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Tuesday, 18 April 1961

Mr SWARTZ (Darling Downs) .- I was very interested to hear the honorable member for Lalor (Mr. Pollard) propounding Labour's policy in relation to the nationalization of insurance. I am sure that he was reiterating Labour's policy on this occasion because I did not hear any denial from honorable members behind him. I assume it is also his desire to pursue that policy to its conclusion - control of banking and the means of production, distribution and exchange. It is good for us to be reminded at regular intervals by the honorable member for Lalor and other honorable members opposite of the continuation of their adherence to the policy of socialization. I think the public is interested to know that Opposition members are firmly determined to pursue that policy if ever they gain government again.

The honorable member for Lalor also said that a nationalized insurance organization could act on a non-profit and non-loss basis in a similar way to the organization that we are discussing. I think he has overlooked the fact that insurance is a large business which employs, throughout Australia, many thousands of people. Is he suggesting that the unemployment to which Opposition members have referred in this House to-day be increased by disbanding this nation-wide insurance organization? At the same time, is the Opposition suggesting that we can entirely overlook the tremendous investment capacity of Australian insurance organizations and the good they are doing in the development of this country? I think that the honorable member has entirely overlooked that aspect. Insurance companies are also providing loans for housing to many thousands of people. In accordance with the policy of the Government, this gives many people an opportunity to own their own homes. We believe in this policy, but apparently the honorable member for Lalor disagrees with it.

The honorable member suggested that, under this legislation, the Australian Wheat Board could request the Export Payments Insurance Corporation to insure sales of wheat to mainland China. That is quite correct. But, apparently, the honorable member has overlooked the fact that the Minister for Trade (Mr. McEwen), himself, does not make a decision hi relation to this matter without reference to his Cabinet colleagues. The matter would be referred for decision by a Cabinet meeting at which the Treasurer (Mr. Harold Holt) and the Minister for Trade (Mr. McEwen) would be present and Cabinet would consider all aspects of the proposal before any decision was made. The honorable member for Lalor spoke as though the supply of wheat so far as the Export Payments Insurance Corporation was concerned' related solely to mainland China. He overlooked entirely that the bill would apply to any country, and to any export earning group.

Mr Pollard - I mentioned South-East Asia and India.

Mr SWARTZ - You did not give much indication of that. I was interested in the honorable member's desire once again to give Australian wheat away. We have a very vivid recollection of his term as Minister for Agriculture, when he was instrumental in making practically a gift of wheat-growers' wheat at give-away prices to New Zealand.

I now wish to refer to the bill itself, which was substantially avoided by the honorable member. To do so, we should refer to the Export Payments Insurance Corporation Act 1956-1959, the originating act which this bill is intended to amend. The act describes itself as -

An Act to promote Trade with Countries outside Australia, by establishing an Export Payments Insurance Corporation, to provide Insurance against certain Risks arising out of that Trade, nor normally insured with Commercial Insurers.

That is obviously the bone of contention with the Opposition, because honorable members opposite contend that there should be no commercial insurance organization operating in Australia to-day. They would like to nationalize insurance.

The purpose of this 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 existing act. 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. You will notice, Mr. Speaker, that quite deliberately the Minister for Trade, in introducing the bill, did not give any clear definition of " national interest " in this connexion, although he indicated some broad considerations which could influence the Government's determination as to whether particular transactions, which would be referred through the corporation to the Minister and, in turn, to Cabinet, should be covered in the national interest.

I want to refer briefly to credit insurance as an aid to the promotion of exports. The promotion of exports is a major preoccupation of most countries, and in this connexion the part played by export credit insurance in countries which provide such facilities is assuming an increasingly important role. No greater recognition of this fact can be found than the recent decision of the Government of the United States of America authorizing the United States Export-Import Bank to provide credit insurance facilities for American exporters. In Australia, although export credit insurance has been available to exporters only for the past three years, there has been in that short period a considerable gain in export sales by Australia which would not otherwise have eventuated. We have some definite indications of that from the records of the Export Payments Insurance Corporation.

One of the major factors which can inhibit trade is the natural reluctance of exporters, in view of the risks involved, to depart from secured terms of payment even in circumstances where the need so to depart is clearly indicated by the pattern of trade set by overseas competitors for the commodity and the market concerned. It is against the inherent risks associated with credit trading, which are not normally insurable through commercial organizations, that the corporation and the facilities it can make available can provide substantial protection.

Apart from the direct protection that this facility offers to exporters, it is also an aid to them in obtaining bank finance as their overseas accounts are, in effect, received. On this, the Australian trading banks, rn a policy statement in 1959, said -

E.P.I.C. Guarantees considerably reduce the risks involved in export trade and thus can assist an exporter in obtaining such finance as he requires. In allocating their funds available for lending, banks give a high priority to the needs of their export customers and will always give special consideration to those cases where credit insurance cover is available.

Let us look at the progress of the Export Payments Insurance Corporation since it was established in 1956. After the organization got under way the first policy was issued in September, 1957. The face value of policies which were current in June, 1958, was £11,100,000; the face value of policies current in June, 1959, £21,100,000; and the face value of policies current in June, 1960, £26,400,000. The total value of policies issued since the inception is in excess of £75,000,000. Credit cover has been given by the corporation to exporters exporting to more than 100 markets a wide range of primary and secondary products.

Sitting suspended from 6 to 6 p.m.

Mr SWARTZ - Mr . Speaker, before the suspension of the sitting for dinner, I answered the case which had been put by the honorable member for Lalor on behalf of the Opposition. I pointed out that the honorable member had devoted most of his time to explaining the Australian Labour Party's policy, which embraced the nationalization of insurance. I said that the honorable member had devoted little time to the actual bill before the House. He confirmed that when he said, on my questioning the fact, that he had meant to explain that that was Labour's policy on this occasion.

Earlier, I had referred also to the origin of the Export Payments Insurance Corporation and had outlined its progress since it was established by an act of this Parliament in 1956 and since its first business was transacted in 1957. The present bill is designed to extend insurance cover to exporters to include items which, in the view of the Cabinet, could be classified as being in the national interest. The definition of this term was explained by the Minister for Trade in his second-reading speech.

Since the original act was placed on the statute-book in 1956, a number of amending measures have been introduced and have become law. In April, 1959, an amending measure was introduced in order to increase the capital and the limit of liability of the corporation. Initially, it had a capital of £500,000 and a liability limit of £25,000,000. The 1959 measure doubled these amounts, increasing the capital to £1,000,000 and the liability limit to £50,000,000. These limits are still in force to-day. In accordance with the Government's policy, the act was again amended in November, 1959, by a measure which varied the maximum percentage risk which the corporation could cover, the maximum percentage having been originally fixed at 85 per cent. Under the terms of the amending measure, the maximum cover was fixed at 85 per cent, for commercial risks of insolvency or default on the part of a private buyer and up to 90 per cent, in the pre-shipment period and 95 per cent, in the post-shipment period for what are termed political risks. The definition of political risks covers risks which arise from the action of a foreign government, such as exchange transfer blockages, the imposition of measures such as import licensing controls and, in another field, war or revolution.

It is interesting to compare the facilities provided by the Australian Export Payments Insurance Corporation with those provided in other countries. In Canada and the United Kingdom, the relevant legislation already contains national-interest provisions, and these provisions have been quite successful in operation in both countries. In Canada, business totalling more than 300,000,000 dollars has already been done under the national-interest provisions without the payment of a claim. In the United Kingdom, over a ten-year period, a surplus of £2,300,000 sterling has been shown. When we look at the latest records available - those up to the end of 1958 - we find that at that time transactions under the national-interest provisions in the United Kingdom legislation totalled more than £28,000,000 sterling.

This bill, which is designed to embody national-interest provisions in the Export Payments Insurance Corporation Act, was introduced by the Government on the recommendations of the Consultative Council of the Export Payments Insurance Corporation and the Export Development Council. As you, Mr. Speaker, know, both of these bodies are composed of prominent and experienced business men who are doing a great job for their country. They considered that these national-interest provisions should be embodied in the act, and the Government has accepted their advice. The Associated Chambers of Manufactures of Australia and the Railway Rolling Stock Manufacturers Association have actively supported the recommendations of the Consultative Council of the corporation and the Export Development Council.

When cover is granted by the corporation in the national interest, the corporation will, in effect, be acting as an agent of the Government in matters such as the issuing of contracts, the collection of premiums and the payment of claims. It is envisaged that the premiums payable under the national-interest provisions will vary in accordance with the assessment of the risks involved in each particular case. As has already been stated, the business written under these provisions will be treated entirely separately from the normal operations of the corporation and separate accounts will be maintained and will be presented annually to the Parliament. Such business, of course, will not be included in the ceiling which, as I said a few moments ago, is placed on the total outstanding liabilities of the corporation and which, at present, is fixed at £50..000..000.

As I explained to the honorable member for Lalor when he put the Opposition's arguments, when a case is put to Epic, as the corporation is sometimes known, under the national-interest provisions, the proposal will be referred to the Minister for Trade for careful consideration by Cabinet before a decision is made. Some of the factors concerned have already been mentioned, but I think it is desirable at this stage to mention them again, because they are quite important considerations which the Government had before it prior to the introduction of this measure. The nationalinterest provisions are being introduced with certain factors in mind. First, these provisions will cover a proposition which has promise of opening up a worthwhile new export market for Australian products. The House will remember that I stated earlier that Epic has already provided insurance cover up to date in more than 100 markets throughout the world. Secondly, these new provisions will stimulate an industry within Australia which has a high export potential. Thirdly, they will provide for transactions which are important to a particular area or industry in Australia from the stand-point of national development. Fourthly, these provisions will promote transactions which would confer some obvious and significant benefit in respect of our trading relations with other countries.

With respect to the proposals that are contained in this bill, the Government has at present actively under consideration, or has announced, a number of other very definite and complementary aids to export development. The first is its proposals for tax allowances and incentives, which have already been announced. Secondly, with the object of assisting to influence favorably the basic climate for exporters within Australia, the Government is pressing firms to re-examine their position in relation to export franchises. Restrictive export franchises, of course, which operate in some instances at present, are clearly not in the national interest. Thirdly, a number of decisions have already been made with respect to certain commodities, and these decisions will be put into effect in the future. The first of these is the Government's decision to permit the export of certain quantities of iron ore on a carefully controlled and limited basis which will ensure that the reserves essential to Australia's industries are preserved for the future. This policy will provide a stimulus to the discovery of new deposits and to more detailed investigation of existing ones.

As far as the steel industry is concerned, the Government is at present engaging in discussions and is investigating ways and means of enabling Australia to become a major and continuing net exporter in the future. Excise duty on coal for export has been waived as an incentive to encourage the export of this commodity to overseas markets.

In the field of public works, the Government has considered sympathetically large public works needed in the States to increase exports directly. I refer to such matters as road development in the north, including the north and west of Queensland, the Northern Territory and the northern part of Western Australia. This will particularly assist the beef cattle industry and the mineral industries in these areas to increase their export potential. At the same time, the Government is encouraging and assisting the States to improve port and loading facilities for the development of the coal export trade. Further, consideration is being given to the provision of assistance for standard railway gauge work from Broken Hill to Port Pirie, with certain modifications that have been suggested by South Australia. This will, in effect, assist the export of minerals and ores from Broken Hill. Encouragement and assistance is also being given to the Western Australian Government for gauge work that will assist in the establishment of an iron and steel industry in that State.

Some definite promotional activities, in association with this new export payments insurance proposal, are being introduced to further our trade efforts, particularly in the Middle East and in South America. It is intended to open up new trade posts in these areas and to strengthen other posts there in the near future. In conjunction with this, additional trade missions are being organized on an official basis. Negotiations are being undertaken which will result in improved shipping services, particularly to South American ports. Every effort is being made through the Trade Commissioner Service overseas, through trade publicity programmes and through the Australian National Travel Association to improve our tourist trade. Other matters under consideration relate to warehousing, and a number of specialists have been introduced into the Department of Trade to assist in investigations in this field.

I think I may safely claim that all these measures indicate that the Government is determined actively to encourage export development. This bill, which is commended, meets the additional requirements of exporters in the field of exports payments insurance. The functions of the corporation will continue to remain under review, with the object of ensuring that, consistent with commercial prudence and the nonprofitnonloss basis on which this corporation was established, it will continue to operate to meet all future reasonable requirements of the Australian exporter.

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