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Wednesday, 9 March 1966

Mr SWARTZ (Darling Downs) (Minister for Civil Aviation) . - The carrying of the amendment proposed by the Opposition would result in indefinite delay in the purchase of much needed aircraft by our international airline and one of our domestic airlines. But I think the Opposition is fairly confident that its amendment will not be carried. The very terms of the amendment indicate that whilst the Opposition does not decline to give the Bill a second reading it proposes that, in the opinion of the House, the finance for the purchase of the aircraft should come from revenue and not by way of loans raised overseas. This means, in effect, that the Opposition is suggesting that we should utilise part of our overseas reserves for this particular purpose. It has made that very clear in presenting its case.

I think that two things should be pointed out to the House: One is that the level of our overseas reserves traditionally is subject to wide fluctuations over short periods. Under the existing circumstances, that could occur again in the future. Also, the use of our overseas reserves and our balance of payments is a matter for the economic judgment of the Government acting on advice from its experts. On the first count, therefore, we are not in a position of having unlimited reserves which will not be subject to some form of substantial fluctuation in the future. In addition, our economic judgment must be exercised as to how these purchases should be financed. It should be remembered that the Government really does not own our overseas reserves. They are held by the Reserve Bank of Australia and by the banking system and can be drawn on only if they are purchased in Australia. This can be done by the Government using its revenue, the proceeds of loans raised in Australia, or central bank credit. The Treasurer (Mr. McMahon) has made it quite clear in his second reading speech that he does not wish to burden our budgetary position at the present time.

The second thing which I think should be pointed out is that the proposition of the Opposition probably would not be acceptable to the States. I do not think it would be acceptable to suggest that internal loan raising should cover the financing of the purchase of these aircraft because, as honorable members know, for some years we have been adopting a system of financing Commonwealth works out of revenue and allowing practically all the available borrowings to be used for State works programmes. Under those circumstances, we feel sure that the States would not be agreeable to the proposition that has been suggested. I do not think that the issuing of central bank credit in the existing situation could be contemplated. After considering these facts it comes back to the position that this is the correct way, and the traditional way, of financing the purchase of these aircraft.

This principle does not relate only to the purchase of aircraft. Today the Australian Coastal Shipping Commission Bill was introduced into this House. The Bill was referred to by my friend the honorable member for Melbourne Ports (Mr. Crean). It is designed to extend the borrowing opportunities of the Commission. Of course, the Australian Coastal Shipping Commission is only one other Government instrumentality that operates in this field. There are many other Government instrumentalities, as well as private institutions, which operate in the overseas borrowing field. It is not just a question of taking this particular issue in isolation. A far broader field is involved.

This measure is designed to provide for the borrowing of a maximum of SUS54 million. The money will be paid first into a loan account and then made available to Qantas Empire Airways Ltd. and TransAustralia Airlines. But the significant point is that the two airlines will pay to the Commonwealth all of the funds necessary for the repayment of this loan. Therefore, there will be no net cost involved to the Commonwealth itself. The arrangements, as has already been said, are similar to those approved during a previous borrowing programme in November 1964 when $US30 million were borrowed for a similar purpose, namely the purchase by Qantas and T.A.A. of aircraft. The full proceeds of the loan at that time were made available to the two airlines.

I point out again very clearly that the Commonwealth in this case is acting as an intermediary on behalf of the two airlines which will fully recoup the Government in relation to the loans involved. To indicate the sound commercial practice involved I direct attention to the fact that the loan borrowing period covers about the life of the aircraft. In other words the loan is amortized over the whole life of the aircraft which, during that time, is earning revenue for the company and, in the case of Qantas, is earning overseas currency to assist our balance of payments. Taking all these facts into consideration I am sure that the Opposition, when it gives further consideration to the matter, will appreciate that this is a commercial and sound method of approaching this position. In the circumstances that I have mentioned the Government cannot accept the amendment moved by the Opposition.

I wish to refer very quickly to the points raised by the honorable member for Mitchell (Mr. Irwin) and the honorable member for Mackellar (Mr. Wentworth) in relation to the type of aircraft being purchased by T.A.A. under this loan arrangement. Under the Airlines Equipment Act 1958 the airlines must obtain a certificate from the Minister for Civil Aviation before they can acquire additional aircraft. Where any substantial amount of finance is involved the Minister obviously will refer the matter to the Government for consideration and approval. That was done in this case. The choice of aircraft is a matter for the airlines themselves. The Department of Civil Aviation does assist with technical advice but it does not influence the decision. The airlines themselves must make up their minds in relation to the aircraft which they require. The only conditions the Department lays down are that the aircraft of the two major airlines must be comparable in size and that they must not involve the Commonwealth in unacceptable commitments so far as aerodromes or airport or navigational aid facilities are concerned.

After an independent assessment each of the major airlines in Australia arrived at the conclusion that the type of aircraft they wanted in this particular case was the DC9. After the recommendation was received from both airlines - after they had arrived at this decision independently - the matter was considered by the Department of Civil Aviation on the basis that I have mentioned. We have the facilities to handle the type of aircraft requested and we can programme to provide additional runway requirements in the future. After considering all these facts, approval was given for the purchase of these aircraft.

Consideration was given also to the merits of the BACIII, and other types of aircraft. The points that had to be considered were first of all the suitability of the aircraft for the type of operations to be engaged in within Australia. Secondly, the purchase price and, thirdly, the maintenance cost had to be considered. In relation to maintenance cost, it is a fact that some of the equipment for the Boeing 727 is interchangeable with that of the DC9. The interchangeability of engines is a very important aspect as far as the DC9 is concerned.

In conclusion, I would stress that the decision to purchase these aircraft was arrived at by the airlines themselves completely independently of each other. The recommendations were made independently to the Department of Civil Aviation and were approved by the Department after careful consideration of the facts which it has to take into account. Later, a submission was made by the previous Minister for Civil Aviation to the Government and it was approved by the Government. All that was done before arrangements were made for orders to be placed and the financial arrangements put in hand. The Government cannot accept the amendment moved by the Opposition but wishes to proceed with the Bill as it stands.

Question put -

That the words proposed to be omitted (Mr. Clean's amendment) stand part of the question.

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