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Wednesday, 21 September 1983
Page: 1064

Mr HICKS(12.17) —Mr Deputy Speaker, as you and most honourable members of this House would be aware, this year, 1983, is the year when the City of Broken Hill is celebrating its centenary. For a century the Australian nation has been the beneficiary of the wealth obtained by the work of the people of Broken Hill. These people have lived for the greater part of the century in what , to put it mildly, can be described only as inhospitable conditions. It is only in relatively recent times that Broken Hill has become a comfortable, modern and well-appointed city, and the residents of that city are concerned to ensure that Broken Hill progresses into its second century as a prosperous and progressive city that can provide work for its citizens.

It has been the concern of Broken Hill for many years that the quantity and the grade of ore remaining is reducing. Perhaps the first major shock in recent years came with the closure of the South Mine in 1972. In April 1979 the Broken Hill City Council approached the New South Wales Government expressing grave concern for the future welfare of the city and stressing the importance of joint government decision-making and action if the future of the city was to be assured. As a result of that representation, later that year the setting up of the Broken Hill Committee of Economic Review was announced. Its terms of reference included a study of Broken Hill, its economic structure, the labour force, its social fabric and, most importantly, an examination of the alternatives for the future. The report of that study, entitled 'The Broken Hill Economic Review', was released in May 1981.

It is not my intention to go into every detail of this informative document, but there are some recommendations of that report I wish to discuss in relation to the Federal Budget. Because of the diminution of known reserves of high grade ore for which Broken Hill has been famous for many years, the extraction of low grade ores at competitive cost has now become a necessity. In fact the future of Broken Hill hinges on the mining companies being able to extract those low grade ores at costs competitive with the rest of the world. This means that some fundamental decisions have to be made by mining companies, mining unions and governments if the mines are expected to be operating after the mid-1990s.

Many costs related to mining are escalating rapidly, but the costs which mitigate most against the mining companies today are the royalties paid to the New South Wales Government. Honourable members will be interested to know that the royalties imposed by the New South Wales Government on the Broken Hill mines are set at 4 per cent of the first $400,000 net profit, increasing by 2 per cent for each additional $400,000 until the rate reaches a ceiling of 50 per cent. Most other New South Wales mining royalties are imposed at a flat rate on the minerals won particularly at 4 per cent of the total value. This means when profits are low the Broken Hill mining companies are better off than they would be with a production royalty of 4 per cent. However, at higher profit levels they are much worse off. The only other similar royalty structure is imposed on Cobar Mines Pty Ltd. Its rates are 2 per cent for the first $200,000 profit, increasing by 1 per cent for each additional $200,000 to a ceiling of 8 per cent . The Cobar rates are therefore significantly lower than for the Broken Hill mines.

An indication of the value of the royalty payments is that for the 10 years to June 1979 the Broken Hill mining companies paid $131.5m in royalties and with the addition of company tax, payroll tax, municipal rates, water board deficiency and tax paid by employees the total became a massive $355m.

All mining companies in Broken Hill regard the present royalty scale as inequitable. Not only is the royalty rate excessive, but also with inflation eroding the real value of profits, the fixed scale of royalties means an increasing share of real income is taken by the New South Wales Treasury. The scale is also a disincentive to future mining investment in Broken Hill because of the low rate of return after tax on royalties. It is not surprising then to find that the Economic Review Committee recommended that an incentive be devised whereby royalty relief could be provided to mining companies extracting low grade ores. It was suggested that this should be on a sliding scale which related royalties to the lead grade of ore. It was also recommended that the Commonwealth Government be asked to match any royalty relief approved by the New South Wales Government, bearing in mind that any such relief would otherwise benefit the Commonwealth by way of company tax, which is 46c in the dollar.

In April 1982 the then Deputy Prime Minister and Minister for Trade and Resources, at my invitation visited Broken Hill and learnt first hand the problems facing the mining industry-an industry in which he was already well versed-by speaking to the leading commercial, industrial and civic organisations of Broken Hill. Subsequent to that visit Mr Anthony wrote to the Premier of New South Wales, Mr Neville Wran, pointing out the anomalies that existed in the payment of royalties by the mining companies to the New South Wales Treasury and asked that they be reviewed in order to help Broken Hill industry to plan for the future on an equitable and competitive basis.

In his reply to Mr Anthony, the New South Wales Premier contended that the economic future of Broken Hill had been a matter of continuous concern to his Government. Mr Wran wrote that he had instigated and participated in discussions with senior directors of the mining companies concerning royalty charges, energy supplies and other industrial issues. He went on to suggest that a joint consultative State-Federal committee be established in the near future to ensure that maximum results could be achieved. Mr Wran commented on Mr Anthony's valued and co-operative approach to his Government on the coal industry and he hoped a similar approach could be adopted in the case of Broken Hill.

In a Budget debate on 28 September 1982 the New South Wales Premier stated that the New South Wales Government would be prepared to change its royalty basis provided that the Commonwealth Government agreed to the additional benefits going completely to Broken Hill. On 27 October 1982 Mr Anthony wrote to the Premier, pointing out that there would be no-

Mr DEPUTY SPEAKER (Mr Millar) —Order! The honourable member will not refer to another member by his name, but by his electorate or the position he occupies, in this case, the Leader of the National Party of Australia.

Mr McVeigh —A good leader, too.

Mr HICKS —A great leader, indeed. I apologise-

Mr John Brown —Mr Deputy Speaker, I raise a point of order. I am loath to stop this pleasant interlude on the life of Broken Hill but we are dealing with a certain matter before the House. I think that the honourable member's remarks ever so tenuously should relate to that matter. At this stage they have not borne the slightest relationship to the Appropriation Bill.

Mr DEPUTY SPEAKER —There is no point of order.

Mr HICKS —I am trying to point out the importance of Broken Hill to the economy of Australia and its relevance to the Budget. On 27 October 1982 the Leader of the National Party of Australia wrote to the Premier, pointing out that there would not be any scope for the Commonwealth Government to change its laws on the rate of company tax so as specifically to benefit the companies operating at Broken Hill. The Leader of the National Party also listed a number of incentives the Federal Government had taken in the August Budget to assist the mining industry. He assured the New South Wales Premier that he had written to the Prime Minister, the Right Hon. J. M. Fraser, with the Premier's suggestion that a joint Commonwealth-State consultative committee be established. Unfortunately the then Prime Minister became ill. Christmas followed and it was not long after that the last Federal election occurred, which did not enable the former Prime Minister to reply to the request of the Leader of the National Party.

In his recent visit to Broken Hill, the New South Wales Premier told different groups that when he had approached the Leader of the National Party, the then Deputy Prime Minister, he had rejected his approaches and that of the Broken Hill City Council. As I previously explained, the Leader of the National Party said with regard to federal company tax that there would be no scope for alteration, but he did not rule out other forms of assistance. I believe that the present Prime Minister, Mr Hawke, has given his personal support to this attitude. I know that all Broken Hill people will be pleased to hear of his interest in the welfare of the city.

Various New South Wales governments over a number of years have given as their excuse for not changing the royalty system that the Federal Government would gain from the increased profits of the companies by obtaining increased company taxes, whereas the New South Wales Government would lose on its royalty receipts . I do not believe that this is as strong an argument as the New South Wales Government would try to have us believe, because other mining companies are paying lower royalties and still pay the same rate of company tax to the Federal Government as do the Broken Hill mining companies.

Having made that observation, I agree that the New South Wales Government, after having had Broken Hill as a milking cow for so long, would find the weaning process very difficult. It is therefore important that the Federal and State governments come together on this matter so that a balance can be struck that will enable the rate of royalties to be reduced, thus promoting the further development of the large low grade ore body. In turn, because of the increased revenue to the Federal Government through company tax I believe, as do the citizens of Broken Hill, that the Federal Government must play a role in providing funds to ensure Broken Hill's future, whether it be in promoting private industry or government enterprise within the city.

I can understand this Government's and the previous Government's problem in making any alteration to the universal company tax that applies throughout Australia. However, I am sure that where there is a will, there is a way of getting federal funds into Broken Hill. Broken Hill is used to going it alone and of being ruggedly individualistic and self-sufficient. However, the time has now come for assistance to be given to Broken Hill, not as a handout but as an investment in a city that has put Australia on the map as an industrial nation and that intends to continue its part in providing for the nation's welfare. It may be too late for substantial amounts to be made available for Broken Hill in the Budget. Certainly, however, they could be made available for planning so that by the time the next Budget is being formulated substantial amounts can be allocated for projects within Broken Hill.

Talking of Broken Hill leads me to the Army Reserve. Recently the 10th Battalion, Royal South Australian Regiment, whose complement includes a number of Broken Hill men and women, received the freedom of entry to the city of Broken Hill as part of the celebrations for Broken Hill's centenary. This is the first time in Broken Hill's history that any military unit has been given that significant honour. I mention this in order to impress upon members of this House the high esteem in which the Army Reserve is held in Broken Hill. I am sure that this is reflected in all areas of Australia from which the Reserve is drawn.

Presently sections 23S and 23SA of the Income Tax Assessment Act provide an exemption from income tax of the pay and allowances for certain part time members of the Reserve defence forces. The exemption is to be phased out in two steps. From 1 December 1983 one half of such pay and allowances will be exempted and from 1 December 1984 the exemption will be completely terminated. This is tragic not only for the Reserve forces but for the total Defence Force of Australia. I know that the Government has instigated an inquiry under Justice Coldham into many aspects of the defence forces. It has been intimated that the report should lead to an increase in salaries for members of the Reserve. Any rise in pay would need to be significant, or else the present tax free system of payment should remain.

Once again, I raise the matter of the recently imposed iniquitous $2.50 a litre indexed excise on grape spirit.

Mr McGauran —Disgraceful.

Mr HICKS —It is disgraceful. I know that most honourable members will be sick and tired of my labouring this point, but I make no apology for that.

Mr McGauran —Don't ever apologise for representing your people.

Mr HICKS —That is true. Before the introduction of the recent Budget I had assured wine grape growers in my electorate that there would not be a tax or excise on wine. Why did I do that? I did it because the Prime Minister was a man of his word and he had pledged before the Federal election that there would be no tax or excise on wine grapes.

Mr McGauran —They are wiser now.

Mr HICKS —They are certainly wiser now. However, I must confess I became worried when a number of other promises that were made to rural Australia, such as the promise not to reduce the tariff on orange juice and the promise to support the drought aid packages instigated by the former Government, were not kept.

Mr John Brown —He got the drought over. That was more important.

Mr HICKS —The Minister at the table says that the drought was over, but I can assure him that in parts of my electorate the drought was nowhere near over, and in parts it is still not over. Still, I believed that when a pledge was given with no conditions attached that pledge would be kept. It was not kept. After thousands of letters of protest and submissions from many members of this House and the other place, it is pleasing to see that the Government has realised that if the proposed excise goes ahead many wine grape growers will face bankruptcy. It now appears that the Treasurer (Mr Keating) is prepared to reconsider the Government's earlier thoughtless action in this matter. Others may have a different view, but in my opinion no tax or excise of any type should be placed on wine. That was promised before the last election.

Many things worry me about this Budget, particularly as they affect rural Australians, irrespective of whether they live on the land or in small non- metropolitan communities. Because of the lack of time I cannot speak of them today. However, I ask the Government to consider seriously the points I have made, particularly in relation to Broken Hill's future, the future of the Army Reserve, and the threat to the stability of the wine industry by the imposition of an excise on grape spirit.