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Wednesday, 7 December 1960

Mr KELLY (Wakefield) . - I thank the honorable member for Lalor (Mr. Pollard) for leading us so carefully through a description of the processes of making and using sulphuric acid. I should like to think that the further steps in the argument will be as clear as those that the honorable member set out. As a matter of fact, however, it is rather a complicated story from now on, but, at the risk of oversimplification, I shall try to make it as easy as possible to follow.

First, I agree with the honorable member's remarks concerning the origin of the problem. The history of this bounty started with the Government's decision to encourage actively the manufacture of sulphuric acid from indigenous materials. The Government made a wise decision at the time. At least, it appeared to me to be wis?. I was very actively interested in the matter at the time, because I was farming and badly needed superphosphate. I knew that we could not obtain superphosphate without adequate supplies of sulphuric acid. I knew also that we could not maintain our supplies of acid unless we could import brimstone, but the price of brimstone was then very high, and in any case it was most difficult to obtain. The Government wisely decided that it had to encourage the manufacture of sulphuric acid locally from local materials. The companies interested in this local manufacture said: " This is not going to be a quick and easy process. What guarantee have we that if we undertake this production, and the price of brimstone falls, we shall be protected? " The Government said, as I understand it, " We will protect you and make sure that you do not suffer if imported brimstone becomes cheap ".

That is the background to the establishment of a number of acid-producing plants.

One of these is in South Australia, and I know that many South Australian members take an active interest in this matter. In that State a plant was established by Nairne Pyrites Limited, and 95 per cent, of the sulphuric acid used in South Australia is now produced in South Australia from locally obtained indigenous materials. In some States the manufacturers did not undertake to produce according to the new processes, using indigenous materials. One such firm is Pivot Superphosphate Company of Geelong, which is a very worthy company and I am not criticizing it in any way. That company said: "We do not think this is good business. We will continue to import brimstone."

That is the background. The position then changed considerably and brimstone became cheap and plentiful. That is the sort of thing that often happens. Any one making a judgment such as this runs the risk of being wrong, and in this instance the Government was wrong. When brimstone became cheap and plentiful, the manufacturers using locally produced material asked the Government to afford them some protection, because they had been asked to engage in this industry and it was now difficult for them to compete with those who used imported brimstone. The Government agreed to give some protection, but first had to decide whether this would be bv tariff or bounty. It was not hard to make a decision. Indeed, it would be foolish to impose a tariff because this would only make superphosphate dearer. The Government decided to grant a bounty and asked the Tariff Board to inquire as to the amount necessary to protect the locally produced material.

Now brimstone has become even cheaper and even more plentiful, and it is difficult for the companies making sulphuric acid from locally produced material to compete with those making acid from imported brimstone. The Government wisely decided to consider whether expansion of the industry should be encouraged. It agreed that it had an obligation to those already in the industry, but decided that the industry should not be further expanded. It asked the Tariff Board to inquire into the amount of bounty that would be required to discharge its obligation to the industry without encouraging uneconomical expansion.

I think that the position is made quite clear in the Tariff Board's report and in the Minister's second-reading speech.

The Tariff Board held its inquiry and the bill now before the House flows from that inquiry. The Tariff Board recommended that the bounty on 100 per cent, sulphuric acid made from locally produced materials should be a minimum of £3 a ton for the average-cost producer and £5 4s. a ton for the high-cost producer. It may seem strange for the Tariff Board to give a range of duties. Usually it does not make such recommendations, but says what it thinks. However, the difficulty of the Tariff Board in this instance arose from its difficulty in assessing the Government's responsibility to those who were producing sulphuric acid from indigenous material. The Tariff Board met this difficulty by recommending a bounty ranging from £3 to £5 4s.

The Government took the figure of £3. It varies as the price of brimstone rises or falls. It is very difficult to argue against the decision to adopt £3 as the rate of bounty sufficient to meet the position of the average producer. If the bounty were fixed at too high a rate, there would be a waste of money, and even honorable members opposite would consider that an unwise procedure. A high bounty, of course, would be satisfactory for the high-cost producer but it would be too much for the low-cost producer, who would then do too well out of the bounty. The low-cost producer would then produce too much sulphuric acid from locally made material and the Government's policy of discouraging the expansion of the industry would be defeated. The Government clearly would have these arguments in mind in deciding that the bounty should be £3 a ton, which is the amount found to be necessary to compensate the average-cost producer. Honorable members on this side of the House would undoubtedly hold the view that if a bounty is to be paid, it should be on a proper business basis.

But the position is not simple. South Australia entered into this business with a good deal of enthusiasm and with encouragement from the Government. Our Premier took an active interest in the establishment of the industry. Nairne Pyrites Limited in South Australia accordingly set to work to make sulphuric acid from locally produced pyrites. For some reason, which 1 am not technically capable of explaining, sulphuric acid made in this way is a good deal dearer than the acid made in other places from other materials. The Tariff Board makes this quite clear. It said in its report that there are several types of producers of sulphuric acid and the costs of some are higher than the costs of others. The board would not accept the suggestion that highcost producers were inefficient. Some producers were compelled to use material with a good deal lower sulphur content than the material available to other producers, and other factors influenced the production costs.

South Australia then accepted the challenge of the Commonwealth and, with a good deal of enthusiasm, started to produce sulphuric acid from local material. Because South Australia is a high-cost producer and because the bounty is said to be insufficient, the superphosphate made from the dearer acid accordingly tends to be dearer. But the industry cannot raise the price of superphosphate because of the fairly efficient price control system in South Australia. In addition, the Pivot Superphosphate Company is just over the border and would send from Victoria cheap superphosphate into South Australia if the price rose in that State. So the people who responded to the Government's call to make sulphuric acid from locally produced material apparently are the people who suffer rf the bounty is not high enough.

The farmer who uses the superphosphate is not suffering as yet. I am sure that the Government's policy would be designed to ensure that he did not suffer, and in fact this bounty is paid for that very purpose. The difficulty is that the South Australian producers of sulphuric acid, who responded to the Government's challenge to manufacture from indigenous materials, are now placed in a more difficult position, or so the situation appears to be. I am certainly not capable of analysing the balance-sheet of the South Australian company, and I think that the crux of the matter rests on an analysis of what the Government's obligation really is. Did the Government promise to protect the high-cost producer of sulphuric acid? If it does protect him, it over-protects the low-cost producer. I think that if the Government did give such an undertaking to the South Australian producers, it is in honour bound to protect them, and I am sure that it will honour its obligation.

All that I want to say in conclusion, Mr. Deputy Speaker, is that I hope that the Minister for Air (Mr. Osborne), who is in charge of the bill in this chamber, will recognize that there is a good case to be made for the South Australian company which did as the Government asked it to do in 1950. The Government ought to consider whether the bounty bears hardly on that company. I ask the Minister to have this matter inquired into with sympathy, because I think that the South Australian producers of sulphuric acid from indigenous materials have a case that is worthy of consideration.

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