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Thursday, 10 March 1966

Mr CONNOR (Cunningham) .- I listened with considerable satisfaction to the comments of the honorable member for Mackellar (Mr. Wentworth). Whilst ideologically undoubtedly there would be a chasm separating us, on matters of economics, particularly where the true and real national interests of Australia are concerned, we might share to some extent common ground because his comments, and his strictures, on the question of overseas investment certainly agree with my own views. I would commend to honorable members the perusal of a publication by an organisation which goes under the acronym of "C.EJJ.A." - the Committee for Economic Development of Australia, which is sponsored by the major banking and industrial firms of Australia - namely its issue "Growth", No. 6, containing details of foreign ownership of Australian businesses. The comment which is made on page 24 of that issue is particularly relevant. This is what the author, Mr. V. D. Gibson, said -

It is patently evident that a thorough examination by the Australian Government of its policy towards foreign capital is long overdue. Unless Australia throws off its inferiority complex and resolves to be master of its own economic destiny it can never achieve the title of a great nation for which its resources are ample and to which its people aspire.

Mr. Gibsonprovides some most illuminating evidence. We understand, of course, that something approaching 90 per cent, of Australian capital investment is generated from savings within this country. We know that the remainder is coming from overseas.

Let us have a look at the policies for the control of foreign investment in overseas countries. Take, for instance, India, a country which has just emerged in recent years into self government and which has probably the most formidable task of any major country in the world in terms of its economic development. There, although it is desparately short of capital, there are rigid controls on foreign investment. In fact, in some fields it is prohibited. In all others there is a requirement that the controlling interest in all new ventures must be in local Indian hands.

Let us now take the case of Japan, which, over the last few decades, has had phenomenal economic growth. There also we find that most rigid controls are imposed. For instance, whilst Japan welcomes overseas loans we find that companies with a majority of overseas ownership are refused guarantees for remittance of profits and capital. They are also -refused guarantees of compensation in the event of expropriation. But, despite this, foreign investment is still coming into Japan on a quite substantial scale.

Let us go now to the United Kingdom which is more internationally minded and tolerant than most other countries, and more sophisticated in its economic policies. Even there every endeavour is made to preserve the major British equity in its own industries. Take New Zealand where recently enacted legislation requires Treasury approval of takeovers by overseas companies. I do not think that I need quote to honorable members the situation in the Dominion of Canada and the economic problems that have arisen there by foreign domination of its industry. Even there the Canadian Government is doing its best to extricate itself from the,dilemma in which it has been placed by its own lack of wisdom or the lack of wisdom of preceding governments. In Holland approval is required for direct investment. In France government approval is required for direct foreign investment, and local participation is required in mining and certain other fields. Brazil, another country in dire economic circumstances, prohibits foreign investments in mines. Malaysia gives tax concessions to new industries which have a local majority ownership. Pakistan and the Philippines require a special licence for overseas investment without local equity.

To summarise the situation, I point out that, in all these cases, despite the varying controls, none of these countries has frightened foreign investors away, and few would have as much to offer the foreign investor as Australia does, even if we were to introduce a degree of regulation. I view uncontrolled foreign investment as a new form of economic colonialism which is substituted for the old imperialism. Armies of occupation are no longer sent to subject countries to exploit them. There is a much more select and sophisticated technique of ensuring that the dominating country is able to extract the profits it seeks to obtain from its investments. I would be the first to concede that there are many substantial benefits to be gained by certain forms of overseas investment. Having said that, I ask: What do we face? The warning appears in the Vernon Committee's report. It is there, and the Government knows it is there, and resents its being there; namely, that we face a substantial degree of overseas control of our industry. We face overseas economic control; we face overseas dictation of our policy; and in the long term we will have overseas dictation and restriction of our national development.

I listened with great interest last night to the comments of the new Treasurer (Mr. McMahon) and whilst I was prepared to extend to him the charity and the courtesy of an impartial hearing I was quite frankly amazed. The man is an incorrigible optimist and the victim of his own propaganda. The whole of his speech, with due respect to the honorable gentleman, was an exercise in self deception. I will not weary the House by quoting excerpts from it but in toto it was merely a string of economic platitudes. It contained a marked degree of flippancy, of ineptness and of inefficiency. In substance and in form it typified the sloth and complacency of this Government. After all, we are in a new era. We are in the post Menzies era when new men of less stature have assumed the reins of government in this Commonwealth, and the crown is perhaps a little bit big for some of them and the shoes into which they have stepped are perhaps flopping around on their feet as well. It is quite certain that the former Prime Minister knew and deliberately timed with great precision the date of his retirement. He has left to this Government a very considerable legacy of economic trouble. The problems are very real.

It is only a matter of a week ago, or a little longer, since there was a mass deputation from the various manufacturing interests, the various importing interests, the Chambers of Commerce, wool growers, master builders, retailers, the automotive industry, and the whole gamut of industrial and economic activity within Australia to the Prime Minister and his individual Ministers to state their case for, as it has now been aptly phrased, a little more gravy in the Australian economy. The warnings that we of the Opposition uttered at the time of the 1965 Budget are coming home to roost. That Budget was a soak the sinners budget. It was deliberately designed to reduce consumer expenditure and consumer demand, and it has had precisely that effect. Because of that effect we had the encouraging spectacle, from our point of view in political terms but one which we greatly regret in terms of the welfare of Australia and the living standards of its people, of a mass onslaught to this Government asking that it face up to its responsibilities and drop its sloth and its living in a world of make believe and get down to the stark economic realities of 1966.

If ever there was a modern Micawber it is our present Treasurer, because of the confidence he exudes and the confidence he expressed when he said that the interests of the nation are likely to be best served if the pattern of economic activity is able to adapt itself freely to the changing pattern of national and economic demand. Micawber never did better than that. I should say that he has out Micawbered Micawber, and from this modern day Micawber all we can expect is a repetition of the near disaster that occurred in this country in 1960 and 1961. After all, we now have, shall we say, dual ministerial control. We have the former Treasurer who is now the Prime Minister and we have a Treasurer who is an economic hierophant and who, like the sorcerer's apprentice, has learned part of the trick of producing rabbits out of the hat but does not know how to stop producing them. Most of those rabbits seem to be like those bred in the economic crises of 1960 and 1961.

After all, the Government is suffering from a reaction. It no longer has the national image of the former Prime Minister. It no longer has his prestige, his charisma or his mystique to shelter it from the wrath of the Australian people. We have taken with the retirement of the former Prime Minister a leap from the economics of 1960 to the realities of 1966, and this Government does not know how to handle them. Worse that that, it is saddled with the Vernon Committee's report which is round its neck like an albatross and which will be there until the Government's destruction at the forthcoming election. Two things will then destroy this Government. One is the economic effects of the drought and the other is the certainty of the resentment of the Australian people of the Government's economic incompetence and its inability - its utter stark incapacity - to plan in terms of Australia's best national interest.

The Vernon plan is an economic hair shirt, if I may change the metaphor, that this Government, Treasurer and Prime Minister will wear until the next election. It will be there as a constant irritant. I should say that 80 per cent, of the Vernon Committee's report is acceptable to the Opposition. Its suggestions seem reasonable, practical and make common sense, but the technique of the big smear was adopted when the report was tabled in the Parliament. Goebbels used precisely the same technique. It was aptly said this morning by a radio commentator that the former Prime Minister did not like the Vernon Committee's report and neither did the report like the Prime Minister. His reaction was a typical and obvious one. He was perhaps at the peak of his arrogance and petulance when he stigmatised the Committee. I remind honorable members of what he said when the report was tabled. He said -

It will, of course, at once appear to honorable members that, if the only problems in dealing with economic policy in a nation were purely technical, Parliament, which is not technical, and a Cabinet which is not technical might as well hand over to a group of technicians. In such a case democracy would have ceased and a technocracy would have begun.

That smear, that sneer, is still there and the Government is stuck with it. Last night the Treasurer attempted to wriggle out from under it a little, but the hard fact is that this is an age of technocracy, an age of planning, an age of stark economic realism. But the Government is living in the past. It has had a big brother to protect it, but now it has nothing other than the pygmies who have come in his place.

Let me deal in particular with one of the problems that has arisen and which this Government is utterly incapable of solving. I refer to the situation that has arisen within the Australian steel industry, which of course is of national importance and which has still a marked export potential. I should like to quote from a comment made by Sir Colin Syme, the Chairman of Directors of Broken Hill Pty. Co. Ltd. as reported in the "Sydney Morning Herald" of 2nd March. The report states -

The Broken Hill Proprietary Co. Ltd. foresees difficulties in keeping all sections of its plants operating at capacity levels during the remainder of the year ending May 31. . . .

It further states -

Recalling the annual meeting last September, Sir Colin says that he told shareholders of indications of an easing in demand for some types of steel. "Since then and particularly during the last two months these indications have become quite marked."

Sir Colinwent on to state the various factors that were responsible - the drought, a re duction in housing and a decline in automobile sales. He referred also - I particularly stress this factor - to steel imports. The report states -

Sir Colinsays that a further factor is that substantial steel imports in the form of rolled products and manufactured goods - such as motor cars - are coming into Australia.

These goods are coming mainly from Japan, and the prices for rolled products must show a very low return to the overseas producer, he says.

These imports, coupled with the effects of the severe drought, have affected the demand for products of our largest customer, John Lysaght (Aust.) Ltd., and that company has consequently reduced its demand on us.

In 1962, when B.H.P. had some surplus capacity, export markets were available, but the current situation is entirely different as many countries have surplus steel capacity and are putting heavy selling pressure on world markets.

My comment relates particularly to the Japanese steel industry. The latest figures show that last year Japan had a total steel production of 44 million tons. Her internal consumption needs were 32 million tons, leaving an export surplus of approximately 12 million tons. Flat rolled steel products are coming into this country at dumping prices, but the Government cannot do anything about it. Certain types of steel produced in Australia are still able to compete on the export market. I refer to the bigger sections of steel - ingots, billets, blooms, rail and larger structural sections. But when the labour content is high, as in the end products like flat rolled steel - particularly the flat sheet steel that is used in the automotive industry - the Japanese have a competitive advantage. That competitive advantage is enabling them to undercut the Australian product. For the first time in 30 years John Lysaght (Aust.) Ltd. has had to make an application to the Tariff Board for the application of dumping duties under the relevant legislation. That application was made in December last, but up to date the Minister for Customs and Excise (Senator Anderson) has not decided whether to make a reference to the Tariff Board. I have sent telegrams to the Minister on the matter, but the replies I have received state that he has not yet been able to ascertain the selling price or the domestic production price in Japan and therefore has not been able to decide whether a dumping duty could be applied. Because the Japanese depreciated their currency in 1949 they are able to sell at a competitive advantage which cannot be detected under the terms of the existing legislation. I shall have much more to say on that matter when, at a subsequent sitting of the House, I deal with the Prime Minister's statement.

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