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Wednesday, 13 May 1936

Senator A J McLACHLAN (SOUTH AUSTRALIA) (Postmaster-General) . - I am obliged to my leader for giving me the opportunity to continue.

As regards New South Wales, the board stated, in its supplementary report, that it is satisfied that efficiently conducted factories could meet the competition of free importations landed at fi cost as low as £3 10s. 3d. a ton, free on wharf, Sydney - 4s. 4d. a ton lower than the lowest actual landed cost to dateand still make a higher margin of profit than the 10s. a ton, which the board considers reasonable. The evidence tendered by the industry in connexion with last year's trading confirms this view. Fourfactories that sold 260,000 tons in New South Wales during the trading year, would, after providing 6s. a ton for depreciation, have made an average profit of 9s. a ton if all their product had been sold at Sydney at £3 10s. 3d. a ton free on rail. This could have been achieved by the four companies operating in the aggregate to less than 40 per cent, of their capacity. Figures of individual manufacturers, which, for obvious reasons cannot be disclosed, give much stronger support to the board's contention.

In its supplementary report the board pointed out that two new companies are being formed to manufacture cement in this country - one in New South Wales, and the other in Western Australia. Whilst the Government views with some apprehension the construction of further works for the manufacture of a commodity, the demand for which can more than fully be catered for with existing plant, the fact remains that these new companies are entering the field in the full knowledge that the duties on cement have been reduced. Inquiries instituted in Western Australia, in February last, indicated that the formation of the new company in that State was proceeded with in the full knowledge of the abolition of the duty on British cement, as it was definitely held that the company would be able to produce cement at less cost than other companies now operating in Australia.

In its two reports, the Tariff Board has proved that the cement industry, in charging the excessive prices which the previous protection permitted, has not only traded profitably, but has also caused unnecessarily high costs to users, particularly the building industry which is a far greater employer of labour than is the cement industry. It can reasonably be claimed that these higher prices have retarded natural progress in the building industry and others. In retarding this progress the cement-makers must stand charged with having prevented employment in dependent industry. Moreover, the capital cost of homes, factories, farm requirements and Government and municipal works, has been increased by the amount by which the actual price exceeds a reasonable price. During the life of those buildings or works, the community has to pay that extra cost.

This industry, which is monopolistic in character, has earned high profits with cement plants working at less than half capacity. If production increased in relation to capacity, and the protection provided by the Customs Tariff 1933 were allowed to continue, the excessive profits which would be earned by the cement industry can well be imagined.

I have proved, by the figures I have cited, that the free admission of cement from the United Kingdom, while not preventing local manufacturers from making reasonable profits, will ensure fair prices to consumers, and accordingly, I ask the committee to support the request. It appears to me - and I say it more in sorrow than in criticism - that this industry has drifted into an impossible position economically. The addition of another uneconomic unit will increase the already great difficulties. The industry will be menaced, not so much by competition from overseas as by internal competition. In the interests of Australia, it is wrong to maintain an industry with a capacity too great for local requirements.

Senator Sampson - And, therefore, the Minister suggests reducing the capacity?

Senator A J McLACHLAN (SOUTH AUSTRALIA) - The only corrective that can be applied economically is an increased output of the local factories. During my second-reading speech, Senator Arkins asked why a certain cement-making factory in Tasmania was built. The explanation is that the British firm which had the contract for the construction of the Sydney

Harbour bridge decided to make its own cement rather than pay the prices asked by Australian manufacturers.

Senator Collings - The Minister is giving his case away.

Senator Sampson - The Goliath company was in existence before Dorman Long and Company came to Australia.

Senator A J McLACHLAN (SOUTH AUSTRALIA) - That company created another unit, thereby adding to the already existing difficulties. Had prices been reduced, there would have been uses for cement other than those which exist in Australia to-day.

Senator J V MACDONALD (QUEENSLAND) - Local competition is a good corrective of excessive prices.

Senator A.J. McLACHLAN.The corrective will be the local competition. It will not result from anything done under this tariff proposal. The Tariff Board has shown the extent to which prices can be reduced, and it is a pity that this natural industry has not been organized on a more satisfactory footing.

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