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Tuesday, 12 May 1970

Mr DOBIE (Cook) - Mr Deputy Speaker,much has been written and quite a deal has been said about the Export Payments Insurance Corporation since it was first established in 19S6. Nobody would deny that this Corporation has been a success not only in achieving its original goal of promoting and facilitating trade with overseas countries by providing insurance against certain commercial and political risks of loss, but in establishing an important aspect of the Australian financial scene which had been sadly lacking such facilities previously. As the Minister for Trade and Industry (Mr McEvven) mentioned in his second reading speech, its establishment was not without problems or criticism. I do not know whether it is fair to say that the establishment of EPIC was delayed at least 4 years for I am only aware of the delay between October 1954, when the then Prime Minister, Mr Menzies, received a deputation from the Associated Chambers of Manufactures, urging the establishment of such an export credit insurance scheme, and its introduction into the House in May 1956 by the Minister for Trade and Industry. Admittedly, no contracts were entered into by 30th June 1957 but this was surely the period of establishing the Corporation. Yet a year later there were 43 policy holders whose policies had a current face value of $22. 2m and premium income for that year was $37,406.

Of course, there was hesitation on the part of certain manufacturers and from one's own experience there can be no denying the cautious nature in which the Australian trading banks, including the Government owned and directed Commonwealth Trading Bank, moved into accepting the insurance paper of EPIC as collateral security. This was clearly understandable.

The mid-1950s was a time when the Government, and the trading banks, were encouraging Australian industries and interests to look beyond the Australian domestic market and think of servicing and supplying overseas markets, particularly South East Asian ones. It should not be forgotten that when EPIC was established, Australian exporters and traders could only avail themselves of insurance against marine risk, which insurance was available commercially, bank letters of credit and forward exchange cover from the Australian trading banks which was a short term protection against variations in exchange rates, vis a vis Australian currency. Forward exchange cover was, and still is, only available for specific export transactions. It required, and still requires, Australian exchange control approval and involved, and still involves, a slightly different exchange rate to the rate used for current transactions. Forward exchange cover, (hough well worth the stability it gives to the exporter for little extra cost, has never been popular with Australian traders. Yet up to 1957. it represented perhaps the only form of protection that was available to a manufacturer who was interested in seeking out markets in non-traditional areas. It remains the only practical form of protection against variations in exchange rates.

Fifteen years ago individuals were shy in venturing forth into new overseas markets. The giants of Britain, the United States of America, France and Japan seemed invincible in the markets of Asia and Africa - and perhaps they would have remained so if the Australian Government, and particularly the Minister for Trade and Industry, had not taken such bold initiatives in encouraging incentives and rewards to those who wanted to move or, rather, those who should move forward into developing Australia into an important exporter of manufactured goods. Not the least of the actions taken by the Government was the establishment of the Export Payments Insurance Corporation 14 years ago. The mammoth role of the Minister for Trade and Industry in directing, influencing and moulding Australia into a significant international trader in all fields can never be adequately described and one can only wish that his personal achievement over a lifetime of public service will never be understated by any Australian of whatever political persuasion.

Contrary to what some honourable members opposite may suggest, Australia's development as a significant international trader just did not happen. It came about as a result of a Government policy of encouragement and guidance. I must confess to being somewhat surprised to hear the Minister for Trade and Industry refer to the barrage of criticisms and opposition raised against EPIC from inside and outside government. I have researched the printed record of the mid-1950s and cannot find much public evidence of the attacks and blockages that were described by the Minister in his second reading speech. I must assume that most of this evidence is on departmental files and within the secrecy of Cabinet. From my own experience there was considerable caution by all financial institutions including, as I have already stated, the Commonwealth Government's own trading bank, but in view of prevailing opportunities, in view of a manufacturing structure which was enjoying the remarkable yet necessary protection of import control with protected and captured domestic markets, I believe there was need for caution and slow haste in relating such new devices as EPIC to individual companies and customers. Perhaps there was too much caution by some; perhaps there was too little appreciation by others of the needs of business to be sure rather than sorry After all, it is one thing to believe that all manufacturers should export for the good of the country. It is quite another matter when the well being of a manufacturer is being considered in isolation "and his banker has to consider what volume pf credit and what degree of risk should be encouraged and allowed.

But, Mr Deputy Speaker, no matter what initial caution may have surrounded the establishment of EPIC, 2 points should Bow be taken. In 1970 the scheme has succeeded up to and beyond the greatest hopes of its architects. Of course, the scheme has undergone substantial amend- ments since the initiating Act of 1 956 and shall briefly talk on these later. However, e second poult to be noted is that those who have 6een named among the early critics of the scheme - namely, the Australian trading banks - have now come around to suggesting to the Government that EPIC cover, as it now is offered, was a fundamental prerequisite, to use the Minister's words, before the banks would agree to extending credit to those Australian industries which, having the willingness and ability to supply the capital equipment required for the Bougainville project, were looking for Australian-generated credit which would allow them to hold their own with their international competitors. There can be no denying that the Bougainville project is of such magnitude and the international competition to supply equipment so keen, that all possible avenues to assist Australian industry should be opened. But what is the competition? We know that Euro-dollar loans have been negotiated by American financial interests. Long-term credits have been arranged for Japanese suppliers while there is a constant line of credit available to American manufacturers from the Export-Import Bank of the USA. There is evidence, then, that the Bougainville project, which is expected to cost, overall, about $400m, has most certainly attracted international notice.

As members will be aware, Papua-New Guinea is outside the Australian customs area and so, contrary to what may have been thought by many, Australian suppliers enjoy no preferential treatment. Exporting from Australia to the Territory has been, in a competitive sense, just like exporting to any foreign country. In the sense that EPIC cover has been available to Australian suppliers in foreign markets, the suppliers to New Guinea have been at a disadvantage when one considers that longterm credit facilities have been available to Japanese interests, for example, who have come into the Territories' markets with such advantages over their Australian competition. Now why should we be extending EPIC facilities into Australian Territories now? The answer is simple. To date, most exports to Papua-New Guinea have been sold for cash or on very short term credit and this has presented no real problems - at least no greater problem than any member of this House would encounter when he goes to see how his own personal credit rating stands with his bank manager. But the market that is being opened by the Conzinc Rio-tinto of Australia Ltd copper development on Bougainville, presents a series of new factors. The credit required for housing, mining and transport equipment has to be offered on long-term suppliers' credit and as I have already mentioned, this form of credit is readily available and has, in fact, been made available to Australia's competitiors for this huge market.

The Australian trading banks have announced their intention to assist in the sense that the Australian Banks' Export He-finance Corporation will make finance available to cover long-term credit sales by Australian interests to the Territories. However, such are the rigours of bank practices in Australia that collateral security is required especially when terms of 5 years and more are specified. It is here that EPIC paper proves its worth and it is in this context that the trading banks have suggested the need to secure EPIC guarantees so that the maximum credit can be extended. Quite obviously, unlimited credit will not secure, in itself, any market. But without sufficient credit, markets will be most certainly lost. Already there is reason to believe that Queensland suppliers have negotiated forward stiles estimated I believe at $20m, in the expectation of EPIC support. If these suppliers can be assisted and no other, then 1 believe the current amendment to the Act has been well worth while. But 1 have no doubt that many more contracts will be negotiated with other Australian suppliers and that the amendments currently before the House will bc seen, among other things, us one of the significant milestones in the development of the Territory of Papua and New Guinea. Should Australian interests secure a major share of these attractive markets in Papua-New Guinea, then it could be an incentive to even more Australian-based companies to gear their production for export to overseas markets.

In conclusion, I would like to commend EPIC on its financial administration. We have seen it stick to the requirement that it should endeavour to develop its business in such a way as to cover costs without coming to a profit. In its 13th Annual Report, the Commissioners have reported that since 1957, after insuring some $906m worth of exports, the Corporation has had a trading surplus of $35,510 only. In addition, it has been able to cut its premium rates without infringing the provisions of Article .16 of the General Agreement on Tariffs and Trade which does noi allow hidden subsidies through charging uneconomic rates. This has not been achieved without intelligent management and there would be few, if any, who would challenge EPIC on these grounds. EPIC is also to be congratulated on the amendments it has recommended during its 14 years of operation. Most of the points on which some hesitation was evident in the days of establishment have been progressively removed. Members win recall that several technical alterations have been made hut perhaps the most substantial alterations were made in 1964 when the Corporation was empowered to provide unconditional guarantees to lending institutions which finance exports of capital and semi-capital goods. Again, in 1965, when the Corporation was empowered to ensure on behalf of the Commonwealth, certain Australian investments abroad against the noncommercial risks of war, expropriation and exchange control restrictions.

These extensions of protection have resulted in an increasing use being made by Australian exporters, albeit by rural industries, and if must be admitted that the Export Payments Insurance Corporation has made a worthwhile contribution to Australia's exporting programme to move, as provided Australian exporters with the large degree of security which has been necessary for the penetration of new markets. Now, if EPIC can continue with the same capacity to amend its operations as it has shown over the past 14 years and as has been indicated in the amending Bill before the House, then we surely can expect Australia's exporting programme to move, as progressively as financial encouragement will permit, well into the future. As the honourable member for Cowper (Mr Robinson) has already said in this debate, Australia's efforts in promoting exports far transcends those of any other country and this Government deserves the congratulations of all including those on the Opposition benches, and I am pleased that we have received such plaudits from the Opposition on this Bill.

Question resolved in the affirmative.

Bill read a second time.


The Bill.

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