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Thursday, 5 December 1974


Dr EDWARDS (Berowra) -The Opposition does not oppose the main thrust of this legislation. Indeed, I would go so far as to say I am inclined to raise a cry in the style of the old time religion- 'Hallelujah! At last, at last!' This Government, from the start, has been bent on a policy of so-called restructuring of industry. Indeed, it has gone about it with some gusto. The only difference has been that neither the Government nor anyone else for that matter has any clear idea of just what the policy amounts to, and in particular, towards what end industry is to be restructured. The whole approach has been a matter of the cart before the horse or, as I put it the other day, we have had the exodus before the genesis.

We have had a whole variety of measures- all candidates for being declared 'adjustment situations' in terms of clause 5(1) of this Bill all tending to force structural readjustment. One is the recent very large and prolonged revaluation of the currency, which was partially reversed on 25 September last. I presume that the Government was aware, when it instituted that measure, of the profound effects of such a move on industry, particularly manufacturing industry, competing with imports and manufacturing industry seeking to export its goods. A second is the now notorious and also substantially reversed- we go one way, then we move the other- 25 per cent across the board tariff cut. There have been other tariff changes- major changes in the electronics industry and in the domestic appliance industry.

There has been a credit squeeze of unparalled severity, and other measures.

Under the pressure of these changes, industry has changed, and is changing, in significant ways. For example, under the impact of revaluation, a major machinery manufacturer located in the Albury-Wodonga complex has packed it in and moved to Sydney to conduct an import operation. I would say that is great stuff for the development of Albury-Wodonga- a major objective, as one understands, of the Government under a different head. Incidentally, the firm involved applied for, but has been specificaly refused structural adjustment assistance. I think it is worth stressing this aspect of the revaluation. As I said the other day when speaking on the Customs Tariff Bill, the tariff cut was one body blow to industry and the revaluation, in its magnitude and the length of time it was continued, was another body blow to industry. The revaluation vis-a-vis the United States of America was such that an American product could enter Australia, be subject to a tariff of, say, 25 per cent- no relation to the 25 per cent tariff cut in Australia- and still sell for less than the landed duty free price before the revaluation. So the effect of the revaluation, even leaving the tariff unchanged, was effectively to reduce assistance to that industry to negative protection.

I have cited the case of an industry- in the Albury-Wodonga area at that- which sought structural adjustment assistance and was refused it as if the currency change was of no relevance. As I said, we have had an exodus of firms and employees- it is in full swing- under the impact of the Government's amateur economic management and the misguided enthusiasm with which it has pursued the policies to which I have referred. After this exercise in confusion, to pursue this analogy, comes the Genesis or at least part of it. We have this Bill, the Structural Adjustment (Loan Guarantees) Bill, the purpose of which is to authorise the Government to guarantee loans to firms to facilitate their structural adjustment from one industry where they are in difficulties as a result of Government policy measures- for instance, the 25 per cent tariff cut might well qualify as such a measure under clause 5 ( 1 ) of the Bill- to some other sphere of operations. I think that is a relevant phrase which raises a good question. By the Bill, firms are to be assisted to adjust out of an industry, but to what? Others and I have pointed to this issue on many occasions. Apart from the generalities in the annual report of the Industries Assistance Commission, there are still no specific answers to that question available.

This comes to the heart of the problem with this Bill namely, the extent of the ministerial discretion or discretions written into it- inevitably so with the Government floundering in the dark, as it is, but creating difficulties nevertheless in respect of this legislation. Thus clause 7(1) of the Bill states that the Minister shall not guarantee a loan unless he is satisfied of 3 conditions. The first is that he must be satisfied that as a result of the policy measure a significant and distinct part of a firm's assets has been rendered 'incapable of economic use.' The second condition is that he must be satisfied that the firm in which the loan moneys will be employed 'has taken all reasonable steps to adjust itself to that situation.' The third condition is that he must be satisfied that the manner in which the loan moneys are to be employed is consistent with the national interest in relation to the use of resources.


Mr Kelly - What does he mean by that?


Dr EDWARDS - That is a good question. I am looking forward to the Minister enlightening us as to the sort of factors he will look at in satisfying himself that clause 7 ( 1 ) (c) the 'manner in which the loan moneys are to be employed is consistent with the national interest in relation to the use of resources' and, where the prescribed adjustment situation relates to any action of the Australian Government, it is consistent with the objective of the Australian Government in taking that action'. In clause 7 (2) even the first of the requirements I have just mentioned is overridden. There do not actually have to be any assets that have been rendered incapable of economic use. The Minister is to satisfy himself on these matters. The Minister alone is to judge or assure himself that the loan moneys are employed in a way which is consistent with the national interest in relation to the use of resources. We could get a great variety of views on that matter right at this moment. At present there is a notable divergence between the views of the Government and its principal adviser on industry matters- the Industries Assistance Commission. The LAC is for manufacturing industry restructured- in the national interest, of course -on the criterion of the efficient use of resources interpreted, as I see it, in the most narrow economic sense. On the other hand, for a variety of reasons including its immediate electoral survival, the Government is taking a different view, as its decision in respect of the motor vehicle industry clearly indicates.


Mr Kelly - It is in the South Australian national interest, though.


Dr EDWARDS - It may be in the South Australian national interest but a wide national interest is involved here. I confess I am largely on the side of the Government. There is a national interest in maintaining the technology of producing a vehicle right through. Also factors other than the efficient use of resources in the narrow economic sense ought to be taken into account in these matters. There are strictly economic matters, notably growth. Pursuit of narrow economic efficiency can tend to undermine the capacity and incentive for growth in many respects. That is a very important consideration. It could be put this way: The doctrinaire pursuit of the efficiency criterion will blunt- it is already doing so in this country- the growth performance of the economy. In particular, uncertainty as to future levels of protection has been having a major inhibiting effect on new investment and capital expansion plans. I suggest to the Government that it bears that in mind in its current rather desperate measures to resuscitate business.

I come back to my central point, which is that in the absence of a national industrial policysome understanding or some guidelines in the positive sense as to the activities which firms might adjust to- judgments under clause 7( 1 )(c) of the Bill will put a very heavy strain on the Minister for Manufacturing Industry (Mr Enderby). He has come to appreciate that traditionally imports come from overseas.


Mr Enderby - I have broad shoulders.


Dr EDWARDS -But how will he determine that proposals to employ loan moneys are consistent with the national interest in relation to the use of resources? Clause 8( 1 ) of the Bill reads as follows:

The Minister shall not give more than 1 guarantee in respect of any 1 firm in relation to any 1 prescribed adjustment situation and for that purpose shall, unless he is satisfied that there are special circumstances that make it unreasonable to do so, treat firms that are associated with one another as 1 firm.

I would be very interested to know about the special circumstances. I can certainly imagine cases of large multi-product firms which are producing different products in fairly distinct avenues. In such cases I hope that if any two or more of those avenues get into difficulty as a result of Government policy, the largely separate components of those firms will be permitted to qualify under this Bill. Again there is ministerial discretion. The Minister must be satisfied as to what these special circumstances will be. We have been given no indication of that. My honourable friend the Minister suggests that he has very broad shoulders. He looks robust enough now and in good shape.


Mr Hewson - He shrugs them too often.


Dr EDWARDS - That is how he exercises them and develops them for the task that he is taking on under this Bill. The Minister is letting himself in for an almost impossible job. It is the sort of thing that belongs in another dimension, with the Industries Assistance Commission with its large and highly qualified staff- of the order or 400 or 500 people, no less- there to give guidance on assistance to industry. It is the Industries Assistance Commission to which one turns for advice in the ordinary dimensions of economic activity, as distinct from the so-called adjustment situation. I suggest to the Minister that in his own interest he should try to get out from under the pressures to which he would become subjected under this legislation to guarantee this loan or that loan. In other cases he will make decisions that are fair and just, but will they be seen to be so? It is important that loan guarantees given under this legislation be seen to be fair. I put this to the Minister: His capacity is above question but, as we have seen, on that side of the House Ministers can swap jobs and the discretion under this legislation could be operated by lesser hands than those of the Minister.


Mr Enderby - They are all honourable men.


Dr EDWARDS - That is as may be. However, I am raising the question of the capacity of the gentlemen elected to the Cabinet. Once they are elected that is it; the Prime Minister is stuck with them, as all honourable members know. If there is to be a change of one Minister there has to be a clean swap with another. This is the issue to which I am referring. In the Minister's own interest, that is to take some of the weight of lobbyist pressure off his back- off his broad shoulders; in the interests of the importance of the treatment of applications not only being fair but being seen to be so; and, thirdly- I do not want to stress this too hard but one has to be realistic- to forestall the use of the powers under this Act in what could amount to political patronage, it is essential that as soon as possible the task of making recommendations in respect of government guarantees to loans for structural adjustments be vested in an appropriate board or advisory committee. Surely this is the normal procedure. There is a Rural Assistance Board in respect of the rural reconstruction program; the Export Development Grants Board is about to be established under legislation which was before this House an hour or so ago; and the Minister has foreshadowed a Structural Adjustment Board.

The Minister said that legislation to establish the structural adjustment board will take some time to prepare. I address a question to the Minister to which I would very much like an answer Why will the legislation to establish a structural adjustment board take such time? The Opposition is most firmly of the opinion that such a board should be established without delay. I ask honourable members to consider what is already happening under the so-called selective subsidy scheme. I wonder how many members of the House have heard of this scheme. The Minister stated to the House the other day that under the selective subsidy scheme a firm in Wangaratta, Victoria, will receive $400,000; the Wangaratta Woollen Mills Ltd, $150,000; Kelsall & Kemp (Tasmania) Ltd of Launceston, $100,000; and so on. I mention in particular Kelsall & Kemp because not long ago I visited that area. I have no doubt at all that the making of these grants to these companies in the situation in which they find themselves is fully justified, but my point is that these matters should come before an impartial committee.

The Government has adopted the principle, and much has been made of it in this House in relation to the Industries Assistance Commission, that in granting assistance to industry there must be public investigation, inquiry and report so that justice is done and seen to be done in the public arena. The public has a great interest in payments made under this selective subsidy scheme and it will have a great interest in the loan guarantees that will be made under this legislation. Accordingly, the Opposition urges the Government to get on with the establishment of the board without delay and to include, among its other responsibilities, the making of recommendations in respect of these loan guarantees. For that reason it is proposed- I am sure the Minister will concede I propose it very reasonably- that the present legislation be regarded as an enabling but interim measure. To underline my point- I am sure the Minister will agree- and to safeguard the public interest in this matter at the Committee stage of this Bill I propose to move the amendment standing in my name.


Mr Enderby - It has not reached me yet.


Dr EDWARDS - I understand it is available. The amendment is designed to encourage the setting up of the structural adjustment board, to which the Minister referred and to which I have been making reference, before 30 June 1975. I am sure the Government and the Minister will see fit to accept this amendment because I understand it is the Minister's intention to press ahead with the establishment of the board and that the board should adopt advisory and administrative responsibility in respect of these guarantees. Therefore, in the confidence that the amendment will be acceptable to the Government, the Opposition supports the Bill.







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