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Thursday, 30 August 1973
Page: 653

Dr F CAIRNS (Lalor) (Minister for Overseas Trade and Minister for Secondary Industry) - I move:

That the Bill be now read a second time. Three years ago, when the legislation to establish the Australian Industry Development Corporation was before this House, the Labor Party, then in opposition, welcomed it with enthusiasm, but we saw from the beginning that AIDC as then structured could not be expected to stem the rising tide of foreign ownership and control in Australia, let alone reverse it. The Australian Industry Development Corporation was formed at a time of capital scarcity in Australia. Large. blocks of capital were needed for big new mining ventures and, in the main, it had to come from overseas. Whether it was venture capital or loan money, when brought in by foreign corporations it added to foreign control of Australian resources.

So AIDC was given the job of tapping overseas capital markets for loan funds, and putting these moneys at the disposal of predominantly Australian companies - to help them to undertake, or participate in, new development or expansion. This in itself was an important task. I should think that almost every Australian would have thought that this was an important task and would have been prepared to give it his wholehearted support and to have wished AIDC well in the mission, limited though it was, that it was able then to begin to undertake. I have no doubt that whatever was the possible role of AIDC then, its role will be of even greater importance now

Industries processing and using mineral resources, for example, require blocks of capital many times larger than those merely extracting raw materials for export. The processing industries are the kind of industrial development we want in Australia - and I think some other countries want it in Australia too - but we also want Australians to share to the greatest extent practicable in the ownership and control, and the rewards of that ownership and control of those operations. We want a fair deal for Australians, and we include Australian capitalists in that desire

Where there is strong Austraiian participation in the ownership and control of a development, we can expect that development to be directed towards the national interest of Australia, and towards maximising earnings in Australia. Without such Australian participation we will have the prospect of Australian resources and industries being developed to maximise the global profits of multinational corporations, and very often at lower export prices than if we in Australia were able to match a little closer their monopolistic powers. When we are concerned with export prices we are not alone concerned with the export prices of, say, minerals and energy, important as these aire. We are concerned with the whole range of exports - wool, wheat, meat and so on - within the wide range of commodities that still remain of importance for Australia in the future and possibly of even greater importance in the future than in the past. It is of course my main responsibility as Minister for Overseas

Trade to see that Australia's bargaining position is established in relation to all these commodities.

But AIDC, in its original form, was equipped neither with the functions nor with sufficient financial resources to make the kind of impact on the problems of foreign ownership and control that the Government, and the Australian nation, wished it to make. On the one hand, AIDC just did not have the means of gathering together sufficiently large blocks of entrepreneurial capital for investment in major development. As a borrowing agency, of international stature, it is already well accepted in the capital markets of the world, but it has been restricted in its access to Australian funds, and has not been in a position to invest in the share capital of projects to any great extent.

Moreover, AIDC has had to operate under restrictions which limited it to investing at the invitation of the company concerned, and to temporary, minority holdings. It could not, for example, act itself as the Australian partner in a joint venture with foreign companies. It has had to decline requests for it to act in this way when other Australian partners could not be found. AIDC has had to decline offers to purchase substantial holdings, including 50 per cent holdings, in companies in Australia at present 100 per cent foreign owned. Under its charter it could only acquire shares when providing finance for a development, or in investing its limited capital funds. And, when it did take shares in a development enterprise it had to try to sell them as soon as it could. One cannot help feeling that these limitations upon AIDC were the result of pressures by business interests which objected to the competition of AIDC and similarly now much of the opposition to an enlarged and expanded AIDC is derived from those whose interests are served by leaving the field alone to the financial giants who increasingly dominate the capitalist world. But it is not in the interests of the Australian people that we should do nothing or limit our own powers in trying to hold our own a little more effectively.

With its existing limitations it was clearly not possible for AIDC to operate and negotiate on equal terms with the many overseas corporate giants operating in Australia. Nevertheless, what it has been able to achieve even while hemmed in by such restrictions indicates the contribution which an institution such as AIDC, properly equipped, will be able to make in this area of national policy objectives. By offering development finance in suitable 'packages', often containing both loan and equity capital and on terms and conditions tailored to the particular venture, AIDC has been able to help many good projects, large and small, which otherwise could not find suitable finance without selling out to overseas interests.

Although limited in its own participation, AIDC has often been able to introduce other Australian companies into a project. These companies have contributed to the capital but, more importantly, they have strengthened the management and thus also the financial prospects. To take a few examples, there is a major manufacturing venture in Victoria, over 75 per cent Australian-owned, which was able to proceed only when AIDC brought together the Australian partners. There is an important mineral development in Queensland which needed AIDC at a critical time to avoid diluting the Australian ownership. There is a raw material processing venture in Tasmania which is Australian rather than foreign owned and controlled through the efforts of AIDC. A major resource in Western Australia, yet to be developed, has been brought into the hands of Australian companies, instead of being 50 per cent owned by foreign companies.

With the obvious potential of AIDC in mind we said in the policy speech that we would expand its activities to enable it to join with Australian and foreign companies in the exploration, development and processing of Australian resources. This objective I believe is supported by over 90 per cent of the Australian people. Australians want us to increase the influence of Australians in our own affairs. Australians want us to be able to stand up for ourselves in world economic affairs which may be vital for us. We also foreshadowed mobilisation of Australian capital by issuing national investment bonds through the expanded AIDC. Our platform spelled out that we would enable ordinary Australians to take part in the ownership, development and use of Australian industries and resources, divert investment by large financial institutions from bricks and mortar into desirable development projects, and make it a primary policy objective of the Corporation to obtain majority Australian ownership and control over existing and future enterprises.

The Bills I am now presenting represent the fulfilment of these proposals and policies. The first Bill, the one to amend the Australian Industry Development Corporation Act, expands the functions of AIDC. The range of industries in which the Corporation may assist companies is extended to include transportation and distribution and activities related to the industries already in its charter and its original charter theme. Development is a comprehensive word. It does not only mean digging enormous holes, driving huge drills into the earth and sea or producing power. Development is development of people in the social and human sense as well as in the purely material activities related to the industries already in its charter. AIDC is given a second principal function: That of securing the greatest practical Australian participation in the ownership and control of companies engaging in those industries. The Corporation is given power to initiate particular investment proposals itself, rather than having to wait for approaches from companies. It will no longer be required to divest itself of shareholdings it acquires in companies it assists.

The Corporation will no longer have to borrow principally overseas.. It will, as necessary and convenient, be able to raise money either in Australia or overseas, provided that it acts in accord with the Government's monetary policy, as notified to it from time to time.

In all of the above, AIDC will continue to be required to act in accordance with sound principles, providing funds only' to those companies or projects which it judges to be efficient and financially sound. All these provisions will enable the Corporation to fulfil more effectively its functions of assisting Australian companies to develop Australian industry. Special attention will be given to encouraging individual enterprise and' supporting smaller Australian businesses in their struggle to compete with local and international giants. Assistance will also be available to establish and expand sound and viable co-operative enterprises.

We also want AIDC to help implement our policies for industrial development, not to replace private ownership with Government ownership but to help build more productive, more socially desirable, and more positive and progressive Australian industry. To the extent that there is a change in ownership, we will work towards more ownership in the hands of individual Australians. Public ownership in the AIDC area of responsibility would be within the national interest division. But the main general function of AIDC will be directed at strengthening the individual Austraiian enterprise in primary, secondary and tertiary industry so that it may sooner obtain better technology and management and more than hold its own against the conglomerates seeking to exploit it on one side and the consumer on the other. In some cases some action of working together by individual enterprises will be essential, but I consider that the co-operative form of action will be most appropriate and effective.

Under the provisions of the Bill the Minister will inform the Corporation of Government policy in relation to establishment, development or advancement of an Australian industry. Where it would be in accord with those policies for the Corporation to assist a company or participate in a development project but the Corporation for any reason is unable to help - for example, because the funds required, or the scale of risk, are beyond AIDC's unaided resources - the Bill provides machinery for the Government to ensure that assistance is given.

A series of provisions will enable the Government, in such cases, to provide the needed capital to AIDC, or to give guarantees which enable AIDC to support the project itself. In this way the Government will be able to make use of the financial skills and industrial knowledge of the Corporation in pursuing Government policy in relation to industrial development and to Australian participation therein. The accounts of such 'national interest' transactions will be kept quite separate from AIDC's other moneys, including the National Investment Fund, and a National Interest Committee will be established to advise the Government on the decision to give support in such cases. In the light of the changed functions of the Corporation, the Board of Directors is to be strengthened by appointing to it the Secretary to the Department of Secondary Industry. This will provide a needed channel of communication between the Board and the Government, enabling the Board to be fully conversant at all times with relevant Government policies.

The second Bill, establishing the National Interest Fund provides the means of raising the financing AIDC needs to perform its new functions in its main areas. The Bill empowers AIDC to raise funds in a variety of ways, through different divisions of the National Investment Fund. There will, for example, be divisions containing savings plans similar to superannuation and endowment insurance schemes. Contributions to these divisions will be tax deductible within the $1,200 deduction now allowable for payments for superannuation and insurance. Contributions to these divisions will be invested by AIDC in sound developmental projects and other appropriate assets enabling the ordinary Australian to participate in his country's development and secure a return suitable to his need and especially to his needs in the future.

His rights, including income and equity, will be set out in the contract he has with AIDC and he will know exactly what his position is. Income will be paid to him out of the income earned by the assets in his division of the Fund and he may sell his bond at any time or redeem it at the value of its asset backing. I interpose to point out to the House and to the people that there is an opportunity here for the ordinary citizen to share in the kind of capital appreciation which so far has been confined to a very small percentage of the Australian people.

The creation of investment bonds will enable the Corporation to support projects that by their nature cannot be financed with borrowed money. It will thus be enabled to play its role in the financing of mineral development and other long term industrial projects. Because an investment bond is not a fixed interest security providing for repayment of a stated amount at a given time but a contractual interest in the value of a given collection of assets and in the income earned by them, it is possible to finance projects with little or no return in the early years but high growth and income at a later stage. Such projects cannot be financed with loan money. Subscriptions to investment bonds as distinct from the superannuation and endowment plans will not be tax deductible, but the Government has decided to contribute $10 to the Fund for every $100 invested in the bonds by individuals resident in Australia. The extra income and capital growth accruing from this Government contribution will flow to the individual investor and when the bonds are redeemed the Government's contribution will be returned to it. Provided the investor holds his bonds for at least 3 years, 'the Govern- ment will bear, to the extent of its contribution, any depreciation in the value of the bonds. The Government's contribution is insurance for 3 years against any risk that the investor might take and increasing the base of his earnings from, say, $100 to $110 during the life of his investment. These measures should provide a powerful incentive to the small investor to put his money into investment bonds, and thereby to seek to achieve the objectives of the AIDC.

It is also our intention to make appropriate changes to the 30/20 rule to channel towards the Fund some of the very large amounts of capital available to insurance companies and private pension funds for investment. The Treasurer will be discussing this matter with the companies and firms concerned, lt will be the responsibility of the Treasurer, in consultation with these companies and firms, to work out the rate at which the change in the application of the 30/20 rule will apply. The companies and firms concerned will have a full opportunity to have an effective say in what the rate ought to be.

It will also be possible to use the National Investment Fund as a channel for overseas capital which would otherwise take the form of an equity interest. Where it is desired to finance a particular development project in this way a special division of the Fund could be created. The overseas investor would buy investment bonds in the series in that division and the money raised could be invested in the project. The overseas investor would, in accordance with the terms and conditions of his bonds, be entitled to income earned by the project and to the benefit of growth in its capital value. He would not, however, exercise the control over the project that he could as the owner of ordinary voting shares. Of course, it is not the owner of ordinary voting shares with whom we are really concerned. We are concerned with the owner of a large block of voting shares, who is the very antithesis of the individual in any meaning of the word at all. Australians subscribing to the Fund will enjoy the benefit of investments that have been assessed and selected by AIDC's able and experienced Board.

Mr Street - Will that be kept?

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