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Thursday, 21 March 1985
Page: 572

Senator VIGOR —My question is directed to the Minister for Industry, Technology and Commerce. What is the current state of the offsets program that was instituted to encourage local production of certain high technology items for our defence and government requirements? What is the current size of unclaimed offsets credits? Is the level of offsets credits which companies have to honour in order to meet their commitments under the offsets program of the order of $1,200m, as reported in a recent edition of Ascent in November 1984? Is it true that the system of offsets is being shamefully exploited by certain organisations that are claiming benefits and not using the required local content? If that is so, what is the Minister intending to do to eliminate such exploitation?

Senator BUTTON —The honourable senator was kind enough to give me some notice of this question. So if I sound more than usually articulate today it is because I am reading from a prepared answer. Since 1970 the Commonwealth Government has operated an offsets program using the leverage available through government purchases to direct back to Australia work and technology to stimulate local industry. To ensure that the program remains effective, given the changes in market conditions and changes in industry policies since this Government came to office, the Government in April last year initiated a review which was conducted by an independent committee chaired by Sir Brian Inglis, the former Managing Director of the Ford Motor Co. of Australia Ltd. That committee has reported and its recommendations are currently under consideration by the departments concerned. The committee recommended that the program be continued on the basis of its assessment of the cost effectiveness of the program to date. It also made a number of suggestions to review the program's objectives and improve its operation and performance. It is expected that decisions about the Inglis report recommendations-not all of which I agree with-will be made by the Government in the near future.

Senator Vigor also asked me about the differences between the value of the offsets commitment and the value of offsets work actually placed in Australia. I understand that figure to be something in the order of $850m. This amount should not be interpreted as a level of delinquency by prime contractors, as many major offset agreements extend over three to five years. We expect that a high percentage will ultimately be fulfilled. An earlier figure which was quoted included a substantial amount from Daimler-Benz in Germany. I understand that that offset obligation is now being discharged, which will go towards reducing that amount. As I said, the current figure is some $850m. The Inglis committee, in commenting on the figures generally, reported that in its view the extent of non-compliance had been very much exaggerated, and it considered that a significant backlog of long term non-compliance, however, still existed. The committee estimated the value of the backlog as being $160m. It attributed this backlog to the 'best endeavours' nature of some early offset arrangements.

While it is true that some overseas companies have difficulty in establishing satisfactory offsets arrangements with Australian companies, there is no evidence that false claims for offset credits are being made. The value of offset activities undertaken in Australia by overseas suppliers is confirmed by regular reports by the local companies involved. I conclude by saying that improvements in the administration of offsets are proceeding in parallel with the Government's consideration of the recommendations of the committee of review. I am very confident that any exploitation of offset credits will be prevented.