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Thursday, 5 May 1994
Page: 303


Senator SPINDLER (11.27 a.m.) —The Senate is debating the Industry, Technology and Regional Development Legislation Amendment Bill (No. 2) 1994. It is an omnibus bill. Three parts of the bill make various amendments which the Australian Democrats do not oppose. Part 3 will increase the number of members of the National Standards Commission from six to eight. Part 4 contains a technical amendment to the Patents Act consequent upon amendments to the Seas and Submerged Lands Act, with reference in the Patents Act to the 1958 continental shelf convention. These references are no longer appropriate. Part 5 deals with companies applying for pooled development fund investments. It changes the period to which these accounts must relate in recognition of the fact that audited accounts usually are not available until six months into the next financial year.

  I have listened to the comments on pooled development funds made by Senator Gibson. I agree that there is a great difficulty at the moment in Australia in marshalling investment funds for productive purposes in Australian industry. Australian industry might be more willing to go along that road to further capital investment, which is clearly needed, if it could get some certainty from government as to the policies that government will follow in the industry and trade portfolios. One can hardly blame Australian industry for being reticent when it is being thrown to the wolves by a very harsh and fast program of reducing protection to Australian industries, even when these industries are strategically important to the Australian economy.

  There are other ways of marshalling investment funds which the government should look at. One of them is to provide a savings incentive to Australian small investors who are prepared to put their savings into a venture development capital fund. This is one of the suggestions the Australian Democrats have made in our budget proposals.

  The other suggestion is to require superannuation funds to invest at least a small amount, which we suggest should be one per cent of their funds—which after all were accumulated by giving tax incentives to savers, tax incentives which have cost the Australian taxpayer—in productive areas, particularly in the venture capital area, which is a difficult one since, while we are a very inventive nation and intellectually very vigorous, we seem not to be able to translate that into a finished product that can be used to obtain a bridgehead in international markets. Time and again, we read about inventions that have been developed in Australia but are then snapped up by foreign companies. I think there is a lot of work to be done in that area.

  The burden of my comments today will be directed towards the privatisation proposals in the bill on the AIDC. An amendment has been circulated by the government proposing to delete that part of the bill. I should be grateful to the government for saving me the trouble because, if that part of the bill had been left in the legislation, I would have moved an amendment to delete it. I rather regret that the government's motive in moving an amendment to delete the provisions relating to the sale of AIDC is somewhat different from the motive that would have been mine in moving such an amendment. I would have wanted the government to retain its current shareholding in AIDC, whereas the government, far from wishing to retain that shareholding, has decided that it wants to sell the lot.

  The government does not want any public ownership component in AIDC, which is an agency designed to assist Australian industries in obtaining access to funds for productive development. I would have thought that was precisely the strategic direction in which our government should travel and was precisely the strategic assistance that should be provided to Australian industries at a time when we are struggling to maintain our position in overseas markets.

  The latest balance of payments figures, which were released yesterday, have shown a substantial deterioration in our balance of payments with a massive surge of imports and are again proof of the failure of government policy in this area. However, the government has decided that it does not wish to retain any shareholding, despite the fact that official ALP policy, as it is currently in existence, prohibits the sale of the AIDC and obliges the government to retain 51 per cent.

  The minister has jumped the gun on his party's policy and has said that the government intends to sell the lot. He has jumped the gun, and he will need to seek approval from the ALP national conference to give agreement to that. I think that is a very instructive example of how the ALP works in government. The government makes somewhat arrogantly and high-handedly major decisions which are contrary to ALP policy and then expects the party to fall in behind the government's decisions.

  I understand that there is considerable disquiet in the government's ranks about this decision on two counts: firstly, the process, which, of course, is a matter for the party; and, secondly, the substance of the policy direction that this once again indicates. The process in a sense is also a matter of some concern because, when a party gets elected to government, it gets elected to government on the basis of its published policy platform. Voters can and should be able to rely on those documents.

  In this particular case it is not being changed through the processes one would acknowledge as legitimate, it is being changed by fiat—by a government decision out of the blue. I would expect that at some stage the government will raise the issue again when it has bulldozed these measures through the party structure, and we will again be dealing with the issue of the sale of AIDC. It may be useful to advert to one other aspect of the proposed sale—apart from the strategic one which I have raised—and that is whether selling a good earner which funnels profits back to the shareholders, who are the Australian taxpayers, is the best way to raise money or whether the government should not be still using its capacity to raise loan funds in the market.

  Let us look quickly at the facts. In 1988 AIDC was faced with a capital shortage. The government's response was to transfer nearly all of the operational assets of AIDC to a subsidiary, AIDC Ltd, in order to facilitate listing on the stock exchange. The parent company—the corporation—is a statutory authority. The legislation passed at the time allowed sale to the public of up to 30 per cent of AIDC Ltd's nominal capital of $200 million. Currently the Commonwealth, through the parent company, retains 81 per cent of AIDC Ltd.

  The government originally announced its intention to reduce its shareholding in AIDC Ltd from 81 per cent to 51 per cent in August 1992, and that was included in the proposed assets sales published in the 1992-93 budget. This position is anchored in ALP policy. However, poor financial performance at the time had impacted heavily on the AIDC Ltd share price, which dropped as low as 44c per share from an issue price of $2 per share. The government then announced that the sale would not take place until the government was able to get full value for AIDC Ltd's underlying assets. The sale was again listed under proposed assets sales in the 1993-94 budget. The Minister for Industry, Technology and Commerce announced on 25 November 1993 that the sale would take place in the first quarter of 1994 following the release of AIDC Ltd's half-yearly results.

  To some extent the government can be seen as having `missed the boat' yet again. The share price of AIDC Ltd peaked at over $2.90 late last year; it dropped 15c in February on the release of its half-yearly results, which showed a profit of $20.6 million, down slightly from last year; and the share price is now down to $2.50 in a somewhat more shaky market.

  The 1993-94 budget incorporated assets sales of $2.6 billion. Even with this and the other still available possible sale—Commonwealth Serum Laboratories, which would yield roughly $350 million this year—the government will realise only about $2 billion. The 30 per cent sale of AIDC would have yielded $90 to $100 million. Let us remember that the profit derived from it was $20 million. The government will obviously be keen to achieve these sales this financial year to make the deficit outcome look better. However, the political situation in terms of ALP policy impacting on it may make that a little more doubtful.

  In this particular situation why does the government not raise funds in the debt market, when it proposes giving away an asset by selling equity which has shown a substantial earning capacity? Why does the government intend doing it this way? The only answer can be found in the figures I have quoted. The government intends improving the look of its balance sheet—its budget will look better by selling assets rather than by retaining them, getting a higher profit flow and seeking loan capital at a much lower cost in the open market than the profit it derives from its AIDC shareholding, which will be lost when AIDC Ltd is sold.

  On behalf of its shareholders, the Australian taxpayers, the government is making a financially and commercially stupid decision—a criminally negligent decision. The only reason is to make its budget papers look better. So we should look at the way our budget is framed. In large measure, it is a cashflow statement rather than a balance sheet. We should look at changing that and producing a balance sheet that shows clearly and factually the consequences of government financial decisions, rather than, as shown in this example, finagled figures at a substantial cost to the Australian taxpayer.

  I welcome the government's announced intention to move an amendment to delete the part which would have brought about the sale of AIDC. Clearly, my reasons for welcoming it are somewhat different from the government's reasons for moving that particular amendment.