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Tuesday, 4 December 1973
Page: 4239

Mr DEPUTY SPEAKER -Order! If the honourable gentleman disagrees with my ruling there is a procedure under the Standing Orders which he can take.

Mr KEATING - I understand that, and if I am obliged by your ruling to do so I will use that procedure. But let me say this to you, Sir, in answer to the point you raised: The Bill seeks to extend a piece of legislation covering the takeovers of companies in Australia by foreign corporations and, as such, it opens up the whole ambit of that question.

Mr DEPUTY SPEAKER -I am sorry; the honourable gentleman is incorrect in his assessment of the ambit of the Bill. The ambit of the Bill is not that of the original Bill. Its sole purpose is to amend section 7 of the original Act.

Mr KEATING - It cannot if the legislation is not reviewed.

Mr DEPUTY SPEAKER -I suggest that the honourable gentleman continue what he is saying, but I have given him fair warning that he may not enter into a full-range debate on foreign takeovers.

Mr KEATING - If the legislation has not been reviewed there is no cover in relation to foreign takeovers and therefore the renewal of the legislation covers the whole ambit of the legislation.

Mr DEPUTY SPEAKER -Order! The question of repeal of the legislation is not before the House.

Mr KEATING - The Bill extends-


Mr McVeigh - Name him.

Mr DEPUTY SPEAKER -Order! If the honourable member for Darling Downs does not remain silent I will deal with him. I suggest to the honourable member for Blaxland that the purpose of this Bill is to extend the life of an existing Act. The cover of the existing Act is not at present before the House. What is before the House is merely that the life of the Act be extended to another date. What is being enacted by this legislation is the removal of one date and the insertion of another. It is an extremely limited measure. At this stage I inform the honourable gentleman that he may not pursue a full debate on foreign takeovers. It is time to suspend the sitting for dinner so we will not continue the argument at this stage. I just give the honourable member that reminder and suggest that he take the appropriate course.

Sitting suspended from 6.15 to 8 p.m.

Mr KEATING - Mr Deputy Speaker, before the suspension of the sitting I was speaking to the Companies (Foreign Takeovers) Bill which extends the operation of the Companies (Foreign Take-overs) Act 1972 until the end of 1974. I believe the Act ought to be extended, even though in the Government's view this legislation is inadequate, and the Treasurer has announced his intention of introducing subsequently a Bill which will have far wider and more far-reaching powers than does the existing legislation. Although the existing legislation does cover the question of the acquisition of shares, there are many other means by which takeovers of companies can be effected, including the purchase of assets.

As the legislation itself was a consequence of a Treasury White Paper, it was interesting to note that that White Paper showed that, in terms of foreign ownership in the oil and extractive industries, the proprietary rights which are owned by overseas interests amounted to 62 per cent, and yet the control exercised by those rights was 83 per cent - a disparity of 21 per cent on the basis of control over proprietary ownership. The legislation does not cover that situation in terms of the 21 per cent. The same goes for secondary industry, where overseas ownership is of the order of 58 per cent, and yet the control exercised is 78 per cent - a 20 per cent disparity, but the legislation does not cover that at all. The same applies to convertible debentures, where an individual or interest, through funds in a company, can end up controlling it. So to that extent the Government believes that the existing legislation is inadequate. It would also have liked to see in the legislation a register of all foreign investment in Australia. Such a register has never been compiled. Therefore, for those reasons the Treasurer has indicated that he will introduce subsequent legislation. Still, the existing legislation has been effective more by accident than by design. A lot of foreign companies did not want to allow themselves to be scrutinised by an agency of the Federal Government, and so a lot of them, even though they would have liked to take over a company, have never applied. Because it is effective to that extent, I believe that the legislation ought to be extended into 1974.

Of the 300 takeovers which were notified under the legislation, 72 attracted an interim order, which is a freeze for 3 months until it can be investigated. In IS of the 72 cases the Commonwealth was powerless to act under the legislation; in 21 of the 72 cases the takeover proceeded after the order had either been revoked or lapsed; 14 of the 72 were still under review; and 13 of the 72 cases that attracted the interim order were prohibited from takeover outright. So to that extent, there have been 22 takeovers that have been blocked directly by the legislation, and for that reason alone, if no other, it ought to be extended for this period.

In the year before that, the number of takeovers relative to what has taken place since the legislation was introduced was astronomical. Of course, a lot of this was due not only to the absence of this sort of legislation but to the fact that the foreign exchange policies of the previous Government induced an enormous capital inflow into Australia and there was so much money lying around the economy that foreign firms were borrowing on the Australian capital market to acquire companies in Australia. It is interesting that just recently Dr Porter of the Reserve Bank introduced a paper indicating that, because the last Liberal government failed to change the parity of the Australian dollar relative to other currencies and the currency remained under-valued, there was an enormous speculative capital inflow into Australia, companies being bought up on the Australian stock markets very cheaply. At the same time, that massive capital inflow attracted more speculative inflow from people hoping for a revaluation and, of course, a capital gain in asset.

Because of those policies, there was all this money in the economy. So to that extent the legislation has stopped what could have been massive takeovers of companies in this year. Again, if the legislation, though it is inadequate, still exists and goes for another 12 months, that will of course delay some more takeovers. It was interesting to note that the 'Treasury Round-up of Economic Statistics' of May this year states:

The pattern of capital flows indicated by these preliminary figures is one of some further outflow in April, though at a considerably reduced rate compared with the outflow of about $200m in March. During the three months to April there appears to have been a net private capital outflow of the order of $600m, compared with a net inflow of $535m in the corresponding period of 1972.

That means that there was a turn-around in the amount of capital moving into Australia of SI, 100m. The year before there was $600m coming in; this year, because of the measures taken by this Government, there was $53 Om going out, which is a unique situation in the last decade, when the pattern has been always of capital inflow and not outflow. That is because of the sensible exchange rate policies of this Government. Because of that situation, there is not the pressure for takeovers, because there is not so much free money lying around the economy. Therefore, this legislation that we are extending for another 12 or 15 months will not be as effective as it has been in the last 12 months, because of the dear money policy which the Government is pursuing at the moment to move against inflation and because of this capital outflow situation. Therefore, for those persons who are interested, Dr Porter's thesis shows that the reasons why we have such an enormous growth in the money supply in the last 12 months and why we have a level of inflation of about 14 per cent can be traced back to the exchange rate policies of the former Government.

I will not continue any longer: I know this is a restricted Bill, and I will not deal with it as though it were a second reading debate on a full amendment to the existing Act. Nevertheless, the Government believes that this legislation ought to be extended until the Treasurer can introduce far wider powers in new legislation, as he has indicated. He has said that this legislation has at least shown some of the pitfalls and some of the attributes that may be encompassed in new legislation. To that extent, as I said - and I would like to emphasise the point - this legislation has been effective to some degree more by accident than by design.

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