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Thursday, 8 December 1960

Mr BARNARD (Bass) (12:26 PM) .Mr. Speaker,this bill is intended to give parliamentary approval to the agreement that was signed last month between the Commonwealth Government, Consolidated Zinc Proprietary Limited and the Tasmanian Government to dispose of the Commonwealth's interest in the Australian Aluminium Production Commission's works at Bell Bay. When this bill becomes law the Commonwealth Government will retire from an industry which was established by the Commonwealth and the State of Tasmania in 1944 during the time of the Curtin Government. It was then a 50-50 partnership between the Commonwealth and the State of Tasmania, the Commonwealth providing £1,500,000 while the State of Tasmania was to provide a further £1,500,000, a total of £3,000,000. In 1949, the Menzies Government took over from the Chifley Government and continued with the programme that had been laid down in the 1944 act. Six years later, in 1955, the Bell Bay industry produced its first ingot. It is now producing 12,000 tons of aluminium annually. Last year, Mr. Speaker, we imported into this country 37,000 tons of aluminium ingots, so it is obvious that the industry at Bell Bay is not meeting the aluminium requirements of the Commonwealth.

The importance of aluminium is not disputed. I believe it would be generally agreed that it is second to iron and steel in importance to the building industry. Since 1951, the Opposition has frequently requested the Commonwealth Government to expand the industry at Bell Bay in order to increase production as well as to provide for rolling mills and extrusion plant. Despite the requests that have been made frequently in this Parliament to have the industry further developed, the Commonwealth has remained adamant that it was not prepared to enter further into aluminium production. Obviously, it was not the intention of the Government to expand the industry at Bell Bay. I believe that that point of view has been further illustrated by statements that have been made from time to time by the Minister for National Development (Senator Spooner).

The act was amended in 1952 to provide that the Commonwealth Government would not be obliged to consult the Tasmanian Government if it was decided that the Commonwealth should retire from the Bell Bay industry. However, the

Aluminium Industry Act of 1944 provided in paragraph 3 (J) of the agreement in the schedule to the act -

The Commission shall not enter into or be in any way concerned in or a party to or act in concert with any commercial trust or combine but shall always be and remain an independent Australian undertaking;

I believe that the intention of the act was quite clear. The Commonwealth Government should always remain in the industry at Bell Bay. Although the 1952 amendment provided that the Commonwealth Government would not be obliged to consult the Tasmanian Government if it decided to sell out its financial interests, beyond giving three months' notice, no attempt was made to alter the paragraph to which I have referred. In other words, the Commonwealth Government was prepared to leave in the agreement the provision that the Commonwealth Government should remain in the Bell Bay industry.

The Government's attitude to Bell Bay is completely un-Australian. This industry was established under the 1944 act to serve Australia's defence requirements. If the Government had any intention of retiring from Bell Bay, surely it should have been on the basis at least of retaining a one-third interest, even if it wanted outside capital. On that basis, both the Commonwealth Government and the Tasmanian Government would have retained a controlling interest in the industry. The Government's clear intention now is to withdraw from the industry. What was an industry fully controlled jointly by the Commonwealth and Tasmania will now pass primarily to overseas interests. T believe that the need for the expansion of the industry at Bell Bav and the Government's decision to retire from it are due to the fact that in 1957-58, the Australian Aluminium Production Commission drew attention to the fact that on the existing basis of production at Bell Bay, it would not be possible for the industry to progress economically.

The commission drew attention to this matter in paragraph 53 of its report in that year in which it stated -

As indicated earlier in this report, the Commission's efforts to reduce operating costs met with some success and further gains are expected. The Commission naturally gives close and continuous attention to the scope for effecting reductions in costs, but sees little prospect, on the basis of present productive capacity, of being able to reduce costs to the extent necessary to compete with recent Canadian and Russian prices. In this connexion, it is relevant to observe that the present capacity of the Bell Bay plant is only about one-third of that of the smallest aluminium plant in north America. The Commission believes that a substantial increase in the size of the plant would offer the only means of achieving a significant reduction in costs per ton of production.

That, I believe, was a challenge to the Commonwealth Government. When the report was made available, the Government was approached by the Premier of Tasmania who requested the Commonwealth Government to provide additional finance so that the proposal of the commission could be put into effect. The Minister for National Development (Senator Spooner) stated at once that the Commonwealth Government was not prepared to make available additional finance for the Bell Bay industry. I acknowledge at once that since 1952, the Commonwealth Government did make additional moneys available over and above the amount of £1,500,000 originally laid down in the act of 1944.

The argument has been advanced by the Minister for National Development that this Government has provided the bulk of the finance to establish the industry at Bell Bay; but it should not be forgotten that although the Commonwealth has supplied more than £1,500,000, the Tasmanian Government has also spent more than the £1,500,000 originally set down in the act. Had it not been for the money made available by the Tasmanian Government for incidental expenses in connexion with hydro-electric development, the housing project at George Town, the water scheme to service Bell Bay and a first-class highway from Launceston to Bell Bay, obviously the industry would not have been able to function as it does to-day. So on a £1 for £1 basis, I think it can be shown that the State government has provided equally as much finance for this project as has the Commonwealth Government.

Following this report, the Premier of Tasmania sought additional finance to increase the output at Bell Bay. It was subsequently refused. In September, 1958, the Minister for National Development made a statement on this matter in which he indicated quite clearly and definitely that the Commonwealth Government was not prepared to make additional finance available.

On that occasion, the Minister for National Development said -

In my talks with Mr. Cosgrove it was agreed that we should explore the possibilities of obtaining additional capital in order to increase the size of the Bell Bay plant and expand its activities. The Commonwealth Government believes that this expansion should be effected with private capita] and not with Government funds. Mr. Cosgrove agreed with this view and, following our discussions, he wrote me a letter in which he told me that he had raised the matter in the Tasmanian Cabinet. He assured me that his Government would favour the admission of an outside partner into the Bell Bay project.

The Commonwealth Government has indicated that it was not prepared to make available additional finance. It had been suggested that additional capital should be provided for the industry from an outside source. I believe at the time the Premier of Tasmania anticipated that that would mean a third partner would be admitted into the industry. I do not believe that the Premier of Tasmania thought at the time that the Commonwealth Government would retire from the industry. The proposal was on the basis of an outside partner acquiring an interest in Bell Bay in conjunction with the Commonwealth and State governments. The bill now before the House indicates that the Commonwealth Government has decided to retire from Bell Bay and will hand over its interest completely to aluminium interests outside the Commonwealth.

Following the agreement that was outlined by the Minister for National Development, this House had an assurance that additional finance would be made available. It is on that basis that the Opposition concedes that some improvement of production at Bell Bay can be expected in the near future. We welcome the proposal to expand production. I believe it will be appreciated by all honorable members, particularly those from Tasmania, and it will certainly be appreciated by the Tasmanian public.

However, I believe that the Government is open to criticism for the way in which these negotiations have been conducted, because, following the statement to which I have just referred, the Minister for National Development did not hesitate to inform the Parliament that he was negotiating with an overseas interest for the sale of the

Commonwealth holding in Bell Bay. At that time it was commonly believed that the company with which the Minister for National Development was negotiating was the British Aluminium Company Limited. This House was never informed of the details of those negotiations, and subsequently the negotiations fell through. When the agreement was finally announced we found that it was not the British Aluminium Company Limited, but Consolidated Zinc Proprietary Limited which was to be the new partner. It is now proposed that that company shall take over the Commonwealth's interest, which will give the company a controlling interest in the Bell Bay industry. The holdings will be on the basis of two-thirds by Consolidated Zinc and one-third by the State of Tasmania.

While those negotiations were being conducted by the Minister for National Development, the Tasmanian Government, in order to give effect to the recommendations of the Australian Aluminium Production Commission, as outlined in its report to which I have referred, on its own initiative decided to push ahead with its plans to expand the industry's annual production to 16,000 tons from its present rate of 12,000 tons. The Commonwealth had already stated that it was not prepared to provide additional finance, so the Premier of Tasmania indicated that Tasmania would provide the additional finance for the commission, to the extent that was possible from accumulated revenue.

Now we have an agreement with Consolidated Zinc Proprietary Limited under which the output at Bell Bay will be increased - according to clause G of the agreement - to 28,000 tons annually. As I have already said, we welcome this plan to expand production to that extent; but there are five features associated with this agreement to which the Opposition raises very great Objections. First, there are the conditions of sale; secondly, there is the basis on which interest charges will be levied; thirdly, there is the failure of the Government to guarantee in the agreement the continued security of the industry at Bell Bay; fourthly, there is the surprising departure on the part of the Commonwealth from the principle previously observed in this country of calling for tenders when taxpayer's assets are being disposed of; fifthly, there is the failure to maintain effective Australian control. There are probably matters with which the Opposition would find itself in agreement, and I have no doubt that other speakers will refer to them in due course. Let me deal with the propositions that I have just outlined.

The first of these refers to the conditions of sale. The industry at Bell Bay is an asset worth £11,200,000, but the purchase price under this agreement is £10,980,000, and the price is to be paid over a period of sixteen years. We are told in the Minister's second-reading speech that the first payment will be a deposit of £2,500,000, which is to be paid on 3rd January, 1961. Thereafter instalments are to be paid on 31st December of each year. Between 1961 and 1964 there will be four instalments of £250,000; between 1965 and 1975 there will be a further four instalments of £625,000; and in 1976 there will be a final instalment of £605,000.

I would suggest, Sir, that this is a very generous proposal on the part of the Government. Surely we may assume that Consolidated Zinc Proprietary Limited, which has wide interests, would be able to pay the purchase price in a shorter period. This company is prepared to establish an aluminium industry in New Zealand which is expected to cost £125,000,000. It can find an additional £43,000,000 to develop the bauxite deposits at Weipa. So surely it cannot be said to be short of capital. Yet under this agreement the Government allows the payment of the purchase price of a Government asset to stretch over a period of sixteen years. I suggest that, in view of the fact that this company is now a world-wide organization of both British and American interests, it should have been possible for it to pay the purchase price for the Commonwealth's interest at Bell Bay under far less generous terms than have been guaranteed to it by this Government.

The second point to which I want to turn concerns the interest rates. Interest is to be paid on the investment, and according to the Minister's second-reading speech it will be levied at the rate of 5 per cent. The interest, however, will be paid only after the company has declared a dividend of 6i per cent, and paid tax calculated at 3i per cent. In other words, 10 per cent, must be shown on the investment before the company will be obliged to pay interest. Interest in the first year, according to my rapid mental calculation, would be approximately £420,000, after the deposit has been paid. In the second year the interest due would be £407,500. I have calculated only the interest payable in those two years. In the fourth year it could be expected that interest accumulated over the four years would be very nearly £1,000,000. Yet under this agreement which we are asked to accept interest is allowed to accumulate unless the company can show a profit of 10 per cent. - that is, its dividend of 6± per cent, after paying tax of 3i per cent. Unless it can show that 10 per cent., no interest is payable. Of course, the tax accumulates, but one should consider the profit that has been made by the industry. The report of the Australian Aluminium Production Commission indicates that for the year 1959-60 the profit was only £122,753, and for the preceding year, £153,700. This profit is far below that which would have to be made by the company before it would be liable for tax. I suggest that no tax will be paid by the company in the first five years of its operations. When the expansion programme has been completed and when production has been increased, the company might be able to pay some tax, but here is a peculiar circumstance which is contained in the agreement. If, after five years, the company shows a profit after allowing the 6i per cent, and the 3i per cent, and after paying the interest that is due in that year, it is required to pay only one-half of the additional profit off the accumulated arrears of tax. I claim that the arrangement in relation to the tax is merely window dressing.

To support my contention that very little if any tax will be paid by the company, I refer to the agreement which provides that if, at the end of sixteen years, the tax remains unpaid the Government has the right to waive the tax. That arrangement does not apply to any other organization in this country. It is not a concession that is given to ex-servicemen, for example, who are buying a home through the War Service Homes Division. Any amount that remains unpaid at the expiration of the period of the loan is not waived by the

Government. However, according to the agreement that we are asked to accept, the Government has the right to waive any tax outstanding at the end of sixteen years. The opposition does not accept that section of the agreement.

The third point to which I wish to refer relates to the failure of the agreement to provide a guarantee that the industry at Bell Bay will continue to produce aluminium. 1 do not suggest that Consolidated Zinc will accept responsibility for the undertaking, will assume control and then immediately close it down. But a company which already has stated its intention to provide an industry in New Zealand worth £125,000,000, and which has extensive bauxite deposits in Weipa, which no doubt it will develop, can hardly be expected to worry very much about the industry at Bell Bay. The agreement should have provided some guarantee that the industry at Bell Bay will be continued. As the matter now stands, there is nothing to prevent the company from closing it down.

The fourth point to which I now turn - another extremely important aspect - relates to the failure of the Government to call tenders when it decided to sell an industry of this size. I have indicated already that in the first instance negotiations were conducted with British Aluminium but, for some reason, the conditions which were laid down by the Government were not acceptable to that company. The Minister then decided to negotiate with Consolidated Zinc. At no time did he consider making the industry available to Australian interests despite the fact that they approached him. We know that on one occasion an Australian organization contacted the Premier of Tasmania and offered to purchase the industry at Bell Bay on the same terms as had been extended to Consolidated Zinc, but apparently this Government, which claims to recognize at all times the rights of private enterprise, was not prepared to consider this offer.

The Minister has suggested that the price that was paid for the industry was the best that could have been obtained in the circumstances. The Minister is in no position to make that statement. How does he know that it was the best price that could have been obtained if tenders were not called? The Minister is not aware of the price that might have been paid, for example, by Aluminium Industries Actien Gesellschaft, the Swiss company which was very interested in the industry and which sought to submit a tender for it. But on all occasions its representations were ignored. So the industry was handed over to one company and organizations in Australia which were interested in it and which wanted to participate in the negotiations, were not given the opportunity to tender for it.

If the Commonwealth Government decides to retire from control of an undertaking, it has an obligation to advertise that industry and call for tenders in accordance with the normal procedure that has been laid down. When the Government made up its mind to dispose of the industry "British Aluminium should have been given the first opportunity to purchase it. Although the papers relating to this matter have never been made available to honorable members, we have been told that documents are in existence which indicate that British Aluminium had to be consulted first. If that is the case, the Commonwealth had an obligation to consider not only Consolidated Zinc but also any other interested organizations. But the Government chose to ignore the other companies. It is true that Consolidated Zinc and British Aluminium were at that time joint partners in Comalco, which was registered in Australia, but the fact remains that other Australian organizations were interested in this enterprise and they should have been given the opportunity to tender for it, but the Minister refused them this opportunity. The Opposition has no objection at all so far as the conditions relating to employment, long service leave, furlough, sickness benefits and so on at Bell Bay are concerned. We believe that the Minister for National Development (Senator Spooner) has given very serious consideration to these matters in this agreement and we raise no objection to those conditions at all. We believe that the interests of the employees are fully protected as indeed they should be. I turn now to the question of the effect on Australian control of this industry. We believe that the Commonwealth Government should have ensured that an effective Australian interest was maintained in the Bell Bay industry. I have already indicated that when this bill becomes law Consolidated Zinc will have a two-thirds share in the industry at Bell Bay and the Tasmanian Government a one-third share.

Consolidated Zinc consists of 12 per cent. Austraiian interests and the Tasmanian Government will have a 33i per cent, interest, which gives Australian interests approximately a 45 per cent, interest in the Bell Bay industry. We believe the Commonwealth Government should have ensured at least a 50 per cent. Australian interest in Bell Bay. Under the terms of this legislation, the Australian interest is far less than 50 per cent, and that is one of the omissions which the Government should never have allowed under this agreement. The industry at Bell Bay will now be controlled by Consolidated Zinc in conjunction with the Tasmanian Government. It might be just as well at this stage to consider the tie-up of these overseas interests with the industry at Bell Bay, not only as regards the production of aluminium but also so far as the bauxite supplies of this country are concerned.

Following the agreement signed by the Minister for National Development with Consolidated Zinc, British Aluminium dissolved partnership with Consolidated Zinc. At that stage it was decided to share the assets that were previously held by those two companies in relation to bauxite supplies in this country. British Aluminium was to take control of the bauxite supplies at Gove in the Northern Territory and also to retain control of the Purari River rights in New Guinea. Consolidated Zinc, on the other hand, was to take control of the bauxite supplies at Weipa - 2,270 square miles - with a further deposit in the Cape York Peninsula and also a five-year lease over the Blair Athol coalfields. Between them these two companies control all the bauxite in this country, with the exception of one or two small areas in Tasmania, and another at Marchinbar Island which, under the agreement, will be retained by the Commonwealth. The fact remains that between them these two companies have a controlling interest in the bauxite supplies of this country. According to the schedule to the agreement the industry at Bell Bay will - under the agreement which is not available to members of this House - be guaranteed a supply of bauxite from both British Aluminium, from the Gove deposits and from the deposits at Weipa. I understand from information that has been made available to me, that 150,000 long tons of bauxite from each of these areas will be made available to the industry at Bell Bay. From that agreement it appears that the production of aluminium at Bell Bay is guaranteed because, on the proportions of 4-2-1, on which I believe the production of aluminium is based - that is four tons of bauxite to two tons of alumina to produce one ton of aluminium - it would guarantee sufficient bauxite to produce 75,000 tons of aluminium each year at Bell Bay and it would appear that that would be sufficient for the requirements.

Under the agreement Consolidated Zinc and the Tasmanian Governmer will increase the output to 28,000 tons annually, which, of course, is far below the 75,000 tons to which I have just referred. On the other hand, it has been suggested that the industry there might ultimately be increased to a production of 40,000 tons of aluminium ingots per annum. There is no guarantee of that. It has only been suggested and is not contained in the agreement. The agreement merely refers to the 28,000 tons but I hope the production will be increased to 40,000 tons of aluminium ingots each year, because by 1970 the requirements of this country will be far in excess of 40,000 tons. Twentyeight thousand tons of aluminium ingots per year is now well below the requirements of this country, so the position arises that we will be exporting bauxite supplies from Weipa and Gove to a major industry in New Zealand which, in turn, will produce aluminium ingots for export to this country and to overseas countries. We, of the Opposition, believe this Government should have remained in the industry at Bell Bay and should have provided the additional capital, or, if outside capital was desired, it should have been admitted on the basis of equal representation. That would have ensured control so far as the Commonwealth Government is concerned. The control would have remained in the hands of Australian interests, but this Government has chosen to hand over our extensive bauxite supplies to overseas interests. It has handed control of the industry at Bell Bay to overseas interests and therefore I believe the Government can expect that in the future the major aluminium industry in the southern hemisphere will be established not in Australia but in New Zealand.

Nobody disagrees with the attitude of the New Zealand Government in respect of this industry. It was able to secure this industry for New Zealand, but I believe the Commonwealth Government lost five valuable years in which negotiations could have been completed, thus putting Australia in the position of being the major producer and exporter of aluminium in the southern hemisphere. As it is, the Government now presents to this House an agreement which will guarantee that the greatest bauxite supplies in the world - sufficient for 150 years at current world production rates or for several thousand years to meet Australian requirements only - will be exported to another country for production into aluminium ingots. On that basis, we believe the Government has refused to accept the responsibility that it was originally intended to accept under the 1944 act. It has set aside the principles so clearly laid down in that act; that this industry was established as a defence measure.

The Government should have retained its interest in the industry. There was no reason why it should not have pursued a course which would have resulted in increased production at Bell Bay. The undertaking is now producing an aluminium ingot that is as good as that produced anywhere else in the world. We have technical advantages at Bell Bay. The industry is already well established. All that was required was a sympathetic and co-operative government. We could then have had a major aluminium industry. The opportunity has now been lost. We welcome the provision df the agreement which is designed to increase production from 12,000 tons to 28,000 tons, but we believe that if this Government had been prepared to accept its responsibilities it could have done much better for Australia.

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