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Thursday, 21 August 1980
Page: 645

Mr HURFORD (Adelaide) - The purpose of the Preference to Australian Goods (Commonwealth Authorities) Bill is to require Commonwealth authorities to give preference to Australian made goods in respect of their procurements. The Opposition welcomes this legislation. The members of the Opposition believe that Australian manufacturing industries must be given an opportunity to participate in the growth of the Australian economy which should, if the appropriate policies are pursued, result from a generous endowment of human and natural resources. There are two important means of achieving this. One concerns preferences in Commonwealth procurement for Australian made goods; and the other the related policy of securing offset arrangements for Australian producers when major items of equipment are purchased from overseas.

Before discussing these policies in more detail I must indicate that although we in the Opposition welcome the legislation we consider that it is at least three years late. I can substantiate this by pointing out that the Prime Minister (Mr Malcolm Fraser) promised a new procurement preference policy in his notorious 1977 election policy speech. It was notorious for the number of broken promises that it contained. The litany of soon-to-be-broken promises in that speech included the undertaking that an effective Commonwealth procurement policy giving preference to Australian made goods would be introduced. It has taken almost three years for any such legislation of lasting note to come before the Parliament. I know that there has been legislation relating to other government procurement, but when I say legislation of lasting note I mean legislation of comprehensive note. It is enormously important, as I shall show again in a moment, that Commonwealth authorities be included in that decision of general preference to Australian made goods. As the notorious 1977 election campaign continued the Prime Minister fell over himself with enthusiasm on this subject. On 29 November 1977, in the program This Day Tonight, he said:

Now we have adopted a policy of buying Australian for all Government purchases, unless it just isn't something made in this country, or some other overriding reason why we have to buy overseas.

Frankly, this promise proved little better than the grammar of the sentence I have just read. Nearly three years later we find ourselves debating proposed legislation for a more comprehensive procurement policy. The Government sought to introduce its guidelines after the last election, but only now is it introducing the legislation needed to enforce those guidelines. Much water has flowed under the bridge since then. The many opportunities that would have arisen for Australian industry if the legislation had been brought in earlier have been lost forever. The Prime Minister's premature and, I allege, misleading claims about this policy were not isolated ones because in the This Day Tonight program to which I have just referred, he promised inflation of 6 per cent and a sustained reduction in unemployment 'once the summer hump is over'. There have been many summer humps since then. Each one has been bigger than the one before. Last night's Budget promises us yet another summer hump.

This Government is becoming famous for summer humps, which really means that it has presided over and caused the most tragic level of unemployment experienced in this country since the Depression. One of the reasons is that the Government has been slow to develop an effective program of procurement preference for Australian goods. In the words of the Minister for Administrative Services (Mr John McLeay): . . it has become apparent that there is some unevenness in compliance by the various Commonwealth Authorities.

The Government has been similarly tardy in its efforts to develop effective offset programs. Offsets are agreements which provide for parts or other products to be produced in Australia when major equipment items are procured overseas. This policy instrument is closely related to local procurement preference. Both policies allow Australian manufacturers to increase their participation in the supply of goods to the Commonwealth, including higher technology items, such as computers and defence and telecommunications equipment.

The importance of government procurements to Australian industry cannot be overstated. These are presently valued in the order of $5 billion a year, which is a very significant proportion of the total demand for the products of our industries. This close relationship between government spending and the level of economic activity in the private sector has never been understood nor given appropriate recognition by this Government. Instead this Government has peddled what I consider to be the phoney view that if the public sector is cut the private sector is miraculously encouraged to increase its level of activity. This is a view which is completely nonsensical and one which costs Australia dearly. Needlessly it has cost Australia dearly for the past five years. By reducing demand in the public sector and by failing to ensure that this demand is increasingly met by local production all that is achieved is further damage to Australian industry. We have seen that continuously over the five years that this Government has been in office.

It is possible that in one area at least - namely, defence - government procurements will increase in the future even in the unlikely event that the Fraser Government is returned to office for a further term. In this area it is of utmost importance that the supply of goods and materials from local sources be maximised. In the defence area pioneering technologies often are involved. These include advanced electronics, simulators and computers. Unless Australia seeks to develop its capability in these areas it will lose out not only in terms of lost opportunities in its manufacturing industries but also in terms of its defence force effectiveness. Reliance on foreign sources for our defence equipment, parts and material is clearly foolish in these uncertain times.

Since preparing the speech I am delivering today I have learnt of yet another example of how the sell-out of Australian technology, of an Australian industry, has forced us into foreign hands. I am referring to technology relating to the aluminium industry. Members of this House will be aware that there used to be Australian Government ownership of the aluminium industry at Bell Bay in Tasmania. It was sold out by the Menzies Government. In the days when we had that enterprise it led the world in aluminium technology. Sadly - sadly only from the point of view that the technology is not ours but gladly in many other ways- as we move into an era in which there will be enormous new enterprises in the technology field we find that we have to import that new technology. We have to do so because we sold out to overseas concerns something which was Australian. I am reminded by the honourable member for Lalor (Mr Barry Jones) that what we are advocating here applies also to solar equipment. We have had to sell a 50 per cent interest in the Solahart company to the Shell organisation. This has been done more recently. It could have remained an Australian organisation and many new jobs could have been built on this Australian technology and inventiveness. There are more examples of this Government's opposition to the attitudes of the Australian Labor Party. The Government from which we in this country have suffered so long does not have the national feeling of the Australian Labor Party. With governments of that complexion we have seen Australian inventiveness and Australian research and development decline. Technological developments and jobs have gone overseas. In many cases the Australians who have been going overseas to work for those companies would have been far happier to stay in Australia and pursue their inventiveness in their own country. The Bill indicates that there are no simple solutions to many of the issues of ensuring the help of government purchasing in this area.

We concede that application of an acrosstheboard offset rule to defence purchases would be of limited value, particularly if the whole of the offset occurs in low technology areas of limited strategic and industry development value. We do not have the economies of scale in this country to be able to compete. Similarly, it is of little use our having offset rules or procurement preference rules if Australian manufacturers are not given adequate time to develop proposals which will enable them to participate fully. I am not pretending in any way that it is an easy problem to solve. Even though this problem has been tackled belatedly, I sympathise with the Minister about some of the complex problems he had to overcome before the legislation was drawn up. I repeat that I believe that the decisions have been tackled belatedly.

It is no good saying: 'Why did this not happen in the early 1 970s or, indeed, back in the 1 960s when a government of the same complexion as this Government was in office?' In the three years in the early 1970s during which the Labor Government was in office we were for most of that time in a full employment situation. There was not the same need for us in this Parliament to apply our thoughts to industry policy. I repeat that we had full employment during that time and indeed the international economic downturn which came in 1974 and continued through 1975 and is still with us, due to Government policies since then, has forced this Parliament and the people of this country to turn their minds to other means in order to ensure that there is greater restraint in production. This is one means of ensuring just that.

The present Government, I believe, has deferred decisions on many equipment items in the defence area so that we are now faced, over the next few years, with a massive and sudden increase in procurements of about $4 billion. The uneven flow of work due to the succession of delays and now mass orders seriously damages the capacity of local firms to participate in tenders for procurements and offsets. For example, the poor planning in the election-geared delays in replacement aircraft orders has put our capacity for meaningful participation in engine production at considerable risk. The best offer on the fighter replacement appears merely to be assembly in this country. Having stressed the need for offset and procurement policies which are effective and implemented within a more planned environment I now turn to the detail of this Bill.

In essence the Bill aims to enforce the Government's policy for procurement preference in respect of Commonwealth statutory authorities. There are two elements of this policy. Firstly, it calls for preference to be given to goods of Australian origin or of relatively greater Australian content unless there are substantial reasons for the contrary. Secondly, it requires tender specifications to be drawn up so as not to exclude Australian suppliers - which are suitable or reasonably adaptable. The problem has been that many statutory authorities have not complied with this policy. That is why the legislation is needed. In large measure this was the result of legal advice obtained by these authorities which told them that they could side-step the guidelines and which indicated that a best-buy approach, therefore, was required in their charters and that their charters should take precedence over the announced government policy. That was the advice they got and the side-stepping that they carried out.

It has therefore become necessary to pass enabling legislation to ensure that statutory authorities conform to government policy on preference to Australian manufacture. Since statutory authorities are responsible for more than twothirds of total government procurement, this was a very substantial problem that had to be overcome. Given that the statutory authorities were able to get this legal advice and to act on it, I must say that it raises in my mind how remarkable it is that the Government was unaware of the problem at the time the guidelines were formulated three years ago. Those statutory authorities which have not complied are by no means the smaller ones.

Telecom Australia was among them. This involves one of the most important and fast growing industries in both the service and manufacturing sectors. I recognise that Telecom has given strong support in other ways to Australian industry, but its rejection of the procurement preference policy was nevertheless a significant weakening of the effectiveness of this policy.

I am glad that the Minister is here tonight. I have heard rumours that one of the problems at the late stage of this legislation has been the attitude of Telecom. I would be glad if the Minister, in replying to this debate, could tell me whether that problem did arise at a late stage and, if so, whether it has been overcome. There has been a lot of to-ing and fro-ing about this legislation. He, I and others in this Parliament know that it was to be debated yesterday, then today. Then it was off, but now it is on again. I believe that may not have been just due to problems of the timetable. It may have been due to problems that the Minister was having with certain statutory authorities. It would be good if he could come clean with us- if I may use that term- and tell us some of the difficulties he has had because I believe in open government and 1 am sure that he does too.

Under the legislation that we are debating the procurement policy is intended to take precedence over the charter of statutory authorities. Clauses 4 to 7 deal with the tendering provisions. Both the open tender and list tender systems are provided for. The latter system is open to possible abuse and it is to be hoped that the Minister for Administrative Services will, in accordance with his powers under clause 7, exercise a close monitoring role over this system. This power given to the Minister under clause 7 is very broad. Its intention, as I understand it and as I see it set out in the explanatory memorandum of the Bill - which I was glad to receive - is to allow the Minister to defer or reject tenders if he forms the impression that purchase procedures in relation to a particular procurement have not been conducted in accordance with the policy. The clause in the Bill does not set out any such specific guidelines which should govern the Minister. At the same time it provides for intervention only before the tender is accepted. This is a broad power with a short time span for oversight.

It is to be hoped that the Minister will provide adequate departmental resources to ensure that such a provision is effective. It would be very useful, once again in the spirit of open government, if there could be some means of our knowing about some of these ministerial decisions and what difficulty the Minister is having in complying with the general spirit of this Act because of the administrative difficulties with which he and his Department will have to contend. In all charity I would hope that very soon it will be a different Minister who administers this Act and, of course, a Minister from this side of the House. 1 want to make it clear, in case it is I who is doing so, that I am aware of the difficulties that I will have to contend with.

Clauses 8 to 1 3 provide for the other half of the procurement policy, the preference to goods of Australian origin. 1 understand that the amendments which the Minister is to move at the Committee stage - I thank him for his courtesy in letting me have an advance copy of those amendments and offering help with my understanding them - quantify this preference which is to be implemented through a 20 per cent reduction in the tender price in respect of the Australian content in a tender. The Opposition supports these provisions and the level of assistance which is proposed.

There has been some debate in the manufacturing community regarding the method of calculation of Australian content. It is of some concern that in some quarters there is scope for firms to, for instance, overstate the level of Australian content by inflating the price of Australian content and perhaps then compensating when it comes to the total price by understating the price for any import content. So clause 1 S provides some check on this by providing for unsuccessful tenderers to be given information on the Australian content claimed by successful tenderers. However, we in the Opposition believe that this area of the policy should be closely monitored and if necessary a change in the legislation should be made to provide greater disincentives to any firm abusing the benefits afforded by the policy.

I come finally to this point: The Bill provides for almost unlimited powers to be given to the Minister to exempt either authorities or specific procurements from the provisions of the legislation if commercial viability or functions are affected. The procurement preference policy is a form of industry protection and any such policy of course has a cost. This cost is borne by the purchasers of the goods concerned while the benefits accrue to the firms and employees in the supplying industries. Such a policy does have some effect inevitably on the commercial viability and functions of a statutory authority. Under clause 1 6, therefore, the Minister's exemption powers are very broad indeed. The Opposition hopes that such exemption provisions are not used unless circumstances are exceptional. We would prefer that the Government got close to the firms concerned and made sure to the greatest extent possible that we were able to achieve greater productivity, scale economies, lower prices and so on so that we could have our cake and eat it too. In other words, we should achieve the objective of making sure that we are stimulating Australian jobs for Australian production and for Australian needs, but at the same time not penalising Australian consumers by allowing ourselves to buy Australian at a cost which is greater than the imported price.

Mr John McLeay (BOOTHBY, SOUTH AUSTRALIA) - We have an identical view there.

Mr HURFORD - It is nice to hear that we hold that identical view. As honourable members know and as I stated earlier, the Opposition is not opposing this legislation. I just hope that some of the ideas that we have arrived at after studying this legislation, as of course is our duty, will be helpful for its general administration. Indeed, it is difficult to envisage circumstances in which such a provision as the one 1 have just referred to would be needed, since the 20 per cent level of preference in choice of tender systems seems a very reasonable and flexible parameter for the policy. We hope that these clauses will not have to be used by the Government to weaken what is already long overdue legislation.

In summary, the Opposition firmly believes that effective procurement preference and offset policies are an essential component of a package of policies for Australian industry. Accordingly, the Opposition supports this Bill which seeks to overcome some of the major weaknesses which have existed in the policy up until now. However, as honourable members would have gathered from what I have said to date, a number of concerns remaining in the areas specifically dealt with by this Bill do worry us. We urge that these areas which I have outlined be monitored closely in the early stages of the implementation of the new legislation.

I have one final thought. When the Australian Labor Party takes over the responsibility of national government - I have stated that I hope for the vast majority of people, as we have noticed from the polls, it will be this year- and if I have the role in this area, I shall be seeking to persuade all State governments to think Australian and to adopt parallel legislation and guidelines in relation to procurement not only by government departments but also by their statutory authorities. It is in the national interest. In fact, it is in the interests of efficiency and of increased productivity and competitiveness that all those State governments should think not just traditionally or regionally, and in terms of buying just their local

State products, but in terms of buying Australian so that each State can specialise in its own area and so that we can get those scale economies, the lowest possible prices and the greatest productivity for the benefit of Australian consumers. I repeat: The Opposition supports this Bill.

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