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Thursday, 2 May 1957

Mr PEARCE (Capricornia) .- When the honorable member for Scullin (Mr. Peters) rose to speak on this bill I suspected that he would know very little about the subject, and he has ably demonstrated that to be so. The tirade that we had from him was entirely unwarranted, because it did not touch on the points that are involved. This is a most serious matter, as the honorable member for Lalor (Mr. Pollard) was careful to point out in his well-balanced remarks.

The bill that we are considering to-day proposes to amend legislation which was introduced in 1954 as part of a programme to ensure that Australia became as independent as was possible in the supply of sulphuric acid for the manufacture of fertilizers. Other legislation also has been introduced to bring about this desired result. Before the Government introduced the act as it now stands, the matter was referred to the Tariff Board, as the honorable member for Corangamite (Mr. Mackinnon) has mentioned. This vexed matter of the 12! per cent, profit, which has agitated the mind of the honorable member for Scullin, and also that of the honorable member for Lalor, became the subject of serious discussion before the Tariff Board. Section 9 of the 1939-1944 act provided that there should be a profit limitation of 10 per cent, on the depreciated capital cost of the plant manufacturing the sulphuric acid. When the matter came up for review by the Tariff Board, the manufacturers and the producers presented a case to the board based on the ground that this profit margin was operating against the use of indigenous materials for the manufacture of sulphuric acid. They presented their case in such strong terms that the Tariff Board expressed itself very clearly and definitely in regard to this profit limitation.

First of all, I should point out for the benefit of the honorable member for Scullin, who may read my remarks, but who cannot hear them because he has left the chamber, that the 121 per cent, profit provision is based on capital investment which means, as the honorable member for Corangamite has pointed out, that it is an eighth of the profit on the whole of the capital investment. If a modern plant, with a capital investment of £2,000,000, wishes to partake in the bounty it has to show a profit of less than £250,000, but a company that has been producing sulphuric acid from indigenous materials all along with a depreciated plant, and whose capital is only £500,000, is excluded from the bounty provisions when it reaches only a fraction of that profit. Consequently, in seeking to make Australia independent of overseas supplies of materials for the manufacture of fertilizers, the Government has not reached anything like the objective that was set in 1950. The Tariff Board recognized that fact. It appreciated that the limitation set by the old 1939-44 legislation put a brake on the use of indigenous materials, and so it said, at page 18 of its report, that the provision in the Sulphur Bounty Act which limited profits by recipients of bounty to 10 per cent, of the funds employed was no encouragement to investors of capital or to conversion of plant, particularly as the net return after such provision would be very low.

The board considered that the circumstances in which assistance was being sought by this industry were different from those usually associated with an industry seeking tariff protection or assistance. The board admitted that it had before it a new set of circumstances which were peculiar to this industry. In its report, it went on to say -

In this instance, the Government has been urging manufacturers to convert their plants to the use of indigenous materials and there is no limit to the profits that may be taken by any manufacturers who may choose to postpone conversion or who may decide not to convert.

Some manufacturers have decided not to convert and have said, in effect, " lt would be more profitable for us to use imported brimstone or elemental sulphur in the manufacture of our sulphuric acid ". Consequently, they have ignored the bounty provisions altogether and have gone their merry way, using imported brimstone.

The report of the board went on -

The strongest argument for the maintenance of the profit provision in the Act is that some manufacturers will, on the figures available, be obtaining bounty in excess of actual needs. The Board believes that some of this excess, if not all of it, will be used to reduce the price of superphosphate.

There is no doubt that we in Australia to-day are enjoying a very favorable price for superphosphate. The manufacturers, in Victoria and elsewhere, have never been called blood suckers-

Mr Pollard Mr. Pollardinterjecting,

Mr PEARCE - The honorable member for Lalor has never had any cause for complaints about the manufacturers of superphosphate. They have played the game and have done a very good job. The confidence of the Tariff Board in them is reflected in the paragraph of the report that I have been reading and which continues as follows: -

The Board considers that present circumstances justify the removal of the restrictive clause, that the whole matter should be kept under observation and that if there should be any tendency on the part of manufacturers towards excess profittaking, consideration should be given to some practical method of its restoration.

The board supported its arguments in this regard by a definite recommendation. In the second column on page 18 of the report, the following appears: -


The Tariff Board recommends -

(5)   Repeal of section 9 concerning the limitation of profits.

When the case was presented to the board., it recommended that, for the benefit of the industry and Australia the profit limitation clause should be repealed entirely. Then, in 1954, the Government introduced legislation which included the provisions of section 9 of the 1939-44 Sulphur Bounty Act as section 10 of the 1954 act, so that we perpetuated the mistake that was made in the 1939-44 legislation. Events that have taken place since then have shown that the Tariff Board was entirely right in its judgment, because we have not attained the desired degree of usage of indigenous materials. Events that have transpired since the current legislation was introduced have shown that the Government was completely wrong in inserting this 121 per cent, profit limitation provision at that time. It may well be argued that a certain degree of conversion to the use of pyrites has been attained. I agree that there has been fairly substantial conversion. But the use of indigenous materials has not reached the target that was set many years ago.

I say emphatically, with some knowledge of the subject, that the target cannot be achieved while this profit limitation remains n the principal act, because the manufacturers who need the bounty will not be able to get it as the act stands. I have never found any indication - the matter has not been carefully explained to me - why the 121 per cent, limitation was introduced. Why was the figure not left at 10 per cent., as it was in earlier legislation? Why was it increased to 121 per cent.? There is no logic in it, and there seems to be no reason for it.

Mr Hulme - Does the honorable member intend to move an amendment for the purpose of reducing it?

Mr PEARCE - The Tariff Board recommended that the limitation be removed altogether, but the Government decided to raise it to 121 per cent., for no substantial reason. Indeed, no reason was given, except that it was the practice to place a limitation on profits in industries to which bounties were being paid. I believe that the argument advanced by the Tariff Board in .1954 was , that there was an unusual set of circumstances revealed by the evidence given to it, and it considered, therefore, that there should be no limitation of profit'. We now see the ludicrous spectacle of a government that is seised of its responsibility to make Australia independent of overseas supplies of sulphur, knowing that we have, in Australia sufficient indigenous material to make us independent of supplies from overseas, perpetuating in this bill a blunder that was made in the 1954 measure. The continuance of the profit limitation will gain nothing. The honorable member for Petrie (Mr. Hulme) asked whether I intended to move an amendment. I consider that this matter should be examined, and I foreshadow that, at the committee stage, I shall move an amendment and do everything possible to have the matter reconsidered and rectified before the measure becomes law.

This problem has very serious implications for Australia. I have said before - and I think my opinion is shared by many honorable members - that, so far as Australia's defence is concerned, we are already living on borrowed time. We have not sufficient time to waste any in monkeying about with these things. If we are to discharge our most important responsibility in the event of war or a serious threat from the north - the responsibility to maintain primary production at a high level - Australia must be as independent as possible of overseas supplies of materials essential to primary production. Adequate supplies of superphosphate are essential for the maintenance of primary production and the supply of foodstuffs and other important commodities in any war, especially a long one. Therefore, we must ensure at all costs that we are independent of overseas sources of supply.

What is the present position in the sulphuric acid industry? The plants that manufacture sulphuric acid from pyrites and other indigenous materials are situated mainly in the southern part of Australia. Some of the important sources of raw materials are in the south, but almost all are many miles distant from the factories. Materials produced at the Lake George mine at Captain's Flat, fairly close to Canberra, must be transported over long distances to the coast. Yet this source of supply of the indigenous materials used in the manufacture of sulphuric acid is probably closer to the manufacturing establishments than are most of the other sources of supply. This bill will not help in any way to reduce the transport difficulties experienced by the manufacturers. Pyrites, zinc concentrates, or whatever material is used in the manufacture of sulphuric acid must be transported, usually over long distances, to the factories. Some of the greatest supplies of pyrites now available are in north Queensland, more than 1,000 miles distant from the nearest factory, and a considerable distance inland. Transport must be improved so that the raw materials from those sources can be landed at the factory at an economic cost, especially where the manufacturing plant is in the south. I do not know how we can improve our transport quickly enough in the short time that we may have available before we are threatened or hostilities break out. because our transport services, by rail, road and air, are already strained to the utmost. The new rolling-stock required for the railways alone could not be produced in the matter of a few weeks only.

The entire problem must be examined immediately. 1 warn the Government, with all the emphasis at my command, that if we neglect the problem until we find ourselves in a desperate position, we shall find that we have not enough time to improve the transport of these materials from the inland to the coast and to the factories. Therefore, we must give the manufacturers an incentive now to use greater quantities of our indigenous materials. 1 think it was the honorable member for Lalor who said that we might have to pay as much as £1.000,000 a year in bounties. 1 suggest that he compare that sum with the cost to our economy of a breakdown of superphosphate supplies at a time of desperate need and danger of attack from without. Compared with what we should suffer in such circumstances, a present expenditure of £1,000,000 would be infinitesimal. Governments can, perhaps, create money, or, at least, credit, but the raw materials for the manufacture of fertilizers cannot be dragged out of the ground by the wave of a magic wand, and crops cannot be forced to grow without adequate application of fertilizers. We should do everything possible now to induce the manufacturers of sulphuric acid to use only indigenous materials so that we may become completely independent of overseas supplies. We are very foolish not to establish factories at points closer to the sources of the raw materials. 1 have never been able to understand the crazy attitude of the Queensland Government.

Mr Hulme - Which party does it represent?

Mr PEARCE - There is only one government party in Queensland, but it is infested with white ants, and borers and parasites, as they were called last week. Over the last 20 or 30 years - far too long, anyhow - one party has been in office in Queensland. Since 1949, the Queensland Government has realized that the sugar industry needs adequate supplies of fertilizers for the cane-fields. The price being paid for sulphate of ammonia at the present time is prohibitive. Yet, although there are at Mount Morgan adequate supplies of pyrites that could be used for the manufacture of ammonium sulphate, close to the centre of the sugar industry, the Queensland Government has not established a sulphuric acid plant near to the source of the raw materials in order to produce fertilizers at a reasonable cost and reduce the production costs of the important sugar industry. Although such a proposal has been submitted to the Queensland Government time and again, it has taken no action, and a stalemate seems to have been reached. Fortunately, it appears that the wheel has now turned full circle, and that the split in the Australian Labour party in Queensland will make it possible for that State to elect a new government within the matter of a few months. That will be a change very much for the better. At any rate, it could not be for the worse. I am hopeful that a new government in Queensland will acknowledge the national need for the establishment of a fertilizer factory in the Rockhampton area to use pyrites which are available in unlimited quantities at Mount Morgan. This would be to the advantage of every one, and I hope that, when a good Liberal party and Australian Country party government takes office in Queensland one of its first acts will be to establish such a plant.

I do not think that there is much sense in labouring this point. I just want to say bluntly that I appreciate all that the Government has done in its endeavours to stabilize the sulphuric acid industry and to make Australia independent of overseas supplies of superphosphates and other fertilizers. 1 appreciate its goodwill. But I cannot for the life of me understand why it ran counter to the Tariff Board's report and included in the 1954 act the profit limitation of 121 per cent. I cannot understand why it was not able to see, when it was preparing thi", om. i events since 1954 have not led to theattainment of the goal at which we aimed or even a near approach to it, and thatthe main obstacle to the attainment of the goal was this stupid profit limitation of 12½ per cent. So, as I said earlier, I foreshadowthat when we reach the committee stageI will move an amendment to try to delay this measure so that the Government may take another look at it and endeavour o correct the mistake made in 1954.

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