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Thursday, 14 May 1970

Mr SPEAKER -Order! There are far too many interjectors in the House.

Dr J F CAIRNS (LALOR, VICTORIA) - I am glad they are interested, Mr Speaker. Normally they are half asleep. But these traditional methods are now quite unacceptable; the people will not accept them. Then there are the nontraditional methods. I congratulate the Minister for Trade and Industry for a development in this direction. In his second reading speech on this Bill the Minister said:

Our policies to strengthen and broaden Australia's export capability have been directed importantly to increasing the export of manufactured poods.

This has been done reasonably well. He then says:

Export incentives, trade promotion, the Export Development Council, the Export Payments Insurance Corporation, have all helped to create a very real capacity of Australian manufacturing industries to sell their products overseas.

This has also been done reasonably well. He then says:

But much more needs to bc done to build in Australia an industrial structure which can be a principle source of export earnings in the future . . .

I will not quote other passages. The Minister's speech is available and he says more than that. But he says something else. He says that despite this situation, hardly a month goes by when we do not hear of an overseas takeover of an important and growing Australian In 1969 alone he says at least 15 Australian owned companies with assets worth $l00m disappeared from the lists of the two largest stock exchanges because of takeover by overseas interests. They disappeared into the private realm that is not even the stock exchange. We have then to take on trust the amount of money the foreign owned Corporations can take from Australia; the influence they can have in the Australian economy; the effect of their industrial policy on labour relations; the tendency they have - I think it is true - to aggravate labour relations, to create problems of stoppages and so forth because decisions are made not here in Sydney or Melbourne but in New York, Detroit or somewhere else and tohellwithMelbourneorSydneywhatarethey. These are the multi-national corporations that even the Chairman of Directors of Broken Hill Pty Co. Ltd in Sydney last November said he had never found to be just what they were described by the President of the Bank of America, Mr Rudolph Peterson - humanitarian organisations that were out to be generous to everybody. The implication he made was that they were out for every penny they could get and they did not take into account very much the human relations that were present 2,000. 3,000 or perhaps 10,000 miles away from the head office. The Minister then went on to give details. He said:

There are also, of course, many other companies which have continued in existence but with the overseas ownership growing and becoming dominant. Overseas takeovers and mergers are not necessarily bad. Indeed, they may be part of the process of an Australian industry growing up, becoming more efficient. But too frequently in the pattern of such agreements, when the Australian partner cannot meet his share of the capital requirements - whether equity or loan - he will at best become the minor partner in the new enterprise that results. We cannot let ourselves be lulled into feeling that all is well because comfortable aggregate statistical figures show only 20% to 25% foreign ownership of manufacturing.

I repeat: 'Only 20% to 25%'. The Minister has described a situation that seems to me to be not an over-exaggeration. He has been aware of it for a long time. I suppose in the joint Party meetings and in the Cabinet he has been fighting for a long time to do something about it. I do not think that he could recognise things as clearly and as vividly as he has without going ahead to do something about it. But for some reason or other the right honourable gentleman has not been able to do much about it.

He chose to say in his speech:

I know of no important country, other than Australia, where the Government exhibits an indifference as to whether its natural resources or production opportunities are owned in whole or in part by overseas interests.

I am sure that the Minister will not be annoyed if I point out that in the printed version of his speech which he gave to me he had another word which he did not include in his spoken speech, and consequently it did not find its way into Hansard. The printed version of his speech was stronger than the spoken version. It read:

I know of no important country, other than Australia, where the Government exhibits a complete indifference as to whether its natural resources or production opportunities are owned in whole or in part by overseas interests.

I wonder if that is an accurate statement of the position. I do not think any man in Australia is in a better position to judge than the right honourable- gentleman. I do not think that anyone has been in a better position to see what has been happening inside the Government for 20 years than the right honourable gentleman. Therefore I would say that is no exaggeration. There has been a complete indifference on the part of the Government for 20 years as to whether Australian natural resources and production opportunities are owned in whole or in part by overseas interests. I have given honourable members some description of the difficulties, the liabilities, the consequences and the harm that can come from this. I have gone a little further than the right honourable gentleman did.

Dr Mackay - No guidelines, no Prime Minister's statement; just indifference.

Dr J F CAIRNS (LALOR, VICTORIA) - The honourable gentleman who has interjected is one whom I would expect to be dedicated to truth. It seems to me that he is continuously dedicated to political advantage and to straining the truth every inch of the way if it suits his prejudices. The Minister has faced this problem and he has helped to design an institution which could be a very useful one. He said in his second reading speech:

We are going to create a new facility which will be in a position to assist an Australian venture that seeks its help to undertake a viable and important industry development.

Surely the most dedicated free enterpriser on the Government benches could not object to that. The Minister continued.

The facility will be fashioned and equipped especially to assist projects in export industries, and industries founded on Australia's natural resources.

The Australian Industry Development Corporation will obtain finance for projects in Australia principally from overseas. Although it is based in Australia it will be at no disadvantage in contracts with foreign borrowers. I think this is a very important point. Turning to the Bill I think it is fair enough to say, with some of the critics of the Bill, that it is stronger than the Ministers speech. The functions of the Bill are set out in clause 6. The Corporation must be constitutional, and clause 6, I think, is a quite creditable and somewhat skilful way of defining a constitutional basis for the Corporation. It has a very general purpose which is stated in sub-clause (1.). Its general purpose is to assist 'Australian companies engaging or proposing to engage in industries in Australia concerned with the manufacturer, processing or treatment of goods, or with the recovery of minerals, for the purpose of facilitating and encouraging the establishment, development and advancement of those industries'. I would like to have seen the word 'services' appear in that clause, because it seems to me that services are of special significance in relation to our balance of payments. I refer to such things as freight, insurance and banking. I think there is need for some new developments in this field and I regret that the word 'services', indicating that the Minister might be thinking of some new developments of a private enterprise nature in this field, is not included in that clause. If it were the purpose of the Opposition to introduce amendments - and it is not - that is an amendment that I would like to see proposed to the House.

Of course, the Corporation has to be constitutional. I am glad to see that subclause (2.) of clause 6 does not limit the constitution. It states:

The Corporation shall perform its functions in such manner as will -

(a)   promote trade and commerce between Australia and places outside Australia;

(b)   promote trade and commerce among the States, between the States and Territories and within the Territories;

(c)   promote the economic development of the Territories; and

(d)   further the development of Australian resources necessary for the defence of the Commonwealth.

It is not limited by these constitutional requirements. It is directed to work so as to perform its functions in such a manner as will achieve these objectives. There is no implication that it is bound narrowly by a constitutional purpose, but it will serve a constitutional purpose.

I will now deal with the powers of the Corporation, which are covered in clause 7. The powers are quite extensive and they will be seen in clause 7. The Corporation has power to borrow moneys, to lend moneys, to participate in the formation of a company, to buy shares in a company, to form a partnership, to give guarantees to underwrite issues of shares, to appoint agents and attorneys, and so on. I want to point out here that it is not just a company in the sense of having a group of money makers who are entering into a business for exploitation and private profit. A company is defined in clause 4, the definition clause, in an interesting and important way. A company is defined to include "any corporation and any unincorporated body or association of persons'. So this is not just a group of money makers. The Corporation can assist a wide variety of organisations, lt may perform functions according to the way the Corporation's purposes are developed.

I want to refer to the financial provisions in clause 7. It seems to me that this is at present perhaps the weakness, the limitation, of the Corporation. I refer to the financial limits that are imposed upon it. Clause 7 (3.) says that the Corporation shall not borrow money - I ant abbreviating the words of the Bill - if the total amount borrowed and not repaid exceeds 5 limes the sum of the amount of capital of the Corporation and any amount set aside by the Corporation as reserves. What it can do is limited by its - 'capital and reserves. Of course if it were limited to using only its capital and reserves it would not have very much money and it would not be able to get it very quickly. The amount it may lend or invest is limited to 5 times its capital and reserves.

What is its capital? I do not think its capital is $100m as set out in clause 24 (I.). Its capital is something that will grow as time goes by, and it might in fact grow quite slowly, even under the most favourable circumstances. Its capital under clause 24 (2.) (a) will be $25m as soon as practicable, and under sub-clause (2.) (b) the remainder will be made up by instalments in accordance with the succeeding provisions of this clause. Under the provisions of clause 24(4.) instalments of capital are limited to $25m unless the Treasury consents to more. Also the total amount payable to the Corporation shall not exceed S25m in any 12 months.

Clause 24(5.) imposes the most serious limitation. I would not have had any of these limitations in the Bill if I had been drawing it up. This clause provides that payment of an instalment of capital shall not be made where the total of the amount payable to the Corporation exceeds $50m unless the Auditor-General of the Commonwealth has certified in writing that the total amount borrowed by the Corporation exceeds 4 times the sum of the amount of capital of the Corporation at that date and any amount set aside by the Corporation as reserves. So the Corporation is given a certain amount of capital. It cannot go beyond 4 times that in its operations until the Auditor-General certifies that the total amount borrowed by the Corporation before a certain date exceeds 4 times the Corporation's capital and reserves. It cannot go on to 5 times that amount. It cannot get its next instalment until it has used the instalment it already has. In practice it may be said that this will not amount to a practical limitation, and it may well not do so.

Mr McEwen - It would have $200m of lending money at that point.

Dr J F Cairns (LALOR, VICTORIA) - As the Minister says, it would have $200m of lending money. This is a lot of money, but we must not forget that the capital inflow on which we depend is running at well over $ 1,000m and is rising all the t me. This Corporation depends on being asked for assistance. Surely its whole purpose is to make a significant difference to the channels through which the money is to flow. Instead of the money flowing through channels which mean foreign ownership and control and far higher rates of withdrawal of profits and investments than might otherwise be the case, we hope that it will reduce the drain on our balance of payments. If it is to achieve this it will have to become a significant institution pretty quickly, and it has to be significant in terms of the $200m it can get at the best possible rates compared to the S 1.200m that is coming through the other pipeline into Australia at present. The amount that the Corporation will be able to borrow is about one-sixth of capital inflow. This is important, and it may be that the Corporation has all the limits it can exercise in the foreseeable future.

I do not have time to go into much more detail. There are 2 things which I think need closer examination than I have been able to give them. Clause 8 provides that assistance can be given at request in relation to a company in which the Corporation holds a substantial number of shares. If the board which runs the Corporation is satisfied that retention of the shares is not necessary for the proper performance of the functions of the Corporation the Corporation will sell out, and the Minister knows that the Corporation will buy in and sell out again quickly, and then come in and sell out quickly again.

Mr McEwen - I did not suggest that it would be quickly. It will be as the enterprise justifies.

Dr J F Cairns (LALOR, VICTORIA) - I think it may be in the interests of the enterprise to stay in for quite a period. I will try to sum up in the very little time I have left to me. Like everything else that is designed by man, I think this institution will be good or bad in accordance with the way that it is run. The board that will be running it is important. The board is to be composed of men drawn from business and who have business experience. If the Minister considers the Bill is bold, it will be bold in accordance with the way it functions. If it simply functions as a means of assisting certain existing private enterprises, it will not be very bold. If its policy is a short term policy it will not be very bold. But if it is likely to secure interests more widely, it will be a very important measure indeed.

Mr SPEAKER -Order! The honourable member's time has expired.

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