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Tuesday, 2 October 1984
Page: 1021


Senator GRIMES (Minister for Social Security)(3.16) —I move:

That the Bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows-

BOUNTY (AGRICULTURAL TRACTORS) AMENDMENT BILL 1984

This Bill and the Bounty (Tractor Cabs) Amendment Bill 1984, which I will introduce in a few moments, propose a continuation of short term assistance to the agricultural tractor industry in Australia until 31 December 1984 or until the Government's decision on the Industries Assistance Commission report on long term assistance to this industry is announced.

Agricultural wheeled tractors and their derivatives having a power output of not less than 15 kilowatts at the power take-off were accorded 12 months temporary assistance from 10 June 1983 in the form of doubling the then existing bounty.

The continuation of this short term bounty assistance to the industry was announced by the Government on 8 June 1984.

The IAC in its interim report of 16 February 1984 on agricultural wheeled tractors and certain parts stated that the industry's position had changed since the Temporary Assistance Authority Inquiry in March 1983 when the market was characterised by depressed demand, high inventories and heavy price discounting. According to the IAC the changed position included a generally improved market outlook for tractors, a lessening of the pressures which led to heavy price discounting during 1981-82 and 1982-83, and a substantial decline in imports in 1982-83.

It was the commission's view that cessation of the existing temporary assistance on 9 June 1984, when it was originally due to terminate, before the Government's decision on the long term assistance arrangements for this industry expected before the end of 1984, would not have resulted in a significant withdrawal of resources from this relatively low cost industry.

The major local producer, Chamberlain John Deere Pty Ltd, suffered a substantial decline in sales during the last six months of 1983 despite an upturn in demand in that period and the availability of short term assistance up to June 1984.

The extension of the temporary assistance is intended as a holding action. The government considers that cessation of the temporary assistance would result in greater losses than otherwise being incurred by the industry. It would also result in a reduction in the effective rate of assistance to about ten per cent compared with the current average for manufacturing industry of about twenty- five per cent.

Moreover it is expected that the Government's decision on long term assistance arrangements for the industry will be announced within a few months and the Government considers it would be undesirable to terminate the temporary assistance before that time.

Financial Impact Statement

It is estimated that the bounty assistance to 31 December 1984 will cost approximately $1.4m, depending on the level of sales.

I commend the Bill to the Senate.

BOUNTY (TRACTOR CABS) AMENDMENT BILL 1984

This Bill is the companion of the Bounty (Agricultural Tractors) Amendment Bill 1984 and proposes a continuation of short term bounty assistance to the tractor cab industry in Australia.

Temporary bounty assistance for 12 months from 10 June 1983 was accorded the production in Australia of tractor cabs at the rate of 15 per cent of the factory cost of the cabs sold in Australia for fitting to imported agricultural tractors.

In its interim report of 16 February 1984 on agricultural wheeled tractors and certain parts the commission found that there had been a significant decline in the share of the market supplied by Australian manufacturers of cabs, and that this was caused mainly by a shift towards the importation of tractors with cabs already fitted.

The commission considered cab manufacture in Australia was facing a long term structural change and that this was not an appropriate basis for the extension of the temporary assistance.

It was the commission's view that a decision to cease short term assistance for the period June to December 1984, pending decisions on assistance arrangements to apply from January 1985, would be unlikely to result in a significant withdrawal of resources from this industry. The commission, therefore, recommended that short term assistance should not be extended beyond 9 June 1984 .

As almost all imported cabs enter Australia as an integral part of a tractor and are therefore free of duty, the 20 per cent duty on tractor cabs imported separately has little protective effect and consequently prior to the temporary bounty the local industry had been operating with virtually no assistance.

The Government therefore believes that the question of the long term future of cab manufacture in Australia will best be addressed in its consideration of the IAC report on long term assistance. In the interim period the government considers that the current temporary assistance should be maintained.

Financial Impact Statement

It is estimated that the extension of the temporary bounty assistance on cabs to 31 December 1984 will cost about $85,000 depending on the level of sales.

I commend the Bill to the Senate.

BOUNTY (COMPUTERS) BILL 1984

This Bill proposes to introduce a bounty on the production of computer hardware, computer sub-assemblies and electronic microcircuits in Australia for 6 years until 5 July 1990. During this period the bounty will be paid at the rate of 25% of the value added to the equipment by the manufacturers in Australia.

The Bill, which replaces the Automatic Data Processing Equipment Bounty Act 1977, implements the Government's decision, announced on 5 July 1984, on the Industries Assistance Commission (IAC) report of 7 February 1984 on computer hardware, software and related goods.

Together with the other elements of the government's decision, which includes a reduction to minimum rates of tariffs on most products covered by the IAC's report, the bounty is an important step in the formulation of the government's policy for the computer industry.

The new assistance arrangements will result in access by users to these important productivity aids at close to world prices, a stable assistance framework for the local industries' continued development, and a stronger infrastructure within the domestic industries.

The Government believes that the new arrangements will reinforce other measures already introduced to encourage the development of the computer hardware and software industries. These include measures designed to stimulate the development of a venture capital market, modified Government purchasing arrangements, and changes to the Australian Industrial Research and Development Incentives Scheme last year to specifically include software. In addition the Australian Industries Development Corporation has undertaken three investments in these industries with further investments being evaluated.

The Government is currently examining the need for additional development measures for the computer and related industries. A recent input has been the W. D. Scott/Arthur D. Little report on Opportunities for Australia in Information Technology.

In its report the IAC proposed a 25 per cent value added bounty on general purpose computer hardware, computer based office machines and parts and accessories. The proposal excluded systems software costs and limited bounty to production for domestic sale. The commission also recommended minimum tariff rates for most hardware, duty free treatment of software on recording media, and phased reduction in duties on recording media and electronic components to 20 per cent.

The Government accepted the general thrust of the IAC report. However, its approach to direct assistance to the computer industry has been based on the following objectives.

Computers and key micro-electronic components should be available in Australia at world prices. These products are important productivity aids and are an integral component of a rapidly increasing range of industrial products.

Domestic producers should not be disadvantaged because of protection accorded their inputs.

The level of assistance provided should be sufficient to encourage local industry to be internationally competitive without creating a situation of dependency on government assistance.

Inconsistencies and disparities in assistance between products that were inherent in the previous arrangements for this industry should be eliminated or reduced.

The assistance provided should provide a general framework within which more specific industry development needs can be addressed, if necessary.

These objectives led to the assistance package announced by the Government on 5 July 1984.

Australia has a large number of producers of computer hardware engaged in various levels of development and assembly concentrating on supplying small computers and terminals. Many of these companies are small and innovative.

The large number of manufacturers, many producing only in small volumes, has meant that production economies are generally not being obtained, there is duplication of production capabilities and in some instances the investment in testing and quality control equipment is insufficient.

The bounty arrangements under this Bill have been designed to address some of the weaknesses in the infrastructure available to computer manufacturers and to provide flexible arrangements that do not distort the manner in which manufacturers conduct their business.

For this reason the bounty is to be paid on production of sub-assemblies and parts as well as fully assembled hardware. This should reinforce the trend that is already evident for companies to utilise specialist producers of sub- assemblies with increased specialisation and greater volume. The Government considers that the bounty arrangements will provide an opportunity for these specialist companies to invest in labour saving equipment as well as quality control equipment and hardware and software testing. This in turn should further improve the competitiveness and quality of Australian hardware.

One of the problems faced by hardware producers everywhere is the availability of key microelectronic components. As a relatively small consumer of these components, remote from the main suppliers, Australian computer hardware manufacturers have experienced problems greater than those of larger companies with more purchasing clout. Increased use of specialist assemblers is expected to lead to greater purchasing economies and greater stock holdings of the main components. The reduction in duties on these components should also facilitate greater stock holdings.

Payments of bounty on locally developed or modified operating systems, design and development costs are particularly important as these items are major costs of those companies that are undertaking substantial developmental work in Australia. These activities can also be sub-contracted out to specialist research and development teams, software houses or in some circumstances research institutions, such as universities and the CSIRO. This will have the advantage of building up specialist teams.

The overriding benefit from these flexible arrangements is that they enable companies to specialise in what they do best and should free both human and capital resources to concentrate on development and marketing innovative hardware.

Another feature of the Government's decision is that bounty is to be paid to producers of special purpose as well as general purpose computers. The former ADP equipment bounty did not cover equipment that was incorporated in other equipment or that was used to control other equipment. Many of Australia's best prospects lie in these specialised areas. The Government has therefore decided to extend bounty assistance to such equipment provided that it does not involve 'double assistance'. As a consequence, any goods that are being assisted by Tariffs, or where the Defence Department is accepting cost penalties as part of designated defence contracts, will not be eligible for bounty.

Bounty is also to be paid on the production of electronic microcircuits such as integrated circuits and hybrid circuits. Duties on these components have been reduced from 35% to minimum rates. This combined with the bounty on local production, should encourage increased competitive application of microelectronics.

In conclusion, the new assistance arrangements are considered by the Government to provide a meaningful level of assistance to local industry. They have been designed to provide flexible and predictable assistance to enhance the competitiveness of local producers both directly and through strengthening the infrastructure that supports the industry.

Reduced import duties will, of course, mean that it will be a very competitive market. Competitive innovative local producers will now have the opportunity to succeed and contribute to our overall economic performance.

Finally, clauses 24 and 25 of the Bill contain provisions giving authorised officers a right of entry at reasonable times to commercial premises without warrant and enabling them to require persons to truthfully answer questions and produce documents relevant to the operation of the Act.

These provisions are not new to bounty legislation. They are consistent with the powers provided by governments of all political persuasions to ensure that taxpayers are fully protected by appropriate compliance audits.

These powers have been considered on a number of occasions by the Senate Standing Committee for the Scrutiny of Bills. The Committee has previously acknowledged the view that it is not unreasonable for persons who have been paid moneys out of the public purse to expect a degree of auditing to establish that payments have been correctly made.

Financial Impact Statement

The bounty proposed by this bill is expected to cost $7 million in 1984-85 and $ 8 million in 1985-86. The cost for the remainder of the bounty period cannot be estimated at this time. It will depend entirely upon the success of the Government's assistance package.

I commend the Bill to the Senate.

AUTOMATIC DATA PROCESSING EQUIPMENT BOUNTY AMENDMENT BILL (No. 2) 1984

This Bill proposes to terminate the bounty period under the Automatic Data Processing Equipment Act 1977 on 5 July 1984.

The Act was extended from 6 May 1984 to 6 August 1984 pending the Government's decision on the long term assistance needs of the computer industry.

The need to terminate the Act on 5 July 1984 arises from the proposed introduction of a new bounty scheme on 6 July 1984.

On 5 July 1984 the Government announced its decision to implement new assistance measures for the computer industry. These measures include an extension of the range of computer goods on which bounty is proposed to be payable. The new Bounty (Computers) Bill 1984, which I introduced earlier, is proposed to commence from 6 July 1984, that is, the day after the Government announced its decision on new assistance measures for the computer industry in Australia.

Financial Impact Statement

Bounty paid under the Automatic Data Processing Equipment Bounty Act 1977 in the period 6 May 1984 to 5 July 1984 is expected to be $200 000.

I commend the Bill to the Senate.

BOUNTY (ELECTRIC MOTORS) BILL 1984

This Bill proposes to implement the Government's decision, announced on 17 July 1984, to pay a temporary bounty from that date on the production in Australia of certain types of alternating current, three phase, squirrel cage electric motors .

This temporary assistance is to apply until the Government's decision on the Industries Assistance Commission's report on long term assistance to the industry is announced. The IAC is expected to report by 16 April 1985.

Manufacturers of motors will be eligible for the bounty if, during the bounty period, motors with a power output of at least 0.746 kilowatts but less than 38 kilowatts are completed at registered premises and the added value of each motor is not less than 33 1/3% of the total Australian factory cost. The bounty will be payable on eligible motors for sale locally and for export.

The rate of bounty will be $14 per motor and bounty payments to any one manufacturer are to be limited to $300 000 during the proposed period of the Act .

As a complementary measure, duty will be increased by 5 percentage points on imports of electric motors of the same kind as those upon which bounty is to be paid. This increase is the subject of a separate legislative amendment.

The IAC in its interim report of 16 April 1984 on electric motors recommended no variation to the current levels of assistance pending its final report on the long term assistance needs of the industry.

The Government has accepted this recommendation in so far as the bulk of electric motors are concerned.

However, the Government is concerned that without interim assistance, producers of the larger 'integral' electric motors might be forced out of production before consideration of the industry's long term assistance needs is completed. Such an event would cause a permanent structural change to the industry on the basis of an IAC interim report.

The Government sees important advantages in sustaining a capability in Australia to manufacture electric motors.

Interim assistance is therefore proposed to the producers of the larger ' integral' electric motors by way of the bounty and tariff increase.

We are confident that this assistance package will ensure the continued viability of all sectors of this important industry until the decision on the long term assistance can be announced.

The industry is aware that the extent to which it takes advantage of the benefits afforded by this interim assistance package will have a considerable impact on the Government's decision on the long term arrangements. It is aware also that there are no grounds to assume the continuation of the special assistance beyond the interim period.

By the inclusion of a ceiling on bounty payments to any one producer, the Government has minimised the risk to the Commonwealth of open-ended liability for bounty payments beyond a level necessary for viable Australian production.

The use of a balanced package of tariff and bounty assistance is expected to minimise cost increases to users of electric motors whilst ensuring the lowest possible cost to Australian taxpayers.

Finally, clauses 25 and 26 of the Bill contain provisions giving authorised officers a right of entry without warrant at reasonable times to commercial premises and enabling them to require persons to truthfully answer questions and produce documents relevant to the operation of the Act.

These provisions are not new to bounty legislation. They are consistent with the powers provided by governments of all political persuasions to ensure that taxpayers are fully protected by appropriate compliance audits.

The powers have been considered on a number of occasions by the Senate Standing Committee for the Scrutiny of Bills. The Committee has previously acknowledged the view that it is not unreasonable for persons who have been paid moneys out of the public purse to expect a degree of auditing to establish that payments have been correctly made.

Financial Impact Statement

The cost of the bounty for 1984-85 is estimated to be less than $500,000.

I commend the Bill to the Senate.

Debate (on motion by Senator Peter Rae) adjourned.