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Tuesday, 25 November 1986
Page: 2696


Senator GRIMES (Minister for Community Services)(5.53) —It has been a long and complex debate over all these pieces of legislation. I will attempt to pick up the points raised by various speakers and answer them. There will obviously be more debate in the Committee stage when the amendments are brought forward. Senator Chaney, in speaking on the Subsidy (Cultivation Machines and Equipment) Bill 1986 alleged that the Industries Assistance Commission may have miscalculated the tariff equivalent rate of the bounty and that the bounty should be increased to 11 per cent. Some industry representatives have raised concerns about the way in which the IAC arrived at its proposed bounty rate for cultivation machinery. They have specifically argued that the calculations in respect of wharfage and customs clearance were overestimated. In support of these arguments they have submitted a small number of specific examples and comments from one customs agent.

These industry concerns have been discussed at length with IAC staff and, following re- examination of the basis for its estimates and after discussing these with a small number of importers, the IAC stands by its figures and in fact sees no substantive basis for significantly revising them. While there are differences between the IAC figures and the few examples proffered by industry representatives in support of their case, these have not been considered significant justification for varying the bounty rate arrived at by the IAC. One final point which Senator Button would like me to make is that even if the IAC's calculations on wharfage and customs clearance were out by the unlikely factor of 50 per cent, the bounty rate, following rounding, would still have been 10 per cent.

It was also suggested that the Government should consider extending the bounty to exports. Notwithstanding the Budget related reduction in bounty rates, the intention underlying this whole bounty exercise was to introduce a scheme which resulted in a level of assistance similar to that prevailing before the changes were announced. It was decided not to include exports within this scheme because to do so would have meant that additional assistance to that prevailing before the commencement date of the Bill, in 1986, would have been accorded this sector. This issue is one, however, that will receive close attention in the course of the review of the long term assistance requirements of the agricultural equipment industry sector which it is anticipated the IAC will commence in the first half of 1987.

Senator Chaney also sought an assurance that claims for payments would not be delayed. Claim forms relating to payments under this scheme are currently being drafted. The Australian Customs Service is aiming to have these forms available as soon as possible after this legislation has received royal assent. It is not anticipated that there will be any delays in the processing of claims. There was a request as to if and when a reference to the IAC on the long term assistance to the industry will be given. The agricultural equipment sector has not been subject to a detailed review since 1970 and it is the Government's intention to forward a reference to the IAC calling for a report on long term assistance requirements for this sector in the first half of 1987.

On the Bounty (Ship Repair) Bill 1986 Senator Chaney claimed that the bounty was just a blatant attempt to buy peace on the waterfront and to provide an incentive for unions to misbehave in order to extract a large bounty allocation. The ship repair industry has been of concern to the Government for some time. Following representations from the Australian Chamber of Shipping, the Australian ship repairers group and ship repair unions concerning the long term viability and poor outlook facing the ship repair industry, Senator Button established a working group in June 1984 to examine the industry and to report back on possible alternatives to assist its rationalisation and restructuring.

In his second reading speech he pointed out that the ship repair assistance package, of which this Bill is one element, resulted from the Government's consideration of the working group's report. It was not, as Senator Chaney has suggested, a result of the Australian Council of Trade Unions' ship repair campaign. The Government is well aware of the difficulties facing the ship repair industry, the significant excess capacity, the failure of the industry to invest in contemporary technologies and to adopt efficient work practices. Fluctuations in domestic demand have not provided a stable employment environment and have acted as a disincentive to investment. The introduction of this package is designed to increase throughout and provide a stable environment in which the industry can improve its efficiency.

Senator Button also mentioned that registration criteria to be specified in regulations will include codes of business and industrial relations practices. The Government considers that it is essential that these codes include the adoption by the industry of arrangements which facilitate improved work practices and labour flexibility measures to enable labour and capital to be employed more efficiently with less demarcation problems. An important precondition to the implementation of this bounty scheme has been the agreement by the relevant unions to end their ship detention campaign. Clause 11 of the Bill, however, which provides a unique power to unilaterally suspend the bounty should the ship repair retention campaign be recommenced, is designed to ensure that the agreement is upheld. There is certainly no incentive for unions to misbehave in order to extract larger bounty payments. Indeed, quite to the contrary, union misbehaviour may lead to the suspension of the bounty with the result that no bounty is or will become payable for any repair work commenced during the period of suspension. It should be noted that although the cessation of the ACTU's ship repair retention campaign is an important factor impacting on this industry's reputation as a repairer, it is only one element of the package aimed at assisting Australia's ship repair industry in becoming a viable, technologically advanced and export oriented industry.

On the Fertilisers Subsidy Bill 1986 Senator Chaney asserted that the original intention of the Bill was to give a consumption subsidy to assist farmers and that, therefore, the status quo should be retained. That is an interesting concept from a free enterprise person, but I accept that is what he is about. The intention of the subsidy is to increase the use of fertilisers.


Senator Crichton-Browne —Increase their use?


Senator GRIMES —It increases this intent, as the good senator says. It continues subsidies to the rural sector for consumption of fertilisers at $55m per year. It removes an inconsistency of Australia subsiding imports as well as giving bounty to domestic production, particularly at a time of severe balance of payments deficit, which I also understand was referred to by Senator Siddons and indirectly by Senator Crichton-Browne. It provides local manufacturers with indirect assistance through the potential to increase production. The Government, in reviewing the fertiliser scheme, has had to balance the interests of all parties involved-farmers, including the 25 per cent who do not use fertilisers, manufacturers, importers, taxpayers and unions.

Senator Chaney also asserted that the proposed changes will have an insignificant impact on the balance of payments. Each small saving made by the Government assists towards the goal of reducing Australia's balance of payments problems. More importantly, what message are we giving manufacturers? If we continue to subsidise imports, the message is that we do not care if manufacturers stay in business or not. Hence the legislation. Senator Chaney also asserted that the administrative mechanisms will not be as effective as imports in restraining domestic prices. It is a pre-condition of recognition of premises and of the payment of the subsidy that the Comptroller-General of Customs must be satisfied that the manufacturer is passing on the full benefit of the subsidy. I refer to page 5 of the explanatory notes, to clause 10 and to clause 22 of the Bill, which relates to the registration of premises.

Senator Chaney said that the Bill will adversely affect those farmers who must continue to purchase imports of high analysis phosphatic fertilisers. However, this problem will diminish. The manufacturers have already stepped up their production and have committed funds to increase their capacity. Nevertheless, other factors such as geography, climate, location of manufacture and ports and transport also impact on farmers' costs. It is important to note that all manufacturers have lowered their prices of all fertilisers and importers appear to be matching these prices.

Senator Chaney and Senator Siddons expressed opposition to the Minister's discretion to refuse registration of premises or persons where it is considered that such registration would not promote the orderly development of the industry. The Government is on notice that the Opposition is apparently opposed to this discretion and will be opposing its inclusion in the various Bills under consideration, which Senator Chaney has correctly identified as containing this now standard provision. Senator Siddons has also put the Government on notice that the Australian Democrats also oppose the provisions in their present form and will be moving a series of amendments to make the Minister's discretion reviewable by the Administrative Appeals Tribunal.

The Government remains committed to the continued inclusion of the orderly development provisions in their current form as a necessary facility to ensure that bounty assistance is available only to applicants who have made a clear long term commitment to the particular industry concerned. Given the monetary limits which are now universally placed on this type of industries assistance, the Government is of the view that unrestricted access to bounty to those who might have only a marginal commitment to the industry is entirely inappropriate. This discretion does not, as has been suggested, exclude new entrants to an industry from receiving bounty nor does it unfairly entrench existing bounty recipients. Provided new entrants are prepared to undertake the necessary commitment to the industry and meet the registration requirement, they will not be denied registration.

The discretion is designed to improve efficiency and competitiveness in the industry. Using the ship industry as an example, prior to the orderly development amendment to the Bounty (Ships) Act in 1985 there were over 90 registered shipyards; yet the available market was nowhere near sufficient to support that number. As a result of the combined use of the orderly development provision and the new registration criteria the number of registered shipyards has been reduced to 30 today and throughputs have increased significantly.


Senator Button —The alternative, Senator, is disorderly development.


Senator GRIMES —My Leader points out that the alternative is disorderly development. Because the discretion implements an important element of government policy it is also the Government's view that it is inappropriate to have the Minister's discretion independently review- able. To make the discretion reviewable would-


Senator Crichton-Browne —Hi, Solomon.


Senator GRIMES —I reckon that the honourable senator ought to ask some of his colleagues who have previously been Ministers what they think of that. I have a strange view that governments are elected to govern, not to be governed by the AAT. To make discretion reviewable would have the potential effect of frustrating high government policy and, as such, the Government relies on the acknowledged exception by the Administrative Review Council to the reviewability of administration decisions which this category of decision-making represents. It is for this reason the Government cannot accept restrictions on the discretion which the amendments proposed by the Australian Democrats would represent.

Senator Siddons raised a number of points on the Bounty and Subsidy Legislation Amendment Bill (No. 2) 1986 which I will deal with by indicating the Government's position on the various amendments to that Bill which have been circulated on behalf of the Democrats. I refer to the 20 per cent reduction in bounty. The Government cannot accept the amendments proposed to restore bounty and subsidy rates to their pre-Budget levels. Senator Siddons will be aware that Senator Button has indicated on a number of occasions that the reduction in bounty rates is a fiscal measure made to reduce government expenditure and for no other reason. In framing the 1986-87 Budget the Government considered a wide range of options for reducing outlays and exercising necessary expenditure restraint. It was the Government's view-it remains the Government's view-that such restraints should be borne by the community as a whole and a cut in bounty and subsidy rates is just one of the measures needed to achieve the Government's expenditure objectives.

I turn to share ownership schemes and the proposal to make bounty payments conditional upon the establishment of employee share ownership scheme. The Government cannot accept at this stage the proposed amendments with regard to these schemes. It is the Government's current view that the introduction of these and other forms of employee financial participation should be undertaken voluntarily following consultation between companies, employees and unions, rather than being imposed by government which would be the effect if they were made a condition for receipt of a bounty payment. It is important that employee financial participation schemes are considered within the wider context of more effective employee involvement. This is the subject of the policy discussion paper on industrial democracy and employee participation to be released by the Government in the near future. This paper has been designed to stimulate community debate and includes the issue of employee financial participation. We would not be in favour of pre-empting that process of discussion by indicating at this stage a final view on this issue.

I refer to the proposal to make bounty payments conditional on a 25 per cent local content requirement. Amendments to make bounty payments in 13 of the existing bounty and subsidy Acts conditional on a 25 per cent local content requirement cannot be accepted. Local content is already a feature of most bounties which are paid on a percentage basis of the in-house value added to the particular bountiable product by the local manufacturer. Those bounties commonly require a minimum of 20 per cent value added input by Australian manufacture in order to qualify for the bounty. Other bounties are specifically restricted to Australian products or processes specifically carried out in Australia, such as the Australian books in the Bounty (Books) Act 1969 or the printing of a pattern on fabric in Australia under the Bounty (Printed Fabrics) Act 1981. In addition, prescribing an arbitrary minimum threshold requirement for local content in the manner suggested might lead to the undesirable situation which was identified by the Industries Assistance Commission in its report on the metal working machine tools and robotics industries of 7 February 1984 and the old Bounty (Metal-Working Machine Tools) Act 1978 which had a 50 per cent local content rule. The Commission concluded that because of the local content threshold manufacturers were, at times, prepared to pay a premium for marginal components available locally just in order to qualify for the bounty. This was undesirable in the Commission's opinion as it effectively accorded the local component producers very high and unintended levels of assistance.

It has also been noted that policing local content rules is a complex and costly procedure which is made particularly difficult when imports are bought from merchants who source both locally and overseas. In the same IAC report previously mentioned on the old machine tools bounty, the IAC concluded that one of the significant disadvantages of that scheme was the local content rule which created problems for the administering department in determining the origin of supply of materials and components.

Other assertions were made about the Fertiliser Subsidy Bill 1986 which, I understand, will come up in later debate. I thank honourable senators for their contribution to this gripping, but very important, subject. I urge support for the legislation. I regret that some honourable senators have announced that they will not support all the legislation.

Question resolved in the affirmative.

Bill read a second time.