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Thursday, 9 June 1994
Page: 1596

Senator MICHAEL BAUME (12.37 p.m.) —I would like to make a couple of brief remarks about the true nature of this budget which was hidden away about 300 pages into the budget documents and not mentioned at all in the budget speech. I refer to the fact that total tax revenue is budgeted in this document, which is supposed to have no fresh taxes in it at all, to rise this year by $9.15 billion. This will lift the total tax collections by the Keating government to a record $103.3 billion, 2 1/2 times more than the total tax take of $41 billion in the Fraser government's last year in office.

  After adjusting for the forecasted inflation rate—and this is the real test of whether taxes are going up—real tax revenues in this budget will jump by 7.4 per cent. This is more than double last year's highly contentious rise of 3.9 per cent and represents an aggregate increase in two budgets since the March 1993 election of 12 per cent despite the government's election promise in March 1993 that there would be no tax rises and that the tax cuts were not only promised—they were l-a-w. In fact, the latest budget's real tax rises are the worst since the 11.6 per cent increase in Paul Keating's 1984-85 budget. Yet, here is the government still pretending, still putting out the propaganda, that there are no extra taxes and no tax rises in this budget. It is simply another of the major deceptions that this government has come out with.

  Let us see where this rise hits. The people it hits most are the ordinary pay-as-you-earn taxpayers. In last year's budget, gross pay-as-you-earn deductions went up by 1.9 per cent. In this budget, they are budgeted to go up by 5.8 per cent. That is a huge rise, and it is the ordinary Australians who are being hit by it.

  I dealt with this matter at some length on 11 May and I do not want to repeat it. All I wish to say is that this debate is most unsatisfactory because we are debating appropriations before we have had the report back from the estimates committees. There are many unanswered questions and I regard that as grossly unsatisfactory. There are many matters relating to the Australian Securities Commission that we should be given an opportunity to debate in this chamber once those responses come back. But in fact we will not get that opportunity.

  I can understand why the government would be reluctant to give us the opportunity to raise these matters in which there are unsatisfactory responses in estimates committees. I think that it is not a trend towards good government. It diminishes the capacity of this chamber for proper examination of the budget. The indecent haste with which this budget is in effect now being pushed through is totally inappropriate and diminishes the capacity of this Senate to give the sort of scrutiny that has been a significant element in trying to provide some supervision to a government that is out of control, arrogant and a government one should not trust with money. That is the key factor: this is a government one cannot trust with money. Yet it has changed the procedures so that our capacity to supervise that expenditure is diminished.

  I turn to another matter, that of the Prime Minister's piggery. That also raises questions about the capacity of people in high places to handle money.

Senator Schacht —What about your capacity at Patrick Partners?

Senator MICHAEL BAUME —I accept that interjection. The minister has made it repeatedly and it is fascinating. Apparently he is unaware of the fact that there was an inquiry into the failure of Patrick Partners and that inquiry, which reported to a Labor government in New South Wales, found there was no matter against me which should properly be raised. Any criticism of Patrick Partners specifically excluded me. The minister knows that perfectly well.

Senator Schacht —You were part of the company. You took their money.

The ACTING DEPUTY PRESIDENT (Senator West) —Order, minister, please!

Senator MICHAEL BAUME —I wish we could have the same kind of inquiry into this minister's integrity that was held into mine. If we could have the same kind of inquiry into this minister's integrity that was held into mine and mine was shown to be excellent, then perhaps we would have a little less interjection and a little less contemptuous and disgraceful response than we have heard from this minister.

Senator Schacht —Shareholders were diddled while you were a partner.

The ACTING DEPUTY PRESIDENT (Senator West) —Order, Minister Schacht!

Senator MICHAEL BAUME —Why should a man who has an incapacity to face the truth and who, knowing the facts, deliberately continues to slander me, and he is not game to go outside and do it—

Senator Schacht —You are the expert on bucketing ministers.


Senator MICHAEL BAUME —Madam Acting Deputy President, that is pleasant. Thank heavens at last you have momentarily silenced this offensive person who has been slandering me continually with interjections non-stop.

Senator Schacht —What have you been doing? You have been in here smearing the Prime Minister for nearly a year.


Senator MICHAEL BAUME —I will not be discouraged from proceeding with the matter I was dealing with. Madam Acting Deputy President, why have you not warned this minister who you have told to be quiet but who refuses to be quiet?

The ACTING DEPUTY PRESIDENT —Order! I am about to ask the minister to cease his interjections as they are unparliamentary. Please be warned, minister.

Senator MICHAEL BAUME —Thank you, Madam Acting Deputy President. Mr Keating's purchase of a half interest in a $30 million piggery group was unprecedented, not only because of the incredible gearing of equity to liabilities. Other Prime Ministers have been long-standing owners of primary production interests, but none has ever while in high office, such as Treasurer, bought into a loss making, high risk, effectively bankrupt venture whose liabilities exceeded its assets, which was allowed by the Commonwealth Bank to avoid paying its annual interest bill for years and whose only prospect for viability depended on the granting of governmental approvals at federal, state and local levels, along with successfully negotiating a joint venture agreement with a foreign multi-national.

  The relevant FIRB approval and the joint venture with the Danes were both signed after Paul Keating became the Prime Minister of this country. Disposing of his piggery interests has not resolved the question over Mr Paul Keating's ownership. Not only is the public entitled to know the manner of its disposal—for example, whether Mr Keating avoided loss on his investment over almost three years while both the piggery group and the Commonwealth Bank lost millions of dollars during his half ownership—but his and his companies' actions during that period must be shown to be acceptable. Ceasing to misbehave does not remove the need to be responsible for and suffer the consequences of that misbehaviour.

  Mr Keating's attempt to put an end to questions of the propriety of his piggery venture by `disposing' of it is, effectively, a belated acknowledgment that he was in an intolerable position of potential conflict of interest, as the opposition has been pointing out for almost two years. This `disposal' therefore increases the need for Mr Keating to come clean about the very serious questions that have emerged, which are largely of his own making. Unless he answers these questions, which his own secretive actions have generated, there must remain serious doubt about the whole question of the integrity of this investment and the status of the office of Prime Minister.

  The status of the joint venture which Mr Keating had such an important role in negotiating appears to have changed considerably after the Danish partners found out that the finances of Mr Keating's piggery group were nothing like the rosy picture falsely presented at the time the Treasurer, Mr Paul Keating, acquired his half ownership of the company. As a result, the Danes apparently were not prepared to expose themselves to an equity risk in Mr Keating's piggery and refrigeration group, which was technically bankrupt, and kept the `high-tech' pork processing end of the joint venture to themselves, with the only really joint part of the operation being in the local wholesaling of pork products from a new facility owned by the Danes and built by a Danish associate at South Strathfield.

  The piggery's profitability also depended on government action being taken against cheap imports of Canadian pig meat. After anti-dumping applications failed, quarantine restrictions which are unmatched in any other country that imports Canadian pork were imposed by the federal government. Mr Keating half-owned his piggery group from 15 May 1991 to 7 March 1994, almost three years. During only two years of that time, to June 1993, the debt of the parent company, Brown and Hatton Group Pty Ltd, which was mainly to the Commonwealth Bank, increased by $5.2 million to $24.5 million but its assets decreased by $600,000 to $18 million. For the whole group the picture is clouded by inter-company loans and write-offs, some of a very questionable nature. But the trend is very clearly there. While Mr Keating was a half owner, this piggery group slid multimillions of dollars more into debt, a debt that the Commonwealth Bank believed 20 months ago it would not fully recover when it made a $4.5 million bad debt provision.

  While the Australian people's bank was losing millions of dollars on its loans to Mr Keating's companies, what was happening to Mr Keating's own investment? When he `disposed' of his interest on 7 March, did he get all his money back? Did he even make a profit? If so, were the only losers the Commonwealth Bank and the shareholders, including the public of Australia? Mr Keating should come clean on whether he got a free ride into the pleasures of ownership and the prospect of gain, while ordinary Australians were left to suffer all the pain and loss that resulted.

  Mr Keating should explain how this bank, of which he was the ministerial head, continued to allow this group, of which he became a half owner while Treasurer, to avoid paying its interest bill, especially as other farmers in less serious financial strife than this group, which had been technically bankrupt since its inception, were being sent to the wall by banks, including the Commonwealth Bank. It cannot be because of expectations that the joint venture with the Danes would get the bank back the $20 million-odd it had lent by August 1992. By then, when the bank's credit committee made its $4.5 million provision for bad debts against the group—and remember that Mr Keating had by then been an owner for 1 1/4 years and Prime Minister for nine months—it was `on the basis that the joint-venture will proceed'. It expected to lose $4.5 million, even assuming the joint venture would proceed. According to that credit committee's report, it was `subject to the joint venture company arranging finance and should result in a reduction of the CBA's debt'. But this reduction would not be enough to save the bank as, it said, `the residual debt is projected to be around $10.3 million against security with an estimated value of $5.3 million', leaving a possible principal loss to the bank of $5.4 million.

  Against this, the bank made a provision of $4.5 million in the hope that cash flow from the piggeries could help the situation even though this `cannot be relied on to reduce the residual debt'. I repeat: whether there was to be a joint venture with the Danes or not, the banks stood to lose millions of dollars on Mr Keating's piggery. The credit committee's reason for the loss was the bank's `failure to investigate adequately the financial position of the operation'. Yet this bank had never required the group by then to meet its obligations under its mortgage documents to provide the bank with audited annual returns, which would have shown it how bad things really were. How could this politically well-connected group have managed to get away with this for years?

  The parliament is entitled to know, in these circumstances, the nature of Mr Keating's rescue from his financially disastrous piggery group, particularly the financial consideration. It deserves to know whether the Prime Minister holds any option or right, or whether his family does, to reacquire his interest in the piggery group or Danpork or associated companies or joint ventures. Does he have any present or foreshadowed involvement, direct or indirect, in any activities of Danpork or its associated companies in Australia? Does the Danpork group or any of its associates have any involvement in the manner of Mr Keating's disposal of his interest?

  The parliament is entitled to know the method by which Mr Keating was financed into the piggeries in the first place, whether or not there were any personal guarantees to fund his $430,000, 50 per cent interest and whether any such guarantees were forgiven at any time. What happened to the $860,000 subscribed by Messrs Keating and Constantinidis as new capital to Euphron in May 1991? There is no evidence of it having gone into the Brown and Hatton Group; no interest was apparently earned on it in the 1992-93 returns of Euphron; and none of the Brown and Hatton Group balance sheets refer to any loan from Euphron. Was this money recirculated to provide, perhaps indirectly, the funds to finance Mr Keating's purchase of the Euphron shares, with none of it going to provide any financial assistance in real terms to the cash strapped piggery group? I stress, there is no evidence of that money going into the piggery group. I think it should be shown whether it did.

  How did Mr Keating represent himself to the Danes when, while he was a backbencher, he was, to quote his partner, `heavily involved in the negotiating' with them in 1991 over the joint venture? Was he then acting as an officer of the companies? If so had he, by doing so, assumed the duties of a director and therefore undertaken the liabilities of a director? He has repeatedly said he was not a director and, therefore, not liable in those terms. I think we are entitled to know whether he had any personal involvement in the joint venture negotiation or operations with the Danes before he became a backbencher, that is, while he was Treasurer, or after, that is, while he was Prime Minister.

  What restructuring of Danpork's Australian interests or associated companies, such as Intercool, has taken place? Has the status of Mr Constantinidis or any of his companies been changed in their relationship with Danpork or associates? Is Intercool Constructions still half-owned by Olympia Refrigeration (Sales) Pty Ltd, which is one of the Brown and Hatton Group companies owned by Euphron, or has a new company, Olympia Group Ltd, in which one of his right wing factional mates in New South Wales, Mr Eddie Obeid MLC, is now a director, acquired that interest? What financial support have Danpork and its owner and associated companies given or undertaken to the Euphron-Brown and Hatton Group, apart from the bank guarantee of $3 million and the $285,000 loan revealed in Danpork's 1991 annual report?

  What interests do any of the Danes' Asian associate companies now have in its Australian operations? Has the departure of Mr Keating changed Danpork's plans for Australia? What is the extent, if any, to which he or his companies received special treatment from the Commonwealth Bank of Australia, particularly while he was Treasurer? What is the extent to which Mr Keating put himself into a position of potential conflict of interest—I do not say `conflict' I say `potential conflict'—between public duty and private profit, particularly as a result of acquiring a business whose viability depended on subsequent governmental approvals at federal, state and local levels? Whether the Danes were conned into the joint venture with the Brown and Hatton Group by false accounts or other improper inducements, including those of a political nature? Have the One Nation changes in tax concessions and FIRB approvals brought any benefits to the Danes or the joint venture? What was the nature of the links between Olympia Refrigeration (Sales) Pty Ltd and the failed Exhibit Resources Group, which had an involvement in the Brisbane Expo in 1988, to which Olympia owed $1.4 million in its last public accounts in 1991, but about which its liquidator knows nothing? There are many more questions which have to be answered.