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Wednesday, 13 May 1936

Senator PAYNE (Tasmania) . - I refrained from speaking previously on this very important matter, as I was anxious to hear as much as possible of the arguments for and against the Government's proposal. I have come to a decision only after weighing very carefully the " pros " and " cons " of the whole matter. My decision has been influenced by the fact that I have watched the progress of the cement industry in Tasmania, which State I represent in this chamber. I shall go back a good many years to the time when a venture was set on foot, having at its head men of the highest repute in Australia, men such as Sir John Monash and Mr. Bowes Kelly, who were esteemed for their business acumen and their general attitude towards commercial matters, to establish a large cement works on Maria Island. A capital of nearly £500,000 was invested in this venture. The shareholders' list represented very broad interests, because it was generally felt that the venture should succeed in the interests, not only of Tasmania, but also of Australia. The history of that concern provides very painful reading. After a few years of strenuous work, during which as fine a plant as could be procured was operated, the undertaking collapsed, the shareholders losing practically the whole of the money they had invested. However, some years later it was generally felt that an opportunity still existed to establish a cement works to exploit the limestone deposits at, Railton. Consequently a new company set to work; it employed some of the best men available, but it soon met with difficulties. For twelve years it has been operating, and in 1933, after nine years' work, it paid its first dividend of 2i per cent. Then its capital had to be written down by one-third, and in 1934 it paid a dividend of 10 per cent., which was equal to 6$ per cent, on the original capital. The main reason for the company's success at that time was the gradual revival of trade then taking place in Australia; we were getting out of the depression. Last year this company paid a dividend equal to 10 per cent, on its original capital. These are the only dividends it has paid during twelve years of its operation. Thus honorable senators will realize how small has been the return to these shareholders on their capital. On reading the Tariff Board's report, which is an excellent document from one point of view, the average reader would be given the impression that the ordinary shareholders of the company had been receiving unduly large dividends; whereas in fact they had not received 2 per cent, return on the capital over the period in which it had been invested. I have followed the development of this company for many years. Its fortnightly expenditure totals £2,000, half of which is paid in wages and salaries, and the other half for coal; these payments are equal to £52,000 per annum. The district in -which the works are established relies almost entirely upon this industry. In addition, the company distributes money as payment . for power, railage and wharfage, and this expenditure benefits Tasmania ' as a whole. Consequently, as a representative of that State, I am vitally interested in the proposal now before the committee, because whatever decision is arrived at it will have a profound effect upon Tasmania's economic welfare. Last year the Goliath Company shipped from Devonport alone 48,000 tons. I have to consider whether I should be justified in supporting the Government in its desire to eliminate altogether the duty which hitherto has enabled the industry to become established in Tasmania. The item imposes a duty equivalent to onehalf of the rate previously obtaining. The Government asks this committee to request the House of Representatives' to adhere to the recommendation of the Tariff Board, which is that importations of British cement should be free of duty.

Several honorable senators have referred to cement as a key industry. No one will challenge that statement and, notwithstanding all that has been said about unnecessary plant, I can visualize the time when, if the present prosperity continues, there will be two or three times the existing demand for cement, and the whole of the plant that has been installed by the various companies will be working to capacity. Any company which is so short-sighted as not to make provision for future needs will be at a disadvantage when the increased demand is made.

We have heard a good deal to-day about the Ottawa agreement. I regret that that issue has been raised. The amount involved in this item is so small that I think its effect on. any provision of the Ottawa agreement is hardly worth discussing, unless it can be shown that the retention of the reduced British duty would be a distinct breach, not only of the spirit, but also of the letter of the agreement. I have studied the agreement very carefully, and have come to the conclusion that the proposed duty in this item is not a contravention of any article of that arrangement. If the contention of the Leader of the Senate is correct, Parliament must, in future, be guided solely by the Tariff Board and accept every recommendation which that body makes, irrespective of whether the duties recommended are appreciably lower than existing rates. It will not then be competent for Parliament to ignore any recommendation of the Tariff Board and impose higher duties. I could make out a strong case, and show that the Government has ignored the spirit of the Ottowa agreement in connexion with the duties on another item; but I do not wish to discuss it at this stage. I repeat that I have come to the conclusion that the British duty of 6d. per cwt. is not a breach of the Ottawa agreement, and I believe that if this committee passes the item as it stands, the British Government will not regard the matter very seriously, or question the good faith of the Commonwealth Parliament.

Senator Sampson - The honorable senator does not think that we should lose our overseas markets?

Senator PAYNE -Certainly not. The following statement, which I have received from an authoritative source, should interest honorable senators: -

Attempt to limit plant capacity: Critics of the industry suggest that its maximum plant capacity should be limited to 900,000 tons, yet before the depression Australia's actual requirements in one year, 1927-28, had grown to 776,180 tons. On the basis of anticipating only a 20 per cent. expansion (for which any "key" industry must look ahead), an annual supply of 031,432 tons wouldbe needed. To produce this and allow for strikes and emergencies, a margin of 25 per cent. below plant capacity would have to be provided for. Anything more than an estimated production of 75 per cent, would be unsafe, which means that the total plant capacity, at full run on a three-shift day throughout the year, would be 1,241,897 tons.

In addition to imposing limits on the industry's capacity, it is suggested that gross returns from the industry should be limited to 10s. a ton. On last year's production, 481,148 tons, this figure would yield: -


This equals 3.8 per cent, on a capital of £5,000,000, which is the present valuation of the industry's assets, after making an adequate allowance for depreciation. Even on the board's valuation . of £3,600,000, the return is only 5.34 per cent.

If the trade recovered to predepression peak year at 776,180 tons, the return at 10s. a ton (deducting income tax) would yield: - 6.21 per cent, on a £5,000,000 valuation. 8.62 per cent, on a £3,600,000 valuation.

This is before providing for selling and administrative costs, and contingent reserves.

The Australian manufacturers have expenses to meet for administration head offices, share department, research and advertising, the aggregate cost of which averages 5s. a ton, and the suggested limit of 10s. a ton gross profit has been declared after a careful accountancy analysis, to be " commercially impossible ".

Senator Hardythis afternoon cited figures showing the amount of capital invested in the industry, and the range of profits made. I took a careful note of his remarks, and, from my calculations, I estimate that the average profit earned by the companies mentioned was 8 per cent., which is not an unreasonable return. It must be remembered also that the figures covered the period since the return of prosperity.

I am not taking this attitude to the item because of any personal interest in the Tasmanian concern, I am not financially interested in any cement company in Australia, but I feel that if I supported the Government on this item I should not be acting in the best interests of the State which I assist to represent in this chamber, or in the best interests of the people of Australia. I admit that there are, in connexion with the cement-manufacturing business, many things of which I do not approve; but this is not the time or place to deal with them. The Australian cement manufacturers have been told 'by Parliament that a portion of the protection which they have hitherto enjoyed is to be taken from them, a*nd we can reasonably expect that with the adoption of more efficient methods this necessary commodity will be made available to users at a lower -price than they have hitherto paid.

The TEMPORARY CHAIRMAN (Senator Badman - The honorable senator has exhausted his time.

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