.
If we are to do these things in the time we have left in which to do them in Australia we have to borrow from overseas. As I said earlier, we must borrow like the farmer has to borrow to develop hisland. Without assistance, he can develop his land in his lifetime and his son’s lifetime, but he can do it a darned sight quicker if he can get assistance. Of course the Australian economy has its problems, but so has the economy of every other country. That is why we are debating this subject tonight. America has her problems, Great Britain has her problems, and so have we. But let us remember that we have a very high rate of growth and expansion in this country and that we have maintained a standard of living that is the envy of most people in the rest of the world today. The Government has had some pretty savage critics who have accused us of having a stop and go policy I refer to critics both inside and outside the Parliament. I wonder whether they are perhaps disappointed and a little dejected because the economy is avoiding the disasters they have predicted.
– The honorable senator is starting to worry now.
– It is only a matter of a few months ago, Senator Bishop -
– You are gloomy now.
– The honorable senator was not here earlier, when I said that I am quite optimistic. It is only a few months ago that the Treasurer (Mr. Harold Holt) brought down a Budget that the Opposition said would be the worst Budget of all time. Look at the financial news in the newspapers today. Looking at the most recent figures, in respect of the last quarter, 1 am sure every fair minded person is utterly delighted to see that we were holding costs in this country. It is easy, sitting on the Opposition side of the Parliament, to criticise the people who hold our economy together and make Australia a good place to live in. Honorable senators opposite have no responsibility for the economy. It is the people sitting on the Government front benches who are charged with this duty. If honorable senators opposite were fair minded and would forget politics - I know that is hard to do - they would admit that the Government has done a good job. I am sure that when the Treasurer returns from America, as he will, I hope, shortly, he will have good news for us.
– You are hoping he will bring good news.
– I am sure he will have good news. The present indications are that this will be so. I am fortified in my optimism by what President Johnson said in his letter to the Prime Minister (Sir Robert Menzies). He said- -
In the present instance, we believe after careful review that our Balance of ‘Payments programme is not likely to have a serious adverse effect on the Australian economy. . . We believe therefore that this programme will not impose undue strain on Australia. But it is always possible that specific action under a programme of this sort can have consequences for a friend that outweigh their value to the general programme.
It has been reported that the Americans are prepared to receive the Treasurer with sympathy and understanding. The President continued - 1 have asked the Secretary of the Treasury and the
Secretary of Commerce to give a careful hearing to Australia’s view in any particular case which might be of this sort.
Honorable senators opposite who are attempting to interject would be squealing now if the Treasurer had not gone overseas. Urgency motions would have been raised in this House if he had not gone. I have said before that you cannot win against the Opposition. I appreciate that it is the task of the Opposition to keep the Government on its toes, but when honorable senators opposite interject they should not mind if I bite back. The Treasurer has gone to the United States as our capable representative. He has with him a team of people for whom I have great admiration and respect. I am sure he will put forward the best case possible. I am still optimistic that the American situation has taken a turn for the better, as evidenced by earlier statements I have made. I am sure that Australia will not suffer the dire effects that some people would have us believe are in store.
– Mr. President, after listening to the tail end of Senator Branson’s speech, I wonder whether the debate should continue. He said that we are holding costs in this country. We are holding costs! He could have fooled me, for one. He said that it is good news that the United States of America has taken the stand that it has and capped it by saying that the Treasurer (Mr. Harold Holt) is a capable man. If all those things are correct, I do not know why we are having this debate. The Treasurer seems to have belied the fact that he is a capable man ever since he took over the Department of the Treasury. If America’s stand is good news, I do not know why the Prime Minister (Sir Robert Menzies) should have written to the
President. Senator Branson said that we were holding costs in this country. Of course, we do not always accept statements made by Senator Branson, but if we accept this statement, it is hard to see why this debate should continue.
– Sit down then.
– Senator Hannaford says that I should sit clown. If the honorable senator stood up a little more and had more to say when he did stand up we might have the benefit of gauging his abilities. I suggest to him that if we cannot have the benefit of his ability we should have the charity of his silence while I have something to say. Obviously America’s action is serious for Australia. Otherwise, the second most important member of Cabinet would not be visiting America. I fully agree that he should visit America; that is the very place he should be tonight. If America’s action were not serious for us, the Prime Minister would not be writing urgent letters to the President. The situation would not have arisen but for the Government’s laissez-faire attitude of sitting and waiting until it is kicked and pushed into acting. The Government seems to have forgotten the meaning of initiative. Its electoral victories have influenced the attitude of Government supporters. Events are moving too rapidly in world politics today for that attitude to be adopted.
On 4th August 1964 the United States Senate passed legislation to introduce an interest equalisation tax. From the point of view of the United States, this action was taken for very good reasons. I have no quarrel with the legislation. I shall analyse it very briefly. I do not wish to go over those points that have been discussed here today, in the Press and by very responsible people, not the least of whom are members of the Australian Labour Party. The Leader of the Australian Country Party (Mr. McEwen) has very graphically said on more than one occasion that we are selling parts of the farm every year in order to live. That statement is so graphic and literally true that it ought to be understood by everyone.
This debate is taking place tonight because the United States has become alarmed at the outflow of dollars from that country to all parts of the world. Amongst the many actions taken is the one which I believe to be the most important - the legislation introducing in the United States an interest equalisation tax. That action has thrown some alarm into the Australian Government. Evidently Senator Branson does not share the concern of the Government on this point. It is not a new step and it is to the disgrace of the Government that it has been caught flat-footed. The Treasurer has been sent to the United States handicapped, with one hand tied behind his back. He has been placed in this position because Government supporters have refused to listen to even the most cautious questioning on the matter of overseas investment in Australia.
The legislation relating to an interest equalisation tax in the United States of America dates back to the late President Kennedy who first sent down to the parliament of the United Stales the suggestion that such a tax be introduced. Because of the way in which the American parliament and the American community work, it was not until 4th August 1964 that the legislation was passed. As 1 understand it, it ceases to operate in 1965 unless the President exercises his power to extend its operation. The necessity for such legislation arose because of the tremendous and unusual position that the United States has occupied in the world community since the end of World War II. Never before in history has there been such an outpouring of wealth from one country into other countries without any great reward or remuneration in return. The course of action of the Americans has been influenced by political purposes which are beyond the scope of this debate, but in terms of pounds shillings and pence on the balance sheet they have not looked for return or reward.
The interest equalisation tax legislation has been the subject of reports since 1963, mainly because it carried within it provision for retrospectivity, or retro-activity as the Americans call it. It has been of interest for a long period because of its effect on borrowings in the United States. At first sight, one is inclined to be fooled by the legislation. It is designed to raise the cost of borrowings in the United States by 1 per cent. To those of us who are tyros in the field of finance, 1 per cent, does not seem very much of an increase, but evidently it is quite a lot in the field of international borrowings. The legislation was introduced because the American Government believed that it would bring the cost of borrowing in the United States to about the European level, which meant that there would be no great advantage in borrowing from American sources of finance. Because of rapidly changing events in the world today, I always find it tremendously difficult to keep fully informed at all levels of international politics and finance. Countries we set out to help about 20 years ago - just after the end of World War II - today are lending to other countries. It is very difficult to think of a rise of 1 per cent, as representing a lot of money. But apparently it does represent a lot of money. The raising of the rate has been designed to bring the cost of borrowing to the European level in an effort to arrest the drift of dollars that has been brought about by all sorts of things, but mainly by borrowing from the U.S.A. Because of the peculiar type of debate we have in this place, I do not know whether the Minister will reply; but if he does. I should like to know whether, if the Americans are right in saying that this increase of 1 per cent, will bring them more or less to a state of parity with the other lending nations, particularly the European nations, it will affect Australia to the extent we believe and about which we are worried. I should like the Minister to indicate whether, if the increase of 1 per cent, in the borrowing rate on the American market will bring the position into parity with that of Europe, it would not be just as easy for us to get the money we need from the European market. Such a suggestion seems so simple, of course, that I do not fall for it. I repeat that I should like the Minister, who has tremendous resources of knowledge available to him, to give us some information on this point.
– May 1 say for your information that, if I understand the situation, the dollar loan that is being negotiated at the present time is being taken up in New York mainly by European subscribers.
– That is another thought. Money is flying back to the American market. This matter is so interesting that I should like to have a studied treatise on it presented to us.
Of course, the present situation in America is not new; it is the culmination of a series of debates on that country’s balance of payments. We have been reading about it in all sorts of journals for a long period. We have read of appeals to tourists not to spend so much money overseas. Five or six years ago some restriction was applied to the importation of dollars by members of the American forces in Germany and their wives and families. Senator Fulbright made this graphic appeal: “If you intend to gamble, why not spend your money in Las Vegas rather than in Monte Carlo? “ I do not know what Prince Rainier said in reply. In these things there are always two sides to the story. Senator Fulbright said, in effect: “ After all, you are making the dollars in America. Why not spend them in America? “ Over a long period an appeal has been made to the Americans to restrict the outflow of dollars by voluntary effort. The Great Five Hundred - banks and other financial institutions - have said: “ We will voluntarily restrict our lending outside the American continent “. On top of all this, America has levied the interest equalisation tax in an attempt to restrict the outflow of dollars.
When we look at the recent decision of the President of the United States in that context, we realise immediately that the problem is vastly different from merely being one of American money coming to Australia. America has not aimed its recent action at Australia. As I have indicated, America’s action has been directed to the outflow of dollars from that country and to her own balance of payments situation and has not been aimed particularly at Australia. I suppose if I were a Japanese or a Mexican I would view the position as would a Japanese or a Mexican if America’s action affected either of those two countries. But being an Australian, I see Australia in the peculiar position of trying to plead a special case, at the same time realising that this action has not been aimed individually at Australia. If I were an American, I would certainly be worrying about the current situation in America, just as I would worry if the same situation arose in this country.
The countries chat subscribed to the Bretton Woods Agreement agreed that dollars and gold would be interchangeable. As a Western Australian, I am always interested in the subject of gold, even though I may not be interested in it in the same way as are other honorable senators from that State. During the 1920*s, after the First World War. America bought gold on all the world markets. A/though she was hoard ing gold, nevertheless she was giving great help to countries that had been ravaged by war. But after the Second World War a different set of circumstances obtained. America then started to pour her dollars into other countries, not only under the Point Four and Marshall aid schemes, but also in the form of investments. Then, as I was about to say earlier, we had the Bretton Woods Agreement under which the United States of America - I stand to be corrected on this matter by the purists - virtually set herself up as a world bank. She said she would buy gold at 35 dollars an ounce, or 3,500 cents as in the wording of the Bretton Woods Agreement. The purists might not agree that this was a banking activity, but it seems to me that America then took over a tremendously important function of banking and in effect set herself up as a world bank.
So after the Second World War we did not run into a world depression as we did after the First World War. Instead, prosperity bloomed. Many countries - West Germany and Japan immediately come to mind, but others enjoyed the same benefit - were brought into a state of prosperity because of the outpouring of American dollars. Then they started to send the dollars back to America to buy gold. That situation has been accentuated recently by the decision of France to hold a very small reserve of dollars and to buy all the gold she can possibly lay her hands on. The situation becomes alarming when it is observed that over a certain period about two-fifths of the reserves of gold have been haemorrhaged away from Fort Knox. The reserves have dropped from 25,000 million dollars at the beginning of the period in question to 1 5,000 million dollars at the time of the last survey about which I read. I may be a couple of years out of date. It is not unusual for me to be that much out of date; it is rather difficult to keep up to date with the latest figures. If my thesis is accepted, then in effect there has been a run on a world bank. It seems rather silly to say that if this state of affairs were allowed to continue America would be bankrupt. Such a statement would be ludicrous.
Now we have suddenly had thrust on us the decision of America to introduce legislation to deal with the balance of payments situation. Her leaders have appealed to tourists, to soldiers overseas and to the big business interests to impose voluntary restraint.’ As any Prime Minister would do, the present Prime Minister (Sir Robert Menzies) has placed before President Johnson personally the situation in which Australia finds herself. He has drawn attention to the obvious features of the situation. He has pointed out that Australia is a large country, that we have great distances to travel, that we have a sparce population, that we are a great importer of capital and that we have to rely heavily on capital from overseas because of our immigration scheme. He has pointed out that we occupy a peculiar position in world affairs because of our situation in the Pacific area and that we are allied to America and Great Britain in very many ways. He has pointed out that America’s action could have an adverse effect which would spread beyond the confines of Australia. The Prime Minister was not drawing attention to anything, that was novel or new - rather did he have a duty to do so - when he stated in his correspondence, which Senator Branson has quoted, that America has placed embargoes on the importation of our wool and minerals such as zinc and lead. The same sort of thing hangs over our head in relation to meat and sugar and other exports which are vital to us. I think it is something that this Government has not appreciated over the years. It was emphasised when it appeared that Britain would join the European Economic Community two or three years ago. It was then said: Unless we export we die. In past years there was a slogan: Populate or perish. I think today the appropriate words are export or perish. The incidents that occur in the international field bring home to us day by day how true that statement is. We have to realise that, when we put up propositions to the American people and to President Johnson the situation which arises is similar to that which arises with every law that is passed in Australia. When a law is passed people try to become exempt from its provisions, and as sympathetic as you might be, if you exempt them you defeat the purpose of your law. You just do not get anywhere.
I suppose that every honorable senator has realised that that is true of the call up for national service. I did not know that so many people were against the call up of young men until the authorities began to call them up. Perhaps some of them were the sons of people who now oppose the scheme. You pass a law and you think it is a good law. You realise, that it impinges upon the interests of certain people, but if you are sympathetic enough to try to help all of them, the law will’ become completely invalid.
The Australian Government has never faced up to the question of overseas investment in Australia. Nobody in his senses would say that there should be no overseas investment in Australia, but voices have been raised concerning the problems associated with it over a long period of time. The Government has turned its back on the difficulties that could arise. Now the Americans have thrust them before us. In America today people are asking what the effect of the measures will be. Some critics say that they will have no effect and that it is a mere tampering with the situation. I do not accept that argument because I think the Administration would be aware of what it is doing. But if that is correct Australia is in even greater danger. If this law does not work and if the actions of the American President are not effective, obviously the Americans will have to resort to other measures which could be more severe. We may then be back here in a few months time debating a far more serious situation.
If there is to be a gradual slackening off and if there is to be a limit to which we adjust ourselves month by month or quarter by quarter, we shall not have a great deal to worry about. We are a pretty adaptable country and we will be able to adjust ourselves to the situation. But if there is a sudden brake, and there is the question of servicing American industrial organisations in this country, that will be a different state of affairs. I do not know that even the Government has accurate knowledge of the amount of overseas investment in Australia or the amount of money it is costing to service that investment year by year. I do not think the Government has that information because it has shut its eyes to this situation over a long space of time. It has always refused to inquire into it although it has been asked to do so by many responsible bodies in Australia. If the situation I have mentioned should arise, we will be in much more difficulty than we are tonight. If America achieves the effect that it desires, it will have a very marked effect on our trade and commerce in the international field. I do not think we can look at the United States as being merely another trading partner. Because of the peculiar and important situation that the United States holds in the world today, I do not think it is a question of the balance of payments between one country and another. Any action which the United States takes must have a marked effect in whatever sphere it operates.
We have seen the effect of its actions in the field of international affairs and in the field of finance. We must ask ourselves how the recent actions will affect commerce and trade over a period of years. I do not think there is any doubt that, having regard to the rip-roaring state of the economy of the United States, they could have a very marked and sudden effect on Australia, as well as on other countries. I think that you, Mr. President, will appreciate that this matter challenges the whole situation which the Bretton Woods Agreement established. By that agreement the United States became almost a banker. It guaranteed to buy gold at the fixed price of 3,500 cents and to sell it at the same price, leaving it open to the whim of countries to make use of that arrangement as they saw fit. In 1944 we could not visualise that countries such as West Germany and Japan would recover so rapidly and make such tremendous economic . progress. If we look back over the years we see the thrilling expansion that they have made. In .1944 it was not possible to visualise that West Germany or Japan would recover so quickly or become so important in world affairs.
– Where did they get their capital?
– I think the honorable senator is agreeing with me that their capital originally came from America. Now there is the reverse position. They are buying gold from America and using, as it were, the result of the dollars that America sent them, to do so. The Americans are placed in a very vulnerable position. The recent action of the United States may lead to all sorts of interesting situations of which we are probably not aware today. Let us consider the position of the International Monetary Fund and the World Bank and the countries which they were set up to help. I suggest that it might be better now to establish a fund for which many countries would provide capital. This may be the time to begin to relieve America of” the necessity of providing funds for international projects and for many other countries to subscribe to a common fund.
The situation that we are facing now may recur in six months or some other period because of the outpouring of dollars. I have dealt briefly with the general situation and the reasons which prompted the Prime Minister to write to the President of the United States. I entirely agree that Mr. Holt should visit the United Slates. Senator Branson seems to think that there is not much for us to worry about.
– I said I am optimistic.
– 1 do not think thi honorable senator is optimistic; I think he is misty optic. I come to the whole question of foreign investment. Over the years the Government has been content to let sleeping dogs lie. Like Micawber it hoped that something would turn up. After all, responsible people have been hammering at the Government’s door in connection with this matter. The Chambers of Manufactures play a big role in the Australian economy, and they have been complaining of this situation. The Deputy Prime Minister (Mr. McEwen) has said some very definite things about it over a long period of time. Although the Government does not often listen to the Australian Labour Party, that Party has set up special committees and has published papers on the subject because its supporters realised that there was a situation occurring which could be dangerous for Australia. We have mentioned the difficulties that could arise in connection with overseas investment in Australia. We have never challenged it. As I said earlier, nobody in his right senses would suggest that a young and expanding nation should not go out and get what it needs. It is pretty obvious that one of the post-war problems in Australia was to get hold of men, materials and capital. This is an old problem that has arisen in all economic circumstances since time began. We went after men by embarking upon a great migration programme. I suppose if the figures were taken out it would be shown that our immigration programme was greater than that of America at the time when most people were migrating to that country. I think that pro rata our effort has been greater thai that of America. This policy has been carried on by successive
Governments and successive Ministers almost without challenge. We have all agreed that people must be poured into this country because we have not the manpower and material to develop it and to build it into the great nation that we know it will be. We have never said that because we have not the materials in our own country we should do without them. If we have not had the knowhow, we have imported it. In trying to get the men that we need, it seems now that we have not done well enough, particularly in my own State, Western Australia.
We have sought materials and capital. Because it has been impossible to find these in our own country, we have moved outside our own borders. We have encouraged immigration because we knew that from our own resources we could not encompass the building of a great and powerful nation, particularly in view of oar international responsibilities and our peculiar position in the Pacific area. If we did not bring capital from outside Australia we would have to reduce our standard of living and our rate of development. Even then, we would probably find that our capital was completely inadequate to maintain minute development and a humble standard of living. There has never been any argument about the fact that we ought to bring in capital from overseas.
After all, in bringing in capital from overseas, what did we do? We said that we were going to race ahead with the development of this great country in this generation but that future generations would have to bear some of the burden. As critics of the Government, we have said that it should have been doing this more intelligently. If proper cognisance is taken of the way in which this capital is dealt with, when our children and grandchildren face up to the burden that we place on them the burden will be pretty well non-existent. If we employ the capital in the way in which capital can be employed today, with the benefit of the tremendous knowledge that science and education have given us, the burden will not be very great; it will be almost negligible.
The crux of the matter is not whether we should get capital from overseas. Nobody to whom I shall ever listen has ever challenged the need to do this. Obviously, it is as necessary to import capital as it is to import men and materials. We say to prospective immigrants that they must measure up to certain standards. We are the receiving nation and we say to them that they must have certain standards of decency and they must not have criminal records. We say that they must have certain standards of health and hygiene. In relation to immigration from southern European countries, we have been even harsher. We have stopped migration for a certain time and we have restricted migration to certain classes of people. I suggest that an attitude akin to that should be applied to capital. All of this has gone on for a long period. Nothing that I am saying is original or new. The United States of America has thrust this situation on our plate. I regret that this Government must have things thrust onto its plate. It has grown a little lethargic because of the unwisdom of the Australian people in continually re-electing it. It has lost initiative. The Government does not appreciate the tremendously important situation in which Australia is today. This matter has been thrust onto the Government’s plate. All that I do tonight is to plead with the Government not to put a serviette over the plate and have it taken to the most remote kitchen that it can find, never to look at it again. I sincerely hope that when the Treasurer is pleading the case in America, he will remember the voices of very intelligent people in Australia who have been putting the point of view that dangers are inherent in imported capital.
When travelling in an aircraft yesterday, I read a report which stated that the Prime Minister (Sir Robert Menzies) had said that he had had great fun at election time, asking the workers in the Ford factory at Geelong whether they really did not want overseas capital in their industry. In other words, according to him, he was asking: “ Do you people not want your jobs? “ The Prime Minister is far too intelligent a man really to mean that. He was missing the point, either deliberately or foolishly. I trust that it was deliberate, for the sake of politics. The jobs of men who are working under American capital for the time being would be just as safe if there were an Australian capital content in the organisation. Soap manufacturing organisations in Australia are largely controlled by overseas capital. Are the workers in those organisations worried about their jobs? Would they not be just as well off if there were an Australian capital content in the organisations? Would not the worker, whose son was undergoing tertiary education, be happier if he knew that that boy could finally rise into the top echelons of these companies? There is a great danger that he will not be able to do so if there is complete control by overseas capital. Would not that worker be just as happy, and would not his job be just as safe, if this money, instead of being channelled into the soap industry in Australia, were channelled into industries which not only brought profits to the investors of overseas capital but also brought to this country knowhow which for the time being we cannot provide.
There are two poles to this problem. At one pole the policy would be to allow the unrestricted investment in Australia of overseas capital. We would develop this country as rapidly as possible and probably in the final analysis make ourselves safe from invasion and a greater ally of our great partners, the United States of America and the United Kingdom, and of the other countries in the western world that want to stand with us. That is one pole; I do not know whether it is the right or the left. At the other pole the policy would be to have no overseas finance. If we allow capital to come in without restriction, this will be a new form of colonisation. If unemployment comes .throughout the world, such as we had more than 30 years ago - I pray God it does not come - it will follow as surely as night follows day that those who put money into Australia will demand that their people and their sons take the jobs in the top echelon. This could be, in the final analysis, a new colonisation. I think the good sense of the Australian people will never let either of those things happen. On the contrary, I think they will steer a centre course. But that is not the picture that the Prime Minister was trying to draw. He said: “ There will be no jobs for you in the Ford factory. I get a lot of fun out of this “. I admire his sense of humour when he gets fun out of a situation such as this, because if, the ‘great might and economic power of the United States began to collapse Australia could very quickly be caught in the vortex of the whirlpool that would result.
For a very long time, not only members of the Australian Labour Party but many other people as well have appealed to the
Government to take a serious view of this situation and to look at the economic circumstances which have flowed from foreign capital coming to Australia. We have had to criticise the Government, as its own supporters have had to criticise it because of its attempts to control the economic situation in Australia. We have appealed to the Government to take some interest in this problem. We have based our appeal on the lowest level. We have asked the Government to conduct an inquiry into the matter, to obtain the relevant statistics, to find out how much money is flowing out of Australia by way of servicing loans, to find out where foreign capital is invested and to find out whether foreign investors are bringing in know how - something we have not got - or whether they are using their funds only to take over Australian industries.
I remember something that was hushed up very quickly on the eve of a recent election. The Press carried a notice to the effect that two Hong Kong millionaires were forming a consortium to take over one of the Broken Hill companies, I do not know whether it was Broken Hill North or Broken Hill South. As I have said, the proposal was hushed up and no one heard anything further about it. Obviously if people form Hong Kong with no knowledge of mining took over, merely by the weight of money, an industry which had been developed as a result of our engineering and mining skills, very little good would flow to the Australian people apart from the shareholders who sold out to the people from Hong Kong and made a good deal of money out of the sale.
We have heard people say that we must have technological information, know how and foreign capital pouring into this country. I mentioned a little while ago that the Government should be looking at the timing in this instance. After all, when it comes to politics the Government is a great master of timing. It ought to be looking at the timing in this instance. There is an argument that may have been valid in the years after the war, from 1946 onwards, but is it so important today? Is it important that there should be such an unrestricted flow of capital into Australia at this time? After all, we have developed rapidly in Australia. Such commodities as plutonium are controlled by an act of the Australian Parliament, and you could not get anything much more important than that. We could be very much more selective today than we were 15, 12, 10 or even 8 years ago. The situation today is vastly different from what it was then.
I have heard members of the Liberal Party say that if we dared to impose a control or a restriction on foreign capital, it would fly away to other countries. I do not believe for one moment that that would happen. I have a profound respect for the people who invest motley. They have a sensitivity about what they are doing that bewilders me. They will come to Australia to invest their money only if this is a nation in which they want to invest. If they do not come here, it will not be because of some minor control, restriction or channelling of money. They will refuse to invest in Australia only when the deal that they can get here is not quite as good as the deal that they can get in other countries.
What has Australia to offer? We have many things that most countries in the world do not have. For decades we have had stable government in both the Federal and State spheres. We have natural resources which many countries do not possess. We have a literate people. We have a standard language. That is important - much more important than one would think before one comes down to the mechanics of doing business. We have people who will honour their contractsThere are not very many nations in the world where that state of affairs exists.
Let us consider the changing situation in Africa, one of the places where British capital, particularly, and a good deal of American capital also have been invested for decades. Investment in Africa cannot be compared with investment in Australia because of the political situation there, because of the racial questions which remain to be solved and because of the problems which the people of Africa are battling with today and which, thank God, we do not have to face in Australia. Instead of becoming wider the area of investment for the great capitalists of the world is diminishing. Do not believe that they will refuse to invest in Australia if we stand up to them and say: “We want to channel your money into certain areas “. They appreciate and respect a country which approaches them in that way. They under stand the position far better than we do. Surely this is a positive form of direction or control, if one wants to use that dirty word. Surely this is a form of action that can be used legitimately by any Australian Government which is concerned about the future of Australia and the Australian people.
The suggestion that controls frighten away investors is not valid. If you examine the countries into which money is being poured today you will find that many of them which occupy a position not nearly as favourable as does Australia are laying down very rigid controls. In spite of this they are still obtaining vast sums of money. In New Zealand the Government has an absolute right of veto. If it wants to veto something, it does so by the authority of the Parliament of New Zealand. India and Pakistan are two countries which many honorable senators opposite have visited. They understand the situation and if it were within their power they would tomorrow feed the starving people there. India and Pakistan are crying out for development but they have imposed the most rigid controls on foreign investment. The Japanese Government looks very closely at any outsider who seeks to invest in Japan, and only on rare occasions will it allow the investor to exercise even a 50 per cent, control of the subject of the investment. The degree of control is a matter for decision solely by the Japanese Government. Most investors have about 30 per cent, or 40 per cent, control.
I am annoyed by the policy adopted by General Motors-Holden’s Pty. Ltd. I think I am right in saying that this company will not allow Australian investment because that is against the policy of the parent company, which has its headquarters in New York. I could understand a company adopting that attitude if it were battling in a country in which the political situation was not stable and if it were worried about whether its factories would still be there in 10 years time, if it were worried about whether its employees would sabotage its production and about whether a coup would overthrow the government overnight and wipe out the company. We have seen that happen in so many countries that I need not mention them. But I do not think that the very rigid policy being applied to many countries ought to be applied to Australia.
India is a country which you would think would go down on hands and knees to obtain foreign capital but she has laid down very firmly the degree of Indian capital to be employed in such international organisations as the International Harvester Co. and Parke Davis. It is apparent Chat you will get more respect if you stand up to international investors and say: “ You may invest in our country with profit to yourselves but with great advantage to the country that we are governing “.
One looks almost in vain through the statutes of Australia to find legislation relating to overseas investment. It is true to say that virtually there is none. The Broadcasting and Television Act provides for certain things to be done if there is a change in the articles of association or the memorandum of association of any broadcasting or television station. If there is a change in the shareholding it must be approved by the Minister. That applies to individuals in Australia as well as those from outside. Under the television legislation, no more than two television stations can be owned legally by groups from within or without Australia and a non-resident of Australia cannot hold more than 15 per cent, of the shares in a television station.
Quite rightly and properly, we have set up the Australian Atomic Energy Commission which has controlled uranium, plutonium and thorium, the elements which are the basis of atomic energy. Thus a monopoly over those minerals is held by the Commission sponsored by the Government. I do not know how that fits in with the anti-Socialist ideas of the Government. Certainly I do not hear any dissenting voices from the Liberals on the Government side. If one studies the companies acts of the Australian States which are pretty well standardised now, one does not find any discrimination against foreigners. In other words, so far as I know we are the most open country in the world for the investment of foreign capital.
I hope we can take full advantage of the hours we have to spend today discussing a situation that has been thrust upon us and I make this point: Is it not nearly time that the Commonwealth Government and the State Governments got together and formed a body of unanimous opinion in chasing overseas capital? Today we have the ludicrous situation in which Treasurers or representatives of the various States chase capital overseas. What must be the reaction of people in the Middle West of the United States of America, deep in the heart of Texas, in England or in Europe when somebody appears and says, “ I represent the north of Queensland “ or “ I am interested in the south west of Western Australia “? I do not know what I would think if somebody said to me, “ I am not here to represent India but Nepal “.
Let us suppose the Premier of a State of Australia approaches somebody overseas and says, “ If you come to my State I will give you free land, an allowance for capital equipment before you start and special concessions in other ways. I will see that you have a railway, roads and footpaths.” The moment he makes that offer, that must be the standard for every other Australian State. Surely the Commonwealth Government should be taking the lead to ensure that we seek overseas capital on a uniform basis and not in competition with one another.
I realise that people might say that we are merely having a bit of local difficulty with the Americans. I do not think this is so and one man who realises that is the Treasurer. 1 think he is tremendously worried about this and he should be worried because of the things I have mentioned - ‘the neglect of these matters by the Government and the incipient problems associated with the investment of overseas money. In anticipation of some of the speakers on the Government side who will follow me and who might claim that the Australian Labour Party does not want overseas investment, I emphasise that there has never been a real challenge by us to the importation of men, materials or capital. We have merely warned of the possible end of this situation. We have seen what happened in the case of oil. There is almost 100 per cent, control of our oil from overseas. We have seen what has happened in the case of bauxite. We have probably the main deposits of bauxite in the world while the consumption of aluminium is growing day by day, particularly in the emerging countries. Geographically we art in a position to exploit this demand.
It is a good thing that the Treasurer should be in the United- States of America at this time. If I had anything to do with the Government I would have had him -there and he would have gone with a much stronger hand than he has. I hope he relies not on the attitude that has been adopted by this Government over a long period but on the warning voices that have been raised in an attempt to challenge the Government to do something and face up to the situation which could develop finally, particularly if there is an economic collapse overseas. This is something we have been able to dodge since the Second World War but the danger hangs over our heads like the sword of Damocles. I hope that the Treasurer remembers these warnings when he discusses the situation with those in the top echelons in the United States. I hope that in doing so he will realise that he is talking to people who want overseas profits and who also have a national interest when they invest in Australia. 1 hope - and I do not say this disrespectfully - that the Treasurer will not adopt the half-hearted attitude of the Prime Minister in emphasising, in relation to the embargoes against Australia, that export is our life blood. We were brought face to face with this fact when the United Kingdom looked like entering the European Common Market - and that issue is not dead. We have to impress on the American people that their great ally Australia is dependent on exports. We want to impress on them that we can do something about this problem of capital investment and can limit the amount of capital investment from the United States of America on our own terms to help the Americans. We have to show them that any limitation on their capital investment should be of benefit to them and we can do that by saying that we will take capital on certain terms.
We should ask America to examine very critically the embargoes it has placed upon investment in Australia. We should point out that we appreciate the problems that face America. We should ask the United States to regard Australia as a nation in a special position because of its situation in the Pacific and realise that anything America does to help us will also help other nations in this area and throughout th« world.
.- I shall deal with some of the matters raised by Senator Willesee in a moment but first I want to revert at least for a time to the polemics of other honorable senators on the Opposition side. I think it is fair to say that a great number of members of Parliament who are members of the Australian Labour Party literally hate the thought of any foreign capital - sterling, dollars, New Zealand, Danish or Dutch currency - coming into Australia.
– They do not like the capitalist system.
– They do not like to see coming into this country money that has been earned by capitalists. For some reason, dollar capital is a worse devil than any other form of capital. For some hours today we have had to listen to these polemics about the importation of capital. I promised Senator Willesee that I would deal with matters that he has raised but I must emphasise that we were not in a position to establish a capital market in Australia at the end of the Second World War to meet the situation that faced us at that time. There was not the capital in Australia. You could get capital internally by adopting the Russian system. If you ground your workers down and imposed the strictest rationing of food and consumer goods you could create a miniscule form of savings from every worker in the place and get an aggregate of capital inside the country. The best illustration of this process is the Russian illustration. Twenty years after the Second World War, Russia is getting to the stage where we were about 15 years ago. At the present moment, Russia’s aspirations, in terms of capital, are to reach the high level of consumer and capital goods and production that we have at this stage. Such is the Socialist paradise that Russians envisage.
– Different ownership, though.
– It is ownership that the honorable senator is worrying about, isn’t it? The honorable senator is not worrying about the happiness of the worker. That is characteristic of the Socialists. They do not care a damn about the worker. They have no interest in the worker. The worker is cannon fodder or industrial fodder. There is no Socialist country in the world that cares two pennyworth of anything about the worker. The worker is there to spend the whole of his lifetime grinding out savings so that the controllers and planners at the top can invest the money. That iswhat is happening in Russia and that is what is happening in China.
– Do not drag the level of the debate down.
– I am not dragging it down.
– The honorable senator is dragging the debate around the gutter now.
– I am putting in correct perspective this problem of how a capital market is created in one form. If you do not want to create your capital market in that way, you can create your capital market in the way that Senator Willesee describes. You borrow money, skills and knowhow in order to create a generative capacity in your own country, as Senator Willesee said, by ploughing back profit and by bringing out machines and knowhow. You eventually start to create a generating capacity for capital within your own country. Ultimately you reach that situation which Rostow, the famous American economist-adviser to President Kennedy, describes as the take-off situation where the economy can take off and begin to generate not only its capital needs but also the capital needs that it can export. There are only a few countries in the world which have reached that situation. There is Great Britain, the United States of America, and, we will say, West Germany and France.
– In other words, it becomes a creditor country.
-In other words it becomes a creditor country because it has reached a situation where it can generate its entire capital needs and have capital for export.
– There is some direction, also.
– There is direction here, also. The direction was that we had to import the capital, machines and knowhow in order to try to reach the situation where we could establish an economic takeoff of our own accord. I think we are proceeding somewhere along this way. But the claim is made that there is no control over the category and the nature of the category that is being imported. We have had to get capital where we can get it in a world that is clamouring for capital and at the present time is clamouring for capital investment. There is not enough capital to go round in the world today. We have had to take the capital that has been available to us. We have not been able to be selective in our capital imports.
– An honorable senator says “ nonsense “, but what if capital comes in and takes over an existing industry such as that mentioned by Senator Branson, the soap factory down in the electorate of the honorable member for Melbourne Ports (Mr. Crean)? That industry is taken over and it becomes a portfolio investment. This releases some native money or capital for reinvestment somewhere else inside the economy.
– Does that happen?
– Of course it happens.
– Tell us all about it.
– A claim is made constantly that no-one in this Government knows where the capital is going. Any member of this Parliament can obtain on application to the Treasury, the “ Annual Bulletin of Oversea Investment in Australia “. The copy I have is for the year 1962-63. The first item on page 5 is -
Annual Inflow of Private Overseas Investment in Companies in Australia, by type of Companies in which Capital invested, 1947-48 to 1962-63.
Table 4 on page 8 is -
Investment Income Payable Overseas by Companies in Australia, by type of Companies, 1947- 48 to 1962-63.
In chapter III, there is a whole series of tables relating to -
Australian Investment Overseas and Investment Income Receivable from Companies Overseas.
Table 12 is -
Annual Outflow of Australian Investment in Companies Overseas, by Type of Companies in which Capital Invested, 1953-54 to 1962-63.
In fact, there is close scrutiny of all forms of investment that takes place in Australia by importation and by natural generation. So it is nonsense to make the rhetorical remarks that have been made here tonight to the effect that no-one in the Government or in Australia knows where the end destination of capital is. The truth is that there ls a constant scrutiny kept on how capital has been employed and on the amount of profits which have been withheld in industry for reinvestment in industry and, therefore, reinvestment in Australia.
– Therefore, it is not really free.
– Of course it is not really free.
– That is what we are saying.
– What is claimed is that there is no control, supervision and overlooking of capital investment in Australia. The fact is that there is a constant overlooking and overseeing of capital investment in Australia.
– It is only Labour’s controls that you do not like.
– I am not talking about Labour control. I am talking about the situation that has existed since 1950 to the present time. Not only has this capital been invested when it has come in but as a portfolio investment it has released indigenous capital for other employment. There have been vast inflows of capital for development, as Senator Willesee has mentioned. It is not possible even at this stage of the game to be able to produce the capital market in Australia that will finance all the requirements for the development of this country. Senator Willesee knows this. He stated it. He is the only man on the Opposition benches in this Parliament who has said this. The rest of the Opposition members, as I have said, have been polemic against the importation of any capital at all because, in Senator O’Byrne’s words, it is owned by capitalists. What Senator O’Byrne says, I suppose, is that you can borrow money from Russia, China or somewhere else because it has a Socialist flavour as distinct from a capitalist flavour. If that sort of capital is coming to Australia it is to be welcomed; but if it has a private character about it, then it is dangerous. In essence, that is the only construction you can place on Senator O’Byrne’s remarks. I do not think he means that, but that is the deduction that has to be made because he said by interjection only a few minutes ago that his resentment against capital inflow into Australia is that it is capitalist money. That is what Senator O’Byrne said.
– Amongst other things.
– What about the International Bank for Reconstruction and Development?
– We will deal with the International Bank in a moment. There is a limited amount of money that can be borrowed from the International Bank and certain elements of capital investment which we require in Australia apply in that case. The Snowy Mountains project is one illustration. Australia borrowed 60 million dollars from the International Bank. The debt was incurred to meet a problem in relation to scarce dollar machinery and certain other aspects of the Snowy development. But there is a limit to the amount of money you can get from the International Bank.
We then come to the real nub of this matter. There have supervened circumstances which, I suggest, no one with all the wisdom of hindsight that is now being claimed by the Opposition, could have foreseen in relation to balance of payments. I think that, as an example of this, PierrePaul Schweitzer, the Managing Director of the International Monetary Fund could be a man who could be in a position to foresee these things if they are readily foreseeable, as they are claimed to be foreseeable by members of the Opposition. In the Supplement to International Financial News Survey of 26th March 1965, just one month ago, addressing ECOSOC, one of the elements of the United Nations Organisation, he said -
When I last addressed this Council in December 1963, I was able to report that a number of favourable developments in the world payments situation had been under way for more than a year. At that time, progress was being made in alleviating two of the major strains in the world payments system. First, the United States was meeting with encouraging success in its efforts to narrow the deficit in its balance of payments. Second, for the first time in several years there had been a strong and general rise in the prices of primary commodities to the benefit of the developing countries.
He said this only a few weeks ago. Later, having reminded his audience that that was what he said in 1963, he said -
Several industrial countries did indeed encounter difficulties with their balance of payments. Two of them, Italy and the United Kingdom, suffered foreign exchange crises and were given substantial international support in their efforts to overcome them.
At the same time, although the United States achieved notable improvements in certain elements of its international payments in 1964, its over-all deficit for the full year was not markedly lower than that recorded in 1963.
So it was only about a month ago that the Managing Director of the International Monetary Fund began to realise - with all his sources of information and his knowledge of the movement of capital throughout the world - that the situation was becoming dangerous. Of course, it was about this time that President Johnson made his announcement, requesting the repatriation of certain undistributed dividends and requiring American corporations and companies operating overseas to try to raise capital in the areas in which they were operating. So this balance of payments problem is one which does not relate to any misdeeds or any lack of supervision by this Government.
– That is rubbish.
– It is not rubbish. In the sterling area - sterling is one of the reserve currencies - we have consistently been carrying vast sums of money as part of the international reserves of Australia. In good years, we have been making the greatest possible use of opportunities to build up our reserves, so that, in the event of a situation arising which would cause the Australian economy to be pinched slightly because we dared not import machine tools or continue to bring in migrants at the rate we would wish, we could stand a siege for at least one or two years. That has been the position except in one year when I think we were caught rather unawares. Since 1950 the economy has been able to sustain a reasonable wage level. The number of people gainfully imployed in Australia, in relation to the overall population, is probably the best indicator of the success with which this Government has been able to carry through development with a great, deal of safety and with built-in safeguards all the way along.
Now there suddenly arises this balance of payments problem. Senator Willesee made a brilliant examination of Australia’s balance of payments problem, but, having done that, he dealt with the capital investment situation in Australia and tried to relate it to the balance of payments problem in which we are at present involved. Nothing that we have done “in the way of importing capital into Australia in the last 15 years has anything to do with the balance of payments problem in which we are at present involved. This is a separate problem - one which has come out of a clear sky, as it were. The best we can do is to try to mitigate the severity of what is being felt - felt dangerously and alarmingly, I agree - as a result of the need of the United States of America for a flow of dollars back to that country. I thought Senator Willesee covered that question very well. He mentioned, quite properly, that when the Bretton Woods Agreement was being negotiated in 1944 the late Lord Keynes - the great economist - advocated that a new international currency should be established to take care of international trade. After a great deal of discussion, that suggestion was turned down - mainly, I think, at the instigation of Mr. White of the American Treasury - and dollars and sterling were made the reserve currencies of the world.
But the Bretton Woods meeting did set up the International Monetary Fund to back the reserve currencies of dollars and sterling. Senator Willesee, with great clarity and objectivity, explained how the dollar, in particular, had been - to use his phrase - a sort of international bank of its own accord. He said that the Americans had displayed enormous generosity in rehabilitating the economy of defeated Germany. It has been said that that was a great miracle of recovery. They rehabilitated the Japanese economy by pouring millions of dollars into that country. Is is said that that was a miracle of recovery, but it is not such a miracle if you examine it carefully. The Americans poured untold millions of dollars into the underdeveloped countries of the world and made large gifts of dollars all over the world. They have kept the peace of the world at enormous expense.
There seems to be some sort of paradox in the situation that France is now acting in the way that it is, although it was prostrate in 1945 and was put back on its legs by American aid. Germany was totally rehabilitated through gifts of millions of dollars and the investment of millions of dollars in that country. These two nations have been gathering dollars at an enormous speed and in enormous quantities as a result of American investment in the area and as a result of spending by American troops there. They are. bulging with American dollars. 1 suggest it is the raid in a substantial! way on the gold backing of dollars by these two countries that is the cause of the balance of payments problem in which we are involved.
As Senator Willesee said, President Johnson had to make a general rule. He could not recommend to Congress that it pass laws itemising the requirements which have to be met in every country of the world. He laid down three broad categories. Canada was put in a special category and the underdeveloped countries were put in another category. He then said that American companies operating in other countries had to remit some of their undistributed profits and to try to raise some of their capital requirements in the countries in which they were operating. I think that was fair enough. It has already had a marked effect in Europe, because the reflow of dollars to America is going on with great speed. I think that General de Gaulle, who sought to put himself in a position where he could begin to use American dollars and gold as another element in his power play, is probably feeling a bit sorry for himself at present.
We have to sweat this out. The Treasurer (Mr. Harold Holt), at the behest of Cabinet and with the encouragement of the Prime Minister (Sir Robert Menzies), has gone to the United States of America to say that we think we occupy a special position in relation to the discretion which is available. Senator Paltridge, the Leader of the Government in the Senate, has been abroad in the last few weeks and has accepted obligations of millions of dollars for weapons systems which we have had to buy for defence purposes. If for no other reason than that, I think the United States of America is bound to give us some consideration. The purchases we have made for defence are as much to America’s benefit as to our own. I think we will get some consideration. If we do not, we shall bc faced with a deficiency in capital requirements equal to a normal year’s capital inflow - something in the vicinity of £200 million a year - and this will place a strain on the economy. It will obviously place a strain on the economy if we have to find £200 million a year of fresh money in the capital market in Australia. I do not care what any member of the Opposition says, it would not have been possible for us to find an additional £200 million of capital in any year since 1950. I do not know whether it is possible to do so today, but it may be necessary to find an extra £200 million or slow down our rate of development. In these circumstances we have the option of deciding where this slowing down of our rate of development is to take place - whether in the private sector or in the public sector.
This problem has to be met in the future. To examine it at length at present would be speculation, because until we know what are the results of the Treasurer’s applications and supplications in Washington, it is not much use canvassing the matter. An obligation of Australia is involved which has never been admitted by any member of the Opposition,, either here or in another place. As a member of the sterling area, we have had an obligation to maintain our balances in sterling without embarrassing sterling in the period when it was under its severest strain - from November of last year to the present time. The ability of the Government to manoeuvre internationally in economic and financial terms had to be at least congruent to the problem with which the Labour Government in Great Britain was faced and is facing at the present time. This is true because the greatest underwriter of the sterling area since 1945-46 has been Australia.
We are in a situation of some difficulty if, in truth, the fraternal party - fraternal in the Opposition sense - in Great Britain is doing what appears to be suggested by Mr. Brown, the Minister for Economic Affairs in Great Britain. In last Saturday’s edition of the “ London Financial Review “ Mr. Brown is reported as having sent a letter to 300 companies regarding their overseas investments and asking for the remission of undistributed profits. It is reported that he has asked the companies to borrow capital on the local market if additional capital is required. So we have had the situation where someone has seen a little further than someone else. For example, the AngloIranian Oil Company went on the Australian market for £10 million and got it. A few weeks later Vickers Ruwolt Pty. Ltd. announced that it would float a loan of £H million. An illustration that the Government has been watching the situation lies in the fact that, at the Government’s direction, the Reserve Bank has directed the trading banks to inform it of any attempt by overseas companies to raise capital on the Australian market for their own requirements. .In this narrow sector in Australia we cannot allow other countries suddenly to preempt our capital market. 1 suggest that the claims that constantly have been made here and in another place that the Government is recreant to its duties are wrong. The Government has watched the situation with the closest scrutiny. If it has been recreant it has been in only one respect. It could not have anticipated the situation that has arisen in the last two months where extraneous movements which not even the managing director of the International Monetary Fund could foresee have caused a raid on the two reserve currencies of the world.
I suggest that our situation is, perhaps, not as bad or as gloomy as it can be painted. lt can be painted in the most gloomy colours, but we still have reserves of about £800 million sterling. We have unused reserves and calling rights on the International Monetary Fund to meet contingencies that may lie ahead. It is certainly a time for great caution and a time for every element of production, distribution and exchange of commerce and industry to examine itself with the greatest care. It certainly is also a time for the trade unions which have been hacking at the cake for 15 years to realise that this is a period for caution, not only in the Government and capitalist sectors, but also in the trade union sector where the least sense of responsibility to the community is to be found at present.
We will meet this situation and survive it. 1 repeat what I said only a few minutes ago: The problem of capital investment in Australia is not the problem in which we are involved at present. Our present problem is our balance of payments which only in the most minuscule way attaches itself to the problem of capital investment. I believe that great wisdom has been shown by the Government. I believe it is in complete touch with the situation. If the worst happens and the United States cannot be shifted from its present stand, if the raid on sterling continues and sterling sags more, and if the British Government is tempted to strengthen its demands on the sterling area - particularly on Australia - there is sufficient will and power here to resist those demands.
– May I say at the outset that I greatly regret the opening remarks of Senator Cormack. I thought that the debate had been conducted at a pretty high level and I regret that a Victorian colleague should bring it down to the Russian-Chinese level. This point is always raised when the Government is in trouble. Senator Cormack surprised me as I thought he would be the last one to descend to that argument in order to bolster his case. I do not think that Senator O’Byrne, any member of this Parliament or anyone in this country would wish Australia to borrow from China or Russia, even if such a loan were available. I am not only surprised but hurt, knowing Senator Cormack as I do, to find that he would descend to that level.
Quite a number of remarkable statements have been made during this debate. As a rule we do hear remarkable statements - perhaps extravagant statements - when the Government finds itself in a predicament such as it is in on this occasion. One Government supporter when referring to immigration said that last year we brought into this country 150,000 immigrants. I ask him to examine the net figure and he will find that he is out by many thousands. I remember reading that about 140,000 people came here, but we are entitled to deduct from that figure the number of those who left Australia and the number of Australians returning from abroad who have been absent from this country for two years. It would be interesting to learn the net figure. Tomorrow, if I remember, I think I will put a question on the notice-paper so that we may learn what is the net figure. I should think that anybody who takes an interest in immigration would appreciate that the figure quoted by the honorable senator is very wide of the mark.
Senator Cormack seemed to me to complain about the Minister for Economic Affairs in Great Britain writing to hundreds of companies, bringing to their notice that they had undistributed profits in foreign interests and suggesting that in Britain’s economic hour of trial they should bring those profits home. The honorable senator cannot altogether blame a government for requesting that that be done. If the Minister for Economic Affairs believes - no doubt he does - that the bringing home of undistributed profits will help to alleviate the economic plight that the present British Government has inherited from its predecessor, then unfortunately we will be affected. I, too, would prefer that not to happen. One would have thought that the economic advisers to this Government would have had sufficient knowledge of the economic situation in Great Britain to know that sooner or later steps would have to be taken to save the £1 sterling. I am somewhat at a loss to know why anybody should complain about the government of another nation taking steps which it believes to be in the best interests of the people that it has been elected to govern.
My friend opposite has stated, in effect, that the workers should not apply to the Commonwealth Conciliation and Arbitration Commission for a fair share of the profits that are derived from the goods that they make. For one, two or three years - I stand to be corrected if the period is longer - the Government had a hold on the cost structure of this nation.’ Like others, I was very pleased that our cost structure remained comparatively stable for a period. It was not exactly stable, but was as stable as one could wish. However, in recent months it has not been stable. In the last quarter the cost of living in my own State of Victoria rose by half a crown. What does the Government expect the workers to do in the light of that fact? Does it expect them to be the only ones to tighten their belts? Are the workers not entitled to at least a fair share of the profit that is derived from their production? They will be lucky if they are granted a fair share, but surely there is no harm in their submitting a claim for it.
The Government cannot say that it has not been warned that sooner or later the effect of the importation of capital into Australia would have to be faced. This matter has been discussed at length in the Senate on at least three occasions. Figures released by the Commonwealth Statistician show that what he describes as investment income payable overseas by companies in Australia amounted to £97.6 million in 1962, to £127.8 million in 1963, and to £133.2 million in 1964. New direct investment in those years respectively amounted to £78 million, £126.1 million, and £131.7 million. It will be noted that in those years dividends paid overseas from investments in this country totalled £358.6 million as against new direct investments amounting to £335.8 million. In other words, there was a difference for those three years of £22.8 million. The bigger the industries in question grow and the more profits they make, the greater will be the extent to which they outstrip new investment. I say with great respect to Senator Cormack that this must affect our balance of payments situation. In the three years before President Johnson took action, the situation was affected to the extent of £22.8 million. To say that the repatriation of profits overseas has no direct effect is wrong.
Senator Cormack mentioned two British companies that are raising extra financein Australia. The same can be said of companies that have their headquarters in the United States. If these companies cannot get finance from the normal financial institutions of this country, they will pursue other means of getting it. For example, the General Motors Corporation has placed advertisements in the Press asking people to invest in that undertaking. Such an approach has two faults. First, it means that we do not get the investment capital that helps to correct our balance of payments situation. I am not blaming the Government for the position, but the facts are that ever since it came into office, there has been a difference of about £1,800 million between the value ofthe goods that we import and the value of the goods that we export. We have only been able to build up reserves of £700 million in London because of the investments that we have received from overseas. I think that we have borrowed about £800 million overseas, on which we pay £40 million a year in interest. I ask for leave to continue my remarks at a later stage.
Leave granted; debate adjourned.
Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Anderson) read a first time.
– I move-
That the Bill be now read a secondtime.
Mr. President, the Bill now before honorable senators proposes amendments of the schedule to the Customs Tariff 1933-1964. The Bill comprises three schedules with each schedule having a different date of commencement. For the assistance of honorable senators, 1 shall outline the subjects covered by the Bill as they appear in each schedule. The First Schedule deals with tariff changes arising out of recommendations of the Tariff Board on ginger, oil of ginger, oleoresin of ginger; dental chairs and units; and narrow woven fabrics and adjustable shoulder straps.
The new duties proposed for various forms of ginger will provide the Australian ginger growers with increased assistance against competition from imports. On ginger in syrup, for example, an increase from 9d. per lb. to ls. 9d. per lb. less 50 per cent, ad valorem is proposed. Dental chairs and dental units become free of duty under the British preferential tariff and subject to 7* per cent, most-favoured-nation rate following the acceptance by the Government of the Tariff Board’s recommendation that the protective duties should be removed. On narrow woven fabrics of cotton, increased duties of 324- per cent, ad valorem plus 2d. per dozen yards British preferential tariff and 50 per cent, ad valorem plus 2d. per dozen yards mostfavourednation are proposed. However, the duties on narrow fabrics of man-made fibres remain unchanged. Higher duties, based on a most-favoured-nation ra:e of 2d. per pair, are also proposed for adjustable shoulder straps of the type used for female underclothing. On hook and eye tape and on narrow fabrics of jute and hemp, however, the existing protective duties are being removed in accordance with the Tariff Board’s recommendations.
The Second Schedule provides for amendments based in the main on the Tariff Board’s recommendations in its reports on emery stones, oilstones and whetstones; processed continuous filament man-made fibre yarns; and butadiene and styrene butadiene synthetic rubber. On emery stones, oilstones and whetstones, other than those of the type used directly in the hand, it is proposed to replace the present combined ordinary and primage duties with new protective duties of 10 per cent. British preferential tariff and 22i per cent, most favoured-nation. In practice, the only change in incidence will be an increase of 5 per cent, ad valorem in the British preferential rate. On the recommendation of the Tariff Board, the present temporary duties are being removed from processed nylon and terylene yarns. These are yarns which have been subjected to special twisting, plying or texturising processes such as in the case of stretch nylon yarns. In the opinion of the Tariff Board, the Australian industry has recovered from the difficulties recently experienced and is at present able to cope with import competition without protective duties.
The Tariff Board report on synthetic rubber concerns products made by local manufacturers forming part of the Altona petrochemical complex. Butadiene is a chemical made from petroleum and is the principal raw material used to make styrene - butadiene synthetic rubber. This synthetic rubber, which is the only type produced in Australia, is also known as polybutadiene - styrene and is described under this name in the tariff schedule. No change is being made to the non-protective duties on butadiene but increased duties of 6d. per lb. are provided on forms and types of synthetic rubber which compete directly with Australian production of polybutadiene - styrene. This Schedule also incorporates a change which is not associated with a Tariff Board report. It relates to calcium carbide and follows the completion of international negotiations. Its purpose is to ensure the maintenance of an agreed margin of preference in favour of Canada and does not affect the current protective rates of duty.
The Third Schedule provides changes in duties based on the Tariff Board’s report on shotguns and parts, and incorporates some other minor changes to the customs tariff following the completion of a round of international negotiations. The Australian production of 12-gauge shotguns is to receive increased assistance by the introduction of duties of 15 per cent, ad valorem British preferential tariff and 25 per cent, most-favoured-nation for guns having a value of £32 or less. Above that value, the British preferential rate is gradually reduced to free and the most-favoured-nation rate becomes £8 each or 74 per cent, ad valorem, whichever is the higher.
Following the completion of the international negotiations, the mostfavourednation rate of duty on light-weight woollen piece goods is raised to 45 per cent. ad valorem to conform to the level of protection recommended by the Tariff Board in its last report on this industry. A reduction of 5 per cent. in the most-favoured-nation duties on motor scooters and non-electric typewriters was also made as a result of these negotiations. I commend the Bill to honorable senators.
Debate (on motion by Senator O’Byrne) adjourned.
Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Anderson) read a first time.
That the Bill be now read a second time.
Mr. President, this Bill proposes to amend the Schedule to the Customs Tariff (Canada Preference) 1960-1964 in respect of non-electric typewriters and is complementary to the amendments proposed in the Customs Tariff Bill (No. 1) 1965. The preferential tariff treatment now being accorded to Canada is being maintained. I commend the Bill to honorable senators.
Debate (on motion by Senator O’Byrne) adjourned.
Bill received from the House of Representatives.
Standing Orders suspended.
Bill (on motion by Senator Anderson) read a first time.
.- I move-
That the Bill be now read a second time.
Mr. President, this Bill proposes to amend the Schedule to the Customs Tariff (New Zealand Preference) 1933-1964 in respect of ginger in liquid and is complementary to the amendments proposed in the Customs Tariff Bill (No. 1) 1965. The preferential tariff treatment now being accorded to New Zealand is being maintained. I commend the Bill to honorable senators.
Debate (on motion by Senator O’Byrne) adjourned.
Senate adjourned at 10.21 p.m.
Cite as: Australia, Senate, Debates, 27 April 1965, viewed 22 October 2017, <http://historichansard.net/senate/1965/19650427_senate_25_s28/>.