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Thursday, 18 October 1973
Page: 2343


Mr LYNCH (Flinders) - I move:

Omit sub-clauses(3) and (4), substitute the following sub-clauses:

(3)   In this Act-

(a)   a reference to a subscriber to the Fund is a reference to the holder of an investment bond; and

(b)   a reference to a subscriber, in relation to a Division of the Fund, is a reference to the holder of an investment bond in the series of investment bonds in relation to which that Division is maintained.

(4)   A reference in this Act to the relevant terms and conditions, in relation to a Division of the Fund maintained in relation to a series of investment bonds, is a reference to the terms and conditions on which the bonds in that series were issued.'.

This amendment to the interpretation section of the Bill is consequential to an amendment the Opposition proposes to move to clause 16. That amendment seeks to prevent the establishment by the National Investment Fund of superannuation or retirement schemes and savings schemes, including schemes for the payment of moneys in the event of death, and with the consent of the Chair and of the Committee I will speak to that amendment at this stage.

The Opposition rejects the proposal to give the Australian Industry Development Corporation the power to augment moneys constituting the National Investment Fund, in addition to the issuing and selling of investment bonds, by the authorisation of the establishment and maintenance of superannuation, retirement and savings schemes. We believe that support of this proposal would create a further diversion of funds from the private sector, supplementary to the funds to be raised as a consequence of the issue of investment bonds by the National Investment Fund. We believe there is absolutely no reason to assume that the Corporation will have the capacity to maximise higher or even equal rates of return than those now obtained by institutions in the private sector. As its area of operation and influence is to be determined by an overriding consideration that it must further Australian ownership and not by what is economically viable, the view of the Opposition parties in respect of this proposition is that it will do decidedly worse. It is particularly doubtful whether, in the short term, the Corporation will have the capability to develop the expertise which existing institutions have taken many years to acquire. To justify the existence of these new schemes, it must be demonstrable that the Corporation can at least equal the rate of return that is available at present, and that they did not simply rely on the question of tax concessions and other subsidies for the purpose of seeking to attract the necessary investment funds.

I ask the Minister for Overseas Trade (Dr J. F. Cairns) why the Government proposes that funds of this type should be established and, further, what justification there is for Government subsidy to maintain their effective rates of return. The effect of the Corporation's moving into this already well served area of the Australian economy is that by establishing in competition to existing entrepreneurs in the field it will reduce their economies of scale and therefore increase the cost of their services to the public at large. The very nature of the type of programs the Corporation seeks to establish requires the amassing of massive actuarial reserves to meet liability under contracts stretching many years ahead. As it is vital that these funds are available when called on, it precludes the institutions currently operative in these fields from investing in anything but extremely low risk ventures, which of course partly explains their low rate of return.

The proposed use to which the Corporation will put the funds gathered in under its superannuation, retirement and savings schemes will be ruled not simply by what is essentially low risk schemes but by what fits into its program of buying back Australia. There is no certainty that the supervisory council of the Fund will be able to prevent the divisions of the Fund from investing in high risk ventures, with the possible result that the Government may have to take on board expensive guarantees. Finally, by establishing in competition with existing institutions, the Corporation will diminish the worthwhile benefits which the community has received over many years.

In 1972 life offices held 11.78 per cent of the total Commonwealth securities on issue, and they were particularly significant as holders of long term bonds. This sector is also a substantial investor in the less attractive area of local and semi-governmental securities, apart from the important indirect assistance that they give those loans through sub-underwriting support. Derived of this support, this particular market could not have continued adequately to meet its requirements. In the field of rural finance these institutions are important, and several of the larger ones have taken a direct interest in the pastoral industry. In the area of housing finance, the savings banks and the rapidly expanding building societies have played a vital role.

Those persons in the Australian community seeking to purchase homes are now in effect bearing. the main burden of the Government's decision to raise interest rates to record levels. The decision to raise interest rates to their present level was taken by a Government which last year publicly advocated low interest rates. It seems incredible, against the background of the Government's fiscal irresponsibility, that it should now propose to divert funds away from the area of housing finance. This, of course, will further exacerbate the situation for prospective home buyers who already have been hit by a general tightening in credit and a substantial increase in interest rates as a direct consequence of Government measures. The entry of the Australian Industry Development Corporation, in its proposed enlarged form, into the capital market will worsen their plight by causing a further reduction in available loan funds and a general hardening in interest rates.

Therefore, it is a matter of great concern that the Minister should introduce such a proposal into this chamber without adequate explanation or justification. The Opposition is resolutely opposed to the Government's entry into this field. There has been no proper inquiry or public debate in the terms I have mentioned. In short, we see this proposal as a device to secure an even greater entree to private sector funds without any guarantee of efficient utilisation and without any perceived need to provide a service to the community which does not now exist. Therefore, in the terms of the amendment moved, the Opposition expresses its complete rejection of the proposal contained in the Bill which, in fact, will come before the Committee at a later stage. This amendment is moved consequentially, foreshadowing a further amendment.







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