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Wednesday, 13 May 1936

Senator A J McLACHLAN (SOUTH AUSTRALIA) (Postmaster-General) . - The Government must regard the proposal of Senator Foll as being just as much a violation of the Ottawa agreement as was the rejection by the House of Representatives of the original proposal. From a logical viewpoint, it is obviously impossible for the Government to accept the suggestion of the honorable senator. I do not know how long the Queensland Lime and Cement Company mentioned by the Leader of the Opposition (Senator Collings) has been incorporated, but an analysis of its financial position as disclosed in Jobson's Investors' Digest shows that its operations have been fairly successful. That publication contains the following particulars concerning the company's financial position : -

Capital issued and paid up, first preference, £44,878; second preference, £182,183; and ordinary, £18,000. Assets consist of freehold laud, leases, &c, valued at £28,624; plant, machinery, buildings, railways, &c, £316,422; debtors and deposits on contracts, £29,179; Australian consolidated stock, £22,829; Queensland National Bank, £6,153; fixed deposits, £61,000; cash on hand, £75; and prepayments, £1,219. Depreciation reserve, £155,532 or 45 per cent, of the fixed assets.

It will be seen that the company is in a very strong position.

Senator Foll - It proposes to use some of its capital in erecting a new plant.

Senator A J McLACHLAN (SOUTH AUSTRALIA) - Obviously, it should do so, but in the interests of consumers and the community generally, it should supply its product at more reasonable rates. Moreover, the company has been operating on an uneconomic basis in that it has been transporting limestone over an unnecessarily long distance. The profitable nature of cement production in Queensland is shown by the net profits earned on paid capital, namely: 1930, 12.3 per cent.; 1931, 7.7 per cent. ; 1932, 6.5 per cent. ; 1933, 6.4 per cent. ; 1934,8.6 per cent. ; 1935, 10.5 per cent.

During the depths of the depression, while other industries were struggling to avoid big losses, the Queensland Cement and Lime Company was able to earn a net profit which did not fall below 6.4 per cent, on the paid capital. That public opinion in Queensland is agreed on the excessive nature of cement prices is apparent from an article in the Brisbane Courier-Mail of the 1st April, 1936, which reported the findings and recommendations of a special committee of the Brisbane City Council. Sections of the committee's report as it appeared in that newspaper, read -

The opinion that the delivered prices paid by the council for cement are too high has been expressed in a report by the chief city engineer (Mr. Gilchrist), the acting tramways manager (Mr. Quinn), the manager of the water supply and sewerage department (Mr. Nelson), and the superintendent of stores (Mr. Roe). Heavy transport costs and the excessive price at the works are given as the reason for the high costs. The delivered price at the works is £4 10s., plus railage and cartage, making a total of £4 19s. 6d. to £5 a ton at the point of consumption. Byan arrangement between the railways and the cement company delivery cannot (except in exceptional cases) be obtained at the works. This practice involved considerably high transport charges, due to double handling, increased mileage of transport, and overhead costs, and a duplicationof transport charges.

The opinion is expressed that apart from the transport question the price charged at the works is too high, taking into consideration the magnitude of the council's activities and the reliability of the council as one of the company's most consistent customers. The landed cost of imported cement in Brisbane, the report states, is £3 16s. 8d. duty free, compared with a local price of £411s. 9d., and it is obvious that if the Commonwealth Government restored the duty of £1 per ton the prospect of a reduction in price in Brisbane would be remote.

It would appear that the council's loyalty to the principle of supporting local industries is being exploited, especially as it is understood that certain government works providing more or less temporary demand have secured better prices than the City Council, which will require very large quantities for itssewerage, tramways, and works operations for many years.

The committee expresses the opinion that there is room for reductions of price in transport costs, as well as the cost of the cement at Darra, and it recommends -

(   1 ) That urgent representations be made to the Minister for Trade and Customs supporting the recommendations of the Tariff Board that the existing tariff provisions remain.

(2)   That tenders be invited for either one or two years' supply of cement (approximately 10,000 tons annually) for delivery at (I) Darra; (2) on rail Roma-street: (3) on wharf Brisbane; and that suppliers and carriers be invited to tender for delivery from any one of these three points on a route mileage basis of a half-mile scale.

Senator Sir George Pearce - Is that a Labour council?


Senator Collings - The Minister is misleading the committee.

Senator A J McLACHLAN (SOUTH AUSTRALIA) - That remark is offensive, and I ask that it he withdrawn.

Senator Collings - In deference to orderly procedure I withdraw it; I shall comment on the Minister's statement later

Senator A J McLACHLAN (SOUTH AUSTRALIA) - I object to the Leader of the Opposition withdrawing the remark in deference to orderly procedure. The statement is offensive, and should be withdrawn without any qualifications.

Senator Collings - I withdraw it.

Senator A.J. McLACHLAN.Naturally, the council, which is governed by the Labour Caucus, hastened to state that the recommendations of thecommittee did not accord with the views of the majority of the aldermen, but the following remarks of the Lord Mayor, reported in the Courier-Mail of the 2nd April, are of interest: -

The Lord Mayor agreed that the council was paying too high a price for cement, but said that no action on the lines suggested by the departmental representatives would receive the endorsement of himself or the Labour aldermen. Tenders, probably, wouldbe invited for the supply of cement for a period.

The newspaper report goes on to say -

Aldermen are agreed that the council should obtain some reduction in the price of cement, and also a big cut in transport costs, and it is likely that both these aspects will be reviewed shortly. The council feels that it has the remedy in its own hands when it receives tenders for fresh supplies.

There is definite evidence that' competition from other companies is being stifled in Brisbane, possibly with the connivance of southern manufacturers. One large merchant in Brisbane has attempted to obtain cement at the lower prices available to members of the Cement Association at that centre. He has been quoted a delivery price of £5 7s. per ton for Queensland cement. His attempts to obtain at lower prices cement made in the other States have been unsuccessful, the distributors for southern manufacturers quoting the same price as for the Queensland product.

Just recently the same merchant telegraphed an order to a southern manufacturer for the supply of 50 tons of cement, but he was advised that that maker was not supplying the Queensland market. This savours of monopoly under the cover of protection.

Senator Sampson - How is it that Tasmania can send 150 tons weekly to Queensland?

Senator A J McLACHLAN (SOUTH AUSTRALIA) - That is the quota allotted to that State; additional shipments are not admitted.

The Queensland company's price to merchants must be regarded as highly profitable, if the price quoted for the supply of cement for a large government undertaking in Brisbane can be accepted as a guide. In this instance, a works price of £4 4s. per ton has been quoted, equivalent to about £4 10s. f.o.r. Brisbane, as against £5 7s. per ton to the merchant to whom I have referred.

We have been told that the board's estimate of a maximum cost of 7s. 6d. a ton of cement is too low, having regard to the fact the Queensland company incurs a freight cost on limestone of 19s. a ton of cement. In this connexion the Tariff Board stated -

The board took note of the company's intention to work a coral deposit at Moreton Bay when estimating the Queensland cost of limestone and clay at 7s.6d. per ton. The board cannot subscribe to the view that cement is being economically and efficiently produced in Queensland under conditions that involve a freight rate of 19s. per ton on one of the raw, materials. Much less can it subscribe to the view that because one company's costs are so far out of step with the others, it should recommend a duty which would protect such costs. The adoption of such a duty would give all manufacturers the opportunity of keeping prices at the level of importing costs, and on an estimated consumption of 500,000 tons per annum in Australia, the margin for exploitation would be considerable, and the board must recognizethat it has not been the policy of the cement manufacturers to pass on to the public the advantage obtained from a secure market.

The board then dealt with competition in northern Queensland. I think that I have said sufficient to convince honorable senators that the free admission of British cement will not interfere with the operations of the Queensland company, which has a depreciation reserve of £155,000, and had in October last a credit on its profit and loss account of £51,000, bank deposits . amounting to £61,000, and Commonwealth inscribed stock valued at £22,000.

Senator Foll - Will the Minister now analyse the financial position of that company's English competitors?

Senator A J McLACHLAN (SOUTH AUSTRALIA) - The English companies are doing remarkably well; they have big outputs and big reserves, and pay big dividends, yet they are still able to sell cement at an astonishingly low price.

The TEMPORARY CHAIRMAN (Senator Badman - The honorable senator has exhausted his time.

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