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Thursday, 10 March 1966

Mr ARMSTRONG (Riverina) . - I join in the tribute that has been paid to the members of the Vernon Committee who compiled the report that we are now debating. The report is the result of the endeavours over a long period of men who are leaders in their own fields. Much of the report, of course, was out of date by the time it was finished, but this is always one of the disadvantages of a report of this complexity which requires a large volume of data for its compilation. I intend to devote most of my time to chapter 10, which deals with the availability of credit. To some extent, the report deals with planning. It is often a little difficult to determine where planning ends and control begins. I, for one, do not think control other than to a very limited and wise extent is desirable.

I.   would like to draw the attention of the House to the matter of rural finance, 1 am reluctant to say this but it is quite remarkable as one moves around Australia to find that a large number of people have no conception whatever of what happens in rural areas. That statement is rather drastic but it is completely true. The spotlight has been put on rural finance now because the rural community is in the midst of one of the most disastrous dry periods which have ever been known in the history of Australia. In fact, if this dry spell should continue, it will follow what is the driest first year of a drought on record. People in quite high offices have told me that they cannot understand why people in rural industries should be in need now of liberal credit because these people have had 16 good years in which to put aside substantial reserves. This view, of course, is based on uninformed thinking. First, we have not had 16 good years. In Queensland and New South Wales there have been what I term several intermittent dry periods. These dry periods have had serious consequences. Secondly, as far as rural finance is concerned, after the wool boom in 1950 the cost structure rose to a very high plane and has remained there. This cost structure is a serious impediment to the establishment by people in rural industry of sufficient reserves to tide them over a dry period. Several other factors are involved. There is the turn around in land. The person who owned a holding a few years ago may not have possession of the land today. People have bought into other land. Another big factor in the continuance of the solidity of the financial position of family properties in particular is the matter of probate. I have mentioned before that probate is something that has destroyed the interests of quite a number of our prominent rural families in Australia, lt is interesting to note in this respect that what have been two of the greatest names in the merino sheep industry are almost out of that industry today. Probate has been one of the biggest factors in reducing the interests of these families in the industry.

Mr Nixon - Shame.

Mr ARMSTRONG - Yes, it is an insidious thing. Our economy is still basically a primary industry economy. Nearly 80 per cent, of our industry is based on our primary products. The report of the Committee of Economic Enquiry points out in chapter 10, paragraph 96 that great changes have taken place in this regard. This paragraph does not refer to primary industry only. The Committee reports -

Changes in the monetary field have been very marked in the post-war period, and we feel that there might now be considerable merit in instituting a further study along the lines of those carried out in the other countries mentioned.

The report mentioned the United Kingdom, the United States of America, Canada and New Zealand as major examples of countries which have investigated the credit system.

A marked change has taken place in the way in which moneys have been advanced to primary industry. While this is not a criticism of trading banks, the fact remains that the proportion of moneys advanced by trading banks to primary producers altogether compared with the amount advanced by pastoral houses primarily to wool growers but also to cattlemen has shown a marked change in the last 10 years. Without going into too much detail or quoting too many statistics, I mention that in 1956 the total advances to all sections of primary industry by trading banks was £213 million. The amount of money advanced at that time by pastoral houses was £74 million. The advances rose gradually. In 1965 the amount advanced by trading banks to rural industry was £292 million while £130 million was financed by pastoral houses. It is fair to say, of course, that some of the money advanced by pastoral houses would have been obtained from trading banks. I do not mean this statement to be a criticism of the trading banks, but I suggest that if credit had been extended more liberally in a great many cases to people engaged in pastoral and agricultural pursuits, to some extent we would have been able to obviate some of the losses which have occurred in breeding flocks and breeding herds.

There is another aspect to this matter. I am a member of a Country Party drought committee which recommended, in June last, the provision of long term credits to rural industries for their re-establishment and expansion. I am certain that I speak for all members of this House, and particularly for the members of my own Party, when I say that I was delighted to hear the Prime Minister (Mr. Harold Holt) announce on Tuesday night that $50 million would be available to trading banks for distribution to primary producers. I hope that, in the very near future, the basis on which that money will be advanced to primary producers will be stated more specifically. It is obvious that if the money goes into circulation it will not be of any particular benefit to primary producers. In times of drought the primary producer is not the best person to whom to lend money. But, whichever way we look at it, the man who has the herds and the flocks today is the man who will provide the basis for putting our economy back on to the level that it was. The re-establishment of people in rural industry is a vital factor in this regard.

Queensland has had relief rains and to some extent the position has been restored. But it is not completely restored. People engaged in rural industry know that this sort of thing has been going on for some time. It is not a matter of the assets a man has. It is just that there is no credit available. I can quote instances to illustrate this point. It has been said quite fairly that if examples of this state of affairs can be given to a governmental authority the case will be taken up. This is not something that any person who owes money to a financial institution is anxious to do. It must certainly prejudice his position. I can quote the case of certain people who have a property in Queensland. A recovery in the season has occurred there. Their property is quite fairly and conservatively valued at as much as £100,000. They owe £20,000 only on it. The wool firms are not able to finance them in the purchase of breeding stock. This is not an isolated case. There are many cases of this type. I do not make a statement that I have not investigated and that I do not know is absolutely correct. This is a matter which is of vital importance if we are to recover from the effects of the drought in the shortest possible time. We are not out of the woods in New South Wales at all. Finance is required to keep the interests of people in the rural industry on an even keel.

Mention was made by the honorable member for Canning (Mr. Hallett) and the honorable member for Robertson (Mr. Bridges-Maxwell) of the advances in science in this field. It is true that half the expenditure by the Commonwealth Scientific and Industrial Research Organisation on science is in connection with primary industry. But we come to another problem in this regard, although I am happy to say that it is being overcome. I believe that we are to give some assistance to the States shortly in connection with extension services. Science has made great advances and so has technology in enabling people on the land to increase production. But none of these advances is of any value unless the producer who is the recipient of this knowledge has the finance with which to put this knowledge into effect. This has been a tremendously limiting factor.

There is another reason why people engaged in rural industry have not big reserves. In recent years, we have seen the period of the greatest expansion in our history of our sheep and cattle numbers. Since the dry times of the 1950's, our sheep numbers have risen from 105 million to 165 million in the course of a decade. This increase has been achieved predominantly by good seasonal conditions. But it has been achieved through the benefits of science also. It is quite impossible for people - within reasonable limits at any rate - to put aside large reserves to take advantage of these great advances in science when they have also to spend large sums on their properties.

I should like to speak on overseas investment, which was referred to in the Vernon report. I am well aware of the great advantages this country has gained by bringing in capital, equipment and technological and scientific knowledge, but I think that the time has probably come when we must realise that we are no longer an adolescent country economically but an adult country. We might well, with great advantage to ourselves, form more partnerships whereby Australian capital can be given a greater opportunity for investment. It is fair to say that in a great many fields Australians are not interested in investing their money.

Mr Erwin - That is unfortunately true.

Mr ARMSTRONG - If it is true in certain fields, where the risk is great, it is proper that overseas capital should get the reward for the risk it takes and for the knowledge it brings into the country; but it is also fair to say that Australians are a little self conscious about the amount of capital they have to invest and the knowledge they have. In this connection 11 mention the steel, glass, paper and sugar industries. Those industries have been established without any assistance from overseas capital. We have obtained a lot of knowledge and benefit from organisations that have brought in money and knowhow from overseas, but we would obtain more lasting benefit in the technical and scientific world from industries which we ourselves established. There is a point of balance in this matter which is not easy to' determine.

The Prime Minister (Mr. Harold Holt) in his statement to the House said that 90 per cent, of investment in Australia is from our own savings and 10 per cent, is from overseas capital. That, of course, is quite correct; but there are two sides to the question. If we require only 1 0 per cent, of overseas capital for some of our investment that would seem to imply that there are a lot of savings on which we could draw. One of the sources, which has been instanced of recent years, is the life assurance field. Life assurance societies are anxious to diversify their investments and have invested in mining and pastoral industries, and would. I am assured by one of the biggest societies, be prepared to expand their investments into other fields.

It would be absurd to suggest that we do not need capital, knowhow or equipment. However, we have established the industries to which I have referred and I am quite certain that we could establish others. T am extremely doubtful whether it is wise for us as a nation in the long run to allow overseas capital to come in and wholly buy out firmly based industries that process our primary production. We have established them. We have acquired the knowhow necessary to continue them and it is very doubtful, to my mind, whether it is an advantage for overseas capital to take them over. It is not so much the financial aspect that concerns me as the aspect of control. The ideas 1 am putting forward are not revolutionary because almost every country has a limitation on foreign investment. This has been done in Japan and India. The United Kingdom itself would not allow the Rootes Group to be bought out. The British Treasury insisted that there be a predominance of British money invested in it. New Zealand, Canada, Holland, France and Brazil are other examples. Brazil is a notable instance, because that country has some of the richest iron ore fields in the world. A consortium of American companies took up leases to mine iron ore in Brazil only a year or so ago and the Brazilian Government - it would not be derogatory to say that by world standards the Brazilian Government would not be considered more stable than the Australian Government - insisted that Brazilian interests should hold a 51 per cent, interest in iron ore production. That was readily acceded to. The same policy has been adopted in the Philippines, Pakistan and other countries.

So I am certain that Britain and America would be prepared to enter into partnerships with us in many fields. What has been done? Those two nations, which are our friends and allies economically and racially, make large investments in this, country. We owe a great debt of gratitude to them. We should not give the impression that we are going to take anything from them by appropriation or anything of that sort. This is a matter that could well be negotiated. This question requires a great deal of examination; it is not easy to answer.

Another matter upon which I should like to dwell momentarily is the large amount of investment by America - and some from Britain - in our pastoral lands. To me this seems to be land settlement in reverse. In my electorate there are 700,000 acres of magnificent land most of which could be subdivided. With the greatest respect to other areas in Australia some of it is the best land in this country. It is wholly owned by a company that has not one shareholder in Australia. These people look after it well, but it seems to me that we have grown away from the developing stage if it can be said about us that we do not know how to develop our pastoral and agricultural industries I do not think there is anything we do not know.

The Vernon report, in my opinion, is something to which we should give a great deal of thought. Nobody would agree with all of it. Anybody would need a lot of spare weekends to read it all. It was compiled by people of great calibre and great commercial achievement. They have put forward ideas that are well worth studying even though it may not be worth while adopting them in their entirety. As far as the economy of Australia is concerned our greatest need is to get over the effects of the drought. This country has a magnificent future; no country has a greater. We need capita], knowhow and people, but most of all we need people who have the knowhow and the capital and who are willing to come here and become Australians.

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