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Wednesday, 6 June 1984
Page: 2630


Senator WATSON(3.08) —I move:

That the Senate take note of the paper.

I think it is encouraging that the Government has accepted approximately three- fifths of the recommendations that the House of Representatives Standing Committee on Expenditure made on Commonwealth Government purchasing. However, I can see a problem. In setting down such tight rules of procedure there inevitably becomes built in a high degree of rigidity. I think that takes away from management a flexibility to enable quick action and also limits discretion of the permanent heads. While I welcome implementation of discounted cash flow technique analysis and the preparation of guidelines on the use of discounted cash flow analysis, I wish to remind honourable senators that this technique of discounted cash flow method of assessment is only one of a number of tools of evaluation and should be used in conjunction with other methods of appraisal, for example, the pay-back method.

Despite the lessons from the past, the record of overseas purchasing by government does present a problem to Australian industry. Let me remind the Senate of some of the past problems. A number of years ago we had the sad story of the procurement of fire tenders from the United States of America. They proved completely unsatisfactory within Australia. There were a number of breakdowns and the company subsequently went into liquidation. The report of the Joint Committee of Public Accounts on the HMAS Tobruk indicated the problem of the lack of expertise in Australia, with governments and government departments continuing to take their purchasing procurements overseas. This was highlighted by the problems within the shipbuilding industry. We also have an underutilisation of existing facilities. I cite the case in my own home city of Precision Tool Annexe. We welcome the acceptance of paragraph 40 (a) of the report by the Government that there will be an attempt to get more of the offset work done in Australia. I also have another local example of the case of James Nelson (Tasmania) Pty Ltd, a textile firm which, over a number of years, has lost contracts to overseas companies. For example, Australia Post has tended to put its work out to overseas operations rather than into the local manufacturing sector. Unfortunately the manufacturing sector still criticises the Department of Defence and other departments for not placing their work in Australia. This is rather surprising considering the emphasis that this Government places on high technology industries. I refer to the pharmaceutical manufacturing industry in which, as a result of the Government's attitude, or perhaps the bureaucrats' fanaticism in attacking certain sections of manufacturing industry, no profits on the sale of drugs listed under the national health scheme are being made by companies which produce in Australia. Australia is now faced with manufacturing plants being closed, workers being sacked and research projects being cut.

While the Government is scattering millions of dollars on high technology industries some of the established industries, also in the area of high technology, are getting very little support. I mention companies such as Ciba- Geigy Australia and Sandoz Australia Pty Ltd et cetera which are being forced into a corner on these sorts of issues. One of the subtle features of this report and of the Government's response is that there is an inherent built in increase in public sector purchasing, and therefore of government activity at the expense of the private sector. Centralisation is also mentioned in several places in that report as well as in the response. I wish to draw the attention of honourable senators to the view of the Business Council of Australia, which states:

The political process extends power to the thrill or selected clientele and tends to inhibit rather than facilitate change.

Further on it states:

The case for centralised planning is often built on the premise that future market outlets and prices, technology and input costs are known with certainty.

In general, the profit-driven market system is much quicker on its feet than the bureaucratic model, or triparte management.

Question resolved in the affirmative.