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Thursday, 13 April 1961

Mr McEWEN (Murray) (Minister for Trade) .- I move-

That the bill be now read a second time.

Over recent months, the Government has announced a series of policy measures designed to encourage Australian exporters and to strengthen both the immediate and longer-term export-earning capacity of our primary and secondary industries.

The Government's decision to amend the Export Payments Insurance Corporation Act, in the terms of this bill, is one of these measures. The extension of the facilities available as a result of the amendment now proposed will give further inducement to Australian exporters to investigate export possibilities and to gain new business.

The purpose of the bill is to enable export payments insurance cover to be extended to transactions which the corporation would not, or could not, ordinarily cover. Under the bill, the Government would be empowered to authorize cover in such cases where it considered that it would be in the national interest to take such action. Quite deliberately, no attempt is made to give a definition of what would constitute " national interest " in this connexion, although 1 will indicate some broad considerations which could influence the Government's determination as to whether particular transactions should be covered in the national interest.

At present, under the act, the corporation is charged to conduct its operations on a no profit-no loss basis. This means that, over a period of yearsthe corporation must secure sufficient revenue to meet all expenses properly chargeable torevenue. To carry out this policy effectively, the commissioner is obliged to observe orthodox insurance principles where these are applicable. One of these is an acceptable spread of risks between markets. Another is that the payment term involved in a transaction must be such that the risk can be assessed with some confidence.

The bill provides that the commissioner would refer to the Minister for Trade proposals which the corporation would not normally cover but which would merit consideration as national interest propositions. The responsibility for referring cases to the Government will therefore rest with the corporation. Every case so referred will be considered on its merits by Cabinet Ministers including, of course,_ the Treasurer (Mr. Harold Holt) and the Minister for Trade. It will be for Ministers to approve or reject each and every individual proposal referred to them.

Some important considerations which would influence the Government in deciding whether cover should be granted, on national interest grounds, to a particular transaction may be stated as follows: -

Whether the proposition holds promise of opening up worthwhile new export markets for Australian products;

Whether an industry with high export potential would be stimulated;

Whether the transaction was important for a particular Australian area or industry from the point of view of development; and

Whether the transaction would confer some obvious and significant benefits for our trade relations with the country concerned.

Let me, Mr. Speaker, illustrate types of problems which this provision is designed to overcome. I have referred to the necessity for the commissioner to observe a spread of risks between markets. The corporation's cover could become so concentrated in a particular market that to take on more business in that market - even apparently sound business - could so unbalance the corporation's spread of risks that this basic principle would be breached. On the other hand, the Governmentmight decide that, on national interest grounds, cover should be granted to further transactions with that market. Each such transaction would be examined on its merits.

Again, a particular proposal might involve payment terms which, in relation to the size of the proposition and the market concerned, are such that the corporation would not accept the proposal as part of its normal business. The Government, under this bill, could examine such cases to see whether there were circumstances justifying acceptance on national interest grounds. Where cover is granted in the national interest the corporation, in effect, will act as the agent of the Government in matters such as the issuing of contracts, collection of premiums and payment of claims.

It is envisaged that the premiums payable under the national interest provision will vary with the assessment of the risks involved in each case. Business written under the national interest clause will be treated entirely separately from the normal operations of the corporation. Separate accounts will be maintained and presented annually to Parliament. Such business will not be included within the ceiling on the corporation's outstanding liabilities, which is at present fixed in the legislation at £50,000,000.

In reaching its decision to amend the act, the Government was influenced by the fact that similar provisions have operated successfully in countries such as the United Kingdom and Canada. In both cases, the claims experience has been satisfactory. In fact, Canada has yet to pay a claim, although business of over 300,000,000 dollars has been written. The United Kingdom is also showing a substantial surplus on its national interest operations since their inception some ten years ago.

On previous occasions I have pointed out to the House that export payments insurance cover, because it gives to the exporter a guarantee of payment, is of considerable assistance to him in arranging finance. This benefit will, of course, apply equally to transactions insured under the national interest provision.

In examining this matter, the Government had before it the recommendations of the Consultative Council of the Export Payments Insurance Corporation and the Export

Development Council. Both of these councils are composed of very prominent and experienced businessmen. They considered that the Commonwealth should insert a national interest clause in the legislation. Support for this action also came from the Associated Chambers of Manufactures of Australia, and the Railway Rolling Stock Manufacturers Association.

Since the Export Payments Insurance Corporation Act was passed in 1956, 1 have twice placed before the House amendments which experience had shown would improve the facilities which the corporation offers Australian exporters. On each of those occasions I indicated that the Government would continue to keep the facilities of this still relatively new authority under review, to ensure that the reasonable requirements of Australian exporters were met with respect to export payments insurance.

The corporation has been in operation now for less than four years but has already issued policies to a face value of over £75,000,000. At the present time current policies amount in value to over £24,000,000. This measure, Mr. Speaker, is further proof of the Government's determination to keep abreast of exporters' requirements in this field of export payments insurance. I commend the bill to the House.

Debate (on motion by Mr. Pollard) adjourned.

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