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Wednesday, 8 December 1965

Dr J F Cairns (YARRA, VICTORIA) .- This Bill, and the associated measure, the Pyrites Bounty Bill (No. 2), are very important. They will involve between them the probable expenditure in the coming year of about £\i million of national revenue. They continue an expenditure which has amounted since the measures were first introduced in 1954-55, in the case of the Sulphuric Acid Bounty Act, and in 1960-61, in the case of the Pyrites Bounty Act, to nearly £12 million. This is a considerable amount of money and I think the House would want to know something of what it is doing and some of the consequences.

The purpose of the provision of this subsidy is to encourage in Australia in the production of sulphuric acid the use of Australian produced raw materials. The Australian raw materials in this case are pyrites produced from various mining operations in South Australia, Tasmania, Western Australia and Queensland. The two main raw materials from which sulphuric acid is produced are sulphur, or brimstone, which is imported from overseas, and pyrites, which is produced in Australia. In 1963, which is the last year for which I have comparative figures, some 64 or 65 per cent, of all sulphuric acid produced in Australia was produced from these two raw materials, brimstone and concentrated pyrites. Production of sulphuric acid is important. Sulphuric acid production in 1963 amounted to more than 1,300,000 tons of which 430,000 tons had sulphuric content. Sulphuric acid is a most important industrial raw material.

The Bills provide for the payment of a subsidy on the production of pyrites and on the production of sulphuric acid. The purpose of the Bills, as has been the purpose of all the other Bills that have been passed over the last 10 years, is to encourage Australian sulphuric acid producers to use Australian produced pyrites as a raw material, it being correctly assumed that if this was not done the producers would turn more readily to imported brimstone which is a more economic raw material. So to encourage them to use the Australian product a subsidy is paid on the production of the pyrites which reduces, or is expected to reduce, its cost to the processor. A subsidy is paid also on sulphuric acid. Although I must say that I am not completely sure about this, apparently the subsidy applies only to sulphuric acid that is produced from Australian pyrites. I should like the Minister for Supply (Mr. Fairhall), who is in charge of the Bill, to tell me something about that so that we can be more satisfied with it. As I say, I am not sure whether this is so.

The subsidy is paid to the five Australian producers of pyrites at the source, and I shall refer to figures in this connection for the years 1964 and 1965. The total amount of the subsidy paid in the 12 months ended 30th June 1964 was £644,000; to 30th June 1965 it was £583,000; and for the first nine months of the incomplete year it was £456,000. The producers to whom this money is paid are Goldmines of Kalgoorlie (Aust.) Ltd., which, in 1964, received £48,539; Mount Lyell Mining and Railway Co. Ltd., which, in 1964, received £177,463; Mount Morgan Ltd., which, in 1964, received £109,707; Nairne Pyrites Ltd., which, in 1964, received £207,973; and Norseman Gold Mines No Liability, which, in the same year, received £100,593. The total paid out in 1964 was £644,275. That gives the House some indication of where the money paid by way of the pyrites bounty goes.

As to sulphuric acid, there were seven producers who received bounties in 1964. They were A.C.F. and Shirleys Fertilisers Ltd., which received £50,525; Broken Hill Associated Smelters Pty. Ltd., which received £147,045; Commonwealth Fertilisers and Chemicals Ltd., which received £279,294; Cresco Fertilizers (W.A.) Ltd., which received £78,804; C.S.B.P. and Farmers Ltd., which received £154,989; Sulphide Corporation Pty. Ltd., which received £97,101; and Sulphuric Acid Ltd., which received £304,743. The total paid out to the producers of sulphuric acid in that year was £1,106,501. These are substantial sums from the public's point of view. It seems to me that, considering the scope of their general operations, some of the producers of sulphuric acid might have been expected to carry the production of sulphuric acid to the extent of the bounties that were paid to them. On many occasions when we have been considering in this House industries like the chemical industry and the aspect to which we have been giving special attention is an ancillary one, or one relating to a by-product, we have found that the company under consideration is making extremely large profits, running into many millions of pounds. I think that in some cases the companies could afford to carry some of the lines of production being considered.

The Government's attitude to the payment of these bounties has not been unchanged. We find from the report of the Tariff Board dated 30th June 1965, upon which this legislation is mainly based, that the Board went to work having regard to certain indications that the Government had given to it. The Board says -

Having regard to the Government's conclusion that in existing circumstances, it is inappropriate to pursue the former policy of encouraging the use of sulphur-bearing materials of Australian origin for the production of sulphuric acid. . . .

I know that some of the producers of pyrites are concerned about the present situation, and I think it is well for them to note that the Government laid down as a guide to the Tariff Board on this matter the consideration that I have just read, namely - that in existing circumstances it is inappropriate to pursue the former policy of encouraging the use of sulphur bearing materials of Australian origin for the production of sulphuric acid.

I do not know whether that is a notice to the producers of Australian sulphur bearing materials that they have to regard this legislation as a short term measure. The bounty that is proposed under this legislation is payable until 1965. But is this the writing on the wall? I think the one fault in the way this matter has been handled over recent years is that there has been some uncertainty by the Government about what it intends to do in the future. This uncertainty must have had its effect on industrial organisation and on the attitude of the companies concerned. The Tariff Board went on to say that it had regard to another matter. It was -

The desire of the Government to ensure nevertheless that the change of policy referred to in (i)-

We should emphasise that it is a change of policy - above does not operate to avoid the obligations which the Government recognises it has to those enterprises which have co-operated, or made plans on or before 1st December 1960, to co-operate, in giving effect to the past policy of reducing Australia's dependence on imported sulphur-bearing materials for the production of sulphuric acid.

Putting those two things together, there can be no doubt that there is a change of policy. The Government does not intend to pursue the former policy of encouraging the use of Australian sulphur bearing materials. Is this assistance being given only for the purpose of allowing the producers to make new plans? Is it to allow them to prepare to transfer from production of this kind that these payments are to be made? Perhaps they are being made to enable the producers more readily to amortise their plants. We know that a considerable amount of this has been done already. Is this what the Government's attitude means? And is this what the producers understand it to mean?

I think an examination of the circumstances shows that there is no certainty at all that the operation of these bounties from the beginning some 1 0 or 11 years ago has been effective. Certainly it has by no means been an outstanding success. It is important for us to try to visualise the degree of success that this policy of paying bounties might have achieved, because it is a very costly one. I pointed out at the beginning of my remarks that almost £12 million has been paid out in subsidies. We cannot be sure that this has been a successful exercise at all. This year we are involved in the payment of £li million, and these bounties are to continue until 1969. That is a lot of money to spend on a proposition about which we may not be at all certain.

The reason for my uncertainty is to be found in the figures given on page 6 of the Tariff Board report to which I have referred. In some ways, there is competition between pyrites and other types of sulphur bearing material. The table at page 6 of the Tariff Board's report discloses that from 1957 to 1963 there has been a quite significant and constant fall in the proportion of the sulphur content of sulphuric acid that is attributable to pyrites. In 1957, 31.5 per cent, of the sulphur content of sulphuric acid came from pyrites. In 1963, the proportion was 25.3 per cent., which represents a fall of 6.2 per cent. That fall has been a continuing one right up to the present time, and it will probably continue from now on at an increasing rate. On the other hand, the proportion that has come from brimstone or imported sulphur bearing material has remained fairly constant. It was 49.2 per cent., or almost one-half, in 1957 and in 1963 it was 49.3 per cent. The load carried by imported brimstone, the kind of thing that we were trying to reduce, has remained constant, while the load carried by Australian produced pyrites, the sort of thing we were trying to increase, has fallen by 6.2 per cent, over the period in question. Whilst brimstone has not increased its share - it has still about half - what then has increased? The answer is zinc concentrates. The production of sulphuric acid from zinc concentrates Has risen from 11 per cent, in 1957 - the year I choose because it is fairly representative for other comparisons - to 16.8 per cent, in 1963, an increase of 5.8 per cent. There has been a slight change in relation to some of the other basic materials, but it is quite clear that brimstone has retained a fairly constant proportion, pyrites has fallen by about 6 per cent, and zinc concentrates has risen by about 6 per cent. Of course, zinc concentrates are Australian produced and there is no subsidy on them. It might therefore be better for the Australian economy as a whole to see this trend continue and a raw material which does not need a subsidy compete with imported brimstone.

There is no certainty that this system of using a bounty has been a success, because there is no certainty that it has produced the kind of result that it was assumed was necessary. Why is this so? The answer is, I think, first that the cost of brimstone has been particularly low compared to its normal cost on the world market and, secondly, in comparison with pyrites. Al 30th September 1964 imported brimstone cost £12 18s. 7d. a ton, at 31st March 1965, £13 14s. 4d. and at 30th September 1965, £16 a ton. The advantage that brimstone has had, which has led to a vast increase in the quantity imported by Australia, is perhaps diminishing. In 1960 imports were 221,778 tons and in 1964, 376,639 tons. There has been quite a dramatic increase in the quantity of brimstone imported into Australia and this has been pardy the function of the relatively low price. However, if the price is going to behave as the 30th September 1965 price indicates - when it was £16 a ton - the comparative advantage that brimstone has will be diminished. There would need to be a reduction in the advantage for the apparent purpose of the payment of this subsidy to be significantly achieved. It seems to me there is a possibility of another competitor coming into the field very soon. Industry in Western Australia seems to suggest that petroleum byproducts might also come into the field.

Unless the brimstone prices rise the bounty will not offset the trend that is apparent in the figures I have quoted from the Tariff Board's report. The share of pyrites in the total raw material used in Australia has been downwards for seven years and that trend is certain to continue.

Is that what the Government wants? I do not think that there can be any doubt that the answer is yes. If it were not yes I do not think the Government would have given the Tariff Board to understand what the Tariff Board says it does understand, namely, that there has been a change of policy of encouraging the use of sulphur bearing materials of Australian origin for the production of sulphuric acid. I am sure the evidence shows that lt is the Government's intention that the trend in respect of pyrites should continue. I think this needs emphasising to all those people in the various parts of Australia - Western Australia, South Australia, Tasmania and Queensland - who are interested in the production of pyrites. Perhaps in some ways it is unfortunate that after 10 or 11 years of a policy of paying almost £12 million in subsidies this is the stage we have reached in 1965. It is not a very convincing illustration of the intelligent use of a subsidy for the maintenance and development of Australian production.

The five pyrites producers that I have mentioned in stating the amounts paid to them in subsidies in 1964 employ, the Tariff Board's report tells us, 3,800 persons, of whom at least 350 are directly engaged in mining pyrites. Is there some sleight of hand in this section of the Tariff Board's report? How many are actually engaged in the mining of pyrites? Is it only 350 and, if so, why has there been mention of the 3,800 persons employed by these five companies? We know that these companies do not produce only pyrites. They produce other materials from their mines, but the Tariff Board has tended to suggest that 3,800 persons are involved in pyrites mining when perhaps there are only 350. There is some vagueness here that I think may be deliberate. How many are actually concerned? Then the implication is taken a little further. The report says that 35,000 people living in the towns concerned are directly dependent upon the mines. Are they directly dependent upon pyrites? Obviously not. There is no suggestion that the mines at Kalgoorlie, Mount Morgan and Mount Lyell are dependent on pyrites. If they had to stop producing pyrites - and it seems to be the Government's intention that sooner or later they should stop such production - would the mines close down? No. They might be a little less profitable, they might reduce their scale of operation, and between them all they might put off 350 men, but certainly not 3,800. Between them all, some few of the 35,000 people who live in the towns might be adversely affected. However, the Tariff Board's report seems to indicate that if this bounty were not paid it might well be that 3,800 men would suddenly lose their jobs and 35,000 people directly dependent upon the mines might have to move elsewhere. I do not think this is fair reckoning. I do not think the Tariff Board has been quite straightforward on this. I think at best there has been some vagueness that should not exist.

I should like now to discuss sulphuric acid and its production. The payment of a bounty on sulphuric acid has been going on for much longer than that on pyrites. Although I have laid some stress on pyrites, it is far less important than sulphuric acid. Up to 1964 an amount of £1,794,000 has been paid on pyrites but £10,084,000 on sulphuric acid, so sulphuric acid is the much more costly substance that we are subsidising. The seven companies that produce sulphuric acid are much bigger and far more significant than the companies producing pyrites and most are thoroughly interlocked. My friend the honorable member for Lalor (Mr. Pollard) has their interlocking at his fingertips and during the course of his speech a little later tonight he will demonstrate this. It seems to me that a handout of about £1 million a year to these large interlocked enterprises is a considerable amount to ask the public of Australia to pay in these circumstances.

Also, I raise the question which I mentioned to the Minister: Is the bounty on sulphuric acid paid only on sulphuric acid that is made from pyrites or is it paid on sulphuric acid made from other materials? If it is, it is a particularly unjustifiable procedure. If it is possible for manufacturers to get a bounty on sulphuric acid produced from imported brimstone it would be utter stupidity. If it is possible for them to get a bounty on sulphuric acid produced from zinc concentrates it would probably be unjustified.

Mr Pollard - A lower bounty is paid in that case.

Dr J F Cairns (YARRA, VICTORIA) - If the bounty is lower there may be something to justify it but certainly the comparative costs of zinc concentrates, pyrites and even brimstone would not justify the payment of a substantial bounty. Perhaps information on this matter is available somewhere. I have not read every word of the Tariff Board's report for a week or 10 days, but as far as 1 know there is no clarity on this matter. I would like the Minister to clarify the situation.

The question 1 posed was: If the bounty was not paid what difference would it make to the seven companies which, in some cases, are very closely interlocked whose sulphuric acid production is only a relatively small part of their total operations? As the bounty is substantially paid in respect of the use of pyrites and as most producers are already preparing to shift out of the production of sulphuric acid from pyrites to other things, the non-payment of the bounty is not likely significantly to interfere with their operations. One has the feeling that this bounty is a kind of hand out at the end of the road to allow these companies, perhaps, to write off some of the capital they have invested, which they cannot otherwise do. The Government is, in a sense, giving them notice that there is a change of policy; that it will continue to encourage the production of sulphuric acid from Australian sulphur bearing materials; that it will pay the bounty until 1969 and therefore the companies may clean up what is left over. Is that the position? It seems pretty clear that it is.

The Opposition is not opposing the measure but we consider that there should be a much closer and more detailed inquiry. It may be that the Government's policy is wrong. It may be that the proposition that I quoted from page 3 of the Board's report, which is the basic proposition in the whole business - a change of policy from the encouragement of the use of Australian produced sulphur bearing materials - is wrong. It may be essential for purposes of national development to continue the policy which the Government is now changing. It may be desirable to exclude the importation altogether of brimstone. This is a distinct possibility. I do not think that anything the Tariff Board has done so far would justify us in believing that this may be the case. I direct the attention of the Minister particularly to a statement in the Tariff Board's report. This is an astonishing statement to find at this stage in the business. I do not think the Board is to blame for this. I think that the Board has been put in its present position as a result of the situation that the Government has defined in respect to it. The Board states -

No other or additional forms of discharging the Government's obligations have been considered by the Board in what has been essentially a cursory examination of alternatives, undertaken merely to assist the Government should it wish to reconsider the question.

It is quite astonishing to me that the Board at this late stage should say that. The Board's first inquiry was made in 1954. It held another inquiry in 1958, another in 1960 and, I believe, another in 1962. It began this cursory inquiry, as the Board calls it, on 8th June 1964 and made its report on 30th June 1965 - just over one year later although it was a cursory inquiry. This leads one to wonder how long the Tariff Board would take if it wanted to make a thorough and detailed inquiry. It is remarkable that the Government should bs changing its policy on the basis of a cursory inquiry that has taken a little over a year to carry out and in respect of which the Board has reported -

No other or additional forms of discharging the Government's obligations ... in what has been a cursory examination of alternatives . . .

The crux of the matter is the alternatives. What other alternatives are available? It is a matter of technical priorities. What are the possibilities in the future? Yet the Board makes a cursory examination of alternatives, on which the Government's position is defined.

The Opposition will not oppose this legislation. The bounty will be paid until 1969. Nobody will be put out of business, but we do not accept the situation. We believe that a closer and more detailed inquiry is needed. We believe that the crux of that inquiry should be a consideration of the technical alternatives. What is the future of pyrites production in Australia? Is the Government serving notice that, as far as this bounty is concerned, the Government will wind it up in about 1969? Does the Government know anything about the possibilities of this apparently new development. Between 1957 and 1963 the use of zinc concentrates as the basic raw material in the production of sulphuric acid increased by almost 6 per cent, while the use of pyrites for the same purpose decreased by about 6 per cent. What is the future of the development of zinc concentrates? Clearly these are alternatives which the Tariff Board should have taken into account. What is the possibility in the future of raw materials coming from the petroleum industry as by-products? This appears to be a developing field.

Mr Pollard - Gases for instance. - Dr. J. F. CAIRNS. - What are the possibilities in the future of production from gases, as the honorable member for Lalor mentioned? All of these things have been given a cursory examination on which the House is asked to approve an expenditure of £14 million this year and to continue an expenditure at something like that rate each year until 1 969. This is not good enough for any government or any party in opposition to accept. We will not oppose the Bill because wc do not want to take action which might dislocate the already existing industry or upset it even worse than the Government's uncertainty over the last five or six years has upset it. We do not wish to upset the industry as much as the Government's indifference and change of policy undoubtedly will upset it. But at the same time as we refrain from standing in the way of the payment of this bounty, we believe that there should be a closer and more detailed inquiry before any final decisions about the future of policy are made. I put this to the Minister in the hope that he will take it seriously, because this is the considered position of the Opposition.

The Opposition anticipated that this Bill might have been debated last week. We took special steps to avoid that so that we could use the time in order to make a closer examination of the industry. This we have done and our considered position is that we do not intend to take any action which would add to the uncertainty or confusion that must exist in the minds of the industry as a result of the Government's attitude. At the same time, we believe that a much more detailed and close inquiry should be made, particularly in respect of the alternatives for the future, before any final policy is decided by the Government. We are refraining from moving any amendment, which we considered at length doing, because we believe that the position warrants the full force of examination. The Opposition has refrained from taking positive action which may affect the industry. At the same time, we require the Government to take our position seriously and to give it the consideration that I am sure the industry and the people of Australia believe it deserves.

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