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Tuesday, 28 August 1973
Page: 442

Mr EDWARDS (Berowra) - The Bill before the House has 3 purposes. The main purpose is to continue the export incentives grants scheme for a further 12 months, as my colleague the honourable member for Paterson (Mr 0'Keefe) has just been stressing, but not necessarily beyond that. It has 2 other subsidary purposes - to remove certain disabilities affecting marketing authorities under the present legislation and to permit wider participation by gold producers in the export incentive scheme. This grudging extension of the export incentive grants scheme should be a cause of considerable concern to all. I am not saying, however, that we would necessarily agree with every feature of the scheme, but its elimination would be a most unwise course. It is true that during the past 12 months we have had a record surplus on Australian trade and indeed even a surplus on current account. This outcome owes much to high world prices for foodstuffs and other commodities. There is evidence that at least some of the latter, if not the former, have peaked and already begun to decline. That, at all events, is the hope of many governments throughout the world.

In the long run, taking a long perspective - beyond the present situation - the important potential growth area for our exports is in manufactures. In the realm of world trade over the long period it is the area of manufactures which is the growth area, much of it, surprisingly to some observers, between the developed countries which are themselves highly industrialised economies. Nevertheless this is, and historically has been, apart from the recent upsurge in commodity prices, the growth area of world trade. Therefore from the point of view of the long term external viability of this country in relation to paying for necessary imports and services, it is of the utmost importance that we continue to foster the growth of manufactured exports. Of course, that is what this scheme is intended to do.

In that area the development of export markets has to be carefully cultivated. It is something which requires concerted effort over time in order to develop the connection between the Australian exporter and his market overseas. The problem in respect of commodities is of a lesser order and in many cases markets can more readily be found. However, in the case of manufactured goods it is much more difficult to develop a design, to set up agents and cultivate markets. So what is important in this area is a reasonable certainty that the conditions under which one seeks to cultivate and maintain these markets will prevail. One of the main elements in this context is the export incentives scheme envisaged in this Bill. The total amount involved is relatively minute, particularly if we view it in relation to the assistance which is provided via- tariffs to the import-competing manufacturing industries. In that area I am not saying that assistance should not be provided. I may have some further remarks to make on that subject in the debate on a subsequent Bill. This result could be compared with what might be termed the macro-economic alternative to the tariff.

Mr Daly - That sounds sexy.

Mr EDWARDS - It is not really, Mr Leader of the House, but it has possibilities. What we have to look at in this context is the relationship between the opportunity provided for import-competing manufacturing industries, and manufacturing industries which are potential exporters. As I was saying, the overall effect of the tariff has been to enable this country to maintain an exchange rate at a level higher than otherwise it would have been. In recent months we have seen a revaluation which raised the exchange rate even higher. The effect of that revaluation is to make more difficult the task of Australian manufacturers in making export sales abroad. I am suggesting that if overall the tariff was not there, rather than a revaluation of 0U currency to give it a higher value, it would be necessary to have a substantial devaluation, a substantially lower value to our currency. In a sense that devaluation would substitute for the tariff and, because the value was lower, it would provide a considerable stimulus to the export of our manufactures. There are good reasons why we do not contemplate the substitution of a devalued currency for the existing situation in which we have a tariff plus the present value of the currency.

However, since we do not contemplate this, it is all the more important to recognise that within our manufacturing industries we are, in effect, favouring those industries which compete with imports as against those which potentially would be very competitive in export markets overseas. This export incentive grants scheme is, in effect, a means of redressing this balance to some extent and fostering the development of exports of manufactures.

All that I have said could be summed up in a nutshell by saying that if we want to turn Australia into just the world's quarry - my impression is that the Government does not want to do this but rather the opposite - we could hardly do better than eliminate these export incentives and add to that situation further significant revaluations of our currency plus other measures, such as shorter working hours, the effect of which would be to price the export of services and manufactured goods out of world markets. It is sometimes said that the effect of these export incentives is to provide a benefit for foreign purchasers. That is not a valid argument. Broadly speaking, in these areas there is world competition and a meeting of a world price. By and large, our manufacturers have to meet it. If they do not, the foreigners to whom they might sell buy elsewhere. So, in point of fact, it is a question not of permitting foreigners to buy our goods overseas more cheaply but of enabling Australian manufacturers, in the whole context in which they find themselves, including the level of the exchange rate, to make sales overseas at some profit very often not at a very high profit.

The remarks of the Treasurer (Mr Crean) in introducing this Bill must represent a high point of waffle and a high point of providing one more element in what I have come to call the 'chaos theory' of managing the economy. In his second reading speech he said:

What will happen after 30 June 1974 - as far as these export incentives are concerned - has yet to be decided, so it cannot yet be said whether the present scheme or some other scheme will operate or even no scheme. That will be decided later, in the light of a number of relevant factors. In the event that there were no schemes, consideration might be given to the need for hardship relief, but if that proved to be the situation such relief would not, of course, provide under a different name concessions as generous as the present incentives.

What I have referred to as the chaos theory of managing the economy is an approach in which the Government combines unpredictable and arbitrary measures with as many ambiguous, qualified and non-committal statements as possible, with a view to creating the maximum of uncertainty - indeed, alarm - amongst the business community, thereby inhibiting investment and other spending plans, restraining total expenditure and the total demand for resources and combating inflation. I should say perhaps 'combating inflation in the short run' because the Government is holding back the very development of that productive base - the source of additional supplies - which is the prime requirement of the medium and long term fight against inflation.

Thus, in accordance with this theory - at least until the Budget last Tuesday night - the Government created uncertainty about the continuance of the investment allowance. Uncertainty was implicit in this waffle of the Treasurer in introducing the Export Incentive Grants Bill. He said that the grants were to continue until June next year. After that they may or may not continue. They may be smaller, they may be larger; they may be this, they may be that. Also as I said, the Government has taken arbitrary and unpredictable actions. For instance, last July it slashed tariffs across the board, contrary to the law of the land and to established practice in this area. Only a day or so previously - I propose to make some remarks about this on a subsequent Bill - the Treasurer had piously and unequivocally supported the established practice in tariff changes, of open public inquiry and then action in the light of that inquiry. In addition to the things that I have mentioned, the Government withdrew incentives for oil and mineral search and made all sorts of noises about using public money to chase oil. Again, inflation is rampant. The Government set up the Prices Justification Tribunal, which half the Government takes seriously and the other half does not. Meanwhile other industries are harassed by the Joint Parliamentary Committee on Prices. On the costs side, the Government sets the pace with the 35-hour week and extra leave for Commonwealth public servants which will add upwards of 20 per cent to costs if emulated in the private sector.

The Government promotes an open season on collective bargaining. And it brings in a Budget which clearly is designed not to fight inflation but to play its role in sustaining the upward gallop.

To characterise this as a theory is, I think, going a little too far. It would be altogether too novel and imaginative - I will not say sophisticated' - for the Treasurer. I suspect that the Treasury, which despite the attitude of this Government has the best and most experienced economic policy group in the Government machine, would regard such an approach as untidy and rather unprofessional. Nevertheless, this is the way that the Government is proceeding. In this most important area where the external viability of this country in the long run is at stake - that can rest only on the continued expansion of manufactured exports as a key component of our exports - it is to be hoped that the Government will continue to maintain these export incentives that have been so important for the development of this facet of our economy.

Question resolved in the affirmative.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.

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