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Tuesday, 18 April 1961

Mr CAIRNS (Yarra) .- The honorable member for Mackellar (Mr. Wentworth) is not exactly right in saying that both sides of the House are commending this bill. The Opposition is not opposing it, which is quite a different thing. The honorable gentleman has a great ability to express very simple propositions in a most erudite and complex way, and as a consequence he appears to think that what he says gains some weight. I hardly think that that is the case. He has, however, somewhat spoilt an erudite and complex speech by making a rather shabby political point towards the end when he blamed the Government of New South Wales for not developing its port facilities so as to make the export of coal cheaper and more effective. It is true that the port facilities of New South Wales have not been developed as they might have been, but the port facilities of every other State in Australia have not been developed as they might have been either. If we are going to lay any responsibility or blame at the door of any State government, we should lay it at the door of this Government also, because it has a special responsibility in relation to ports and has the money with which to modernize them if they are to be modernized at all. It is quite a shabby political point simply to pick out one State government for special blame in this respect.

The erudite and complex propositions which the honorable member made were simply these: Australia should not put into secondary industry a large volume of capital because we may not have continuity of export of manufactured products to low-wage countries. He gave as the reason for this that we have at the present time a technological advantage over a number of Asian countries. Having selected Japan for special attention, I think he has selected a country over which we have never at any stage had a technological advantage. In a great range of manufactured goods Japan has always had a technological advantage over Australia. It is not true, as he suggests, that this advantage is narrowing. It was never there, because with modern technical devices and large investible funds even under the Zaibatsu before the war and with American capital flowing into the Japanese industrial structure after the war, these factors in combination have produced a cost of production in Japan which is probably the lowest in the world. This is not an advantage which Australia has ever possessed or possesses now.

Another proposition which the honorable member made was that we might have an advantage over other Asian countries. The question of this advantage is not determined by production in those countries by the indigenous people but by competition in those countries from goods produced in Japan, Western Germany, the United States of America, Czechoslovakia and the United Kingdom. Those are the ones we have to be concerned about if we are to be concerned with the continuity of this market. The very erudite and complex lecture which the honorable member has given to us seems to ignore the common sense propositions which would have been put forward by some one not nearly so erudite. The honorable member for Mackellar ended with a proposition with which I agree: It would be a mistake to rely - if we ever did, and I do not think we did - upon these gimmicks which the Department of Trade is inventing, such as the Export Payments Insurance Corporation and tax remissions on export goods of a secondary type. It would be a mistake to think that these gimmicks would be worth more than the paper they are written on. I think the honorable member for Mackellar is right as far as Australia's exports are concerned, because we have to look to the basic staples for the future for a great proportion of our exports.

I return to the strict limits of this bill. The Exports Payments Insurance Corporation is a device of nationalization - national insurance - to insure business that private profit insurance companies will not take on. It is the principle of nationalization, under a Liberal government, that you hand over to the State the things in which there is no profit or little profit for the benefit of private enterprise and you leave the large profit fields for private enterprise exclusively. You nationalize the places where you would lose money. The title of the act upon which this corporation is based reads -

An Act to promote Trade with Countries outside Australia by establishing an Export Payments Insurance Corporation to provide Insurance against certain Risks arising out of that Trade not normally insured with Commercial Insurers.

Over the years we have not been able to get commercial insurers to insure this kind of thing, because so much of what is done involves a loss and they will not insure it. So you nationalize that section of the business because it is absolutely essential, the Government says, in the interest of the nation that it should be insured. We cannot rely upon private enterprise because it will do only business out of which it will make a profit; so we set up a national corporation - and that is what this is - in the national interest to insure something which is important and which private enterprise will not touch.

The honorable member for Lalor (Mr. Pollard) in opening the debate for the Opposition, said, in effect, " As far as we are concerned that is not good enough. If it is all right for the Government to nationalize losses, it should nationalize gains too. And it could give the States and the Commonwealth of Australia and the people the same advantage in business as private corporations and monopolies have." This is no new doctrine. It was put forward by David Syme, the proprietor of the Melbourne " Age ", in a book called "Australian Democracy" in 1878. It is a basic proposition and one of common sense and not one you have to look to socialist theorists to define, but one which any ordinary Australian with common sense could define - that it is not a sound proposition to allow the profits all to be taken off by private enterprise while you force the Government to carry the losses, and that is what the Government is doing here.

Mr Bandidt - What losses?

Mr CAIRNS - I will tell the honorable member in a minute when I deal with the figures, because I intend coming to that. As the honorable member for Lalor says, let us nationalize some of the gains and set up an insurance corporation which will do the profitable business instead of the loss business. Let me remind the Government what there is in this field. First of all let me explain that this is a procedure only to insure the risks of payment. People sell goods overseas and they might not be paid for them, so we insure them against the risk of non-payment; but there is a very big field of insurance in external trade other than this; I refer to the carriage and storage of goods. As it costs Australia as a whole some £40,000,000 or £50,000,000 a year to do this, why do we not insure this profitable business through our Export Payments Insurance Corporation? Let us bring that business into this field and that will do two things: It will make the Government a lot better off, and it will save Australia a great volume of overseas funds, because a big proportion of that £40,000,000 or £50,000,000 of business is done at the present time by overseas finance. If we set up an organization here which can do that business we will save ourselves that amount.

All this amendment does is to extend the principle of insuring losses - insuring bad business - over a wider field. The Government has decided that the corporation at present does not quite reach far enough down into the bad business field where the losses are greatest. So we are now considering an amendment to push us further down into the field where losses are made. The Minister said -

The bill provides that the commissioner would refer to the Minister for Trade proposals which the corporation would not normally cover but which would merit consideration as national interest propositions.

These are propositions in which the risk of loss is even greater than that in the ones which the corporation insures at the present time. Despite this, the Government argues that these transactions should be insured in the national interest. So we are going to take on even more risky propositions than before in the national interest. We admit that these propositions should be taken on. The Opposition does not oppose the bill. But certainly it does not commend it. We could not commend a bill that gives to the Commonwealth Government only the risky business - the losses - to deal with. We ought to go further than that.

On page 5 of the report on the corporation we see that there are five main types of business which the corporation may at present insure. There are what are called comprehensive contracts and shipment guarantees - that is insurance guarantees over the whole of the exporter's insurable business for up to twelve months. That is business which normal private insurance has not been willing to touch. Then there are specific contracts and shipment guarantees in relation to capital goods. These are goods that will be sold, presumably, to countries which may have difficulty in paying - not countries in which the prospects of paying are extremely bright, but only the doubtful or risky ones.

Then there are service guarantees to engineers, architects, and other technical people who render services in other countries where there is a risk as to payment. But if services are rendered, say, in the United States of America or in some other country where there is no risk concerning payment, then the corporation will not be concerned with that business. Then there is a processing guarantee for exporters selling goods which have to be specially processed in the country in which they are sold and where there is some risk involved. Finally, there are what are called " stock-holding guarantees ". These are all fields which have not been the subject of commercial business before and the reason why they have not been the subject of such business is that the risk has been too great.

The Opposition has made its position quite clear on his bill. It is not enough to confine the business of such an insurance corporation to business of this kind. It is not enough for two reasons: The first reason is that the Commonwealth should avail itself of the more profitable fields of insurance. The second reason is that it is not enough to rely upon the insurance of the payments for export because that is not the real problem. The honorable member for Melbourne Ports (Mr. Crean) pointed out that the real problem was the ability of the countries concerned to pay for these exports in the first place. I think it is now fairly well known to honorable members that a 1958 United Nations economic survey pointed out that in 1958 alone the downward movement in the terms of trade of countries producing raw materials and primary products for export destroyed for them more than they had gained from all types of economic aids since 1950. The one year's adverse turn in the terms of trade involved them in a loss greater than their gain from the Colombo Plan, from economic aid by the United States of America, through the International Bank, or from any other source in the eight preceding years.

So exports insurance is clearly not enough. It is not possible to make up the leeway simply by means of an insurance corporation. I think that this raises the question implicit in what the honorable member for Mackellar said. What is necessary to ensure that the underdeveloped countries in which the risks are involved will develop the ability to pay for exports from Australia and other countries? First, those countries must obtain the powers of national self-government. They must escape from external economic control as many of them are rapidly succeeding in doing. They must get national independence of government for the advancement of their own people.

Secondly, they must have economic development, which was seen by the honorable member for Mackellar as something that would cause competition within those countries with Australian exports to them. But that economic development will also create demand so that, in turn, those countries will be able to buy Australian exports more, readily. It seems to me that the market that will be created in those countries will be for Australian staples such as meat, grain and wool. The demand of countries such as India and China need be raised only by less than 1 per cent, to enable them to double or treble their demand for Australian staples. This is the great hope, it seems to me, for exports from this coun try. As I have said, I think that very little will come from the gimmicks of the Minister for Trade - from his Export Payments Insurance Corporation and his tax remissions on exports. It is all a lot of talk and hot air. It makes good headlines for the press and it could lead numbers of the Australian people into the false feeling that something is being done. But it does not amount to much more than the paper it is written on.

The next point to which I should like to direct the attention of the House is the amount of business that has been done so far by this corporation. The record, now, is a most interesting one. On page 7 of the 1960 report of the corporation we find that the number of transactions handled was very small indeed. There were 43 in 1958, 91 in 1959, and 127 in 1960, a total of 265 since the corporation commenced business. The next striking fact about the guarantees that have been given is that they are for extraordinarily large amounts. In the first year of operation, 43 guarantees were given for business valued at £11,126,630, an average of £250,000 per guarantee. This is an extraordinarily large amount. The report gives no indication of the kind of business. What were the 43 guarantees which averaged £250,000 each? This was certainly not the kind of business that could be undertaken by a small or medium sized Australian manufacturer. This looks like the kind of business that would be undertaken by the very largest of Australian industrial concerns. Is that what this corporation is designed to assist?

In the following year there were 91 transactions, totalling £21,000,000, an average of £230,000 for each transaction. In 1960 the number rose to 127 and the value of the insured business was £26,429,903, an average of £208,000 per transaction. This is not the kind of business that a small or medium sized manufacturer would do. It is obviously the kind of business that the very largest of Australian concerns might do. I think the House wai entitled to some information, either in the corporation's report, in the speech of the Minister for Trade, or somewhere else, as to what kind of transactions amount to these sums of money. The next question - and this was raised in an interjection by the honorable member for Wide Bay, who perhaps is going to follow me - concerns unprofitable business. He asked why 1 said that this was unprofitable business.

Mr Bandidt - No, I used the word il losses ", not " unprofitable ".

Mr CAIRNS - Then let us deal with it on that basis. The 1960 accounts of the corporation show, on page 14, that the premiums on risks insured in 1959 amounted to £85,561. That, in other words, was the income from business in that year. The expenditure on operating the corporation was £42,697 in 1959, so the profit on business operations was about £43,000. But in 1960 quite an interesting and important change took place. The report tells us that in 1960 the premiums on risks insured amounted to £46,789 and the expenditure on the operation of the corporation was £61,986. There was a loss of £15,197. What I should like the Minister to tell me, if he will, is why the value of premiums on risks insured fell from £85,561 in 1959 to £46,789 in 1960, although apparently a lot more business was done. There were 127 policies current in 1960, as against 91 current in 1959. Despite the increase in the number of policies, the value of the premiums on risks insured fell to a little more than half of the value in the previous year, leaving a net loss of £15,197 on operations. In other words, the corporation has appeared to make a profit only because of the book transaction which we criticized when it was made. We can see no economic reason, although there might be an accountancy reason for it, for transferring to the corporation capital to the amount of £1,500,000, presumably in Commonwealth bonds, on which the interest earned in 1960 was £53,965. It is only by that artificial book entry that the corporation appears to have made a profit in 1960.

Therefore, I should think that the position is fairly clear. The corporation has been undertaking unprofitable business, and it has operated at a loss on current business in 1960. Of course, this kind of situation may well be justified in the national interest. Tt may be that this corporation will achieve some of the things that the Minister has said in previous speeches it was designed to achieve. This loss of £15,197 is, after all, only a small loss, and it might be justified. But in order to judge whether or not it is justified the House, I submit, needs more information than is provided either in the report or in the speeches made by the Minister.

So, the position taken by the Opposition is that we are not opposing this bill. It may be quite necessary to have a corporation to insure business of a risky or unprofitable nature which would not be undertaken by a company in private enterprise. It may be necessary to do this in the national interest, but we submit that such a corporation should also enter the field of profitable business, and at the same time make an income for the Commonwealth because it is as entitled to income just as much as are private businesses in this field. At the same time, it would save Australia a considerable sum in overseas funds.

We emphasize that there is a great scarcity of information about the operations of this corporation. We should like to know why premiums on risks covered were so much lower in 1960 than they were in 1959. We would also like to know more about the kinds of transactions that the corporation has insured. The transactions are of very large amounts in average. The average was £250,000 in 1959, but, despite an increase in business, it came down to £208,000 in 1960. So, there are a great many questions in relation to this bill which the House is entitled to have answered. We are left in the position that we can do no more than not oppose the bill.

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