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Thursday, 26 November 1959

Mr POLLARD (Lalor) .- The measure before the House seeks to amend the Export Payments Insurance Corporation Act 1956-59. In 1956 the Government introduced a measure in this House to set up an Export Payments Insurance Corporation, providing a guarantee of £500,000 for the corporation to commence operations. The purpose of creating this instrumentality was to enable exporters of primary and secondary products to obtain from a government institution a coverage against risks of loss incurred in respect of overseas transactions.

The instrumentality commenced operations in September, 1957, and has presented to Parliament two reports, one covering its operations to 30th June, 1958, and the other detailing further operations to 30th June, 1959. A perusal of the financial statement and reports of the corporation indicates that the organization has been successful in its work. To the end of June, 1958, £21,000,000 worth of business had been involved, while by the end of June, 1959, the amount had increased to £40,000,000. It is worthy of note that the Government increased the guarantee to the corporation quite recently by £500,000. It is likewise worthy of note that, up to date, as far as I can ascertain from the reports, no losses whatever have been sustained by the corporation. This is a very good performance. It might have been quite fortuitous, but I think we should give credit to the corporation and to the business people involved for apparently indulging in transactions of a very safe nature.

Mr McEwen - There is a claim in for £100.

Mr POLLARD - That is not too bad. Of course these results may indicate, looking at it from the other point of view, that some exporters have not been as daring, or as venturesome, as they might have been expected to be by the Government and by many of the people of this country. It can be truly said that up to date the corporation, to all intents and purposes, has been a futility, but, of course, no one knows what the future holds.

Mr Bandidt - If you look at the figures you cannot say that the corporation has been a futility.

Mr POLLARD - The fact remains that up to the present time no risks have been involved, or no claims have been made. I merely say that this could indicate that some manufacturers or potential exporters were, perhaps, not as venturesome as they might have been. However, it is always wise to play safe.

The purpose of the amending legislation is, 1 understand, to broaden the extent of the coverage allowed under the principal act. The existing legislation provides that the exporter may obtain 85 per cent, cover, whether the transaction involved is a commercial transaction or the other type which has been called a political transaction. The Minister told us in his second-reading speech that a commercial loss is considered to be a loss caused by the insolvency and default of the buyer. A political risk involves such possibilities as exchange transfer blockage, wars, revolutions and so forth.

The bill provides that the coverage shall be increased, so that in the case of a preshipment of goods there shall be 90 per cent, cover, while in regard to postshipment of goods the cover shall be 95 per cent. There is a proviso that the distinction between pre- and post-shipment shall not apply to certain types of guarantees, such as the stock-holding overseas of goods held, perhaps, for processing. This covers a case in which a seller makes arrangements for his goods to be held in a store overseas, owned either by himself of by some one from whom he has obtained accommodation, the seller having decided, perhaps, to process the goods at a later stage before putting them on the market. In the case of such a transaction I understand that the 90 per cent, restriction does not apply.

Another special case in which a political risk is involved occurs when the buyer is a government or a semi-government instrumentality. If the buyer in such a case defaults, the corporation could hardly be expected to determine, so the Minister says - and I agree with him - whether the failure was deliberate or whether it was due to some genuinely unavoidable circumstance. In these circumstances, the cover is the same as that which I mentioned previously. Another provision is made for guarantees relating to technical services, contracting services and so on. Here 85 per cent, of the commercial risk and 95 per cent, of the political risk is covered. It is said that this also is on all fours with the policy of the United Kingdom Export Credits Guarantee Department.

As far as I can see, 'the proposed expansion of the cover provided by the Export Payments Insurance Corporation is unexceptional. Perhaps a greater risk is involved in extending the cover, but the Government is justified in accepting this risk in the light of the experience of the past two years. However, the Government now deserves criticism similar to that offered by the Opposition when the legislation was originally introduced. On that occasion, the Minister stressed in his second-reading speech that the bill was designed to encourage the expansion of our overseas trade. The Opposition at that time took the view that the provisions of the bill were inadequate, in that, although a type of cover that was not available to exporters from commercial concerns was provided, no provision whatever was made to extend credit facilities. We realize that exporters of long standing, who are firmly established commercially, would have little difficulty in obtaining credit to cover their overseas transactions, pending payment in cash. On the other hand, however, a newly established manufacturer, with relatively small production and with his factory, land and equipment perhaps fairly heavily committed in order to obtain working capital and to pay wages and so on, may not be able to obtain credit although his product may have a desirable export potential. The Minister will recall that, when the original legislation was before the House, the Opposition moved an amendment to give the corporation authority to provide credit facilities for these people.

We thought that amendment was justified, and we thought that another amendment was also justified. The Government provides the money guaranteed to the corporation in cash. In the first instance, the amount was £500,000, and amending legislation raised it to £1,000,000. The Government does not say simply, "We guarantee this instrumentality ". In fact, cash is provided and, until it is used for the purpose for which it is provided, the corporation invests it and receives interest on it. In these circumstances, we considered that the corporation should be required to transact all its business with the Commonwealth Bank of Australia, and we moved accordingly. The Government rejected our amendment. Dealing with the type of in vestment that the corporation can make, the Minister, in his second-reading speech on this bill, said -

Under the act as it stands, the corporation already has certain powers for the investment of such moneys in that they may be placed on fixed deposit with the Commonwealth Bank or with any other bank-

We originally took exception to the words " any other bank " - approved by the Treasurer, or they may be invested in securities of the Commonwealth.

That is the existing provision; there is nothing wrong with it, except that the Opposition felt that the corporation's right to place money on fixed deposit should be restricted to the Commonwealth Bank. But now we have this new development. The Minister went on -

It will often happen, however, that the corporation will have funds available for such short periods that it would not be possible to leave them on fixed deposit with a bank for the normal three months minimum period, or to obtain Commonwealth securities of the appropriate maturity.

This sounds like a bed-time story. It is suggested that a great corporation like this would not have funds available to be left on fixed deposit for three months. The Minister then made this suggestion -

Facilities of the desired type-

That is, for money that may be available for less than three months - are provided by the dealers on the recently established short-term money market. By lending funds to dealers in that market the corporation would be able to earn a reasonable rate of return on such funds.

The Minister has not mentioned one instance that has occurred since September, 1957, when the corporation was established, of the corporation's having funds available for less than three months and being unable to obtain a reasonable return. We are met with the blunt statement that the corporation is now to be given power to lend funds to dealers in the short-term money market, so that it will be able to earn a reasonable rate of interest. The Minister continued -

The bill empowers the Treasurer to determine both the persons to whom the corporation may lend and also the conditions under which such loans may be made, provided always that the loans are made upon the security of securities of the Commonwealth.

So we have a double-header. It looks as it we are establishing a pawn shop. In addition you will back yourself by the security of securities of the Commonwealth. The Treasurer proposes, on the passage of this bill, to give approval for the Export Payments Insurance Corporation to lend to dealers on the short-term money market approved by the Commonwealth Bank, such loans to bc against Commonwealth securities with not more than three years to maturity.

I think it is pretty tough when on the one hand you have a great instrumentality like the Commonwealth Bank, the profits of which go into the National Debt Sinking Fund and into the bank's reserves, as well cs another semi-governmental instrumentality provided with £1,000,000 of the people's funds, operating on a non-profit basis and accepting the community's big risks, and on the other hand you make available to dealers on the short-term money market the surplus funds of the corporation. I am not competent to deal with the intricacies of this short-term money problem, but I feel sure that my colleague, the honorable member for Melbourne Ports (Mr. Crean), will be able to expose this scheme for what it is. He will show how immoral it is politically. I hope that honorable members other than members of the Opposition will protest and that the Government will see fit, even at this late stage in the dying hours of this session, to agree to leave things as they are and not to open the way for this type of transaction. The excuse is that the Government cannot avail itself of fixed deposits under three month's duration so it must flit off to the short-term loan business. I do not think there are any government instrumentalities in the shortterm loan business.

Mr Anderson - It is the people's money.

Mr POLLARD - Is it the people's money that you are going to play with and hand over to the dealers - the gamblers and punters - when you have the opportunity to utilize the great Commonwealth Bank? These things should be closely examined.

I think I should pay a tribute to the people who are managing the Commonwealth Banking Corporation. They are doing a good job. The corporation's annual balance-sheets are excellently produced. It is apparent that the corporation's business is transacted on a sound basis. Perhaps it has been lucky. The Minister has told us that there is only one claim for £100 against the corporation. Because I compliment the corporation, I may be charged with complimenting the very people who recommended investment in the short-term money market. Nevertheless, 1 still compliment the management of the corporation for the way it has transacted its business without at the same time necessarily approving its recommendations to the Government. I doubt very much whether it made any such recommendations. It must be recognized, of course, that associated with the corporation is a consultative council, eight members of which represent private industry. They are all competent men, and that might be the reason for the milk in the coconut, because there are only two Government representatives on the council. The eight private industry members of the council may be able to create interest in the short-term money market, and under those circumstances it would be perfectly natural for them to recommend that the corporation's funds be invested in that way.

Sitting suspended from 6 to 8 p.m.

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