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Thursday, 20 November 1986
Page: 2634

Senator SIDDONS(5.14) —As Senator Chaney pointed out, we are debating the Bounty and Subsidy Legislation Amendment Bill (No. 2) and four cognate Bills. The only thing that these five unrelated Bills have in common is that they relate to money or to handouts by government to industry. So it is a very tall order for me, as one who is putting the Australian Democrats' position in this debate, to cover these five Bills in half an hour. I will do the best I can but I hope the Senate will be tolerant if I need to go just over my allotted time.

Again, as Senator Chaney pointed out, these Bills touch only the edges of industry problems. It is a great pity, since we are debating Bills which relate to one very important part of industry, that we could not at the same time debate some of the more fundamental issues relating to the problems of getting our industries efficient and export orientated. There is a crisis in the balance of payments and unless this crisis is addressed promptly this country is set to go down the gurgler.

I would like to outline the Democrats' attitude to all the Bills, briefly touch on our amendments to some of them, and then deal in some detail with the Bills we consider to be important. First, we oppose the 20 per cent reduction in bounties and subsidies that is proposed in the Bounty and Subsidy Legislation Amendment Bill (No. 2) 1986. We will be moving amendments which seek to restore the bounties to their original levels. As I think Senator Chaney pointed out, to reduce bounties at this stage to meet a Government deficit is nothing other than hypocritical on the part of the Government. It is ad hockery at its worst. Industry cannot possibly operate in an atmosphere of uncertainty, which is what the 20 per cent reduction in bounty places over the whole industry concerned and, I might add, over every industry in this country. When the Government gives a bounty one day and cuts it off the next, who knows whether there can be any reliance on the long term direction this Government is applying to industry problems?

Secondly, we believe that government hand- outs to industry should be conditional. As honourable senators know, I have long advocated the need for employee participation in industry. In fact, the Industrial Democracy Bill which has been introduced into the Senate seeks, amongst other things, to encourage employee share ownership, which is an important aspect of employee participation. Debate on that Bill has been delayed because of the Government's budgetary problems, the shortage of money, and so on. Here we have a golden opportunity to make a handout, which the Government is intending to make anyway, conditional on a company moving to have 8 per cent of its capital sold to its employees. If this were done the Government's handout to industry would benefit not just a small group of shareholders of a company but a much wider sector of the Australian population. I will talk at greater length about this essential initiative when I comment on the Bounty and Subsidy Legislation Amendment Bill (No. 2).

Thirdly, we believe that the Government also has an opportunity to make payment of the subsidy conditional a 25 per cent local content requirement. It is a fact that many of the agricultural implement manufacturers and their work force spend a lot of their time and effort in assembling equipment from overseas. If there were a requirement that 25 per cent local content should apply, an effort would be made to source locally many of the components of essentially overseas designed and manufactured agricultural machinery.

Fourthly, we are very concerned, as is the Opposition, about the dictatorial power the Minister has over where subsidies or bounties should be directed within an industry. The Minister's decisions could represent life or death as far as many industries are concerned. We believe that it is absolutely beyond dispute that the Minister's rulings should be subject to an appropriate appeal procedure to the Administrative Appeals Tribunal. We have an amendment that will put that principle into effect in respect of at least two of the Bills.

Fifthly, in the Subsidy (Cultivation Machines and Equipment) Bill 1986 the Government proposes to replace the tariff with a bounty. We believe that it has made an arithmetical mistake, and this was alluded to by Senator Chaney. Accordingly, we will be moving that the bounty be increased from 10 to 11 per cent.

I support the Fertilisers Subsidy Bill 1986 and will shortly be giving my reasons for that support in some detail. However, I first have to say that my support for this Fertilisers Subsidy Bill is not representative of all of the Australian Democrats. Unfortunately, some of my colleagues do not agree with my position, and Senator Janet Powell will be putting the position of those of my colleagues who are proposing to vote against this Bill.

I will now turn to the Fertilisers Subsidy Bill 1986 and outline in some considerable detail my reasons for supporting it. This Bill terminates a subsidy on imports. This is a typical peculiarly Australian initiative. It is as typically Australian as are the boomerang and the kangaroo. To the best of my knowledge no other country has moved to have a subsidy on imports. It is an encouragement to import against the local manufacturing industry.

Senator Short —It is not a subsidy on imports.

Senator SIDDONS —I do not know what else we can call it. It is a straight subsidy on imports and it is a straight incentive to importers to import a product against a locally manufactured product, and it can be interpreted in no other way by any country that wants to export fertilisers to this country.

Australia, as we know, has a critical balance of payments problem. We have a critical shortage of hard earned foreign exchange. We are spending money that we have not got. We are borrowing money overseas when, at the same time, we cannot meet the interest on money that we have already borrowed. What are we doing about this? We are persisting with a subsidy to import fertilisers that can be readily made in Australia. The whole thing is beyond my comprehension and it makes no sense whatsoever, as far as I can see. Surely the goal, the objective, before Australia is to get its industries working efficiently. They are not going to reach their maximum efficiency if they are being attacked by subsidised imports. They cannot possibly become efficient if that is to continue.

The country is on the brink of bankruptcy and the Government is going to persist with a subsidy on an import which is unique in the world. We are bankrupt but we are going to persist with a subsidy on imports. It is beyond my comprehension why anybody would support such a measure. Certainly anybody who looks at the critical position Australia is in would not think twice about supporting such a measure. Thirty per cent of the revenue gained from our exports currently goes to paying the interest bill on money that has already been borrowed.

In the Australian Democrats' alternative Budget we went to great lengths to point out how this problem of our balance of payments has to be attacked directly, and we pointed out that there should be a tax to discourage imports. A 6.5 per cent tax on luxury imports would have slowed down our import bill dramatically and at the same time raised government revenue. The critical importance of doing something about our balance of payments is the first point that I make on this Bill. This apparently has escaped the notice of the National Farmers Federation, which is fighting a rear-guard action to retain the $13m subsidy on this imported fertiliser. It is necessary for me to answer some of the points that the National Farmers Federation and, I am afraid, some of my colleagues will be raising on this issue.

Before the Government drafted this piece of legislation it negotiated with the local fertiliser industry to re-direct the $13m subsidy on the import of fertiliser directly to the farmers through reduced prices for the locally produced fertilisers. That seems to me to be a much more sensible way to go about it. Instead of encouraging and helping overseas manufacturers with a subsidy of $13m, let us direct that $13m to help the farmers. The original rationale of the Government was that it wanted to help the farmers, and it can do that by directing the $13m directly to them. In fact the Government has done that, because it negotiated with the industry to reduce the price of single superphosphate by $1.30 a tonne, TSP and DAP fertiliser by $10 a tonne and MAP fertiliser by $11 a tonne. It seems to me that the farmers are not in a position to complain about this legislation because they are directly receiving the benefit of that subsidy.

The first and fundamental point I have to make is that Australia can no longer afford to import products that it can make locally. We have to start earning more as a nation and spending less. But it is always the case that when people are making large amounts of money out of importing products, they always go around trying to denigrate the local manufacturer. It is always good tactics to do this. Accusations are made that the local industry is inefficient and monopolistic. I think it is necessary for me to answer some of the propaganda about the industry that has been spread around by the National Farmers Federation and others and to bring a few fundamental points to the attention of the Senate. Firstly, the industry is not monopolistic. There is one manufacturer in each State and 60 per cent of the industry is owned by the farmers themselves. The industry is essentially a co-operative. In Western Australia 100 per cent of the industry is owned by the farmers. Under no circumstances can it be regarded as monopolistic. It has been rationalised to a very large degree but it is certainly not monopolistic and there is plenty of competition. Even without the subsidy on imports companies would continue to import and if the industry wanted to be competitive it would still have to compete with the imports.

From 1970 to, I think, 1981 the Australian fertiliser manufacturing industry saved the Australian farmer $2.5 billion, on a straight comparison of the cost of locally produced fertiliser and the cost of importing a similar amount. The industry is efficient; there is no doubt about that. In a task force report in March 1981 the National Farmers Federation stated just that. So it cannot now turn around and say that the fertiliser industry in this country is inefficient. As Senator Chaney pointed out, the industry has virtually no protection at all. It must be one of the most unprotected industries in this country but it has not been bleating for protection. It has certain problems, such as the carriage of its products around Australia by the Australian national shipping line, which of course helps the shipping line but which puts an additional cost burden on the products.

Another criticism of the industry is that it does not have the capacity to supply high analysis phosphate fertiliser. An Industries Assistance Commission report-as we all know the IAC is not prone to handing out bouquets to industry-stated that the industry has:

. . . sufficient capacity to manufacture all the high analysis phosphate fertiliser used in Australia.

It has also been claimed that Australian farmers pay more for fertiliser than their counterparts in the United States of America. As I have said, the local industry has already been saved $2.5 billion, and that was established in a report relating to the situation between 1970 and 1984. But what is the current situation compared with that in the United States? A survey done only last month showed that prices for high analysis phosphate fertilisers in key areas of the United States, such as Missouri and Kansas, are comparable to current prices in Australia. Some are a little up and some are a little down but, on average, prices are about the same. So there is no cost disadvantage as far as fertiliser is concerned. Prices are comparable to the current prices in the United States.

It is a fact that there is a world shortage of phosphate rock. Eighty per cent of the world's reserves of phosphate rock are located in politically and commercially unreliable countries. Australia does have very large reserves of phosphate rock, so far undeveloped. We have large reserves at Mount Weld in Western Australia, at Duchess in Queensland and at Lady Annie in Queensland. The local industry has stated that it is prepared to develop these critical reserves of phosphate rock. We have just about run out of phosphate rock in our protectorate at Christmas Island. Our sources are somewhat tenuous at the moment.

The industry has undertaken to develop our very important reserves of phosphate rock, but it cannot be expected to do so if it is put under attack by the Government by subsidies on imports. For that reason alone I think it is vitally important to give the local industry a go and let it get on with the job of developing our own resources. As I said, there is only one possible explanation that any foreign country interested in exporting fertilisers to Australia could offer if we continue to subsidise those exports. It would say that the Australian Government wants to wipe the local industry off the face of the country. It could not draw any other conclusion. This matter has to be cleared up. We have to get rid of this peculiarly Australian idiosyncrasy of saying that we want to have a local industry but we will still subsidise the importer.

I turn in some detail to the Bounty and Subsidy Legislation Amendment Bill (No. 2) 1986. I believe this Bill reduces the subsidy on a range of industries by 20 per cent. By doing this the Government has shown itself to be opportunistic. Suddenly to cut a bounty by 20 per cent to meet budgetary requirements has very damaging long term repercussions right through the industry. Of course, it highlights the essential problem with bounties-they are open to manipulation by governments for short term political ends. This Government particularly has put the argument that where possible tariffs should be replaced by bounties. It has acted in this regard particularly with the agricultural industry. There is no doubt that there is a very strong rationale for a shift from tariffs to bounties. The Australian Democrats would support this as a general rule. The big rationale for bounties is that they keep prices at the levels of imports while tariffs, on the other hand, push prices up to the local level. However, the Government, by its actions here, has demonstrated that bounties are open to political manipulation. It has, by its very actions, created a whole atmosphere of uncertainty not only across the agricultural industry but also across all other industries. What industry needs above all else is stability. It needs stability for its markets and stability and predictability for its prices. It cannot make investment decisions unless that stability is there. The Government, by this ad hoc approach, has cast doubt on the whole rationale and credibility of its long term industry plan.

I cannot help seeing the similarity between this Government's initiative and the sudden initiative of the Whitlam Government in 1973, when overnight it reduced all tariffs by 25 per cent and at the same time revalued the Australian dollar. It took over 12 years for industry to recover from that ad hoc initiative. If this present Government is not careful its illogical and sudden attack on bounties will have the same disastrous effect on industry. Industries have made very important investment decisions. They have the daily problem of surviving in a highly competitive world. If the Government says suddenly to an industry `Your bounty will be cut by 20 per cent' it throws the whole cash flow of industry out the window. It is impossible for industries to plan under that sort of arrangement.

The first sentence in the Press release on the Budget by the Minister for Industry, Technology and Commerce, Senator Button, states:

This year's Federal Budget contains strong initiatives for the continued development and strengthening of Australian industry . . .

I cannot see how cutting bounties to meet a short term political crisis is anything like giving industry a strong incentive.

Senator Short —Or leadership.

Senator SIDDONS —Yes. Let us look at the bounties. Overall, they cost the Government $209.6m in 1985-86. That is not a large amount in budgetary terms. The cut in bounties will save a paltry $43m this financial year. For that it is putting at risk its credibility. If the Government loses the trust and confidence of industry in its policies it will not regain it. Industry must be our number one priority, as has been said many times by me and others in this place. If we are not careful we will kill the goose that is laying too few golden eggs at the moment.

The fundamental problem is that this Government is dominated by the radical free marketeers who say that we must have free trade. That is their god and everything else must be subservient to that. The fact of the matter is that free trade does not exist elsewhere in the world. Certainly it does not exist in Japan, where billions of dollars have been spent recently revamping its very inefficient coal industry. It does not exist in the United States or in the European Economic Community. Why does a country such as Australia have to fall down and worship at the free trade altar, presumably in an attempt to create an example for the rest of the world? It does not make sense. Mr Bruce Judge, Chairman of Ariadne, had this to say on protection recently:

Free trade idealists are selling Australia and New Zealand down the river. The smart boys over there are quite happy to bow down and say, `You are marvellous. Somebody has to take a lead on free trade, and then they come in and rape us'.

A sensible industry policy is not one which one changes every five minutes to conform with the whims of the currency speculators. Industry policy must be essentially a long term policy.

Let us look at what has happened as far as the Government's budgetary processes are concerned. Let us look at the events over the last few months. First, we had the comment of the Treasurer (Mr Keating) about Australia becoming a banana republic. The balance of payments crisis and our rising foreign debt caused the foreign exchange markets to panic. The dollar fell to US57c and suddenly our airwaves were choked with money market people demanding Budget cuts, demanding lower deficits, demanding that those that had the least in our society should carry the burden of our reduced trade position. The monster that Mr Keating created when he deregulated our financial markets had taken control of its maker. Panic set in at a Cabinet level. `We must get the deficit down' was the catchcry. Instead of a deficit of $4.5 billion or $5 billion, the Government cut it back to $3.5 billion, ensuring that a recession would follow. We are beginning to see signs of that recession today. Financial markets now totally dominate economic policy. Banks and financial institutions happily lent $5.5 billion to participants in the Broken Hill Proprietary Co. Ltd takeover. The $5.5 billion was fed into a stock market that was already over-heated. The all ordinaries index rose dramatically. This speculative drive was funded by borrowings, mainly from overseas, and did not create one new job or industry. Our productive capacity fell as that money was fed into the stock market.

In the last two days $3.5 billion has been taken off share prices alone. Almost all that money has been lost and will probably be lost forever. We do not have one additional factory, job or productive machine to show for the $5.5 billion that went into financial speculation over the BHP takeover alone. That is to say nothing of the Repco takeover or the Nicholas Kiwi Ltd takeover. I could go on indefinitely. Enormous amounts of money have been speculated in the stock market without creating one additional job.

Senator Short —How do you know that? It depends on where the proceeds go.

Senator SIDDONS —One has only to look at the rate of investment in industry to see that the money is not going into productive investment. It is money being invested to make money. That is the essential problem. We have to encourage investment directly into productive areas. It is being directed into the stock market to fund takeovers. Corporate cannibalism is what is happening. Takeovers do not add to the productive capacity of the country. I thought Senator Short would have understood that. It is very obvious. There is a great incentive for companies to expand by buying shares in other companies. They get a tax incentive to do so. There is a tax deduction on the interest on what is borrowed and the dividends from the shares in the company that is doing the raiding are tax-free.

Senator Gietzelt —The taxpayer is subsidising the takeover.

Senator SIDDONS —Indeed, the taxpayer is subsidising the takeover merchants. If, on the other hand, money is spent on a machine tool, the profits it generates are taxable at corporate tax rates. So, on the one hand, there is a tax-free incentive to expand by takeover but, on the other hand, if a firm expands by increasing its productive capacity it makes itself vulnerable to being attacked by other companies which are interested in expanding purely by takeovers. In the short time I have left I would like to elaborate a little on a couple of our amendments. We believe that it is essential to foster co-operation between workers and management in Australian industry and as a practical move in this direction we will move amendments ensuring that companies which receive bounty protection are required to develop share ownership schemes for their employees.

Senator Crichton-Browne —CSBP is owned by all the farmers in Western Australia now.

Senator SIDDONS —I am pleased to hear it, but it is not very common in Australian industry, I am afraid. The advantages of employee share ownership schemes are twofold. They give employees a stake in the company, thus helping to break down old antagonisms, and they give employees incentives to increase the profitability of the company. They give them a stake in what is going on and a slice of the action. The Australian Democrats believe that employee share ownership in Australian industry should be much more general. Here is a golden opportunity for the Government to put a requirement on bounties. It will not cost the Government an additional penny. (Extension of time granted)

I would like to see the Industrial Democracy Bill on employee participation, which has been introduced in the Senate, debated and implemented. Passage of the Bill would give a broad incentive to all industry to move towards employee participation in a wide area, not only in regard to employee share ownership but also in regard to profit sharing, cellular organisational structures, as opposed to hierarchies, and the small group activity that has been so successful in Japan. I have been told unofficially that money is short and that the time is not opportune. I have been given all kinds of reasons why we cannot debate my private member's Bill at this stage. I hope that it will be possible to do so in the new year. In the meantime, I put it to the Government and particularly to the Opposition that it would be no hardship for any of the industries receiving a bounty to issue shares that could be purchased by their employees over a five-year period. It would substantially increase the efficiency of those industries. The requirement would not put any hardship on the industries concerned. I plead with the Opposition and the Government to give serious consideration to the amendments.

I will leave it to my colleagues, particularly Senator David Vigor, to outline our reasons for suggesting that there is an arithmetical mistake in the bounty the Government proposes to replace the tariffs with in the agricultural implements industry. At the Committee stage I will talk at greater length on some of the reasons for our amendments. In the meantime, I hope that we can consider important aspects of these Bills, particularly of the Fertilisers Subsidy Bill and the aspects of the bounty Bills which are important to the agricultural manufacturing industry. I hope that we will use this opportunity to increase the efficiency and incidence of Australian manufacture in these industries.