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Tuesday, 25 November 1986
Page: 2722


Senator CRICHTON-BROWNE(10.03) —I cannot support the amendment that has been moved by Senator Vigor to the motion for the second reading of the Fertilisers Subsidy Bill 1986-although, of course, I am sympathetic to the spirit of his intention. I acknowledge the point that has been made by Senator Siddons that prices have, in the short term, come down. But in the short term they could do little else. The Government has offered manufacturers the exclusive right to the subsidy. The trade off in the short term had to be acquiescence to a reduction in prices. That is not the answer. We are looking for an answer to this question: What will be the result in the medium to long term when we find that the manufacturers still cannot compete? I would have thought that there would be a temptation for manufacturers to go back to the Government and ask for further and better assistance.

As I said this afternoon, it is interesting that, when the anti-dumping duty was prevailing until April 1984, the two major manufacturers of high analysis phosphatic fertiliser withdrew from the market. I assume that they withdrew from the market because they could not compete, even under those circumstances, and they were able to make a profit by importing and selling. The difficulty they now face is that they are finding that a number of smaller importers are doing exactly the same thing, and more cheaply. Therefore, they find themselves threatened, so they now choose to recommence manufacturing.

I refer briefly to the Industries Assistance Commission report of 27 January 1984 which looked at the question of anti-dumping. I put it to the Senate that it has not been demonstrated conclusively that all the benefits in the past have flowed to the end users. In fact, the IAC stated:

The immediate benefits of the existing anti-dumping measures have mainly flowed to local producers of nitrogenous fertilisers-domestic production of which is, apart from the anti-dumping measures, in receipt of little government assistance. These benefits have arisen because the anti-dumping action has reduced import competition. On the other hand, user industries and consumers have been disadvantaged by having to pay higher prices for fertilisers compared to those that might otherwise prevail.

I think that the point that the IAC was seeking to make was that, as long as there is competition, this will ensure that the local manufacturers are competitive. When there is no competition their competitiveness appears to deteriorate. The IAC, in its report of 21 October 1985, stated:

Since assistance for phosphatic fertiliser consumption is now also paid on imports and considerable quantities of HAPF are now imported, there currently is even less scope for supplies to appropriate any of the benefits of the subsidies than there was in 1982.

What it was saying is that, inasmuch as there are imports of considerable quantities, this keeps the local manufacturers honest. The local manufacturers argue, of course, that it does assist them, on the one hand, which is the Government's intention, and, on the other hand, they are also able to pass on the benefit. I remind the Senate how the IAC dealt with that argument. It stated:

On the basis of this argument restricting the subsidies to domestic production was seen to benefit local manufacturers at a cost to importers rather than at a cost to farmers.

That part is acknowledged. It continued:

However, manufacturers also acknowledged that restricting subsidies to domestic production would result in a cost to users of HAPF. There would be an incentive for manufacturers of HAPF (which is subject to direct import competition) to use all or most of the assistance on HAPF to increase returns from the production of HAPF, with the cif price of imports determining the local selling price.

It was saying that the temptation is for the manufacturers to absorb part of the benefit of the subsidy. I say to the Government that if it is serious about assisting both the manufacturers and the farmers it ought to look elsewhere.

I remind the Senate of a matter on which I touched this afternoon-that is, the question of freight as it affects manufactured imports and as it affects phosphatic rock. In 1983-84 Australian payments for overseas shipping totalled a little over $2,000m. In 1985-86 the figure was $2,827m. That represented 21 per cent of the invisible deficit. In my view that is an area on which the Government ought to concentrate and examine with a great deal of care if it is worried about the balance of payments. In my view, it is absurd to suggest that the balance of payments is a major factor in determining one's view, particularly inasmuch as a significant number of components are, of course, imported, irrespective of whether the product is manufactured in Australia or overseas. There ought to be an incentive for local manufacturers to produce at source, whether it be at Mount Weld in Western Australia-which is, of course, close to the interstate railway line-or at Duchess in Queensland, and so reduce the cost of production but, more particularly, eliminate import costs by way of freight and reduce intrastate costs.

One of the benefits of having imports going directly to points such as, in the case of Western Australia, Esperance and Albany is that it very significantly reduces the costs of freight within Australia. It seems to me that we have not yet faced up to the cost of Australian shipping in the equation of the cost of this item. It is not only the shipping itself; it has been put that only 14 per cent of Australian ship costs are crew costs. It has been put that the single biggest cost component of our freight bill is shore-based shipping costs-between 30 per cent and 50 per cent depending upon a variety of factors such as length of the voyage and the nature of the cargo. According to the Industries Assistance Commission, for instance, in 1977-78 it cost the Broken Hill Proprietary Co. Ltd between $20m and $25m more to use Australian flag ships than if it had used flag of convenience ships. They are the areas, if the Government is genuine in its purpose and endeavour to assist the manufacturers and the end users, the farmers, at which it ought properly to be looking.

Amendment negatived.

Original question put:

That the Bill be now read a second time.