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Thursday, 28 May 1987
Page: 3491

Mr MOORE(12.33) —While the Minister for Science (Mr Barry Jones), who is at the table, busily gathers himself for another trot around the track, I draw the attention of the House to the main provisions of the Bounty and Subsidy Legislation Amendment Bill 1987. First, the amendments to the Bounty (Textiles Yarns) Act 1981 arise from the Government's decision on 28 November 1986 concerning the textile, clothing and footwear industries. Secondly the amendments to the Fertilisers Subsidy Act 1986 give effect to the Government's intention that locally produced fertiliser should be subject to the new assistance arrangements set out in the Act from 20 August 1986. Thirdly, the amendments to the Subsidy (Cultivation machines and Equipment) Act 1986 correct the Act's provisions for eligibility for subsidy. Fourthly the amendments to the Bounty (Books) Act 1986, amongst other things, acquit undertakings given to the Senate Standing Committee for the Scrutiny of Bills that certain determinations by the Comptroller-General of the Australian Customs Service would be subject to parliamentary scrutiny.

In relation to the Bounty (Textile Yarns) Act, this measure forms part of the Government's decision on the textile, clothing and footwear industries to remove the present disincentive from local yarn producers who wish to engage in export production by extending the eligible production costs upon which bounty is paid to include producer's overheads associated with export production. This amendment has been introduced not as a subsidy measure to export production but to address an anomaly in the present Act which has penalised yarn producers engaging in export trade. I will deal with the amendment to the Fertilisers Subsidy Act later, as the Opposition intends to move an amendment.

Clause 21 amends section 9 of the Subsidy (Cultivation Machines and Equipment) Act to remove the present technical impediment on manufacturers of equipment prior to the commencement of the Act in April 1986 from receiving subsidy on that equipment where the equipment was held in stock at the commencement of the Act. The Government has indicated that the current legislative provisions do not effectively enact the stated intention of making all classes of bountiable equipment held in stock as at 15 April 1986 eligible for subsidy.

Clause 10 of the Bill treats the Comptroller-General's declarations for the purposes of section 4 of the Bounty (Books) Act as if they were regulations, to preserve parliamentary scrutiny of the declarations via the tabling and disallowance provisions applicable to regulations. The provisions apparently give effect to the Government's policy by replacing standard appropriation provisions in Commonwealth Acts with annual appropriation provisions.

The Opposition is most concerned with clauses 18 and 19, which relate to the Fertilisers Subsidy Act. That Act gives effect to the Government's decision last year to remove the subsidies payable on imported fertilisers, which is a subsidy on consumption, and reallocate those savings by increased subsidy payments on locally produced phosphatic fertilisers. The new arrangements were intended to operate from 20 August 1986. However, as the Minister indicated in his second reading speech, some uncertainty has been expressed as to whether or not the legislation effectively provides for this operation. The proposed amendments in clauses 18 and 19 make it clear that this is the case. This points to the further indifference of the Government towards embattled Australian farmers. Honourable members opposite do not seem able to understand that Australian farmers are struggling for their very survival. They should not have their import costs further increased by a government that sees them as a potential source of revenue. Farmers in this country are already paying an average of $9,000 a year per farm as their contribution towards protecting jobs in inefficient and non-competitive sectors of secondary industry. This Bill will force many farmers to increase their payouts in order to help an industry which is poorly located and unable to meet the demands placed on it by end users.

Since the mid-1970s, Australian farmers have turned more and more to the use of nitrogenous and high analysis combination fertilisers, as they are better suited to modern farming techniques. These types of fertilisers are economic in terms of transport, handling and application costs. As well, they provide the necessary facilities to supply a combination of nutrients in particular requirements. The Minister for Industry, Technology and Commerce (Senator Button) in another place indicated that Australian manufacturers have the necessary production capacity to meet farmers' fertiliser requirements. He has ignored the fact that the plants are too small to be cost efficient and that they are located in areas quite apart from utilisation points.

In reality, maximum high analysis phosphate fertiliser production capacity effectively is less than half its noted capacity and represents only two-thirds of current consumption. Even if existing plants were of a scale to produce HAPF on an internationally competitive basis, Australia's capacity, combined with high cost shipping services, would mean that it would not be economically feasible to move HAPF production from Western Australia, where there is an excess manufacturing capacity, to the eastern States, while at the same time remaining competitive with imports. The domestic manufacturers have acknowledged this equation. They account for over 70 per cent of the total imports of DAP, MAP and ISP high analysis fertilisers. Farmers are struggling already with the high freight charges incorporated into the cost of many of the imports as well as with the cost of shipping their end products. The Minister in another place, the Minister for Industry, Technology and Commerce, has acknowledged that some farmers will continue to rely on imported fertiliser products.

The present structuring of the industry means that the individual manufacturers will have substantial market power. In Australia the structure of the industry is such that in each of the States there is a monopoly. Without the imported fertiliser there is not the competition to ensure that we receive fertiliser at the most efficient and economic price. Unless imported HAPF products are treated equally with domestic products for the purpose of the fertiliser subsidy, there is a very real likelihood that domestic manufacturers could absorb the subsidy which is paid to them. In its 1982 report the Industries Assistance Commission recognised this possibility. I am not convinced, and nor is the National Farmers Federation, by the Government's assurances that it can monitor price movements in order to prevent manufacturers absorbing the subsidy. The very real risk in changing the fertiliser subsidy is that it will not be passed on to the final user to encourage greater use of fertiliser. After all, this is the purpose for which the subsidy was introduced. The rationale behind the introduction of the subsidy by the Menzies Government was to try to improve the productivity of Australian soils which have been depleted over a long period. It was the basis for extending the subsidy to imported fertilisers in 1982. The subsidy, which costs taxpayers $55m, is the highest component of the Government's assistance to farmers in this country. When placed beside the Government's assistance to many other industries in the country, it pales into insignificance.

The average level of effective assistance to the Australian farm sector is about 9 or 10 per cent, compared with 27 to 30 per cent to the manufacturing sector. Australian farmers have to compete with those farmers in the European Economic Community who have an effective assistance level of about 160 per cent and the farmers of the United States of America with an effective assistance level of 100 per cent. But the Government has tampered with the subsidy, the only substantial measure of assistance to the farm sector, by converting a subsidy system into a scheme now partly designed to assist the manufacturing industry and which is no longer for the total benefit of the Australian farming sector.

The Government has claimed that this measure will produce some benefit for the Australian balance of payments. The total annual balance of trade saving has been estimated at less than $10m. This will make hardly any impact at all. What is $10m when the current account deficit has increased by more than $6 billion in this financial year alone? Rather than trying to justify an attack on the Australian farm sector while claiming balance of payment deficit problems, the Government should make some real attack on Australia's economic problems. The Australian farming sector does not borrow from overseas in order to undertake its operations; it does not repatriate great profits to shareholders in other countries; it does not make great drawings upon capital inflows into this country, but it does make a tremendous contribution to export earnings by earning between 37 and 40 per cent of Australia's total export income. No industry is more vital in remedying Australia's overseas balance of payment deficit, when its overseas indebtedness is expected to reach in excess of $100 billion this financial year, than the Australian farm sector, but the Australian farm sector will be disadvantaged by this decision.

One wonders what the Government is about. I understand that the Department of Primary Industry was horrified when it discovered that the Government had taken this decision. I think that the decision really means that the Minister in another place, the Minister for Industry, Technology and Commerce, has proved to be too strong for the Minister for Primary Industry (Mr Kerin).

Mr DEPUTY SPEAKER (Mr Drummond) —Order! It being 12.45 p.m., the debate is interrupted in accordance with sessional order 106a. The debate may be resumed at a later hour. The honourable member will have leave to continue his speech when the debate is resumed.