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Wednesday, 20 May 1970

Mr Kevin Cairns (LILLEY, QUEENSLAND) - The fate which the 2 amendments which I propose will suffer may not be as pleasant as the fate other amendments have suffered up to the moment. Firstly. I move:

At the end of sub-clause (2.) add 'and that the company has made every reasonable attempt to secure assistance at appropriate rates from banking or financial institutions usually engaged in such type of arrangements and without success'.

In other words, I hope to insert in the Bill - 1 feel that I will be unsuccessful - a provision whereby the Corporation shall be in the nature of a lender of last resort. In this respect I have in mind provisions which have been inserted in other financial measures which have been introduced in this chamber. I refer specifically to the Commonwealth Development Bank of Australia. There are a number of reasons why the provisions which relate to the Development Bank cannot be duplicated here. If it is argued, for example, that one ought not to require that an appropriate borrower has shopped around in all kinds of institutions one could change the plural to the singular and thereby substitute the word 'institution'. The legislation could be changed to provide that the attempt to secure assistance should bc an attempt to secure assistance from institutions within Australia. After all, the bodies which will be approaching this Corporation will be, from their very nature, bodies which will be unable to operate on the world market. That is almost provided by definition - and, almost by definition, it covers all of Australian industry. So it would be quite simple to ensure that such a provision shall apply.

I also suggest that another amendment should be moved. 1 will speak to it in very strong terms. Sub-clause (3.) (c) of clause 8 provides that the Corporation shall endeavour 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. Sub-clause (3.) (d), which 1 propose in my amendment, merely intends to make it perfectly clear. 1 move:

Al the end of sub-clause (3.) add the following paragraph:

(d)   for the purpose of the preceding paragraph the Corporation shall be deemed to be in a position where it is able to control the affairs of a company if it holds more than fifteen per cent of the issued capital of the company except where the equity acquired by the Corporation is in the nature of bridging finance.'.

I think that this is a very important provision which cannot be ignored, lt is important for this reason: We have made it mandatory in a number of fields - for example, in radio and television stations - that an equity holder ought not to hold more than 15% of the equity in such activities. As the Minister for Social Services (Mr Wentworth) has reminded me, this requirement came about years ago when a London newspaper was suspected of trying to buy into a large Australian radio network. Provision was written into the Broadcasting and Television Act at the time that there shall be no greater than 15% equity in such a body. In other words, it was judged that a 15% equity would give a degree of control which would be real and substantial. Th s has been perpetuated in other fields. I suggest that if sub-clause (3.) (c) of clause 8 is to have any meaning the proposed sub-clause (3.) (d) ought to be added. A meaning ought to be given to the maximum amount of equity which the Corporation shall acquire in any body. In other words, if the Corporation is able to acquire any amount of equity, irrespective of whether it supplies bridging finance or otherwise, one has to doubt, and doubt very sincerely, whether clause 8 (3.) (c) has any meaning. The clause means that the Corporation 'shall endeavour1 not to assume or to have a controlling interest in any company. I doubt that the clause has any meaning.

This point lies at the heart of the case. We chose 15%. One could have chosen 10%. A statement has been made by the Treasurer (Mr Bury) in relation to the Brisbane Permanent Banking Co., now the Queensland Bank, to the effect that one shareholder is not to acquire more than 10% interest. It has been foreshadowed that the Banking Act will be amended so that one shareholder cannot acquire more than 10% of the equity in such a body. A figure of 10% was chosen because it is considered that that is a critical level, which would break down the traditional banking structure in an important credit and financial institution. In this amendment we are seeking a higher percentage. We chose 15%. We could go higher if the Corporation is to require for short periods a 20% or 25% equity when providing short term finance. Once that short period of time has elapsed, once the emergency requiring such a large amount of equity to be held has elapsed, then it should be understood that the equity would be brought down to a level such as that required in other important institutions operating in Australia. Those are the reasons why I moved the amendments and I hope that they will be accepted.

I want to revert to the lender of last resort clause. If this body is to operate on equal terms with bodies operated by private enterprise, one of two requirements is appropriate, cither that it be a lender of last resort, or, that it be required to pay a return on its capital such as occurs in the case of Trans-Australia Airlines and the Australian National Shipping Line or that it should operate on exactly the same levels of activity required, for example, of the Commonwealth Banking Corporation in relation to the other banks. Either it is to be a lender of last resort or there should be a return on capital. Both propositions cannot be excluded.

I return again to the suggested amendment requiring a maximum equity of 15%. This figure is appropriate. It is higher than that currently foreshadowed by the Treasury in relation to banks. Tt is a figure which allows a degree of control which is very substantial. The honourable member for Hindmarsh (Mr Clyde Cameron) would know that Wheelwright, in writing his work in the late 1950s, selected the figure of 15% as being quite significant in relation to ability to control a corporation or company. That provision has been accepted in other fields. Therefore I think this amendment is reasonable. It allows sufficient flexibility for the Corporation to go to a higher figure in those areas where such action is required. If this proposed amendment is supported by the Government then it would give clause 8 (3.) (c) meaning which is not presently apparent. That paragraph states that the Corporation: shall 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.

At present those words merely represent a pious aspiration. The amendment should be supported if clause 8 (3.) (c) is not to be nullified or neutralised. The amendment would give it meaning. Above all it emulates and supports a principle which has been acted upon on so many other occasions in Australia and has been adopted by this Parliament.

Thursday, 21 May 1970

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