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Thursday, 28 November 1974
Page: 2973

Senator DURACK (Western Australia) - This Bill, which is designed to set up the Export Finance and Insurance Corporation, is one which the Opposition not only supports but, indeed, welcomes. The Bill itself is designed to replace and expand greatly the activities formerly carried on by the Export Payments

Insurance Corporation which was established as far back as 1956 and whose activities were expanded from time to time during the life of the Liberal-Country Party Government. As I have said, that Corporation is to be replaced under this Bill by the Export Finance and Insurance Corporation. The reason for this is that the Export Payments Insurance Corporation had been limited broadly to providing insurance cover and guarantees for either Australian exporters or overseas purchasers of Australian manufactured goods, and also, to a limited extent, insurance of investment overseas by Australians.

The major extension of that activity which is provided in this Bill is the establishment of an export financing institution which will make loans to either exporters themselves or to overseas buyers or overseas financiers of Australian manufactured goods. That is, in itself, a major extension of the role of the Export Payments Insurance Corporation. In addition to that provision, the Bill also extends the nature of the overseas investment insurance scheme. Previously the criteria on which insurance on overseas investment was made available were that it had to be investment which would provide export benefits for Australia or which assisted in the overseas marketing or production of goods. However, the criteria have now been considerably widened to cover direct investments which will be of assistance to the economic or social development of other countries.

In particular, the purpose here is to assist Papua New Guinea with its development and to assist and encourage Australian private investment in Papua New Guinea after that country gets its independence. Previously Papua New Guinea was excluded from the provisions of the overseas investment insurance scheme which was administered by the Export Payments Insurance Corporation, but now that Papua New Guinea is about to become independent- it is in fact self-governing- and because of Australia's great interest in the economic development of Papua New Guinea, we are particularly interested in and welcome the provisions which expand this insurance scheme to cover Papua New Guinea.

I turn to the other major aspect of the Bill, which is the establishment of an export financing institution to provide loans to exporters in Australia or to buyers from overseas. This provision is greatly welcomed by manufacturing industry because a number of Australia's major competitors, particularly in the United States of America, Canada, Japan and Britain are already providing similar types of financial arrangements at concessional rates of interest and on concessional conditions to assist their own exporters. Therefore, Australian exporters of manufactured goods, as a result of their inability to obtain that type of finance, have been at a disadvantage with our major competitors. Admittedly, the old export payments insurance scheme- the insurance of extended type of payment or the guarantee for extended terms of payment- has been of great assistance to Australian exporters over the years, and what is provided by this Bill is simply a natural but very important development of that type of assistance.

The only question that might concern the Parliament is the effect of such a scheme on existing financial institutions, particularly the trading banks. But there is in the Bill the very clear direction that the Export Finance and Insurance Corporation is not to make loans if in fact finance is available from the banks on terms similar to those provided by the Corporation. The Corporation can make loans only if money is not to be forthcoming from the ordinary financial institutions. In fact, what will be provided here is more of the long term type of finance. The banks will continue to provide the source of funds for the ordinary transaction which will be on a short term basis.

There are laid down some major criteria which the Corporation is to follow. As I have said, the Corporation will be especially designed to provide long term finance, that is, finance on credit terms mainly in excess of 5 years. The Corporation is also to have particular regard to business with developing countries and overseas state trading organisations and, of course, our trade is developing with this type of customer. The Corporation is to act on behalf of the Government in certain matters which are classified as national interest transactions; in other words, transactions which the Corporation would not normally accept as business transactions but which the Government requires the Corporation to accept.

It is also laid down that the Corporation is not actually to set the pace in competition with our overseas competitors. It is intended to provide finance on terms and conditions which will match that type of competition. In that regard I just wonder, in an increasingly competitive world trade with increasingly difficult world trade conditions, whether or not Australia will have to become even more aggressive in its marketing overseas, and whether or not it may be necessary also in some cases for the Corporation to provide slightly better terms for our exporters who are in competition with other countries. That is no doubt a matter which will be kept under consideration from time to time. The other overriding guideline which the Corporation will follow will be the conduct of its normal business -apart from the special type of national interest business which I have already mentioned- on sound, ordinary commercial principles. Therefore, as I have said, it will really be providing an extended type of service which would otherwise be provided by the normal financial institutions and it will really be simply supplementing those institutions rather than trying to supplant them in any way.

The question which I think immediately comes to mind in regard to this new scheme is: What finance is going to be available to it? We are setting up a type of financial institution which will provide a very important service to Australian manufacturers and exporters. Undoubtedly it must be of great concern to find what funds are going to be available to provide this service if it is to be realistic and worth while. The present Budget provides for a sum of $5m only for the purposes of the direct export financing by this new corporation. I am dealing only with the new type of business. The old Corporation has sufficient funds in hand to carry on the old type of guarantee and insurance type of transaction without the need for any new funding. But new funds are obviously required for the Corporation if it is to enter into the new type of direct financing which I have been discussing.

The Government has estimated that approximately $50m will be required for this purpose. It will naturally be a revolving fund because the loans made will be repaid over the years. I am a little struck by the very great discrepancy between the estimate that $50m will be required and the allocation of only $5m in the present Budget. Admittedly it will be required in the first 3 years, but there is a vast discrepancy between the estimate as to the funds required and the allocation. I wonder whether the Minister for Agriculture (Senator Wriedt) could give some indication in his reply of what the policy is going to be in relation to the provision of the finance, apart from this $5m, that will be required in the not too distant future.

As I have said, this type of assistance to manufacturing industry in Australia to enable it and to encourage it to export more of its goods and to be able to compete in an increasingly more difficult world trading situation is one which is of great importance to our community. The importance of manufacturing industry to the nation has been clearly underlined by the Opposition in recent weeks. It is a little ironic that a government which has by its policies caused so much depression in manufacturing industry should be bringing in this very valuable type of encouragement to manufacturing industry as far as exporting is concerned. I would only wish that the Government's domestic policies in relation to manufacturing industry could be as enlightened as this policy in relation to its encouragement of manufacturing industry to export its goods. Of course, the two cannot be divorced

Naturally enough any policies which depress manufacturing industry, which depress the domestic market and which create a lack of confidence and so on are going to have a great impact on manufacturing industry's ability to have the will and the capacity to compete in world markets. An outstanding feature of the Australian economy since World War II- over all the years of the Liberal-Country Party Government- is the great improvements and the great strides which were made by manufacturing industry. Its large development over those years has been a major factor in the strength of the domestic economy and manufacturing industry is now contributing in a very outstanding way to our standing in the world economy, to our balance of payments and to our economic strength generally as a nation. We are now back in a period of time in which we have again to start watching our balance of payments.

For some years we were in a state of very great strength as far as our balance of payments was concerned. Indeed, they were so healthy, of such a high order, that that in itself was regarded as a problem. I could never see why that in itself was such a problem, but certainly in recent months there has been no reason to believe that the size of our overseas balance of payments is a problem. Indeed the problem is that our balance of payments is rapidly deteriorating. The balance in the September quarter showed a reduction of some $600m and a very large deficit of something like $150m actually in the trading account itself. So we are back in an area in which we have to pay very serious regard again to our export performance. We know the problems that exist in our rural industry. Our exports in many aspects of our rural industry- particularly the beef and wool sectors- are a matter of great concern. There are some bright spots, of course, as we know. I refer to the wheat and sugar sectors.

We must always remember the great importance to Australia of the export performance of manufacturing industry and its remarkable growth. In the mid- 1 950s I think it was worth about $100m. By the last financial year it had grown to $ 1,340m. That is a remarkable growth. It is of new importance as far as overcoming our balance of payments problems is concerned, if we are running into that area of concern. As I have said, I think that we are. I believe, therefore, as the Australian economy becomes more sophisticated and even more industrialised and as it hopefully will grow, that the manufacturing industry as an exporter and as an earner of overseas exchange will become even more important and will be of steadily growing importance. Therefore, the Opposition welcomes this additional incentive and this additional type of assistance that the industry is being given. We only wish that the Government's other policies which have had such a great and serious impact on manufacturing industry, causing deterioration, would be as enlightened as this policy is in relation to assistance for exporters of manufactured goods. I repeat that the Opposition welcomes this measure.

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