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Thursday, 18 April 1985
Page: 1219


Senator GRIMES (Minister for Community Services)(1.02) —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 continue bounty assistance to the industry producing injection-moulding machines for the production of plastic goods, and parts for such machines, for a further four years.

The bounty will be paid at the rate of 20 per cent of value added in the first and second years, reducing to 10 per cent of the value added in the third and fourth years.

Since 23 May 1979, local production of the machines and parts therefor has been assisted by a 15 per cent duty and a phasing bounty which was to have expired in May 1984.

In January 1983, following representations by the remaining local manufacturers, Johns Consolidated Ltd and Battenfeld (Aust) Pty Ltd, the industry was referred to the Temporary Assistance Authority (The TAA) which concluded that short-term assistance was not justified. However, in view of the performance of the local industry, the Government decided that an immediate review of long term assistance arrangements was necessary.

A reference was sent to the Industries Assistance Commission on 30 June 1983 seeking a report on or before 29 February 1984 on what long term assistance arrangements should be provided to the industry. Further, in view of an earlier submission to the TAA by the Department of Defence, in which that Department expressed concern at a situation where Australia's injection-moulding machine manufacturing capacity might disappear, the Commission was asked to provide additional advice on the assistance required should the Government decide to maintain the industry on defence strategic grounds.

Pending the completion and consideration of the Commission's report, the Government also decided that short term assistance was required, and it proposed that temporary assistance by way of an additional bounty be paid to the industry from 10 June 1983 until 22 November 1984.

The Commission presented its report to the Government on 28 February 1984.

In its report the IAC commented that the Australian market for injection-moulding machines expanded by 50 per cent between 1979-80 and 1981-82, but, in 1982-83 fell back to about the level existing in 1979-80.

Local production of injection-moulding machines fell by some 65 per cent in the four years to 1982-83, due mainly to the demise of Johns Consolidated Ltd and to an increase in imports. The Commission further stated that in terms of current dollars, total competitive imports increased by over 100 per cent in 1981-82 relative to the previous two years, and although imports declined in 1982-83, the level was still double that observed in 1979-80.

The Commission also stated that there had been considerable changes in the industry since 1979, and that these had resulted in the only remaining local manufacturer, Battenfeld, maintaining market share but with relatively low levels of profitability.

The Commission reported that the adjustment difficulties associated with the quite significant reductions in assistance since 1979 had been exacerbated by the difficult economic conditions that characterised the early 1980's. This factor, combined with evidence suggesting that local manufacturers could eventually be competitive with tariff-only assistance, and the fact that with assistance of this order local production could be regarded as relatively economically efficient, influenced the Commission to recommend further assistance to facilitate adjustment to the long term rate of 15 per cent.

To minimise the direct cost of assistance to user industries and to facilitate adjustment to the long-term rate the Commission recommended additional assistance by way of a bounty. The level of bounty assistance requested by Battenfeld was slightly higher than the level recommended by the Commission. However, the Commission considered that assistance at the level recommended would provide Battenfeld with the opportunity to restructure its operations, while at the same time not shield it from the pressure to adjust to the relatively low long-term tariff rate.

The Commission also concluded that no additional assistance would be necessary to maintain the industry on defence strategic grounds.

On 10 October 1984 the Government announced it had accepted the Commission's recommendations that bounty assistance to the industry be continued for four years and that the long term duty rate of 15 per cent continue to apply.

This Bill will provide over the next four years a bounty equal to 20 per cent of value added in the first two years and 10 per cent in the third and fourth years, with an upper limit of $0.6 million per year for the first two years and $0.4 million for the remaining two years. The bill allows the upper limit to be varied in a particular year to cover unforeseen circumstances provided the total bounty does not exceed $2 million over the four year period.

The government proposes to closely monitor the performance of Battenfeld to ensure that the intent of the assistance arrangements is achieved and the department of industry, technology and commerce will report to the Minister annually in this regard.

Finally, the Bill includes a number of provisions in Part III which are designed to update the administrative provisions in the existing Act. These provisions are modelled on a number of provisions in recent Bounty Acts.

Financial Impact Statement

The cost of bounty assistance between 10 October 1984 and 9 October 1988 will not exceed $2 million.

I commend this Bill to the Senate.

Debate (on motion by Senator Kilgariff) adjourned.