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Wednesday, 28 April 1965

Senator LILLICO (Tasmania) . - At the outset, I want to say that I do not agree with what appeared to be criticism of the Government and the Treasurer (Mr. Harold Holt) by the Deputy Leader of the Opposition (Senator Kennelly). He was critical of the fact that the Treasurer had gone to Washington at all to discuss the balance of payments problem with the Ad ministration of the United States of America. Representatives of Australia have gone overseas to discuss maters of far less importance just as representatives of other countries have come to Australia to discuss matters of concern between Australia and the countries they represent. I think that Senator Kennelly used the word " beggar " in speaking of the Treasurer's visit to Washington and said that he was going cap in hand; but my deduction from newspaper reports today was that such was not the case. The Treasurer would have been most remiss if he had not gone to Washington in the present circumstances.

We have listened to criticism of the Australian economy by the Opposition ever since this Government has been in office. I concede the right of the Opposition to criticise, but criticism could be levelled at the economy of any country in the world. Not one of them is perfect. If or when we reach a stage where countries have all things ordered just as they should be in. accordance with an infallible plan, we will have reached the millenium. There is always room for criticism of a country's economy but it is reasonable to expect from the critic some logical alternative to rectify the problem. In reply to an interjection, the Leader of the Opposition (Senator McKenna) said the remedy for the position we find ourselves in today regarding overseas investment was to increase exports, It is one thing to say that and quite another to lay down a reasonable, practical formula. How do you embark on a campaign to increase exports? This is a most difficult project. The Government has been encouraging export production and has done a good job in that respect. It has offered inducements to farmers and others to export produce. But the plain fact is that there are very limited markets where the buyers can afford to pay the prices necessary to cover our high costs of production.

Senator O'Byrne - It was the Government which the honorable senator supports that took the lid off prices and allowed them to go haywire.

Senator LILLICO - That is another matter. To enlarge the export markets that will take our exports at prices to cover our cost of production is a tremendous problem. I haVe yet to hear of some infallible or reasonably practical formula to achieve that objective. The Opposition has advocated a Commonwealth shipping line to take our goods overseas. The cost, of course, would be fantastic and would impose a burden on our export production greater than the load we are carrying now. The Opposition has suggested that the solution is to subsidise freight on export production. This also would place a burden on the country. There has been a lot of criticism of the Australian economy but no practical proposition to rectify the difficulties.

Since the Second World War a lot of capital has flowed into Australia. That also has been criticised by the Opposition; but it is certain that the flow of immigrants could not have been sustained without it. We would have had to adjust our plans to a much smaller workforce and the working population would not have benefited as it has done from a marked increase in real wages. According to the Commonwealth Statistician such an increase has been achieved in spite of inflation. In other words we would have had to cut our coat according to our cloth and that would have been considerably less but for the inflow of capital from overseas.

Senator Cormackmade a good point when he said earlier in the debate that we had to have capital after the Second World War. There is a schism in the world today as he said. A nation can acquire capital if it orders the population to work under the hardest conditions for the lowest remuneration. That practice was adopted by the Soviet Union, Red China and other Communist countries, but such a policy necessarily imposes much suffering and hardship on the people concerned.

We have heard it said in this debate and many times previously that there is a nigger in the woodpile of foreign capita] inflow and that we are selling the country piece by piece to foreign interests. On the contrary, 1 believe that Australia has had a tremendous uplift from this inflow of capital. The great progress that has been made by Australia over the past few years would not have been possible without it. I was impressed by the statement of the Treasurer when, in speaking about the payments that go out of the country to satisfy foreign investors, he said - . . considered as a proportion of our export income and of our gross national product, the income which is payable overseas from the invest ment that has come here is, if anything, a slightly lower proportion of our gross national product - and, at that, it is about 2 per cent, only - and a slightly smaller proportion of our export income than it was in 1947-48. . .

Senator Hannaford - Who said this?

Senator LILLICO - The Treasurer. He said -

.   it is about 2 per cent. only. . .

That is, of our gross national product. I concede that that is not a fantastic rate to pay for the very great benefits which have come to this country as a result of it. We hear much about these companies which, it is claimed, are owned almost entirely by overseas interests. Let me say that the overseas companies in production in this country certainly exclude the importation of the article that they are producing. We must have a very substantial credit in that respect. Obviously, if they are producing a certain article in Australia, particularly if it >was not produced here before, this obviates the necessity for importing that article. General Motors-Holden's Pty. Ltd., a company which in the main is owned by overseas interests, is a company against which a lot of criticism has been levelled, if I may say so, by the Opposition. The Treasurer said this about that company -

But Hi million Australian people have a share in the profitability of General MotorsHolden's because we collect 42 i per cent, of that company's profits in tax-

That is approaching half - and when it sends some of the balance overseas we get another chop at that under the withholding tax arrangement.

The Treasurer went on to say further that this same company was responsible for export earnings at the rate of £9 million a year. One of the markets for Holden cars is New Zealand. I have been to New Zealand and I think the position that I observed in that country still pertains. There is a long waiting list if you want to purchase a new car. Two or three years ago' I think the waiting period was up to 12 months. There is still a waiting list for cars and for other things simply because they do not manufacture those articles in their own country- Here, in Australia, we do so.

It has been said during this debate that fresh skills, new techniques and advancement of every kind has flowed into this country as a result of the overseas investment. But, Mr. President, in my own opinion and in the opinion of many others, Australia is in a peculiar and dangerous position. We are close to about half the world's population. It has been estimated that a third of that population, or approaching half, is undernourished. It well may be - and all the portents seem to indicate this - that we are to be the culmination of the Communist drive down through South East Asia. We are in a position where we simply cannot afford to be choosy. Australia has to have this development and advancement. The best investment we can make for our own security is to have as much capital, our own and from overseas, as we can possibly obtain and in that way develop our latent resources and be in a position to support a much greater population. Only in that fashion can we approach a position of safety at all.

I took note of what Senator Kennelly said when he spoke about these firms coming to Australia and purchasing industries that were already in operation. I would not doubt for a moment that that has been done in some cases. But surely, when those industries are purchased the money is not simply lost to the economy for ever. That money becomes available for fresh investment and for fresh industrial expansion. I cannot see the point in reiterating that these people come to Australia at times and purchase an industry which is already operating. I feel that we have a lot to lose so far as overseas investment is concerned. A lot has been said about it and it reminds me of the saying about looking a gift horse in the mouth. I repeat that our position is such that we cannot afford to choose in this manner and that a tremendous benefit has been conferred upon us by these industries coming to Australia.

Mr. President,I noted the letter that was sent by the Prime Minister (Sir Robert Menzies) to the President of the United States of America and the reply from the President. I think Senator Mc'Kenna referred to it. I think the President said that in his opinion no serious damage would be done to the Australian economy. Of course those words indicated that some damage could be done to our economy by reason of this curtailment of American investment. I also noted newspaper reports today that the President of the Chase Manhattan Bank said that Australia probably would not be excluded from such measures as are taken by the United States. It well may be that these measures will have some effect on Australia's economy. It is to be hoped, as the President of the Bank said, that the strictures might not be too long in duration. I concede the right of the United States, the United Kingdom or any other country to take such measures as it thinks fit to keep its own economy stable. One' must take into consideration the relationship which exists between Australia and the United States. I think the figures in the Prime Minister's letter to the President of the United States were quoted by Senator Branson when the honorable senator said, I think, that it was only in the past year that our imports from the United States had risen by 43 per cent, and that our exports to the United States had dropped by about 50 per cent. It seems to me that our trading relations with the United States are gradually getting worse. A similar position exists in regard to the United Kingdom. It is to be noted that the Minister concerned with industrial development in the United Kingdom has written to, I think, 300 companies overseas asking them to curtail operations and to bring home as much capital as possible. I agree that both these countries have the right to take such action as they think fit to stabilise their economies. After all. that is their first concern and their first consideration. Our adverse trade balance with the United States of America has been getting worse and now, as the Treasurer (Mr. Harold Holt) has said, the United States has placed an embargo on our goods almost as though we were a hostile power. We had an earlier experience of this only last year in regard to our exports of beef. I can understand the feelings of the American producer who wants to keep his own local market to himself and have produce from other countries excluded. But the fact remains that our trade position with America is becoming worse and worse. The volume of our imports from the United States - and probably from the United Kingdom - is rising steadily. At the time when Britain first proposed to join the Common Market we were purchasing more from the United Kingdom than was any other country on earth. I believe that situation still exists. In view of those things one cannot escape the thought that wherever possible - I do not know whether it is practicable or not, but some people claim that it is - we should turn for our imports to countries with which we have a favorable trade balance. 1 have in mind, for instance, Japan, because our trade balance with that country is the reverse of what it is with the United Kingdom and the United States. We have a trade balance with Japan of about two to one in our favour, and it is claimed that Japan could supply a lot of the goods 'that we at present import from the United States and the United Kingdom.

Japan has not gone nearly as far as the United States in prohibiting imports from Australia. J think I am correct in saying that Japan has been our best postwar customer for wool. Is it not reasonable for us to try to foster trade with those countries that buy our produce rather than to continue in our present trade relationships which, according to all indications, will become worse and worse? The United States, with its 193 million people, takes only a paltry nine tons of our butter annually. Its importations of our sugar are similarly low in spite of the fact that there was, and I suppose there still is, an embargo on the importation of sugar into the United States from Cuba. So, I cannot escape the thought that there is a strong case for turning elsewhere for at least some of those things that we now import from countries with which we have such an adverse balance of trade. I concede that the United States of America has done a wonderful job in postwar reconstruction in many parts of the world. It seems to be rather ironical but, as Senator Cormack said last night, France, West Germany and Japan - vanquished countries of the last war - 'have certainly won the peace as far as prosperity is concerned, while those countries which are supposed to have won the war, with the exception of the United States, are in economic trouble. I hope that the present position will be shortlived and the indications are that it will be shortlived. But I believe that the time will come when a re-assessment of our trading position will be necessary. I do not speak as an economist. Sometimes I am glad to think I am not an economist. My proposition may be impracticable, but it seems to me that the time will come when a re-assessment of our trading relationships will have to take place and we will have to purchase more from the countries that seem eager to purchase more from us. 1 believe that the criticism that has been levelled at the flow of overseas capital into Australia has not done us much good. Certainly a lot of that criticism is not justified. The benefits derived from this capital inflow have far outweighed the disadvantages, and I believe that the continued expansion of our economy requires that the capital inflow should continue. If it does not continue, then like a man who finds his income depleted, we will have to measure up to the position and adjust ourselves to it. We will watch with a lot of interest the experiment which is proposed to be embarked on by Canada. It may be a way out - I do not know - but Canada is in a position very different from that of Australia. It is not so placed that it has to provide for 100,000- odd immigrants per year, with all the amenities they require and the money they need to have spent on them. However that may be, I hope that the mission upon which the Treasurer has embarked will be successful and that we will secure every £1 of capital possible, whether it comes from within Australia or overseas. Nothing is more certain than that unless we do secure the capital we need, wherever it comes from, and go on and develop our potential, that development will be done for us by others in a way and under a system that we will not like very much.

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