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Wednesday, 20 May 1970

Mr CREAN (Melbourne Ports) - I will not follow my friend the honourable member for Hughes (Mr Dobie) down the fascinating path ha lo how a state-owned institution can be nationalised, lt seems to me that the proposed Australian Industry Development Corporation will be a Stateowned institution. The Opposition supports this Bill setting up this Corporation because its purpose is to increase the Australian content of industry in Australia and because it also proposes to promote industrial development. The main difficulty ] see about it - 1 am rather astonished at the nature of the criticism from honourable members on the Government side - is that it is a pigmy in its initial conception. I shall illustrate this by pointing out the magnitude of its proposed capitalisation when compared to the annual supply of capital in Australia at the moment. If honourable members read the Bill they will discover that it is proposed to capitalise the Corporation initially by a grant of $25m. This sum may be augmented in the first period of operation to 4 times that amount, if the Government is able to raise the funds. It is hoped that they will be raised principally from overseas.

I would like to clear one little difficulty that seems to have intruded into this debate, that is, whether this organisation is a bank or something else. If I may I want to repeat a story I have told in this House before. It is attributed to the late Lord Keynes. Someone asked him to explain the difference between the International Bank for Recon struction and Development and the International Monetary Fund. The late Lord Keynes is supposed to have said that you best understand the Bank if you think of it as a fund and you best understand the Fund if you think of it as a bank. I suggest, with all respect, that this Corporation will be a fund rather than a bank.

If one turns to the White Paper on national income one finds that for the 12 months ended in June 1969 what is described as gross fixed capital expenditure in Australia amounted to $8,083m, or in round terms S8.000m. About two-thirds of that sum was expended in private investment and approximately one-third in public investment. The principal thing that ought to concern honourable members is the item described as 'All other private investment'. This is what is left when we take out of the private field the money spent on construction of new dwellings and other new buildings. The sum left is what goes into the expansion or development of industry in our private enterprise system, or that part of industry still in that field, and in that period it amounted to $2,375m. That is why I say it is a pigmy conception to think that somehow the injection of $25m into the Australian Industry Development Corporation, leading up to possibly S lOOm, will disrupt the whole fabric of private enterprise.

The other interesting and significant figure that ought to be noted is that those capital funds amounting to approximately S8,000m were found in the main within Australia, with the exception of a sum of SI, 149m - not an insignificant item - which is described in the White Paper as the net apparent capital inflow. Of course, the significant and strategic thing so far as the Australian economy is concerned is the tendency for the majority of that net capital inflow to go into what is called all other private capital expenditure.

It is this which has led up to the sort of situation referred to by the Minister for Trade and Industry (Mr McEwen) as the preponderance of foreign ownership in certain of our industries. After all, he only quoted the figures, which are freely available, relating to overseas participation in Australian manufacturing industry in the period from 1962-63 to 1966-67. They

The degree of overseas participation in the Australian mining industry in recent years is a stark indication of what has happened. I gather from a lot of the speeches made in the course of this debate that most honourable members have high hopes that the sort of capital expansion envisaged with the institution of this Corporation will be in the mineral field. I shall quote some figures shortly which indicate that in some fields it is already too late because control at the moment is largely non-Australian. The table at page 13 of the document entitled 'Overseas Participation in Australian Mining Industry' shows that from 1963 to 1967 - a period of 4 years - overseas ownership in the mining field increased from 27.3% to 40.9%. Of course, the degree of Australian ownership on the other side declined from 72.7% to 59.1%. In other words, we have reached the stage where two-fifths of the minerals industry is under foreign ownership. Primarily what is being exploited are Australian natural resources. The exploitation is taking place on the basis of two-fifths foreign ownership and three-fifths internal participation.

Some mention has been made in this debate of another organisation, the Australian Resources Development Bank Ltd. The honourable member for Bradfield (Mr Turner) had a great half an hour out here just before dinner indicating how little information the Minister for Trade and Industry (Mr McEwen) had given about this Bill setting up the AIDC: I simply say to the honourable gentleman: How little information was given to this House when the Australian Resources Development Bank Ltd was set up. No legislation relating to it was passed by this House. All that was necessary was the consent of the Treasurer to its calling itself a bank. Apart from the fact that one can go down to the Victorian Companies Office, search the registrations and find the articles and memorandum of association or its annual report, it is subject to no scrutiny whatsoever.

The type of criticism that has come is rather astonishing. Even though the ARDB has been in operation for not much more than 2 years, in the time that it has been in operation it has extended credits amounting to about $250m, the main part of which has been in the field of minerals. The annual report of the ARDB shows that the biggest advances that have been promised are: Something like $65m for bauxite and alumina, something in the region of S40m for nickel, something in the region of $40m for iron ore, $40m for oil and natural gas, $20m for zinc, SI 5m for coal, $10m for pyrites and some $15m for other fields. I repeat that this organisation operates as a bank and not as a fund. With an initial capital of some SI Om it has been able to erect a structure of advances that will in a short period be in the region of S250m.

But I want to draw attention at this stage to some rather interesting features of the situation in the base metals industry in Australia, because this is the one to which, it seems to me, people look with such high hopes for contribution to exports in the future. I use as my main source of information a publication entitled 'The Contribution of the Base Metals Industry to Australian Economic Growth' by S. Tsung which is published by the Committee for Economic Development of Australia. It is from the Committee's M series, No. 26. It says some rather striking things. This is why it seems to me that these apostles of free enterprise in the Liberal Party, as they were described here this afternoon, do not seem to realise the sort of situation that Australia has to face in exports, say, in the 1970s.

The learned writer points out that according to projections for 1971 Australian contracts for the supply of some 40 million tons of iron ore to Japan have already been signed, but Japan's total needs in that year will be 88 million tons. He says that Japan is reluctant to have a dependence rate upon any country greater than 45%. For a strategic material, this 45% seems to be extraordinarily high. It is the writer's opinion that Australia is not likely to get more than 5 million tons of this extra 17 million tons in the years ahead. He goes on further to note that one solution which has been recommended to the Japanese Government by a special sub-committee on the basic problems of the iron and steel industry is the formation of an Iron and Steel Council within the Ministry of International Trade and Industry, which is known very briefly as MITI. This Council would work to co-ordinate industry planning more closely with government projections. It would bring even greater centralisation to the steel industry and a tougher approach to negotiating raw material contracts.

I submit that what this shows is that the Ministry of International Trade and Industry in Japan has a much tougher approach and a much more systematic approach to looking after Japanese interests than the Australian Government has to looking after Australian interests. Some people in the wool industry are concerned at the moment. I do not want to go into that argument tonight except to indicate that it seems that Japan as a buyer is much better organised than is Australia as a seller. The writer goes on further to talk about projections for iron ord exports from Australia during the period from 1966-67 to 1974-75 and lists the likely demands from such companies as Hamersley Iron Pty Ltd, Mount Newman Iron Ore Co. Ltd, Mount Goldsworthy Mining Associates, Cliffs Western Australian Mining Co. Pty Ltd, Western Mining Corporation Ltd, Sentinel Mining Co., the company operating the Savage River project, Morgan Mining and Industrial Co. Pty Ltd, Frances Creek Iron Mining Pty Ltd, Broken Hill Pty Co. Ltd, and the companies operating the Northam and Hanwright projects. He expects that by 1974-75 exports will be of a value of S446m.

But then the other thing that the learned writer goes on to note is the capital structures of these various concerns that are operating in this field at the moment. I have time to quote only one. I quote the rather dominant one. Hamersley Iron Pty Ltd. I think the honourable member for Maranoa (Mr Corbett) quoted some examples of cost this afternoon. At the end of 1967 the cost of the Hamersley project was $179m. This figure includes the first primary crushing unit and concentrating facilities, the railway and rolling stock and the loading and port facilities at Dampier. It also includes the bulk of the cost of a pellet plant that was completed in March 1968. With a planned second crushing unit to lift the capacity to 24 million tons and the balance of the cost of the pellet plant the cost will be in excess of $200m. Mr Tsung pointed out that vast sums are involved in developing Aus*tralia's natural resources. He then comments:

Hamersley 's capital at the date of writing is $A50m. The shares are owned as to 54# by TRA. 36% by Kaiser Steel Corporation of the US. and 10% by the Australian public. Eighty-five per cent of CRA is in turn owned by overseas interest, therefore in effect I8.t%-

Less than one-fifth - of Hamersley's capital is owned by Australians.

This is why I submit that in many respects these measures are too little and too late. lt was astonishing to hear the Minister far Trade and Industry say that he knew of no important country other than Australia where the government exhibits a complete indifference as to whether its natural resources or production opportunities .ire owned in whole or in part by overseas interests. What an astonishing statement to come from the Deputy Prims Minister crf a Government that has governed Australia for 20 years, for the whole of which the inflow of foreign capital has been significant. He says that at a stage when the capital inflow from overseas is hundreds of millions of dollars and when Australian participation is as low as one-fifth. The Government comes along with a paltry measure that will start a capital fund of $25m which is likely to yield at the end of 12 months or so $100m and it claims that the majority of the money will come from overseas. At the moment the ruling interest rate overseas is from 10% to 12%. When inflation is the most pressing economic problem do members of the Government believe that inflation will be halted if they finance investment in Australia at a rate of 12% on money borrowed overseas? Surely the whole concept and approach is absurd.

What is required in Australia is something of the magnitude of the Japan Development Bank: I quote from its financial statements of 31st March 1968, which are the latest available to me. They show that the assets of that concern, and in turn the liabilities - expressed in American dollars, which are one-tenth less than the value at Australian dollars - are $3,617m. That is the way in which our principal customer looks after the problem of industrial development. It is done on a government basis. Australia is faced with a situation in which virtually the whole of our wool is sold outside Australia, more than half of our wheat is sold outside Australia and the same is true of dairy produce and sugar. That is also the situation we are going to face with minerals. Our principal buyer in the years ahead will be Japan whose trade, through its trade department and buttressed by economic assistance from the Japanese Treasury and other sources, is much better organised to do a good deal for Japan than Australia's system is organised to do a good deal for us.

I have said before in this House that Australia is being robbed at the moment of nearly $200m a year in current wool prices. I do not think we know how much we are being robbed of in the prices that have been negotiated for the sale of iron ore. We have abundant resources of iron ore available in Australia. Surely they ought to be regarded as the national heritage of all Australians. Why does it require somebody from overseas to own the preponderant amount of the equity that is required to take that ore out of the soil and sell it to our customer, Japan, 2,000 miles away? Why must the industry be riddled by the dominance of foreign ownership? This is why at last we applaud the measure that is now before us, small as it is. Honourable members should look at the figures for the industrial development corporation in South Africa, whose economy is at a much lower level than ours in terms of the gross national product. The advances through those organisations in Japan and South Africa are for different purposes, according to the nature of the economy concerned. Australia must build this sort of institution that can give this country some strength as a seller of commodities, both primary and mineral, and ultimately of manufacture, that other parts of the world will require. But we cannot do it if we go into the organisation as a curious assembly of individual sellers against organised buyers.

Somebody mentioned earlier today the lack of co-ordination of resources. This is the kind of thing that can happen if we allow foreign concerns to be the dominant determinant of where development takes place. I quote again from the study on the metal industry:

The problem that is causing concern within the Australian iron ore industry is that of resource allocation.

That was mentioned this afternoon by my colleague, the honourable member for Kingston (Dr Gun). The article continues:

The problem has arisen because of the failure of the Government to provide for infrastructures and community services in those remote mining areas. The Government has turned these responsibilities to private industry. As a result railway lines, port facilities, power supply are privately owned. A company's interest is unfortunately not always the same as the national interest -

The Minister for Trade and Industry said something of that kind in the course of his speech, that what was good for General Motors-Holden's Pty Ltd was not necessarily good for Australia - and reconciling the two is an important role ot government in the modern free enterprise economy. In this respect both the Western Australian and the Commonwealth governments have failed to do in the iron ore development in north Western Australia. A disturbing example of this is the failure to co-ordinate the railway lines. Hamersley Iron built a 180 mile railway line from Mount Tom Price to Dampier at King Bay. Mount Newman is about 100 miles to the east of Mount Tora Price. Early in 1967 when plans for Mount Newman were still on the drawing board the Mount Newman consortium approached Hamersley Iron in respect to a proposal to use Hamersley's line for the shipping of Mount Newman ore. The terms demanded by Hamersley were: a capital payment of $A 50m for the use of Dampier and the railway line for which Mount Newman will receive no equity in the assets plus SOc a ton toll plus operating costs. The terms are so tough that Mount Newman has no alternative but to build another 260 mile railway line almost parallel to the Hamersley line and to construct port facilities at Port Hedland. The marginal cost for Hamersley in sharing its railway line with Mount Newman is nowhere near the amount demanded. For the economy as a whole this is a distinct case of misallocation of resources.

He goes on to suggest the prospect of the 2 rival concerns building 2 ports instead of coming to an agreement about building 1 port only. If this sort of thing is done by the use of foreign capital I think it is time that the Government stepped in and regulated what some of these irresponsible multi-national giants are doing as far as planned development in Australia is concerned.

Surely the resources of a body like the Australian Industry Development Corporation could be used to act as a neutral factor between contending companies. The Corporation could say: 'We are not going to allow you to build 2 railway lines when the second company can be served by a spur from the railway line built by the first company.' I submit that to do that is only to be sensible as far as the national development of Australia is concerned. Puny and all as this measure is, at least it is a beginning. 1 hope at any rate that this organisation will grow to great heights in a short space of time.

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