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Wednesday, 10 October 1984
Page: 1574


Senator GRIMES (Minister for Social Security)(4.13) — I move:

That the Bill be now read a second time.

I seek leave to incorporate the second reading speech in Hansard.

Leave granted.

The speech read as follows-

This Bill proposes to implement the government's decision announced on 29 May 1984 to establish an automotive industry authority.

The establishment of this authority is an integral part of the government's strategy for the development of the motor vehicle industry in Australia.

The basic role of the authority is to encourage development of the industry along lines consistent with the government's objectives and in particular to encourage changes designed to improve the efficiency of the industry and reduce its dependence on government support.

As a necessary part of this role the authority will conduct investigations and monitor the performance of and the outlook for the industry.

It would be helpful in putting the authority's role in perspective if I were to first re-iterate the elements of the government's motor vehicle industry policy.

The government's policy has two fundamental objectives; to preserve a substantial vehicle manufacturing industry in this country and to place the industry in a better competitive position against imports.

The Government believes that it is imperative that a substantial vehicle manufacturing industry is preserved in Australia.

We feel that the expectations of Australian consumers are more likely to be realised if there is a strong vehicle manufacturing industry able to compete vigorously with imports.

To achieve this we consider that the local industry must become more competitive in all aspects, particularly price.

One of the Government's policy aims is to reduce production costs.

With this aim in mind the Government announced on 29 May 1984 that it would be: Modifying the export facilitation scheme to place greater emphasis on the export of high value added components; putting the industry on notice that the number of models produced locally must be reduced; and changing the motor vehicle plan to enhance the ability of plan producers to supplement their local product range with imports.

The change to the motor vehicle plan will enable companies to avoid the need to manufacture small volume models which cannot be produced economically in Australia.

We also decided to provide $150 million over 5 years to assist the industry in upgrading design capabilities and to establish the automotive industry authority as proposed by this Bill.

These measures are aimed at overcoming the underlying causes of the industry's competitive problems. Their purpose is to reduce the industry's dependence on high levels of import protection by encouraging the industry to concentrate on its strengths, and promoting greater integration and co-operation within the industry.

I particularly want to emphasise the latter point. Some of the barriers to the industry's progress can be effectively tackled only through co-operative action.

The proliferation in component specifications is an obvious example.

Efforts are being made within the industry to come to grips with this problem. These have been welcomed by the Government, and we have given practical support to these endeavours. But there are other areas which also need attention. I refer again in particular to the question of model rationalisation.

The Government realises that the changes needed in the industry will take time. We are confident however that the policies we have adopted will enable the industry to lift its international competitiveness and bring vehicle prices in Australia more into line with those overseas.

This confidence can be seen in the arrangements for the gradual reduction in the barriers restricting access opportunities for imported vehicles.

Reduced barriers against import competition will serve to ensure that the industry vigorously pursues the opportunities that are available to reduce production costs and that consumers will share in the savings achieved.

The Government's policy has been the subject of considerable consultation with interested parties. It has been well received both in the industry and the general community.

Plan producers in particular have welcomed the Government's measures as a practical and appropriate response to overseas developments.

Component producers, through the Federation of Automotive Products manufacturers, have commented and I quote 'the new policies are for the component sector a vast improvement on those adopted by the previous Government' .

Some sections of the union movement have questioned aspects of the policy but the Federal Secretary of the Vehicle Builders Employees Federation, Mr Len Townsend, spoke I believe for the majority of informed opinion when he commented and I quote '. . . the plan was a commonsense policy that would benefit everyone , including consumers'.

The widespread endorsement of the Government's policy rests on the recognition that the policy is a real attempt to come to grips with the basic problems facing the industry. The policy sets a framework for constructive change which will provide a more secure future for the industry. There can be no security in the industry if its products become increasingly uncompetitive in the market.

I now turn to the Automotive Industry Authority as proposed by this Bill. The Authority is an integral part of the Government's policy framework.

Its central role will be to promote desirable rationalisation and co-operation in the industry.

Establishment of such an agency with this responsibility was recommended by the Car Industry Council in its report to the Government in December 1983. The Council included representation from all sections of the industry.

The functions entailed in this role were foreshadowed in the Council's report and I quote from that report:

'The Council recommends the establishment by the Government of a small (say three person) automotive industry authority, with statutory powers allowing it to encourage rationalisation of model ranges and sharing of production facilities and product amongst the plan producers.

The Council envisages regular and confidential discussions between this authority and each producer, with the authority becoming fully privy to each manufacturer's plans as to how he will maintain or achieve profitability and viability.

Specifically, the authority should discuss with each producer the future of low -volume product lines. The authority should assess whether or not there are national benefits in continuing the low-volume production. If not, the authority should discuss with the producer the future of the line and if necessary put the producer on notice that volume must be increased within a reasonable time or the line closed.

The authority should also play the role of a marriage broker, encouraging the sharing of product (including vehicles) among the five producers and the joint use of production facilities.'

It will be apparent from those comments that the concept of the authority envisaged by the Council was of an 'honest broker' acting primarily through persuasion.

But the Council also recognised that the authority should not be reliant on persuasion alone. I quote again from the Council's report:

'While rationalisation may well be in the national interest it might equally, in many of its forms, be against the interest of individual plan producers. The authority should have the power, therefore, to recommend to the Government incentives to encourage a particular rationalisation. Such incentives might take the form of minor variations to the rules of the plan, adjustments to tariff quota entitlements and so on.

Sanctions would also be needed to ensure that firms acted to the benefit of Australia. The Council considers that a set of such sanctions should be drawn up , that the producers be informed of their content and that they then be set aside, to be invoked when necessary.'

The concepts suggested by the Council are reflected in this Bill and in the Government's decisions on the assistance regime for the industry.

The motor vehicle industry is a significant part of manufacturing industry in this country and receives high levels of Government assistance.

The Government expects the industry to make real efforts to improve efficiency and reduce its dependence on public support.

There are sanctions that can be invoked if the industry fails to co-operate with the authority's efforts to progress necessary rationalisation.

These sanctions will not be available to the authority direct but the views of the authority will obviously have an important bearing on judgments by the Government in these matters.

As part of its monitoring function the Authority will be required to provide an annual report to the Minister on developments in the industry and the outlook for the industry. The reports which will be tabled in the Parliament are to include an assessment of the industries progress in achieving the Government's objectives. The reports are also to identify the basis of the Authority's assessment. Including, where appropriate, identification of instances where members in the industry have failed to co-operate with the Authority.

The annual report is not the only medium available to the Authority to bring such instances to the Government's attention. Provision is also made for the Authority to report to the Minister either on its own initiative or on matters which the Minister refers to it.

In particular, instances of failure by any part of the industry to act consistently with the Government's policy will be brought to early attention. The major matters likely to be referred by the Minister were foreshadowed in the Government's 29 May statement on its automotive industry policy. That statement indicated that the Authority would have an advisory role in relation to the operation of the export facilitation arrangements, and the arrangements put in place to safeguard against transfer pricing. Prime responsibility for the administration of the arrangements will however, remain with the Department of Industry and Commerce.

Provision is made in the Bill for the publication in whole or in part of the reports I have just mentioned.

Other reports may be made by the Authority on the effect of Commonwealth regulatory policies on the achievement of the objects of the Authority.

All of these reporting requirements are an important element in the Government' s overall strategy and have considerable significance for the relationship between the Authority and the industry.

It is important that I mention that any information given to the Authority on a confidential basis is required to be treated by the Authority as confidential.

One of the Authority's functions will be to provide, or support, services that could contribute to the improvement in management efficiency in the industry. The extent to which the Authority develops this aspect of its role will be a matter for its own judgment within the funds available.

New assistance measures to encourage the industry to give greater emphasis to local design of vehicles and components are being introduced. The Authority will have a role in the administration of these arrangements but details have not yet been finalised. The Authority's precise role in the administration of the arrangements will be settled in conjunction with the taking of final decisions on this matter.

And there will be an opportunity for debate on this when the necessary legislation on the arrangements comes forward.

While the Authority will have an advisory role in the administration of aspects of assistance arrangements for the industry there is no intention that it will substitute for the Industries Assistance Commission in the policy review process . The requirement for a report from the commission before making changes in the assistance arrangements for the industry is unaffected by this legislation.

The Government wishes to have the Authority operational as early as possible and appointments to the Authority and arrangements for recruiting staff will proceed as quickly as possible following passage of the legislation. The operation of the Authority will require close contact with those in the industry and for this reason it is planned to locate the Authority in Melbourne.

Clause 28 of the Bill is a 'sunset' provision terminating the Authority as from 31 December 1992. This provision reflects the principal task for which the Authority is being established-to promote necessary rationalisation and co- operation within the industry. The Government believes that this can be achieved within the 8 year time frame. The Government's policy for the automotive industry beyond 1992 will be determined following a further review by the IAC, to be initiated in 1989.

FINANCIAL IMPACT STATEMENT

The Budget allocation for the Authority in 1984-85 is $0.5 million.

I commend the Bill to the Senate.

Debate (on motion by Senator Reid) adjourned.