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Tuesday, 6 December 1960

Mr CREAN (Melbourne Ports) (2:28 AM) . - Mr. Speaker, this bill provides for a loan of 30,000,000 dollars to be raised in the United States of America by the Australian Government on behalf of Qantas Empire Airways Limited. The proceeds of the loan are to be used to purchase three new Boeing 707-1 3 8B aircraft and to make certain structural modifications to the existing Qantas fleet of seven Boeing 707-138 machines. From the second-reading speech of the Treasurer (Mr. Harold Holt), we may infer that the total cost of this programme will be 39,000,000 dollars, of which Qantas is to provide 9,000,000 dollars from its own resources. Repayment is to take place over a period of seven years, commencing in March, 1962. The loan is to be provided mainly from the resources of the ExportImport Bank, which is an American government institution. That bank will provide 25,500,000 dollars and the remainder, 4,500,000 dollars, is to be provided by the Boeing organization. The rate of interest on the transaction is to be 5% per cent.

The Opposition does not intend to oppose the measure, but it wants to use this opportunity to criticize some of the Government's trade policies. The view taken by the Opposition is that this loan can be regarded as being a development loan. The transaction will virtually be financed from the earnings of Qantas Empire Airways Limited from its overseas services. That is in marked contrast to some of the other transactions that are absorbing dollars. We suggest that, if Australia had had better trade policies, it may have been possible to provide for this sum out of our ordinary earnings on dollar account. Instead of being able to do that, we have to pay interest at the rate of 5i per cent.

The last issue of the " Treasury Information Bulletin " indicates that there has been a considerable deterioration of Australia's trade position on all accounts, but in particular on the dollar account. I direct the attention of the House to the relevant figures for the period from January to August, 1 960, as compared with those for the period from January to August, 1959. For the period from January to August, 1959, Australia's deficit on dollar account - that is, the visible difference between exports and imports - was £22,000,000. For the period from January to August, 1960, the difference was £96,000,000, the value of imports being £147,000,000 and the value of exports £51,000,000. I suggest that that flows from the Government's relaxation of import controls.

We are told, of course, that most of the imports which flow into this country are essential goods and that there is very little importing of luxury goods. Although so far it has been thwarted in another place, the Government recently has endeavoured to take a stand in regard to a particular section of our imports - imports for the motor car industry. But it seems to me that the rather optimistic view which is held by the Government about imports and their essentiality is not held by all sections of the Australian community. If I had the time, 1 would quote more fully from a document that was recently circulated to honorable members by the Australian Industries Development Association, which is a body very greatly concerned with Australia's own production. The document, which is entitled " Analysis of Imports 1957-58 - Use and Essentiality ", was prepared before the recent removal of import controls. But the view held by this association was that the greater the volume of Australia's imports was the smaller, relatively speaking, the degree of our factory activity. I suggest that that is a very serious situation indeed, especially when it is realized that Australia still relies to a great extent upon factory employment to absorb the natural increase in our population and the increase that flows from the intake of migrants. We must continue to look to manufacturing industries for the absorption of the majority of those people.

As against that, there has been a certain trend in what is called foreign investment. A large part of our industry is not owned by local people but is financed by foreign investment. We are getting to a stage in this country something like that which has caused alarm in our sister dominion, Canada, lt has been found that large and often very strategic sections of Canada's economy have been the subject of ownership by American concerns. I should like to quote to the House a passage from a publication issued by the United States Department of Commerce and entitled " Survey of Current Business ". At page 19 of the October, 1960, issue, this passage appears -

U.S. direct investments are a large element in manufacturing in Canada, accounting for about 40 per cent, of capital outlays in these industries in that country in 1959 and in I960, when both series are adjusted to a comparable basis.

Approximately 40 per cent, of capital outlay in Canada is due to activity emanating from the United States of America. At page 20, this further passage appears -

Australia has been a leading field for U.S. manufacturing investments for many years, with 1960 expenditures for plant and equipment expected to be nearly $60 million, spread over many commodity groups,

The table set out on that page gives some indication of the groups in relation to which this expenditure takes place. Expenditure in the field of mining and smelting in 1959 was 12,000,000 dollars, and in manufacturing industry it was 53,000,000 dollars. Estimated expenditure for 1960 in the field of mining and smelting is 12,000,000 dollars and in the field of manufacturing it is 57,000,000 dollars. To begin with, that is a fairly significant part of the total investment in those fields in Australia. It simply means there will be a continuation of the trend that has been evident for a considerable number of years.

I refer now to the September, 1960, issue of the same publication, which sets out American investment in all countries over a period of several years. In 1950, the total amount of United States investment in Australia was 201,000,000 dollars. By 1957, that figure had risen to 583,000,000 dolars. By 1959, the last year for which statistics have been collated, the total investment by American concerns in Australian industries had reached the large sum of 739,000,000 dollars or something like £350,000,000 Australian in round figures. The significant trend over recent years has been that the major part of this increase has come not from the flow of new capital but from the ploughing back of profits that have been earned from the sale of goods in Australia.

In 1957, the total earnings - the difference between receipts and outgoings - from an investment of 583,000,000 dollars were 81,003,000 dollars, which is a fairly significant figure. In 1958, for a total investment of 658,000,000 dollars, the earning rate was 90,000,000 dollars. In 1959, the total earning from an investment of 739,000,000 dollars were 101,000,000 dollars. The undistributed profits, the amount ploughed back which goes to augment the ownership by Americans of undertakings in Australia, were 47,000,000 dollars in 1957. By 1958, that figure hao increased to 50,000,000 dollars, and in 1959 it reached 60,000,000 dollars. That is a serious situation. It is the kind of situation which, if not grappled with, will make more and more necessary measures such as the one we are now discussing. After all, an aeroplane is a fairly expendable sort of thing. In the long run, it will have to be renewed, but here, instead of relying upon the normal balance of trade - the excess of exports over imports - we are tending to rely on this large inflow of capital.

I have mentioned the United States of America in particular, but a perusal of the recent bulletin of overseas investment for 1958-59 distributed by the Commonwealth Bureau of Census and Statistics a day or two ago discloses the stark reality not only in connexion with the United States but also all countries. Here again the undistributed income is the significant factor. In 1956-57, undistributed income on account of the United States of America and Canada was £20,600,000 Australian. The figure for 1957-58 was the same, but by 1958-59 it had increased to £31,500,000 Australian. The total for the three years on account of the United States of America and Canada was £72,700,000. Over the same period, the amount of new investment on account of the United States of America and Canada was £7,100,000 for 1956-57, £7,000,000 for 1957-58 and £11,600,000 for 1958-59. In other words, £72,700,000, or nearly three-quarters of the total increase of £100,000,000 in ownership of Australian industries by American and Canadian firms, resulted from undistributed income and only £25,700,000, which means £1 in every £4, can be attributed to new capital inflow. Much confusion arises in connexion with the study of these figures from the fact that in arriving at the balance of payments the undistributed income is added to both sides. This makes the position of the overall accounts appear much better than it actually is. I think it is this failure of the Government to grapple seriously with the situation that has alarmed the people of Canada - I think rightly so - because it is dangerous to have large sections of your industries, especially such important industries as the motor car industry, owned by people outside the country. The Canadians have made extensive inquiries into this particular matter, and I feel that the time is ripe for a similar investigation in this country.

Another significant trend over recent years has been the rise in this country of what are called portfolio investments. By that 1 mean investment by foreign people not in new industries in Australia but in shares in existing and well-established Australian companies. Here again the danger lies in large parts of established Australian industries no longer being owned by us. Much of this type of investment has been occasioned recently by the favorable tax laws in this country. Earlier to-day the Treasurer (Mr. Harold Holt) introduced a measure designed to make a significant change in established practice, and this has been made necessary by the fact that overseas investors have been sheltering under the advantages that our tax structure gives them. I submit that the tax structure of such countries as the United Kingdom has been largely responsible for the flow of capital into Australia. That capital has been coming here because, after coldly calculating the effects of the laws relating to taxation of the individual in both Great Britain and here, investors have decided that the advantage lies with the Australian law and have therefore invested in Australian industries.

That is not a very happy way in which to promote the flow of capital into this country, and if we are not very careful it could lead to all sorts of serious consequences. It tends to encourage the investment of what is sometimes called hot money which would disappear very rapidly if the United Kingdom Government altered its tax laws to deprive the United Kingdom investor of the advantage he now enjoys from the Australian tax structure. The Treasurer of Great Britain could take such steps as would result in consequences that would not be very happy for Australia's balance of payments position. That is the kind of thing to which the Treasurer should occasionally give a little consideration.

I rather regret, Mr. Speaker, that this matter did not come before the House a couple of hours earlier. If it had, I might have been able to support by figures that I have in my possession though not before me at the moment, my contention that there has been a very significant rise in portfolio investment.

Mr Fairbairn - Perhaps they could be incorporated in " Hansard ".

Mr CREAN - I take these matters a little more seriously than do honorable members opposite. It is rather regrettable that a matter of such significance should have to be debated at this hour of the morning.

Mr Harold Holt - A bill providing for a loan for Qantas is rather a curious vehicle for a speech on trade generally.

Mr CREAN - We do not get the opportunity to debate these matters in the proper way.

Mr Harold Holt - I have heard this speech of yours half a dozen times.

Mr CREAN - And you may hear it half a dozen more. I hope that it will be made until a remedy has been provided, such as has been provided in at least one other direction recently. I shall continue to make similar speeches as long as I think the circumstances warrant my doing so. I hope that in the future the Parliament will arrange its programme of business a little more appropriately than it is arranged at present, lt is absurd to ask the Parliament to pass fifteen or twenty bills within the space of two or three days. Some of the measures may be trivial, but others have quite a degree of significance. Whatever the peculiar capacities of some members of the Government may be, I am not able to function better at two o'clock in the morning than at two o'clock in the afternoon, having started work early in the morning. I suggest that considerations of of that kind should be given a little more thought than they are at present.

I view with alarm the situation that faces Australia at the moment in regard to its international accounts. The situation would be much worse, of course, if it were not for the capital inflow that is taking place. Equally, because of that capital inflow, the kind of changes to which I have referred have been occurring. I suggest that it is incumbent on us to point to those facts at every chance we get.

Mr Jones - What happens when capital inflow causes dividend outflow?

Mr CREAN - It creates the other problem of undistributed profits, to which I have referred, so that although ownership is increasing relatively, it is really our own industrial activity and our own people that are contributing to it.

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