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Tuesday, 17 February 1987
Page: 166

Mr DOWNER(5.03) —I always find speeches by the honourable member for Calwell (Dr Theophanous) rich in irony. Not only do I share his view of the honourable member for Ryan (Mr Moore) but I can also reciprocate that view. The honourable member for Calwell is a nice man, he is a pleasant man, but the way he calls anybody who disagrees with him an extremist and an ideologue is extraordinary because if ever there was an extremist, if ever there was an ideologue in this House, it is without doubt the very pleasant honourable member for Calwell. He is a man of the Left whose views are ignored by much of his own Party and are certainly ignored by the broader Australian community. The view that he has been expressing today in effect is that the Australian Government should be nationalising the commanding heights of our industry. That is the view that was popular back in the nineteenth century on the left of politics; it seems to be a view which has been abandoned by most thinking people in the world but which is still adhered to by the Left of the Australian Labor Party. Certainly proposals for the nationalisation of industry do not make any sense in Australia today when we are desperate for investment from the private sector. We are desperate for investment to rebuild an economy which is stalled by high interest rates, which is stalled by record inflation rates and which is stalled by union power and the exercise of that power through restrictive practices. Governments must make substantial changes to domestic economic policy and to economic policy in general if our investment prospects are to pick up. We cannot go on with the sort of mind-set that the present Labor Government has against productivity, against profitability and against development-those things which in the past have been the hallmark of the building of a greater Australia.

Of course the attitude of the Government towards the public sector, towards public corporations, will be an important part of the way our country's economy develops and its investment prospects grow. The Commonwealth Guarantees (Charges) Bill and the Australian Industry Development Corporation Amendment Bill do not do much by any standards to promote the prospects for investment in Australia. What they do, as has been pointed out by the honourable member for Ryan, is impose an 0.5 per cent charge for Commonwealth guarantees for borrowings by public enterprises. That 0.5 per cent charge is without doubt a very significant charge. As the honourable member for Ryan pointed out, it is a charge which would seem to be considerably more than a charge that the market itself would make for a similar kind of rolled gold guarantee. Those things being borne in mind, it would seem that this charge has two functions. One is the rather cynical function of raising more money for the Commonwealth's own Budget through the operation of public enterprises and through providing Commonwealth guarantees for those enterprises. In other words, it is just another way of raising taxes.

Mr Peacock —The honourable member for Ryan was right.

Mr DOWNER —The honourable member for Ryan, as the honourable member for Kooyong says, was entirely right in putting that proposition. It is also true that the Government argues that by imposing this charge those public corporations will be put on a more competitive basis simply because the private sector cannot get such guarantees and as a result has to pay more for its borrowings. I do not think there is any doubt about at least the theory of that. In a sense, these public corporations are being made more competitive with the private sector. In reality, though, does that argument really make any sense? Does it make any sense to impose additional charges on public corporations so that somehow they are more competitive with the private sector because it makes their costs higher? It seems to me a rather curious form of logic, because if those public enterprises are genuinely competitive in the market-place, what is the Government doing owning them in the first place? If they are not competitive, the whole issue of their competitiveness with the private sector is clearly irrelevant.

So it does seem to me that there is a fundamental problem of logic in this whole exercise. This whole exercise draws attention to the fundamental problems of running public enterprises. If the Government is really serious about its objective of somehow putting public enterprises on a competitive basis with the private sector, perhaps it should sell off some of those public enterprises for which there is a market and which are simply involved in commercial activities-not, of course, public enterprises that provide a service that the private sector cannot provide. That is one way of going about it. I suppose the other thing that the Government could do-and it seems a rather impractical proposition-if it wants to put the public and private sectors on a competitive basis is sell Commonwealth guarantees to all borrowers at a charge of 0.5 per cent. Why not do that if the Government wants to make the public and private sectors somehow equal in the market-place? I suppose one could take that argument one step further and say that the Government would not give public enterprises any Commonwealth guarantee whatsoever. I do not think that is a particularly sensible option, particularly when we are talking about some public enterprises which are simply loss making operations because of the nature of the work they do.

What I am really saying is that if we are going to talk about making public enterprise competitive with the private sector and we are going to maintain public enterprise we will run into a whole lot of problems of logic which I hope I have been expounding fairly clearly. When we run into those problems of logic we are faced with one simple solution, and that is that where the public enterprise is simply a commercial operation, such as the AIDC, we are better off not abolishing it, as the honourable member for Calwell says, but handing the control of that enterprise over to the private sector.

The Australian Industry Development Corporation Amendment Bill is a particularly curious piece of legislation. It is the sort of legislation that has a bob each way, because it allows the AIDC not to use Commonwealth guarantees if it so wishes. That raises a very important question. What would happen, for example, if the AIDC entered into some investment and found itself in considerable financial difficulties? Would the Commonwealth then come forward to honour the obligations of the AIDC or would it say: `The AIDC did not get a Commonwealth guarantee so we will not honour those obligations.'? I think the answer would almost certainly be that at the end of the day the Government would honour the obligations of the AIDC. That leads one to the next question: What is the point of this legislation for the AIDC? One of the problems is that if the AIDC gets the Commonwealth guarantee it will increase the cost of its borrowings by 0.5 per cent. On the other hand, if it does not take the Commonwealth guarantee it will pay higher charges for its loans. It will end up paying higher interest rates because of the higher risk in there not being a guarantee. Again, that legislation strikes me as having a curious lack of logic.

I see that there is not a Minister in the chamber at the moment but I hope that the Minister who responds to the debate will explain the logic of the legislation.

Unlike the honourable member for Calwell, I have some real concern about the role of the AIDC-the ever expanding role of what is in effect the Australian Government's merchant bank. That bank lends something like $2 billion a year and invests $91m in ordinary equity in companies. The range of investments shows that they are not just romantic investments in the manufacturing sector, as the honourable member for Calwell tried to make out; they are investments in an enormous range of different activities. There are investments in companies such as Australian Biomedical Corporation Ltd. The AIDC owns 50 per cent of that company which is involved in biomedical inventions. I suppose that is new technology. Twenty-eight per cent of the equity of Barbeques Galore Holdings Pty Ltd is held by the AIDC. That company, not surprisingly, makes barbeques. AIDC invests in a company that makes microwaves. Believe it or not, it even invests in shopping centres. There are plenty of people investing in shopping centres in this country, as the Prime Minister (Mr Hawke) must surely know. We have surely seen the sign `Westfield' up hither and thither around Australia. It is clearly diversifying its investments fairly significantly now. There is not a shortage of people wanting to invest in shopping centres but we see the AIDC getting involved in that kind of investment because it sees it as being the best way of maximising its profitability. But of course that is a concession to the point that it is not providing a significant social service; it is operating as best its board thinks it can in a completely commercial competitive world. That again raises questions about whether the Corporation needs to be owned by the public sector. That is not to say that it should be abolished; it is simply to question whether it is the role of government to be directing investment into such areas which can be handled by the private sector.

There is no doubt that in recent years the AIDC has been successful commercially. It is also important to note that to some extent the AIDC has been hamstrung by the fact that it must at least enter into discussions with the government on what sort of policies it should pursue over the subsequent year. I understand that the informal agreement is that the AIDC and the government come to some kind of-let us use that long forgotten word-consensus about what the strategy should be. I am sure I am right in saying that the AIDC would much rather operate without any inhibitions whatsoever from the government, without any guidance on where investments should go. The people on the board of that Corporation, the people involved in that Corporation, are proud of its work-I think rightly so-and they want to see it develop as a truly strong Australian national merchant bank. Why should they not? That is why, as I understand it, the AIDC has formally sent a submission to the Minister for Industry, Technology and Commerce (Senator Button) suggesting that the Government consider selling off the AIDC to the private sector. I understand that this has happened relatively recently and so far the Minister has provided the AIDC with no reply to the suggestion.

That should not come as a surprise to anybody in this House. The AIDC is on a sure footing. It is operating fairly efficiently as a merchant bank. It has a very strong management team and a very strong board with years of experience in the private sector. There is no doubt that it can fulfil the dynamic role of a merchant bank, in particular in creating investment opportunities in our economy, simply by being privatised-if one wants to use that word-simply be being sold to the private sector. The Government could then put the taxpayers' receipts from that sale to a much more constructive use which bears some relationship to the very major economic problems that our country faces. I do not make these suggestions because I am an ideologue of any kind. I would not argue that all members of AIDC are ideologues, even though they are asking to be privatised, but there is some ideological opposition from the other side of the House to the private sector-to private sector investment, to private sector involvement in and control of the Australian economy. Otherwise, honourable members opposite would not speak with such ridicule about proposals to sell some public enterprises to the private sector. It is simply ideological opposition, and not practical, economically based opposition, that comes from the Labor Party to building a productive and constructive private sector.

It is important to note that the AIDC has apparently made this submission about its future. In conclusion, I say that I think the Government should take up that recommendation and ensure that the AIDC, like private merchant banks, plays a real and vital role in building a proper investment structure for our country. The Government, instead of concentrating on running public enterprises, might start to concentrate on bringing down interest rates, lowering the tax burden, reducing the enormous cost of government, getting rid of a great deal of the waste that is going on in government and ensuring that small business, primary producers and big businesses become profitable once more so that they can create jobs and create wealth, not just for the rich but for all Australians.