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Wednesday, 20 May 1970

Mr CORBETT (Maranoa) - Clause 6 of the Australian Industry Development Bill, which we are now considering, states: (1.) The functions of the Corporation are lo assist in ;he provision of financial resources required by Australian companies engaging or proposing to engage in industries in Australia concerned with the manufacture, processing or treatment of goods, or with the recover)' of minerals, for the purpose of facilitating and encouraging the establishment, development and advancement of those industries.

It is said that there are other avenues for obtaining this type of finance but, despite the fact that those avenues may be available and despite the credit that has been given to them, it is quite obvious that more must be done to retain Australian equity in Australian companies. The other avenues are still there. Notwithstanding endeavours to discount the arguments advanced in his second reading speech by the Minister for Trade and Industry (Mr McEwen) lo prove the need for the Australian Industry Development Corporation, there can be no doubt that there is a need for it if we are to retain such equity in Australian industries as is desirable and in the best interests of this country.

Australia's development in the last decade has been marked by rapid industrial growth. The annual value of production has doubled over the last decade and the value of exports of manufactured goods has increased from 11% to 17% of the total in the same period. Vast mineral deposits have been discovered. We have reserves of iron ore sufficient to supply the world's needs for perhaps centuries to come. We have giant bauxite reserves and vast reserves of coal, phosphate and nickel. The discovery of these reserves is the work of men of vision. It is a remarkable record of achievement by private enterprise both in Australia and overseas. Al] this has been helped by the initiative of the Government in devising effective policies and providing facilities for development: encouraging confidence in the development of Australia. Not enough credit is given to the Government in this regard. An entirely new era in Australian industrial development is dawning, founded on a sound industrial base that has been already achieved. The opportunity is now with us to develop industries to world stature and competitiveness by achieving higher levels of processing of Australian raw materials by associated industries and the full development of Australian inventiveness.

Manufacturing industries can be developed, which are geared from the outset to the export trade. This will overcome the disadvantages of the small home market. Operating at the lower cost because of low cost Australian raw materials, a larger scale of production is possible, making exports possible. This is what we are looking for. We want companies which are large enough to compete with their exports on overseas markets, at the same time supplying the Australian market. We want to see these companies selling to the world Australian invented, Australian designed and Australian manufactured products. All this is possible and will be achieved in the not too distant future. The implications of development are wide ranging and of great importance. The general level of costs in industry will be lower as a result of this type of operation. The new giants will in themselves be important new outlets for Australian manufactures and service industries. They will provide a new impetus for Australia's urban development and, naturally, new wealth always means that a higher standard of living can be provided in this country.

Large scale industrial development needs large scale finance. This is elementary. The development of mineral resources in this country has already cost hundreds of millions of dollars. The Hamersley group, for example, has spent more than $300m in exploring for minerals and will spend perhaps a further $150m. The Mount Newman group has already spent about $200m and will spend a further $70m. Finance has had to be found by private enterprise on a scale which hitherto in this country has been the preserve of governments. The further development of resources for processing, refining and manufacture will require far greater injections of capital than we have witnessed to date. It has been clearly demonstrated that if we are to exploit to the full these new opportunities capital must be forthcoming and effective Australian ownership and control must be achieved. But there is a problem here because capital is very scarce in Australia, despite the remarks of the honourable member for Corio (Mr Scholes). Although the Australian capital market is growing steadily, there is not enough capital in this country for the type of development we envisage. Also, industrial development could not be permitted to absorb all of the capital available in this country because if this happened other vital sectors would suffer.

Few Australian industries are large enough to obtain the vast capital resources necessary for expansion to a world scale of production. This must be conceded generally in examining this aspect. This is particularly so when a new or enlarged project will not be income generating for some years, as is often the case with large scale projects. Inevitably an Australian company wishing to develop must look for an overseas partner. This has been the practice in the past. Such a partner will almost always be a large international company. If that international company or any other company is able to provide finance for the Australian company it can be provided only at the expense of lowering Australian equity in the Australian company. Yet all too frequently these overseas companies providing this finance are themselves borrowing on the international capital market. They are well known to the international investor. They can borrow on their general credit reputation. They can use a variety of capital raising techniques to enhance the attractiveness of their borrowings. This is because of their large scale efforts in this direction.

For an Australian company expansion too often means a loss of independence; a loss of Australian control. The Australian company has the very undesirable choice of accepting this or deciding not to expand. This is a situation which we should not allow if it is possible to avoid it. It is in this direction that the AIDC can play a very worthwhile role because when a project is soundly based and when existing financial institutions have got together all the finance they can provide for it, the Corporation will bring to bear its fund raising activity to help the project on its way. The Corporation will seek the needed resources on overseas markets. It has been claimed that overseas funds would not be available to the Corporation or, if they were available, they would be at rates which would be too costly for Australian ventures. But capital is available overseas. Much of Australia's mineral development is being financed by these very borrowings on the international capital market.

I have already emphasised the extent of such financing by giving one or two instances. To show the extent of overseas capital available let me say that total borrowing on the Euro bond market alone in 1969 amounted to no less than 52,435m. To put the matter in perspective, that sum would be enough to finance 3 Snowy Mountains schemes - schemes which by recent Australian standards were gigantic. It is true that Euro bond rales have been higher than rates in Australia, but as the honourable member for Lilley (Mr Kevin Cairns) himself pointed out, the gap has narrowed significantly. There is no arbitrary upper limit to the interest costs which sound industrial ventures can bear, lt is true that borrowings would be more attractive if interest rates were lower, but it has been proved that sound industrial ventures can carry high interest rates and still be successful; still promote the development of Australia as we want to see it promoted. The multi-national corporations borrowing substantial long term funds at these higher rates show that there is a potential for the profitable employment of higher cost funds raised by the AIDC on behalf of Australian owned ventures even if they have to bear the higher interest rates.

I.   repeat that it would be desirable if these rates could be kept as low as possible but it is not necessary to eliminate this type of borrowing. Proven financing techniques can significantly reduce the cost of borrowing. Such techniques naturally should be the aim. I want to emphasise that there is no doubt al all as to the ability of the Corporation to borrow on overseas markets. 1 say that because I believe that the point has been widely canvassed with Austral an and overseas financial experts. This matter has been gone into very thoroughly and very well and, indeed, it has been gone into with many of those with whom the Corporation expects to do business. This Corporation, established by a Government, using the financing techniques available to borrowers with invest ment appeal will find a secure place in the capital markets of the world. One of the great needs of Australia today is just that. There is no doubt at all as to the Corporation's acceptability to Australian industry. The Associated Chambers of Manufactures of Australia and the Australian Industries Development Association have expressed favourable views. There is no need at all to fear the Austral:an Industry Development Corporation. These organisations welcome it. It was described by the Associated Chambers of Manufactures of Australia as 'a constructive and imaginative contribution to the development of Australian industry'.

In addition the B il provides that the Australian Industry Development Corporation will assist only when it is requested to do so by the company to be assisted and I think this is a point that should be noted. So there are no fears that the Corporation will interfere where it is not wanted. There is ample scope for the Corporation to contribute in a positive and non-restrictive way to the sound and full development, of Australian-owned industry. In the course of this debate there has been some question about the extent of takeover of Australian companies by overseas companies. 1 would like to quote one or two factors that will support this argument, although I do not think that the arguments put up by the Minister in that respect have even been shaken by the arguments used against it.

I will not weary the House with a long quotation but I will quote the first paragraph from a relevant article headed: S 1 00m Goes Overseas'. It appeared in the Melbourne 'Age' on 7th December 1968. The article says:

Overseas takeovers of Australian business are running at an unprecedented level. Since January, foreign controlled corporations have brought more than $wOrn worth of listed local companies under their control.

While 1 will not go on to quote the rest of the article, I would like to draw attention to the fact that on that same page there is an article headed 'Biggest Foreign Takeovers' which lists some 19 companies that were taken over in 1968. In fairness, some of those companies have been mentioned in this debate and have been queried to some extent. There is a list of 19 companies which I could quote but I do not think I need do so in order to support my argument. The list is there for anyone to see. I wish now to refer to an article published in the same newspaper on 14th March 1969. The article is headed 'Uniroyal takes S.A. Rubber'. It says:

The giant Uniroyal rubber group of the US has bought a controlling interest in the South Australian-based tyre and rubber goods maker, SA Rubber Holdings Ltd.

Further on the article says:

The acquisition makes South Australia Rubber a subsidiary of Uniroyal and gives American manufacturers a stronger grip than ever over the Australian tyre and rubber industry. Only two of the major manufacturers are now controlled by Australian interests.

These are 2 examples and if honourable members want more there are plenty available. There is no doubt about the need for some action to be taken to maintain Australian equity in Australian companies. This Bill bringing the Australian Industry Development Corporation into being is certainly a very effective way in which to do it.

I want to turn to one other aspect of this Bill which has arisen during the course of debate. It has been said that the Australian Industry Development Corporation has possibilities for use as an instrument of Socialism. 1 want to point out that if there was a change of government and the new government wanted to use some measure as an instrument of Socialism it would not be necessary for it to be on the statute book; the new government would introduce it. It might be a better one if the new government tried to twist it a little bit rather than establish one of its own. I have no doubt that it would go the whole hog and introduce Socialism over the whole field. The existence of this Bill would not make any difference if there was a change of government. However, there are adequate safeguards in the Bill to prevent it from being used as an instrument of Socialism. Although the Corporation may acquire equity in a company, under clause 8 (3) (c) of the Bill the Corporation is directed to 'endeavour, so far as practicable, to avoid becoming or remaining in a position where it is able to control or manage the affairs of a company to which it provides assistance'. That section specifically directs the Corporation to do that. Under clause 8 (4.) the Corporation is directed to dispose of its equity in a company where the retention of the shares is not necessary for the proper performance of its functions. The Corporation is able only to assist the company to carry on and to ensure that Australian equity is retained. Clause 9 of the Bill states:

In the exercise of its powers the Corporation is not subject to direction by or on behalf of the Commonwealth.

So I think we can fairly claim that this Bill is not a Socialist Bill and that avenues by which socialistic methods might be used in its implementation have been covered by provisions of the Bill. Let me repeat that, although this legislation could be changed, just as easily a new Socialist measure could be introduced.

Mr Foster - What do you call socialistic measures?

Mr CORBETT - I would not try to explain it to you because I have not time today. I conclude by saying that the potential for industrial development on a world scale obviously exists.

Mr DEPUTY SPEAKER (Mr Jarman}The honourable member for Sturt will restrain himself.

Mr Foster - He is being very provocative.

Mr CORBETT - He is the ever open mouthpiece of the new look Australian Labor Party. There is potential for industrial development on world scale in Australia. There is a need to supplement the scarce Australian capital and that need will continue. The capital markets of the world have shown their willingness to provide funds for Australian development. The strongest assurances have been forthcoming in Australia and overseas from eminent and informed financial and industrial leaders that a corporation structured along the lines proposed in this Bill, working as no other Australian institution is geared to do, would be an acceptable partner with private enterprise for Australian industrial development with Australian ownership. Mr Deputy Speaker, I support the Bill.

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