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Wednesday, 8 March 1961

Mr McEWEN (Murray) (Acting Prime Minister and Minister for Trade) . - At the outset, Mr. Speaker, I wish to congratulate the honorable member for Higinbotham (Mr. Chipp) and the honorable member for Calare (Mr. England) - 'the mover and seconder respectively of the motion for the adoption of the AddressinReply - upon their maiden speeches. Each of those speakers brought to the House, straight from the people, a refreshing review of conditions in Australia, and gave to the Government and to Opposition members of the House - I am sure - a new and useful glimpse of what is being thought outside the working field of politics as we find it here. I look forward to a long association with each of them in this Parliament.

I take this early opportunity to make a statement to advise the House of measures which the Government has taken recently, or proposes to take, in its overall programme, aimed at improving our external trading position. This seems necessary if honorable members are to debate the Administrator's Speech with all the available facts before them. I have therefore consciously designed this statement to be non-controversial in its presentation.

In January, the Prime Minister (Mr. Menzies) announced that the Government had taken important steps to intensify the drive to increase our export earnings. He announced that a special committee of the Cabinet had been established to carry through a comprehensive and continuous examination of positive measures to increase exports. This committee has undertaken its work against the background of our already real export achievements. Aus tralia, despite its small population, ranks in the first dozen countries as an international trader. Despite this record we have an intransigent balance of payments problem, related not so much to what would appear to be inadequate exports as to unsatisfactory prices for many of them and, above all, this country's enormous appetite to import.

To attack the problem further, the Government has decided to intensify its export drive. The measures which it has adopted for this purpose during the last few months have been announced by the Prime Minister. These, together with a most recent decision to provide taxation incentives to encourage exports, which I will describe presently, should be viewed and judged against the broad requirements of our national export needs. These and other measures, to which I will refer briefly, have been designed with the knowledge that any successful export programme must encompass certain essential ingredients.

In brief, there must be certain inducements, based upon confidence of profitable operations, to produce for export; markets must be discovered, and access to them negotiated; then the product must be adapted to the needs of individual markets, presented well and vigorously promoted. The overseas agents must be serviced effectively. The Government's export planning has always assumed that the great primary and mining industries will continue to earn for Australia the bulk of our foreign exchange. These industries must therefore be assisted to hold and expand their markets. In addition, exports of factory products must be expanded.

The Prime Minister has already announced that certain public works which he mentioned, and to which I shall shortly refer, would require consultation with, and the co-operation of, the State governments and. where necessary, the devising of financial arrangements fair to both parties. These projects are important to the expansion of Australia's export trade. The Commonwealth is discussing with the State governments concerned the construction of roads in Queensland, the Northern Territory and Western Australia, to aid the beef and mining export industries. In addition, we are examining whether some Commonwealth assistance to the States could ensure the early completion of modern berthing and loading facilities at coal-loading ports.

The results of efforts to sustain and expand coal exports are clearly dependent upon these loading and berthing facilities. The modernizing and standardization of key railway links in Western Australia and South Australia, which could assist the development of important export industries, are at present under active discussion with those States. By planning now, the way should be clear for us to proceed in 1962 on such projects to increase our export earnings. Discussions are proceeding with the appropriate States. It will be evident that this goes a long way towards giving a decided export bent to national development programmes.

Additions to our export earnings are also expected to flow from the recent decision to permit limited trade in iron ore. Much attention has been given to steel as a product which can play an important role in 'becoming a regular and substantial export. Encouraging discussions have already taken place with the Broken Hill Proprietary Company Limited. But to produce goods is one thing and to sell them is quite a separate task, and continuous energy needs to be devoted to the problem of expanding existing markets and winning new ones.

It has already been announced that legislation will be introduced this session to empower the Export Payments Insurance Corporation to give cover to certain transactions which are at present outside its scope, but which the Government may consider should be covered in the national interest. Large-scale trade development efforts have been authorized in South America and the Middle East. Last year the Government sent a survey mission of businessmen to South America. It reported favorably on prospects for increasing Australian trade, particularly in the countries on the north and west coasts of South America. To permit the pioneering work in these markets to begin, the Government is negotiating with shipping companies for the establishment of a regular shipping service and will do this, even if it entails some financial assistance over a limited period to get the service established. It has been decided that trade commissioner posts will be opened in Lima, Peru, and in Caracas in Venezuela. A trade mission will be sent to the area, and an appropriate trade publicity programme will be undertaken. The Middle East and eastern Mediterranean areas also offer good prospects for the expansion of Australia's export trade.

A trade mission will be sent to the eastern Mediterranean countries this year and, in co-operation with industry and commerce, a trade display ship will go to the Persian Gulf areas early in 1962. A supporting publicity campaign will also be undertaken. The agreement of the appropriate governments is being sought for the opening of new trade commissioner posts in Teheran and Beirut. The trade commissioner's office in Cairo, which is already an important one, is to be strengthened. The cost of the Middle East and South American programmes will be in the neighbourhood of an additional £220,000 a year, which will be in addition to the present cost on the current Budget, of £1,750,000, for trade promotion and publicity abroad.

In these days international tourism is rapidly expanding and is becoming a significant source of overseas funds for Australia. The Australian National Travel Association has estimated that some 68,000 tourists spent £12,500,000 here in 1959. In close consultation with the States and the tourist industry, the Commonwealth Government has decided to take an active role in the development of international tourism. It has given an immediate additional grant to the Australian National Travel Association, and has already turned the resources and facilities of the trade commissioners throughout the world, and of the trade publicity programmes overseas, to support tourist promotion abroad. We have just received from the association a programme to intensify tourist promotion, to which the Government will be giving early attention.

I do not want to leave the impression that we have not been vigorous in this field already. The current Budget contains provision for £100,000 to assist the operations of the Australian National Travel Association, and the additional vote to which I have just referred - a prompt and immediate one - represents, if my memory serves me right, which I am sure it does, an additional £20,000.

The Government has given much attention to the need to trigger off an Increased interest in export in which manufacturers must play a bigger part 'than in the past. It has been decided to stimulate the export drive by certain taxation measures. This is an important decision. First we want to assist the promotion of our products in existing and new markets. To this end the Government has decided to introduce a taxation allowance to give positive encouragement to increased effort in export promotion abroad.

Under prevailing tax laws an expenditure in overseas market development which is accepted by the Commissioner of Taxation is an allowable business expense and, as such, the company is remitted tax at the rate of 8s. in the £1. The incentive proposed is that this rate of remission be doubled. This means that for a period of three years, beginning on 1st July, 1961, a company which has expenditure on market development can expect an allowance of 16s. in the £1.

In respect of visits overseas for this purpose, the Commissioner of Taxation must be satisfied that its bona fide purpose is for export market development. In such cases, fares only will qualify for the allowance. Personal expenses will not qualify. There is also a number of other points of importance on which the Commissioner of Taxation will need to be satisfied. The Government expects that this will provide a major stimulus to overseas market promotion and development. It will apply to all products in all export markets. It is expected to give positive encouragement to the further development of the vigorous merchant exporters on whose skills and knowledge of the overseas markets so much of the expanded national export programme will depend.

A way was sought which would further stimulate export of processed and manufactured products. This is a major objective of the export drive, to encourage all Australian processors and manufacturers to seek to enter export markets; to give some aid and incentive to those whose export achievements will be determined by their export costing. To this end the Government has decided to grant a rebate of pay-roll tax related to the value of export sales achieved.

There will be a formula which, up to a point, will increase the benefits of pay-roll tax abatement as the taxpayer lifts the level of his export sales. The rebate will be allowed according to the increase in the value of the exports which an organization achieves over the value of the average of its exports in the base years 1958-59 and 1959-60. The rebate will be calculated having regard to the proportion which increased export sales bear to total income from sales. The rebate will apply for three years from 1960-61. In the light of the experience of those three years the policy will be reviewed.

I think that I can best explain the way in which the scheme will work by giving an example. Let us assume that a manufacturer has been exporting, say, £100,000 worth of goods, and in the course of his drive for further exports subsequently increases his exports by £10,000 a year in value, to the level of £110,000. If his income from total sales - that is, on both the domestic and export markets - is, say, £1,000,000, then his increase in value of exports of £10,000 will represent 1 per cent, of his gross income from sales.

In choosing a realistic basis for a formula that would give good prospects of achieving the objective of encouraging a worthwhile increase in exports, the Government has decided that where export sales were increased over the base period by 8 per cent, of total income from sales, the exporter would gain exemption from pay-roll tax. This incentive exemption would apply on a pro rata basis for increases up to 8 per cent. The legislation will also include provisions whereby benefits can be obtained by firms supplying materials and components to the final manufacturer. No commodity is excluded from this arrangement.

As a result of these two taxation arrangements there will be both an inducement to search for markets overseas as well as an increased inducement and capacity to bid for business overseas. Legislation to cover these proposals will be introduced.

The Government will, of course, continue, and indeed intensify, all its present programmes of export promotion and market negotiations and is confident that private enterprise will respond with increased energy and activity to the financial stimulus now involved in this.

These, then, are recent developments in the policies which are all integral parts of an intensified export drive. In addition, we are examining proposals further to help the sale of our primary and secondary products abroad by assisting in the development of warehousing facilities for Australian products in important markets. We are calling on the assistance of skilled businessmen and advisers to help us in forming a judgment on this matter. Oil and mineral exploration will be further encouraged and, in general, all possible prospects of earning additional exchange funds will be given close and continuing attention. These are all parts of a positive approach. There is no single touchstone by which all our export problems will be solved. Nothing is more important than the costs and efficiency at point of production and the energy and efficiency of the salesmen.

I give this explanation to the House in order to make members aware that the intensified drive of which we have spoken has taken shape. These are important decisions by the Commonwealth which, I am sure, in due course, the Parliament will endorse, but the concept still requires the co-operation and support of State governments and of Australian industry, both primary and secondary, and, by no means last, the commercial enterprises which finance and sell many of our products abroad.

I would not wish to conclude without paying a tribute to those who comprise the Export Development Council and the Manufacturing Industries Advisory Council, who have been so helpful, and have given so much time to the task of developing a wide export consciousness throughout Australia.

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