Senator NEWMAN (Family and Community Services; Minister Assisting the Prime Minister for the Status of Women) (5:14 PM) —I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard .

Leave granted.

The speeches read as follows—

FILM LICENSED INVESTMENT COMPANY BILL 1998

The Government recognises the importance of an active, innovative and vibrant Australian film industry—both on cultural and economic grounds. The portrayal of uniquely Australian perspectives and stories are important to us as a nation. Australians are proud of the high standard and successes of our film industry, and there is increasing interest in contributing to that success through avenues such as investment.

We also recognise that the production of film is a high risk business, and that it is necessary to provide incentives for the private sector to invest in the film industry. Division 10BA of the Income Tax Assessment Act was introduced in 1981 to encourage a broader base of private investment for Australian films.

Whilst 10BA has been important in attracting private investment into the industry, there are flaws with the system. A number of films were never released while others appear to have inflated budgets.

As part of his wide ranging review of Commonwealth Assistance to the Film Industry, Mr David Gonski recommended that the current 10BA and 10B taxation concessions be replaced by the introduction of a Film Licensed Investment Company tax concession.

The Government consulted widely on the detail of Gonski's proposal. We listened to industry concerns about replacing 10BA and 10B with a completely new and untested mechanism. As a result of these concerns we decided not to replace 10BA until the FLIC scheme had been properly trialed. The Government will retain 10B. The FLIC scheme will operate alongside the current 10BA concession.

The adaptation of Gonski's FLIC model signals an innovative and exciting new approach to government support to the film industry in Australia. The FLIC scheme provides an opportunity for the Australian film industry and the investment sector to work together in attracting more effective and wide ranging private investment into the development and production of qualifying Australian films. It is envisaged that the FLIC scheme will be able to tap into a part of the investment market which has shown interest in the past in investing in the film industry. As the film industry matures and develops, the Government believes that sophisticated investors will be attracted to investing in a slate of film and television productions across which their risk can be spread.

This bill enables the introduction of the Film Licensed Investment Company pilot scheme. Under the scheme up to $40 million worth of concessional capital over two financial years will be allowed to be raised for investment into qualifying Australian film and television product. A Film Licensed Investment Company will be a commercially driven company that will invest in a slate of eligible film and television product. Companies will be selected through a competitive application process. Shareholders will be eligible for an upfront tax deduction of 100 per cent on their investment into the company.

While the licence period for raising concessional capital will apply over two financial years, the FLIC will have up to four years to invest the capital and up to five years to complete production. The FLIC will be able to start raising non-concessional capital at the end of the two year licence period.

This represents a major commitment of Commonwealth funding to the film industry. The cost to Government is estimated to be up to $20 million over the two year pilot period. The FLIC scheme will deliver support to the industry that is transparent and accountable, and afford investors an alternative avenue for investment in film. This introduces a level of contestability between current funding sources through the provision of an alternative source of funds from that currently available from the Film Finance Corporation and that which can be raised under Division 10BA.

The FLIC scheme will support and promote the ongoing development of the Australian film industry by facilitating the establishment of a new Australian owned and controlled company that will raise capital primarily from Australian investors for investment in qualifying Australian film.

The FLIC does not replace any existing funding for the industry, rather it will complement those programs. The Government recognises the vulnerability of the industry, especially for some of the most culturally sensitive genres, and need for certainty for investors and producers alike. Forward funding for the Australian Film Commission and the Australian Film Finance Corporation was confirmed in the 1997-98 Budget, and the continuation of Film agencies was confirmed in the Government's response to the Gonski report in November 1997.

TAXATION LAWS AMENDMENT (FILM LICENSED INVESTMENT COMPANY) BILL 1998

The Taxation Laws Amendment (Film Licensed Investment Company) bill 1998 is a companion to the Film Licenced Investment Company Bill 1998.

The bill authorises a deduction for money paid during the 1998-99 and 1999-2000 income years to subscribe for shares in a Film Licensed Investment Company (FLIC). The deduction is not allowable until the shares have been fully paid and issued to the shareholder.

The legislative package comprising the two bills is intended as a pilot measure, to provide assistance to the Australian film production industry in a way that complements the existing tax concession in Division 10BA of the Income Tax Assessment Act 1936. FLIC shareholders will be able to effectively spread their investment across a range of films, whereas Division 10BA applies to investments in individual films.

Full details of the measures in the bill are contained in the explanatory memorandum circulated to honourable senators.

I commend the bill to the Senate.

WOOL INTERNATIONAL AMENDMENT BILL 1998

The wool industry is facing some very difficult decisions about its future.

In spite of all the work put in by the Government, and particularly the efforts of my predecessor John Anderson—as well as the efforts of the industry's own leaders—the wool industry remains deeply affected by the collapse in the market for wool. This collapse is in the wake of the Asian economic crisis and poor consumer confidence in the key European and Japanese markets.

The Government fully appreciates the reasons for the wool industry's call for assistance to alleviate whatever pressures there are on the wool market that are in its scope to control.

The Government's decision to freeze stockpile sales through to 30 June 1999 was a response to this request from the industry, and followed a long period of intense consultation on the future directions of the industry.

The decision reflects the desire of the Government to contribute to the alleviation of the market situation at a time when the fresh wool clip is entering the market, and when privately held stocks are also at high levels.

My intention as I take up my new responsibilities as Minister for Agriculture, Fisheries and Forestry is to continue the Government effort directed at removing the obstacles to full commercial management of the stockpile in the interests of its owners.

This bill is my first step in this process.

The purpose of this bill is twofold. It will

.freeze sales from the Wool International stockpile and, more importantly,

.end the debate about the management of the stockpile, by starting a process of taking responsibility for its management out of the hands of the Wool International Board (which is constrained by statutory obligations) and placing it under the control of a new private sector entity in which the Directors will be responsible to the shareholders who own the stockpile.

The freeze will allow the industry some breathing space—an opportunity to focus on the real issues, such as:

.how to increase demand for their product;

.how to increase farm productivity; and

.how to improve the quality of our wool to better meet customer requirements.

It is both possible and prudent to suspend stockpile sales and transfer Wool International's business to the private sector at this time because of the now low debt load carried by Wool International and the greatly reduced size of the stockpile.

By way of background to this bill, it may be useful to consider some of the events leading to the Government's decision.

Last year the Government passed the Wool International Amendment Act 1997 which provided for the liquidation of Wool International once its key functions of selling down the stockpile and retiring the associated debt had been completed.

Under the current legislative framework the stockpile disposal, and consequent liquidation of Wool International, was to have been completed by the end of 2000.

The target date in the act for retirement of the debt was 31 December 1998.

In March this year, the Government responded to calls from the wool industry to provide some relief from the exceptional combination of events facing the wool industry, by extending the target date for Wool International debt retirement by up to six months to 30 June 1999.

This meant some of the pressure on Wool International to maintain sale rates at a higher level than would be commercially prudent was reduced significantly.

However, market conditions deteriorated further, and in light of the very difficult circumstances faced by growers as the new season wool began to come on to the market, the Government decided on 4 August 1998 to freeze sales from the stockpile until 30 June 1999.

The Board of Wool International initially complied with the Government's decision, but had to resume sales when the calling of the election prevented legislation from being passed in the short term.

Following the Government's election victory, and its restatement of the freeze decision, the Board of Wool International has again suspended sales.

If passed, this bill will now formally freeze all sales from the stockpile until 30 June 1999.

As a point of clarification, the freeze is not intended to stop Wool International from honouring existing contracts. To do so would add further unwanted uncertainty to the troubled wool market, as well as providing Wool International with greater difficulties in maintaining its customer base for when it resumes sales.

With regard to the proposed path to privatisation of the management of the stockpile, this bill allows Wool International to provide information and support for the process, and to commit funds to it.

The Government has asked the Office of Asset Sales and IT Outsourcing to examine the most efficient and effective method of transferring stockpile responsibilities to Wool International equity holders, while keeping costs to a prudent minimum.

The Office of Asset Sales will, of course, engage professional business and legal advisers to assist in its examination of the process.

The Government's role will be purely to hand over the business of Wool International to the new commercial entity, and the Government will not be involved in shaping its commercial activities.

That will be the responsibility of the Board of the new commercial entity, who will be expected to present a business plan to their stakeholders in line with normal commercial practice.

At this point, I would like to pass on my thanks to the Board and staff of Wool International who have carried out their legislated duties in a thoroughly professional and commendable way, in sometimes difficult circumstances.

I can assure all concerned that, in developing the details of the proposed privatisation, the Government will seek to ensure that the employees and staff of Wool International will not be disadvantaged.

Ordered that further consideration of the second reading speech of these bills be adjourned till 14 days after today, in accordance with standing order 111.

Ordered that the Wool International Amendment Bill 1998 be listed on the Notice Paper as a separate order of the day.