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Thursday, 18 November 1976
Page: 2855

Mr HOWARD (Bennelong) (Minister for Business and Consumer Affairs) - The Government will vote against the second reading of the National Companies Bill not because all the objectives of the legislation are not the objectives which the Government might share, not because there is not a very compelling need in this country for a greater level of uniformity and not because I am in total disagreement with a number of the arguments which have been advanced by both the honourable member for Kingsford-Smith (Mr Lionel Bowen) and the honourable member for Grayndler (Mr Antony Whitiam). I agree with quite a number of the arguments which have been advanced. The reason the Government will vote against the second reading is that at this stage the approach which is fundamental to the introduction of this Bill is not in conformity with the policy option which the Government is currently pursuing in negotiation with the States. I appreciate that the honourable member for Grayndler finds it rather dilatory that a Commonwealth Minister over a period of 4 months has not been able to secure the agreement of the States. He chastises me- as he is entitled to do- for not having got on with the job.

I think in doing that he reveals that he still has a great deal to learn about the processes of government. Indeed, I admit that I have a great deal to learn about the processes of government. This is an area which has been occupied by the States ever since Federation and which, by the force of the arguments of the honourable member for Grayndler, is a very fundamental to the commercial life of Australia. To anticipate that one can reach agreement with the States, in what is a very significant change in the arrangements as between the Commonwealth and the States, at 2 meetings and in the short period of 4 months is being a little unrealistic when one thinks of the long time which has been involved in other areas of Commonwealth-State negotiations. The Commonwealth proposals were announced on 6 July. The response at that time to those proposals was mixed. Some believed that the proposals were timorous. I think that was the word used by the honourable member for Kingsford-Smith. Others believed there were such gross impracticalities in the proposals that they would not operate. But there was also a considerable body of opinion which recognised that the approach being taken by this Government, given the enormous complexity of this area, was very practical and realistic. It was an approach which, in a very effective way, reached a compromise between the competing claims of national regulation and uniformity.

I cannot dispute the force of the arguments in favour of those against the legitimate concern which is felt in many areas not only in Sydney and Melbourne but also, perhaps even more, in the less populous States. This legitimate concern has been expressed about the prospect of one government having total control over corporate regulations in Australia. If one listens to the honourable member for Kingsford-Smith and the honourable member for Grayndler one is led to believe that the commercial community in Australia is crying out for total and absolute Commonwealth control over the minutiae of this whole area without any qualification and without any safeguards, checks or balances about the possible abuse of that power. Although there is a very strong feeling in the commercial community for uniformity there is a very strong belief that the frustrations of having to comply with differing State requirements and with the expenses involved are matters which ought to be eliminated. Mixed with that feeling is also concern at the prospect that with one government having total control over corporate regulations without any checks, balances or safeguards, at some time in the future there could be legitimate concern in that area. It is because of these considerations and also out of consideration to the approach which this Government has adopted to cooperative federalism- I was pleased to hear the honourable member for Kingsford-Smith acknowledge the benefits of the new federalism as far as Queensland and Western Australia are concerned- that I was delighted to hear the honourable member say how well off those States are under the Government's proposals. I am glad to hear this ringing endorsement of the new federalism which -

Mr Lionel Bowen - They do not recognise it.

Mr HOWARD -I am not talking about what the States said. I am talking about what the honourable member for Kingsford-Smith said. Those were his words. He said that they had never been better off. I thank him very much for supporting the successful approach of the Government in this area. The Government's proposals are an attempt to bring about the desirable level of uniformity and of national regulation in those matters which are truly national. At the same time the Government proposes to accommodate some of the concerns of which I spoke earlier and also accommodate the very simple fact that despite the shortcomings of which the honourable gentleman spoke there is a very considerable expertise in corporate regulations at a State level in this country.

I invite the honourable gentlemen who have argued that we will solve all these problems by transferring everything to the Commonwealth in one hit to bear in mind that the degree of expertise in administration in this area in, for example, New South Wales or Victoria is far greater than anything which is immediately at the disposal of the Commonwealth Government, be it a Commonwealth Government of our persuasion or of a Labor persuasion. There is nothing intrinsically magical about having a national administration as far as the expertise of the people is concerned. There is no reason why, given a removal of the constraints of having to deal with different jurisdiction, State officers, acting under effective cooperative legislation cannot perform very effectively and be responsible officers.

Having said that, I should like to deal with a couple of the specific matters involved in the Opposition's approach. In effect, the Opposition is saying to this Parliament that there are no constitutional problems involved in this area, that the Commonwealth has such a totality of power that even if there are a few areas not covered by the Commonwealth that does not matter and they will be picked up by the State legislation. I would not be so bold as to assert that the constitutional position is as clear as the honourable member for Kingsford-Smith thinks it is. So far as the advice given to the present Commonwealth Government is concerned, there is no doubt that the Commonwealth's power in this area is quite extensive. Equally, there is no doubt that that is a factor which the Government still has very much in mind in its negotiations with the States. Nonetheless, it is quite unreal to assert simply that it is possible to solve all the problems of differing jurisdictions, to solve all the complexities of companies having to operate across State borders simply by passing this Bill and its companion Bill which was introduced by the same honourable gentleman earlier this year, and that as a result of passing those 2 Bills there would be no problems.

If one accepts the force of the argument put by the honourable member for Kingsford-Smith about the attitude of certain States, one must then recognise that if what he is saying is true the sort of action the honourable member has in mind would immediately invite and provoke a constitutional challenge. Far from moving from a situation of great confusion and lack of uniformity, as the honourable member sees it, into a situation of tranquility and peace, there would be far more confusion and concern. The situation could arise where companies would feel that they had to comply with the differing requirements of both Commonwealth and State legislation in the same area. Naturally, those sorts of considerations impel any government approaching this matter responsibly to try to secure the co-operation of the States. We have put certain proposals to the States. We believe that certain essentials are involved in this area and we are not prepared to make concessions which would water down those essentials. But there are enormous political and commercial advantages, and I believe there could also be enormous legal advantages, in trying to secure the type of cooperative arrangement which is inherent in the proposals we have put forward.

I was interested to hear the honourable member for Grayndler say that my proposals have been criticised by every competent or recognisedI am not sure which word it was- commentator on company law in Australia. I am not aware of any of the individual people and he did not refer to any of them. I am conscious that the proposals have been criticised by some people. I am equally conscious that the Government's proposals have been publicly welcomed by representatives of stock exchanges in Australia and by representatives of other business organisations in Australia. They have been publicly welcomed as proposals which are realistic and which will, if accepted by the States, go a very considerable distance towards solving the fundamental problems existing at the present time.

The Government does not regard the interstate corporate affairs arrangement as being a sufficient response to the need for greater national legislation in this area. The Government does not believe that the Commonwealth's role in this area must be confined to the role of a mere agency for the Territories. A proposition to that effect is absurd because it would mean that if, for example, the Northern Territory became a State and the Australian Capital Territory achieved internal self-government, the Commonwealth would have no role. The Commonwealth does have a very distinct national role in this area. It is a role which flows very directly from the fact that the capital markets of Australia operate irrespective of State boundaries. The trading operations of many companies in Australia, certainly the major companies, operate irrespective of State boundaries. Essentially, we are dealing with a national market and it is therefore necessary to have a national response. It is equally true that of the 390 000 to 400 000 companies incorporated around Australia, about 90 per cent are proprietary companies and of that 90 per cent the overwhelming majority carry on business in only one State. I accept completely, and it is implicit in the Government's proposals, that a company which is trading across State boundaries ought not to be in a situation where the attitude of the Commissioner for Corporate Affairs in New South Wales is different from that in Victoria, but surely one cannot apply quite the same approach when looking at a family business which is simply carrying on its operations in one suburb of Melbourne or Perth or Sydney. As honourable gentlemen who spoke for the Opposition know full well, the great majority of companies incorporated in Australia, so far as numbers are concerned, are companies which do not trade nationally. They carry on their operations within the boundaries of one State.

I think there is enormous merit in trying to establish a scheme which embraces within it a de facto division of responsibility between Federal and State administrations where a national administration is concerned essentially with the national aspects of the operations of companies and of the capital market and where existing State administrations in appropriate cases are utilised by that national administration in the performance of its national responsibilities. But in respect of regulatory matters affecting proprietary companies, certainly in those areas where a business is carried on in one State, in the great bulk of routine administrative work for companies I see merit in the existing State administrations carrying on those operations.

Much reference was made during the speeches of Opposition members to the Rae report. I have just 2 things to say about the Rae report. The first is that the author of the report has publicly supported the Government's approach in this area. The second is that the essential deficiency which the Rae investigation established- a very essential deficiency- was the incapacity of individual State administrations to act in respect of activities which went across State boundaries. Fundamentally, that meant that the most important reform needed in this area was the establishment of a national body capable of acting irrespective of State boundaries. There is nothing at all in the proposals of the Commonwealth Government to prevent that situation from coming about. Our proposals do involve the establishment of a national corporations and securities commission. Our proposals do involve a situation where all the necessary power needed to enable that body to act irrespective of State boundaries will be given to that body. My advice is that the Commonwealth's proposals are within constitutional power and can be given effect to if they are accepted by the States. I believe that if our proposals are accepted by the States and if they are implemented, then essentially we will have given effect to the fundamental recommendation of the Rae investigation. We will have satisfactorily provided that national administration which is so necessary to act irrespective of State boundaries.

This is a very complex issue. It is an issue which involves at the outset, so far as we are concerned, trying to reach a political agreement between the Commonwealth and the States regarding a co-operative approach. We have put proposals to the States which we regard as proper, which we regard as very reasonable, and which we regard as involving the States in a very full sense in both the administration and the reform of the law. I want to make it quite clear to the House that the Government has made a very definite policy decision, that it has certain national responsibilities in this area, that those responsibilities cannot be adequately discharged unless there is a large measure of Commonwealth involvement. We do not intend to retreat from that decision. The decision has been taken. We believe that it can best be given effect to by the approach we have adopted towards the States. But I wish to make it quite clear that in negotiating with the States it is constantly our situation that this problem can be solved only by an adequate level of involvement and responsibility on the part of the Commonwealth.

The only other point I wish to make concerning the substance of the Bill which has been introduced by the honourable member for Kingsford-Smith (Mr Lionel Bowen) is that, as I understand it, this Bill is, in effect, precisely the same as the Bill which was about to be introduced prior to the dissolution of the last Parliament. I think the House should know that this Bill was prepared without any consultation at all with the State governments. It was prepared without any meaningful consultation with the business community of Australia. In other words, the most fundamental piece of commercial legislation that we can have in this country, that is, the basic statute to regulate company behaviour, was, I understand, prepared without any meaningful consultation with either the business community or State governments.

I think this indicates why the approach that was adopted by the previous Government towards matters such as national companies legislation and regulation of the securities industry was greeted with such scepticism, concern and in some quarters, criticism by people in the commercial community. The former Labor Government, in its whole approach to this matter, particularly when it was the concern of former Attorney-General Murphy, exhibited a disregard for the concept of effective consultation in this area. It is little wonder that great suspicion and concern were felt in many sections of the commercial community with regard to this legislation. It is a very important policy objective of this Government and, in particular, an important policy objective of myself, to bring about an effective system of companies and securities industry legislation in Australia which involves a greater level of uniformity, which involves a national body capable of acting in appropriate cases in respect of national matters, which preserves the effective role of existing State administrations and which contains, I think, a desirable level of co-operation and consultation between the Commonwealth and the States.

I believe that, notwithstanding the inevitable difficulties of negotiating with States, irrespective of the political colour of the States or of the Commonwealth Government of the day, there are prospects that our proposals can be and will be accepted by the States. They are a genuine attempt to provide both a politically acceptable solution to this problem and a genuine attempt to provide a solution which will cause a minimum of disruption, confusion and delay to the business community of Australia. This is a very important consideration with regard to this particular matter. Therefore, whilst many of the objectives of legislation of this nature are objectives that the Government shares in common with the views expressed by the honourable member for Kingsford-Smith and whilst the Government is committed to greater uniformity in this area and a greater involvement by the Commonwealth Government, for the reasons I have outlined the approach at this time by the Opposition is fundamentally at odds with the approach that the Government has adopted to this matter. It will therefore be the intention of the Government to vote against the second reading.

Motion (by Mr Howard) agreed to-

That the question be now put.

Question put:

That the Bill be now read a second time.

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