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Thursday, 16 May 1957

Mr CAIRNS (Yarra) .- No one would deny the importance of the accounting and clerical procedures on which the control of imports into Australia is based. These procedures in the Government's administration of imports are of great importance for two main reasons: First, any decisions about the total level of imports must be based upon these procedures, and unless the procedures are accurate and speedy, decisions cannot be made in accordance with the limit on the imports that may enter Australia in a given period. Secondly, these procedures really determine the size of the quotas of indivi-dual firms within that total of imports. Evidence has been obtained by myself and others, from the most reliable sources, that these accounting and clerical procedures are grossly inefficient, slow and hopelessly out of date. As accounting procedures - if they can be so called - they are 50 years behind the times. They are equivalent to single entry bookkeeping in these days of modern methods. They represent a time bomb which could blow up the whole system of import regulation. Because of this inefficiency, hundreds, perhaps thousands, of quotas have been reduced from time to time or kept lower than they need have been, thereby forcing small importers out of business or into insolvency. The accounting and clerical procedures at present in use are so bad that decisions of such dire consequence based upon them cannot be justified. Further, almost as much damage is done by delay. Every honorable member knows of numerous cases involving months of delay, and the cases that we know about represent only a small percentage of the total. Almost as much damage is done to the economy by delay of months which is predominantly the result of the cumbersome and inefficient system.

This proposal is not directed towards revealing trafficking in licences which may or may not exist; it is not concerned with imbalance or unfairness in the allocation of quotas between one importer and another; it is not concerned with dishonesty; but all these things are made possible, more likely to occur and more difficult to detect because of the confusion and inefficiency which prevails. There is a widespread conviction of inefficiency, and there is suspicion of worse. I refer to the " Financial Review" of 4th April last, which states -

Senior officials and Ministers have said that the Minister's interpretation presents far too rosy a picture of the efficiency of his department's control over the rate of imports.

I am citing a responsible financial journal. The article continues -

Observers suggest that, on the basis of experience, the £40,000,000 cuts imposed in June last were actuated by a degree of panic about the inefficiency of the then licensing procedures which have turned out to be unjustified by the events.

The licensing procedures which were in operation then are still in operation to-day. In the economic survey entitled " 1957 and Beyond ", which was presented by the Treasurer (Sir Arthur Fadden) to the Parliament on Thursday of last week, we have an admission that this position exists. The right honorable gentleman said, speaking of import controls -

Administratively they create the most intractible problems for which, in many cases, only arbitrary solutions are possible.

This is far from satisfactory. The accounting and clerical problems involved are far from extraordinary or intractable. Many retail stores and branches of trading banks handle accurately and quickly, vastly more transactions than those handled in this field.

T wish now to read from a responsible communication which has been directed to me. It states -

Close observation of procedure during the past year, have shown that this Department is actually attempting to perform National Accounting functions whilst failing to observe even the most elementary precautions to ensure the accuracy of its Accounting Reports. In many of its major Financial Controls there is no Reconciliation and no Balance whatever, to verify the accuracy of the Financial Statements on which Executive Action of National Importance and far reaching consequence is taken. In other words the System used it too inefficient in Method and consequently so unreliable in execution that it would probably not be tolerated in even a South American Republic. As a result of this, High Level Policy Decisions, of far reaching consequence and incalculable National importance are being based on unreconciled and unproved Financial Statements of consequential questionable accuracy. This deficiency is so serious that its harmful effects to the National Economy can hardly be overstated. The severe restrictions imposed last June were a consequence of a Panic resulting from miscalculation and defects in the Department's Accounting Methods. The recent relaxations, reverting the Licensing Position back to that operative before the June restrictions were again due to the inadequate system's belated discovery, and admission of the June error. But still, apparently nothing has yet been done to correct the Basic deficiencies of the Department's system of Accounting in Import Licensing.

What happens in detail? The Minister for Trade (Mr. McEwen), will know that what I am about to say is correct. The range and variety of the transactions involved are indicated by various publications. In the " Tariff Guide ", for instance, there are 26 divisions covering 437 items. They require 226 pages to state them in detail. In the " Monthly Review of Overseas Statistics ", which is issued by the Commonwealth Statistician, we find 21 classes and 290 items. I understand that approximately 50,000 applications for licences are handled each month, and that there are 75,000 import entries to be made each month. Perhaps this appears to be an extraordinarily big job for the department, but it is a job that is done week by week and day by day in retail stores and banks throughout this country.

Mr Anderson - What nonsense!

Mr CAIRNS - What would the honorable member for Hume know about it? By the introduction of proper methods, this task could be discharged as a matter of course. The Minister has referred to this work as a problem of great magnitude, but it is no greater than that handled by retail stores or banks. What is the system? It is perhaps wrong to use the word " system ", because in fact, no real system exists. First, there is the problem of establishing the quotas. The base year records are made up from documents sent in by individual importers. Upon that base year an established quota level is determined. All of this is done by clerks working with typewriters, pen and ink and using outmoded methods. There are no automatic calculators or other machines. No controlled or automatic balance is possible, and so there is no check on omissions or errors. A whole handful of records could be eliminated and there would be no way of discovering automatically that that had happened.

The second problem concerns the granting of import licences. Here, the two factors are the established quota levels, on the one hand, and the import licence applications on the other. Again, in this field there is cumbersome clerical work. There is no controlled or automatic balance. It is single entry book-keeping and use of ancient methods. These two vital quantities have, on occasions, been millions of pounds out. Frequently the department asks importers to state the balance of their quotas. That is exactly the same as if a trading bank rang a customer and asked, " How much money have you in our bank?"

The third problem relates to the level of licences granted and the actual import entries that are made. In respect of these important matters, there is a cumbersome clerical process with no proved or controlled relationship or balance between the two. Again, it represents the most ancient form of single entry book-keeping. In the course of each transaction, which takes a matter of minutes to complete, there is no control over errors or omissions. Compare this with modern accounting systems, using machines which turn out controlled and balanced entries at the rate of 100 to 400 a minute at various stages of the process. But under the system in use in the department the balance or position of thousands of individual importers is not known and the balance or position of the total imports that are possible in a particular period is not known. Therefore, decisions about the level of total imports which is possible and decisions about individual importers are conspicuous for the fact that there is no control, that no accurate information is available on which to make these decisions, and that such information frequently is six months late in coming to hand. So, decisions upon the total of imports and the quotas of many importers are based on guesses and accidents.

In summary, two fundamental things are not known accurately, but they must be known if this system is to be applied properly. They are, first, the value of licences issued against the value of established quotas in A and B categories, which take up about 64% of the total; and secondly, the value of outstanding licences which, at any point of time, is not known for any category of imports, including A and B categories. So, it is impossible to budget nationally; it is impossible to allocate quantities on quota properly to importers, or even in categories. Thus, the foundation of one vital part of our Australian economy is on shaky ground.

Again I allude to the communication to which I referred a few minutes ago. That such a position can be tolerated at all by a senior Minister with intimate knowledge of the vital importance of proper control is surprising; but the fact that its continuance has been permitted for a whole year since the inception of the Department of Trade is almost incomprehensible to the business community. If, as the evidence seems to indicate, the present departmental management is incapable of effectuating proper methods of national accounting, the Minister should see that the existing system is replaced. For this purpose, he should co-opt, if necessary, qualified officers from other Commonwealth departments and also, if need be, call on trained assistance from outside the Public Service. He should consider the use of accounting machines and automatic calculators.

When we look at what import controls are designed to do, we will be forced to the conclusion, quite definitely, that import controls cannot achieve even the most limited objective that has been set for them. To determine what the objectives of import controls are I refer to a statement by the Minister on 28th February, 1956, which appears at page 297 of " Hansard ". The Minister said on that occasion -

The import controls are designed, not only to limit expenditure to a level that we can afford, but also to give essential imports a high degree of priority in our import programme.

It is worth noticing that, according to that statement, import controls are designed not only for the purpose of limiting expenditure and safeguarding our overseas currency, but also to give essential imports a high degree of priority in Australia's import programme. But import controls are not achieving even that narrow first objective. It is certain that, in 1955, licensing was over the quantity of imports we could reasonably stand. It seems equally certain that, in 1956, we were £40,000,000 under that total. What the position is in 1957 we shall have to guess or wait for the future to reveal.

This on-again-off-again system which the business community finds most difficult to follow is the result not only of fluctuations in our funds, but also, fundamentally, of the methods used to determine import levels.

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