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Thursday, 2 May 1957

Mr BEALE (Parramatta) (Minister for Supply and Minister for Defence Production) [3.481. - As Minister in charge of sulphuric acid production in Australia and, therefore, directly concerned with this bill, I am somewhat between the upper and nether millstones. Some honorable members on the Opposition side say that the 124 per cent, profit limitation is too high, but honorable members on the Government side say that it is too low and should be abolished altogether. In those circumstances, I can do no more than to put before the House what I think are the facts and leave the House to decide.

As honorable members know, there is a bounty of something like £2 a ton on acid produced being paid to all acid manufacturers in Australia who use indigenous materials in its manufacture. The purpose of the bounty is to encourage the use of indigenous materials, chiefly pyrites, in place of imported sulphur. That has been going on since 1923, because it has always been government policy to encourage the use of local material. Great emphasis was given to this need in 1950 and 1951 when there was a dramatic shortage of brimstone as a result of the war crisis of that period and the operation of the International Material Conference which acted - I will not say in a panic - in a way that was very disadvantageous to Australia and some other countries at the time. As a result, Australia was faced with grave threats of shortages of sulphur and the government of the day took action to try to ensure that as soon as possible thereafter, and in the future, Australia would have an industry which would be substantially independent of imported raw materials.

It was never the intention of the Government, as I remember - and I took the first addendum to the Cabinet in 1950 because at that time I was in charge of sulphuric acid production, ministerially speaking - that there should be a complete changeover to the use of indigenous materials. But the Government did want to change over as much as possible. At that time, it contemplated that there would be as much as a 65 per cent, conversion to local materials by 1956 or 1957.

Mr Hamilton - Does the Minister know how the various States reacted to that?

Mr BEALE - I will come to that and I will speak subject to correction and as a matter of recollection rather than from documents before me. As I said, some measure of success was achieved. At present, raw materials are being used to the order of 57 per cent, and a capacity usage to the order of 65 per cent. That represents quite a considerable change for the better from 1950 onwards. It is not as great a change as the Government had hoped to see between 1950 or 1951 and the present time, but Cabinet has examined this problem periodically and decisions have been taken. One, which was taken in 1954, resulted in the amendment of the act, to which honorable members have adverted. Last February the matter was reviewed again.

It can be said that, up to a few weeks ago, there was a degree of pessimism as to whether the Government would achieve what it desired by way of conversion because it was somewhat discouraged by what had been achieved. Although the conversion was fairly substantial, nevertheless when Cabinet examined the position last February it made some further important decisions to which I shall refer in a minute, and I believe that they are the answer to the honorable member for Werriwa (Mr. Whitlam). As a result of those decisions I believe that there will be a further movement towards the conversion of plants to use local materials, certainly in relation to the expansion of existing plants and the erection of new ones. If the Government's expectation is realized, the result will render unnecessary, at the present time, the proposal which was made by the honorable member for Werriwa, and at this stage the Government would not accept his suggestion. However, time will tell.

This is one of these difficult matters which the Government, by encouragement rather than by mandatory action - because it has not much power to take mandatory action - is trying to persuade a great industry, or a network of industries, to change from the normal way of carrying on business - not for their own benefit, because they do rather better by using imported sulphur - for the benefit of the nation. It is for that purpose that the Government has invoked the bounty system.

In February of this year, the Government decided on further conversion, especially with respect to expanding existing plant capacity and the creation of new plants. The process of conversion was to be further encouraged and, if possible, brought about. The Government realized that the ceiling of £600,000 which had been placed on the bounty should be abolished, and in the bill now before the House there is to be a ceiling no longer. That is one improvement, and we hope that it will be an encouragement to many manufacturers, that it will enable them to share in the bounty and thus encourage them to change over. The Government decided also, as is provided in the bill, that the manufacturers should be entitled to share in the bounty of £2 a ton which is paid at present irrespective of the use to which the acid manufactured is to be put. Formerly it was for superphosphate, fertilizer and munitions purposes only. Now that limitation has been removed and manufacturers are to share in the bounty, no matter to what use the acid is put.

Mr Ward - What do you consider is a reasonable profit for them to make?

Mr BEALE - The Tariff Board, in the report which the Government considered a few months ago recommended, in this disputed matter of margin of profit, the removal of the 10 per cent, limitation. A limit of 10 per cent, had operated since 1923. The Tariff Board said that, for certain reasons, this limitation should be removed. In answer to my charming friend from East Sydney (Mr. Ward) who wants to know what I think is a reasonable limit, I say that the Tariff Board thought that in the particular circumstances 10 per cent, was not enough. It wanted, for the time being, to allow the manufacturers somewhat more. The Government also considered the matter in great detail and with great care, having the whole picture before it. It considered that 12i per cent, was enough. Therefore, I can re-assure my charming friend from East Sydney that this is at least one occasion on which he cannot accuse the Government of favouring the big battalions in contradistinction to the Tariff Board, which was prepared to be kinder to them than we were.

The Tariff Board had particular reasons for recommending the lifting of the 10 per cent, limit for the time being. One was that those who were not using the local material were not subject to any profit limitation at all. That discrimination seemed to the board, in its wisdom, to be a little unfair. A second reason was the difficulty which the board saw in regard to " mixed " plants, which were using partly local material and partly imported material. The board thought that it might be a good idea to remove the limitation, but to watch the whole position closely. We came to a slightly different conclusion. We thought, "Let us retain the profit limitation of 12i per cent, at present. Let us administer it in a reasonable and liberal way. Then, if it does not work, we can look at it again." I believe that it has worked. I have before me a minute from the Department of Customs to the effect that the whole of the £600,000 has been used up, so apparently no one has been deprived of the bounty. Secondly, we are told that in no case in which application was made was the profit above the 124 per cent, limit.

Mr Pollard - Can the Minister tell us to what extent the bank guarantee was taken up?

Mr BEALE - I am afraid that I have not the figures with me. The Government's caution in this matter appears to have been fully justified. The board did not recommend removing the limitation on the ground that 124 per cent, profit was inadequate, but because of the special circumstances that I have described. So far as I know, only one company has protested. It is the Phosphate Co-operative Company of Australia Limited, to which the honorable member for Corangamite (Mr. Mackinnon), made reference in a very moderate and reasonable speech. He said that he did not propose to move an amendment because an assurance had been given to him that his company was not liable to the profit limitation. I think that I ought to correct that impression. I gave no such assurance. The honorable gentleman refers presumably to a minute from one of my officers offering the opinion that as this is a co-operative organization it would not seem to be subject to the limitation. I have not given that assurance at all.

Mr Pollard - In view of the good record of the company and the fact that it has kept the other people in their places, the Minister ought to give that assurance.

Mr BEALE - I cannot give such an assurance if that is not the law. In view of the way that this matter of the relationship of profits to capital has been administered, I do not think that any of the acidproducing companies have real cause for complaint. As I said earlier to-day, in answer to a question by the honorable member for Capricornia (Mr. Pearce), the Tariff Board has been asked to look at the bounty, with respect to both amendment of the act and future period of operation. The board will then report to the Government and, among other things, will no doubt advert to this question of profit limitation.

I must tell the honorable member for Capricornia, the honorable member for Corangamite and other honorable members that I believe that that would be the best time to consider whether we can accelerate the change-over to pyrites production by altering the profit level. I hope that the honorable member for Capricornia will accept my suggestion that his proposal is a little premature. We have just embarked upon a new and orderly plan to stimulate conversion, and until that plan has been given a chance to work it would b2 premature to do as he suggests. I hope that wiser councils will prevail and that, in his great wisdom, he will not press his point for the moment.

Mr Pearce - The Minister is making it very hard for me!

Mr BEALE - I am sorry that the Government cannot accept the honorable member's proposal at this stage. We shall continue to look into the matter and take action, if necessary. We believe that, although not necessarily 100 per cent. conversion, a greater degree of conversion than has so far taken place is desirable. I am sure that the honorable member for Lalor (Mr. Pollard), who was himself a Minister for Commerce and Agriculture, and is experienced in these matters, will know what a complex industry he is dealing with and how very difficult it is, by this indirect means, to persuade these great units of private enterprise to do as we would like them to do. After all, they must look after their own shareholders' interests, and the stability of their undertaking. I believe that indirect methods are the only methods which we should adopt, but they are difficult to apply.

I do not criticize any of the companies for anything that they have done. They are merely looking after their own commercial interests. But if they do not, this country will suffer. We must try to persuade them that it is in their long-term interest, as well as in the best interests of this country, to switch over their plants. Moreover, we are making it a little difficult for them to do otherwise. From now on, when people make application for import licences for sulphur which, after all, does involve us in very heavy dollar expenditure, applications will be considered on the basis of essentiality, and the respective needs of new plants as compared with those of existing plants. As 1 have said, all that is part of what we hope is an orderly and sensible attempt, without hurrying too much, and without hurting any one too much, to persuade the industry to change over to local production. I agree that, although the improvement which has been achieved up to date is considerable, it is not as much as we had hoped. But I believe that the new plan, which was announced last February or March, and to which I have referred to-day, will result in a quite substantial improvement in the future.

I notice that the Opposition has indicated its approval of the bill. I hope the bill will go through the House without dissension, and that we shall be able to get on with the business of making this industry more and more an industry which will operate on Australian-produced materiel.

Mr Hamilton - Has the Minister any information on the conversion carried out by the various States and companies?

Mr BEALE - I shall try to get that information for the honorable gentleman. 1 have not the information with me now, but I shall write to the honorable gentleman and let him have it.

Mr Pollard - Can the Minister give us information on all the companies concerned, and the amounts that they have spent on conversion work?

Mr BEALE - I cannot do that now, but I see no reason why I could not give the information to the honorable gentleman later on.

Question resolved in the affirmative.

Bill read a second time.

In committee:

Clause 1 agreed to.

Clause 2 (Commencement).

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