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Tuesday, 13 March 1973
Page: 526


Mr WHITTORN (Balaclava) - As the Minister for Overseas Trade and Secondary Industry (Dr J. F. Cairns) said in his second reading speech, this debate refers to the Export Payments Insurance Corporation Act 1956-1972 and makes particular reference to the maximum contingent liability, which presently stands at $500m. The Government and its advisers want to increase the maximum contingent liability to $750m. As previous speakers have said, it has been the practice for this Parliament over the years since 1956 to increase the Corporation's contingent liability with such Bills as this. Initially the Export Payments Insurance Corporation had a contingent liability of $50m when it was established in 1956. This sum has been increased quite regularly because of the diversity of activities of the Corporation and the fact that it was able, through its activities, to assist exporters.

I believe that there are one or two points concerned with Australian exports which the Minister should examine. I shall refer to those shortly. In past debates I have talked about EPIC, as it is generally known. In May 1970 I encouraged the then Government to increase EPIC's contingent liability from $200m to $300m because then, as now, the Corporation's liabilities were increasing at an enormous rate. The maximum contingency was increased further in 1971 from $300m to $500m. Now the Minister desires a further increase to $750m.

As I have said, the diversity of the Corporation has increased enormously over the years. Particular reference was made by the then Minister to the fact that the Corporation was doing no business for exporters from Australia in Papua New Guinea and other Territories of Australia. Included in the Act then - it remains in the Act - was provision for the Corporation to insure exports to Papua New Guinea. I think that what I had to say on 12th May 1970 on this matter bears repetition. I am reported in Hansard as saying:

I am surprised that the original legislation and the amendments that have been made over the years have not included provision that insurance of goods exported from Australia to Papua and New Guinea should be on the same basis as Japan's arrangements for looking after its traders and manufacturers. I should think that the proposed amendments relate more particularly to requests by industry in Australia to make certain that they do trade in Papua and New Guinea on equal terms with Japanese manufacturers, German manufacturers and the like. I am pleased that the Minister has seen fit to plug this loophole.

Anybody - any member of this House or any trader - who went to Papua New Guinea in those years would have seen, and no doubt would still see, the amount of goods sold in Port Moresby, Rabaul, Lae and other centres in Papua New Guinea which come from Japan, Germany and other countries. Of course, the exporters from the original country are supported by an insurance corporation much the same as the one that we have established in Australia.

A good look at the reports of the Export Payments Insurance Corporation indicate the type of business that the Corporation now covers in ever increasing amounts. For instance, business in the metals section of the Corporation increased by 140 per cent, the amounts being $50.3m in 1970 to a grand total of $120m in 1971. According to the Corporation's report this was further increased during 1972 to $ 137.7m. These are staggering increases and one can only commend the then Government which introduced legislation setting up the Corporation, and the fact that the Corporation has carried out its work in a very favourable fashion. So on the surface there is need each year for the Government and the Parliament to admit that the contingent liabilities of the Corporation should be increased and no doubt, as the Minister has said, there is a good argument for the increase of its contingent liability from $500m to $750m on this occasion.

In his second reading speech the Minister said that at the end of December 1972 the actual contingent liability stood at $41 6m. However, private members of the Parliament do not have these figures available to them. We must have recourse to the reports of the Corporation and the last one, of course, was the report for the year ended 30th June 1972. In a debate of this nature I believe that this Government - as was the case with the past Government - should give its private members the same form of information that is available to the Minister. We are debating the fact that the Minister has said that the contingent liability at December last year was $4 16m whereas the only amount that we have comes from the last report of the Corporation for the year ended 30th June last year. My assessment from the 1972 report indicates contingent liability for the commercial activities of the Corporation of $375.3m. But if one adds to that the Government account, a further amount of $169m is involved. It would be reasonable to assume that if these 2 amounts were added together the contingent liability of the Corporation should be increased to the amount mentioned by the Minister. However, I had a further look at the reports and I find that the Government account consists mainly of primary produce and, as 1 understand the reports of the Corporation, sales of wheat, meat and dairy products are being made to countries on a long term credit basis which in effect is good for producers in Australia. It is my belief, however, that when wheat is exported to a regular importer on a long term credit basis the wheat can be consumed overnight but there is still a liability on the part of the importing country to repay the amount required for that wheat. Therefore, what this Government, and Australia in effect, is doing is giving a long term loan to the importing country for a consumer item.

I believe that there should be a split-up between the commercial activities of the Corporation and the government activities of the Corporation if the major portion of the government activities consists of consumer items. A quick look at the figures concerning the points I have raised indicates that the contingent liability on meat insurances during 1970 amounted to $ 11.6m. In 1971 the contingent liability increased to $ 14.4m and in 1972 to $38.5m. Therefore, on meat alone the insurance was increased by almost 4 times. The reports of the Corporation indicate that there was a contingent liability on wheat insurances of $lm in 1970, $32.4m in 1971 and $8 1.9m in 1972. In effect there was an increase in insurances for the export of wheat of about 82 to one. I have no doubt that the amount of wheat and meat sold in the years I have mentioned, perhaps with the exception of the latter part of 1972, has increased and has still to be paid for by the importing countries. This confirms my belief that Australia is giving a long term loan to the importing countries. There ought to be a better way of granting loans to these countries rather than sell them produce of this nature. We could indicate to them that we will give them long term credit. It would be far better for the Treasurer (Mr Crean) to agree that a loan be granted to the country concerned.

Dairy produce is another item that has shown a tremendous increase. For the year 1970 the contingent liability on government account was $19.4m. In 1971 that amount rose to $27.5m and in 1972 it is shown at $36.2m. In other words, the contingent liability for this consumer item has doubled in 2 years. I have selected only 3 items from the various reports to indicate that we are kidding ourselves when we say that we are exporting these goods to the importing countries and helping them. Of course we are helping them. But I believe it would be far better to grant loans to them so that they in turn could pay for the wheat with our loans. This is, in fact, what we are doing and I think we ought to say so. The danger, of course, is that the food we export is consumed in a very short time but the importing country or the importer concerned still has to pay for this food.

The reports of the Corporation indicate also that most exports, particularly exports of primary produce and minerals, can be sold for cash. I believe that the officers of the Corporation should have a further and a deeper look at the possibility of selling these goods for cash rather than granting these loans to the countries concerned.

Actually, as the honourable member for Wentworth (Mr Bury) has said there is a growing compulsion throughout the world to sell all goods on credits, and long term credits at that. In fact the granting of credits for imports with many countries is of vital concern and is a vital factor for importing countries. I view with alarm the fact that the Corporation has said in its most recent report that 9 contracts still have between 5 years and 10 years to continue. I should like to know whether these contracts are for consumer, engineering or manufactured items. Eighteen contracts are still outstanding between 3 years and 5 years and 58 contracts between 1 and 3 years. The Corporation has said in its reports that Australian producers must match the competition of other exporting nations. -I doubt whether a proper assessment has been made by the exporters on the one hand and by the Corporation on the other hand. In other words, I believe that exporters do indicate to the Corporation that to obtain this export business the exporter will have to grant this credit to cover 3, 4, 5 or more years. The Organisation for Economic Co-operation and Development does not believe, as I do not believe, that exporting in this form is in the best interests of the major manufacturing countries. In fact I am pleased to learn that the OECD is now actively engaged with exporting countries in an endeavour to rationalise the giving of credit. The OECD has indicated that as yet very little has been achieved in this respect. But I do consider that its efforts should be supported by the Australian Parliament so that manufacturing countries, exporting countries and producing countries receive a fair deal as well as those countries which import on this long term basis.

The honourable member for Wentworth has said that the President of the World Bank also has become very concerned about this giving of credit by exporting countries. The President of the World Bank said recently in Chile in dealing with international credits, no credits to Chile itself:

Since the mid-1950s publicly guaranteed debt has been growing at about 14 per cent per annum. At the end of 1971 it stood at over $60 billion and the annual debt service exceeded $5 billion.

I have no doubt that the President of the World Bank was referring to American dollars but those figures indicate the extent to which credit is given and the debt involved with respect to importing countries. The President of the World Bank said further that the annual debt rate of 14 per cent was double the rate at which export earnings grew and, of course, the servicing costs increased proportionally. What he was saying was that the $5 billion for servicing of the present debt would increase as this practice of giving credit for consumer and other items increased. If this practice continued, he felt, world financiers would need to intervene in this granting of credit by export countries to those who import. One needs only to look at the figure of 14 per cent per annum to realise that this form of credit giving cannot continue to increase year by year. I do hope that the Minister for Overseas Trade will look at the figures with respect to EPIC before the Government finally decides that EPIC's contingent liability should be increased from $500m to $750m.

Revaluation has been discussed tonight by speakers on both sides of the chamber. The general impression is that if we have to depress our currency the present exports of the various commodities covered by the Exports Payments Insurance Corporation can be maintained, but if our currency is left at its present value our exports will decrease. If the latter reason is the probable one, it is quite obvious that no need exists for the contingent liability of the Corporation to be increased from $500m to $750m. Here is another question at which the Minister will need to look and the Government must relate its decision to whether this country should devalue its currency or whether our currency should remain at its present level in relation to other world currencies. However, generally, over the years I have supported the need to increase the contingent liabilities of the Corporation and, by and large, I support the contention now. But I do believe that the Minister faces more problems today with respect to the Corporation than that body has experienced hitherto. I hope that he will give to some of the contributions made by honourable members a good deal more thought than has been necesssary in the past.







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