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Wednesday, 19 April 1972
Page: 1231

Senator SIM (Western Australia) - I note that apparently there is some agreement on both sides of the chamber as to the desirability of having in Australia a viable aircraft industry. It is the stated policy of the Government that we should maintain a small but viable and effective aircraft industry in Australia, but it seems to me that the Opposition should try to define what it means by 'viable'. This is important, if I understood Senator Poyser correctly, he wants an industry which is producing some type of aircraft at al! times, whether or not here is a demand for it. I understand that this is what he means by viable. I question the economic viability of an industry which is producing just for the sake of producing. There is a need for an aircraft industry in Australia but not just for the sake of having it. This is what we mean by viable and effective. The industry has to be economically effective within reason.

When one criticises the lack of continuity in orders, when one criticises the troughs and peaks in the aircraft industry in Australia, one should bc prepared to agree also that this is not common to Australia. Throughout the world today there are grave economic and financial problems in the aircraft industry. They have affected the great aircraft manufacturers in the United States of America - organisations such as Douglas, Lockheed and Boeing. Indeed, they have affected the Rolls Royce organisation in the United Kingdom. These problems are not found only in Australia. It is very easy to talk loosely about continuity but other countries are having continuity problems also. When we talk about continuity, what do we mean? I would like to hear what Opposition senators mean. It is all very well to produce an aircraft but there has to be a need for it.

Senator Bishop - Our imports are terrific, as you know. We are paying for them.

Senator SIM - The importation of aircraft is an interesting point and perhaps we should look at it. If we are going to manufacture every aircraft that we want in Australia-

Senator Bishop - That is not the argument.

Senator SIM - I am not saying that that is your proposition. But if we are to manufacture every aircraft in Australia we will need the through put to make the industry an economic proposition. I wonder what aircraft we are buying, except those in the smaller range, for which there would be sufficient through put to justify production in Australia. Certainly there has been such justification for the Mirage, the Macchi, the Canberra and other aircraft which we have built here. There is a plan to build here light observation helicopters, of which the Royal Australian Air Force requires 75, I think, but in order to have a suitable and acceptable programme the industry has called tenders for the manufacture of 116 civil aircraft. I notice that the Minister for Defence (Mr Fairbairn) presented some interesting figures when speaking to a similar motion in the other place on 1st March. He quoted figures which showed that the cost of producing these helicopters in Australia would be 41 per cent higher than the cost at which we could import them. A serious cost factor is involved but in trying to maintain a viable industry the Government is prepared, quite rightly, to pay a cost 41 per cent higher than the cost involved in importing the aircraft from overseas. This is important, particularly when we are talking about manufacturing aircraft other than military aircraft.

We have heard a great deal about the aircraft known as Project N. Senator Poyser spoke about it at some length and I think that some of his statements are open to challenge. It is all very well to say that an aircraft flies well. It is all very well to say, as did Senator Bishop, that there is evidence from people who have seen the test flights of this aircraft to indicate that this is the aircraft we want. I suggest that there are other criteria besides the fact that it flies well. One criterion is whether there is a demand for it. It is all very well to say that the defence forces should have it. But do they want it? Is it the type of aircraft required by the Army or by the Air Force? At the moment I understand that an evaluation is being made to determine whether it is the type of aircraft for which there is a slot in our armed forces. Surely it would be a pretty uneconomic proposition to produce an aircraft which we do not want. It may well be that there is an overseas demand for Project N. If so, we have no problem if we can sell it in sufficient numbers overseas. But we have to know the cost of manufacturing this aircraft because surely there will be competition on the world market. The French, the Indonesians or anybody else will not buy them simply because we make them if there are other aircraft of a similar type available at a cheaper cost. All these factors have to be considered. We can talk very loosely about being able to sell these aircraft.

Senator O'Byrne - You said that about the car industry.

Senator SIM - I think that is the worst industry that the honourable senator could refer to. Goodness me, we had some speeches on the tariff and our car industry some years ago. I would not say too much about that subject, if I were the honourable senator. I hope we do not get to the stage where our aircraft industry has to close down, as some sectors of the car industry are closing down simply because they cannot sell the cars that are produced. These are factors which any responsible government has to take into account.

Senator Poysersaid that we have the ability right now to establish a viable industry based on Project N. I suggest that this is not a terribly responsible statement to make. We all hope that we will have an industry but any responsible government, before spending large sums of the taxpayers money, must be certain that this aircraft is, firstly, required in Australia, and secondly, that there is an overseas market for it. Nothing could be more tragic for the aircraft industry than to start producing this aircraft and then find, after tooling up, that we do not have the orders to maintain the production. It is all very well to say that the Government should take risks but risks such as this, as apparently advocated by Senator Poyser, in the long term, or in the short term, would cause tremendous damage to the aircraft industry. It would no longer be the viable and effective industry that we all want to see.

Senator Poyserwent on to say that there is some dispute in the defence Services as to who will fly the aircraft and that therefore a decision about it has been delayed. In order to put the record straight I think I should quote from the speech made by the Minister for Defence on 1st March when he answered the allegation made in some sections of the Press about what he termed the so-called fight going on between the RAAF and the Army about who is to fly this aircraft. The Minister categorically denied that this was happening. He said:

I can assure the House that there is no fight of any sort because no decision has been made as to whether the aircraft will go into production.

He went on to explain the situation in greater detail. I suggest it is not accurate, in view of the Minister's statement, to say that production is being delayed because of some inter-service rivalry. A minor point made by Senator Poyser should be corrected. He said that the aircraft he saw in flight had been flown for some 300 hours. In that same speech the Minister for Defence said:

One first flew last winter and, by the beginning of February, had done about 70 hours flying. The second prototype had done about 30 hours flying.

Senator Drake-Brockman - It has now done 202 hours.

Senator SIM - I am corrected by the Minister for Air (Senator Drake-Brockman); the aircraft has now done 202 hours. I was quoting the figures given in the speech made by the Minister for Defence. The later figure of 202 hours is much closer to 300 hours so I accept that point. Nevertheless, the aircraft has not yet been certified by the Department of Civil Aviation. The Minister for Defence has assured the Parliament that the aircraft is being evaluated and I think, from memory, that the evaluation will be complete at the end of the month. Then the defence forces will be in the position of being able to say whether this aircraft is suitable for their needs. It seems to me to be fairly irresponsible to urge that it be purchased before a proper valuation is made. One of the problems which we face and which I have already mentioned briefly is that at the moment we are in a trough. We have just completed the Mirage programme and the Macchi programme is nearly completed. With the completion of those programmes, there are no further requirements by the armed forces for a military aircraft. Unless we rush into the Project N there are no aircraft construction programmes which we can undertake. I think this explains in simple terms that the Government is not idle. Indeed, it has been studying this matter over a number of years and it has had some success.

It is all very well to deride offset orders. They are not inconsiderable. The prospects are that we will be able to obtain more and more offset orders. Already in recent times we have reached agreement on new offset orders or contracts worth almost $3m. These are against government purchases of aircraft from the Boeing Company. These contracts involve the manufacture in Australia of rudders, elevators and inspar ribs for Boeing 727 aircraft. We also have contracts which were previously signed with these companies and the Commonwealth Aircraft Corporation Pty Ltd not only for components but also for windows, flap gearboxes for the Boeing 747 aircraft, and miscellaneous machined parts for both the 707 and 747 aircraft. Australia is now the sole source of supply for rudders, elevators and inspar ribs for Boeing 727 aircraft. As the result of a mission which went overseas in November-December 1971 to seek orders from the French aeronautical industry a contract valued at $554,000 has been received for engine components and turbine blades. Negotiations for further orders from the French aircraft industry are being actively pursued.

We are also vitally interested in what are known as reciprocal purchasing arrangements. The Government has made it known to overseas aerospace industries receiving orders for Australian military and civil requirements that reciprocal purchasing opportunities are expected. Special machinery has been set up by the Government to facilitate participation in these opportunities. An interdepartmental committee representing the Department of Trade and Industry, the Department of Defence, the Department of Supply and a committee of industry experts is involved. To date orders worth some $7m have been obtained. I could go on dealing with other actions taken by the Government to obtain not only offset orders but also reciprocal purchasing arrangements and other arrangements which will provide more work for our aircraft industry. I think that in a responsible way the Government is doing everything it can to ensure that in Australia we have a viable, small but effective aircraft industry.

Sitting suspended from 5.49 to 8.00 p.m. (Quorum formed.)

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