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Wednesday, 28 April 1965

Senator KENNELLY (Victoria)

In the few minutes available to me last evening, I had time only to answer the points made by Senator Cormack. It is my intention, now, to commence the speech I would have made last evening, had the opportunity been granted to me. In my opinion this debate is not only historic but is also very important. It marks the first time that the Government has faced up to the fact that overseas investment in Australia carries with it very grave dangers. The Government is not yet facing up to all the dangers and its present attitude has been forced upon it because it now finds that the source of money being invested in this country from overseas is likely to dry up.

I wish now to summarise what has been happening in the field of overseas investment in Australia in the last few years. Almost from the time that the present Government took office Australia has incurred serious trade deficits which at times have assumed monumental proportions. In fact, the total figure is £1,803 million. The figuresI wish to cite have been supplied by the Commonwealth Bureau of Census and Statistics. Over the last four years a deficit of £842 million has been incurred. Obviously no country could continue indefinitely in this way. The Government has maintained international solvency only by heavy borrowings overseas and by encouraging overseas investment in Australia. Over that time overseas investors have invested capital of £1885 million in Australia. A further £900 million has been borrowed by this Government from overseas.

For many years the Australian Labour Party has pointed out the dangers of unrestricted investment from abroad. I think the matter has been discussed in this chamber on three or more occasions. Those who have spoken on behalf of the Government have always said that things would work out all right for Australia. If I may use a very old expression, now some of the chickens are coming home to roost. We of the Opposition have said that, with some reservations, we welcome investment from overseas. We want Australians to have the right to invest some of their money in industries that are established in this country with overseas capital.

We admit that overseas investors have brought new industries and technical knowhow to Australia and in so doing have helped us to overcome temporary difficulties in our balance of payments situation. But the Government has shut its eyes to the fact that some of the money that has come from overseas has been used to buy out existing industries. That has happened particularly in regard to the food processing industry in Victoria. Such investment has done very little to help our economy.

We have said that continual borrowing overseas and the continuing investment of overseas capital in Australia do not provide a long term solution of our balance of payments problem. I do not deny for one moment that the Government has not tried to help our exporters in a small way. The Government has established the Export Payments Insurance Corporation and has given exporters some tax reductions. But because a large percentage of our exports consist of primary products and prices, particularly for wool, fluctuate we find that for the last two quarters we were on the wrong side in regard to our balance of trade to the extent of £168 million. The position was worse to the extent of £179 million than for the same two quarters in 1963-64. The people in Britain or the

United States of America who have invested in Australia the sum of £1,885 million to which I referred earlier have not, in the main, the welfare of this country at heart; they have been activated by the profit motive. Otherwise, it is logical to suggest that they would have found other avenues in which to invest their money.

The Leader of the Opposition (Senator McKenna) has mentioned large sectors of our economy that are under foreign domination. He has told us that the pharmaceutical industry is owned by overseas interests to the extent of 97 per cent., the petroleum refining and distribution industry to the extent of 95 per cent., the motor vehicle manufacturing industry to the extent of 95 per cent., the oil exploration industry to the extent of 95 per cent., telecommunications to the extent of 83 per cent., and the bauxite and aluminium industry to the extent of 75 per cent. If one had the time, one could mention other industries that are owned to a lesser degree by foreign interests. Some may say that if foreign capital had not been brought into this country, some of those industries may not yet have been established. 1 do not believe that to be so. I hope to point out what Canada, which is much nearer to the great industrial nation of the United States than we are, has been prepared to do, as indicated in her last Budget. The time has come when we must do something on the same lines. I am pleased that we are friendly with the United States, but that does not mean that we should sink the whole of our individuality as a nation and should hand over our economic welfare to our friends overseas.

Another bad feature of the present situation is that most of the Australian industries to which I have been referring are at a disadvantage in exporting their products. They are restricted by an export franchise which does not permit them to compete with the parent companies in the United States, Great Britain or elsewhere, or with subsidiaries of the parent companies in other countries. That, of course, slows up the expansion of our exports to a certain degree.

The inflow of capital from overseas has slowed down. I pointed out last night that foreign owned companies are going on to the financial market and are attempting to raise the money that they require to enable them to carry on their businesses. As a result, we are losing in two ways. First, we are not getting the benefit of new capital coming into the country to relieve our balance of payments situation and, secondly, the profits that are being made are being sent back to the parent companies overseas. Therefore, I think we will find in the future that we are in a worse position than we are in today. I am happy that the Treasurer (Mr. Harold Holt) has gone to America, but I am not happy with what he is doing there. I do not like going cap in hand to anyone at all, and I do not think that this nation should do it.

Senator Prowse - Who went cap in hand?

Senator KENNELLY - I think that the Treasurer has. What else has he done? What negotiations is the Government entering into? Let us face the facts. The United States has made a certain decision. 1 do not think that we have the right to quarrel with it. It affects this nation because the present Government has been in office for too long. The Government has said: " As long as we can import capital, irrespective of who owns the industries in this country, it is all right ". I do not know whether the Government has ever realised that sooner or later the profits of these subsidiary companies that have been established in this country must be sent home. I mentioned these facts last night, but I shall repeat them. According to the Commonwealth Statistician, in the years 1962 to 1964 inclusive, we paid out £358.6 million by way of dividends to overseas people who had invested in this nation.

Senator Buttfield - It did not all go out of the country, did it?

Senator KENNELLY - It did. If my charming friend did not interject when she knows nothing about the matter, she might learn something. The facts are that that amount of money went out of this country.

Senator Cormack - Not as dividends, though.

Senator KENNELLY - According to the Commonwealth Statistician, it left the country in the form of dividends. In return we received new capital of £335.8 million. So for the three years from 1962 to 1964 there was a difference of £22.8 million between what we received and what we paid out. That was before President Johnson said to the American people: "We are in some trouble as far as the balance of payments is concerned. You had better stop sending money abroad." In the Senate about three years ago I referred to a speech that was delivered by the late President Kennedy at the Conference of the American Federation of Labour and Congress of Industrial Organisations held at Florida when he first mentioned taxing money which was going out of the United States to be invested in other countries. He said, in giving the reasons for instituting the tax: " We are exporting money and importing unemployment ".

PresidentJohnson has made a decision and we now find ourselves in serious trouble. Over the years only one Minister in the Government has taken a sufficient interest in the question of overseas investment in Australia to tell the people of the dangers. I think that he deserves great credit for it. I refer to the Minister for Trade and Industry (Mr. McEwen) who has told the people of this nation and particularly of the State I represent, the dangers involved. He used words to the effect that we are selling a bit of the farm each year.

Senator Benn - The Government is not aware of the dangers even now.

Senator KENNELLY - The only thing the Government has done is to send the Treasurer to America. I hope that he meets with some success, but the Government should not think for one moment that that will solve the problem. It will not do so. If the Government continues to balance the Budget or to correct the balance of payments by means of overseas investment in Australia, the time must come when difficulties arise. "It reminds me of the period in 1925, 1926 and 1927 when the policy of the Bruce-Page Government was: "Borrow, boom and bust". If the Government continues to adopt its present policy, it will come to the same end.

It is true that we are living well today, but we are not living within our means. We are living by the good graces of other people who sooner or later must demand their pound of flesh, as they are entitled.

Senator Mattner - Do you tell that to the Arbitration Court?

Senator KENNELLY - It is the old story. When the Government gets the country into trouble, the only people who are supposed to carry the burden are those whose wages and conditions are governed by the Arbitration Court. It is remarkable. Government supporters can think of nothing else. Let us have a look at the position. To be quite candid, the question of overseas investment in Australia is one of the most important matters that has ever come before the Senate. The letters that have been exchanged between the Prime Minister (Sir Robert Menzies) and the President of the United States have brought home to us who sit in the Parliament, and to people outside who take the trouble to consider these matters, the very serious economic troubles that confront this country today. An honorable senator said that I was hard when 1 used the words " cap in hand ". The letters were exchanged and I think 1 said when I commenced to speak that that was an historic fact. It is the first time that the Government has faced up to the fact that foreign investment carries with it very grave dangers. Perhaps I am giving the Government too much credit because if President Johnson had not said to. his people: "You had better, cut down on sending money abroad ", it would have continued on its happy way. What has the Government done? Has it asked the best economic brains in this country to look at the position? No, all that it has done is to tell the Treasurer to plead with the United States of America to let us carry on. To my mind, these are stupid and inane financial methods which, in the logical sequence of events, must sooner or later put this country into pawn. The Government has done nothing else.

Senator Henty - Was not the Vernon committee a top level committee?

Senator KENNELLY - What has the committee said? Has it said that we can go on as we are going? Has it thought of anything that will rectify this position? By this method of finance the Government has the people of the nation living up to a standard with which we are all pleased. We are delighted to think that 70 per cent, of the people either own or are buying homes, but we are all frightened of what can happen. Those of us who have sufficient years to know what happened in the early 1930's, when people lost homes, are frightened of the very large hire purchase debt of this country. As a matter of commonsense, this cannot go on. Any sane people ruling Britain must attempt to get Britain out of its trouble. However much we may be a member of the Commonwealth of Nations, the fact is that Britain will look after Britain, and who will blame her for that? Who will blame the United States for looking after the United States? It is true that we are friends, but it is a good friend that looks after himself first, particularly when he is compelled to do so. We know the reasons why the United States is in this position. She is in the position because she has helped practically every country, particularly those that were devastated during the last war. What is this great idea of sending Mr. Holt to the United States? Admittedly, something had to be done. But for what has he gone there? Has he gone to see the President and the other leaders of the United States, to say, with some respect for this nation: " Give us six or twelve months to see if we can place ourselves in a position where we can help ourselves?" Or has he gone, as he has gone in my opinion, just grovelling and crawling in the name of this nation-

Senator Henty - Oh!

Senator KENNELLY - What else is it?

Senator Hannan - Bilge water.

Senator KENNELLY - The honorable senator should rise and answer me; the people answered him. What has the Treasurer done? What does the Government expect him to do? I do not want to read again the letter which appears in " Hansard ". The Government has asked him to try to get from the United States special conditions for this nation.

Senator Henty - Which the U.S. has given to others.

Senator KENNELLY - She has given them to others for other reasons, other economic reasons. I believe that we are not facing up to our responsibilities. I have been over-critical but I think we have thrown away all national pride in this matter.

Senator HENTY (TASMANIA) - I think the honorable senator is getting rid of a little exuberance which he was not allowed to get rid of in Hobart.

Senator KENNELLY - That is not so at all. We shall deal with that later. This is not an answer to the economic position in which we find ourselves today. The Government is, like an ostrich, putting its head in the sand and saying that everything is all right. Will Mr. Holt say in the United States that we shall have a look at import control of non-essential commodities, either by tariff or by licensing? I heard what Senator Benn said recently on a tariff measure about the exotic foods that are coming to this country.

Senator Cormack - They are not exotic to migrants.

Senator KENNELLY - The nation cannot afford this. I would give them the world if I could afford it. I believe in the old, old story that if one earns £1 and spends 19s. 9d. he has no worry, but if he earns £1 and spends £1 Os. 3d. it will catch up with him some time. But the Government has not spent only £1 Os. 3d.; it has earned £.1 and spent nearly £2. The Government followed the United Kingdom and Canada in relation to insurance on exports and housing. According to an article in the "Financial Review" by a special writer in Toronto, the Canadian Budget, presented by the Finance Minister, Mr. Walter Gordon, included the creation of the 1,000 million dollar Canada Development Corporation, which will share in the financing of new large scale industrial development. The article goes on to state that the Government will take up 10 per cent, of the corporation's shares and underwrite the balance. Have we thought of doing something like that? Is that too real? At least, it would keep the money in our own country.

I am certain that if the Government went out and appealed to the people, putting the whole facts before them, using the famous statement about selling a bit of the farm each year - as is the case - the people, in the financial crisis that we face, would give the Government money, as they gave money when we were in war trouble. I believe we are in trouble and I hope we can get out of it. Has the Government thought of using even its taxation powers to say to these foreign owned companies: " Unless you are prepared to allow a certain amount of your scrip to be placed on the stock markets of this nation you will be taxed at the rate of

X per cent."? 1 have no desire to hurt friends but this is a matter in which Australia must come first.

Senator Cormack - That is, after these companies have become successful.

Senator KENNELLY - I know the honorable senator's views. I have a great personal friendship for him but I listened to him last night and I regret his remarks. Has the Government ever thought of saying to those who come to Australia to buy the Rosella and other food preserving plants: " No, our capital is invested in those companies and the dividends they earn will be spread among our own people and spent in this country"? Or does the Government become nervous when confronted by Heinz Bros, and others? I have no particular reason for hurting Heinz Bros, and I have mentioned that company simply because it came to my mind.

We have a credit of about £700 million or £800 million in London. If the trend which the United States has set continues, how long will those reserves stand to us? Let us face the facts. Let us not put our heads in the sand and allow our people to suffer in two or three years time. We were not accustomed to as much in the late 1920's as we are today. The people have become accustomed to a high standard of living now. They like it. I ask the Government not to court trouble.

I thank you, Mr. Acting Deputy President, for the time that has been allowed me to participate in this debate because I think this is a tremendously vital matter. I hope I am not over pessimistic. I see danger in the future even if the Treasurer is as successful as he wants to be. I fear that we will only be selling more of that famous piece of land each day and sometime, somewhere, either the Government or the Opposition, or whoever follows us here, will have to find a way out.

Sitting suspended from 5.44 to 8 p.m.

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