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Wednesday, 24 September 1941

Senator LECKIE (Victoria) (Minister for Aircraft Production) . - I move -

That the bill be now read a second time.

The bill provides for the payment of a bounty of 4d. for each 1 lb. weight of copper wire used in the manufacture of rubber-insulated cable and rubberinsulated wire - other than such cable and wire sold by a manufacturer direct to the Commonwealth for use for defence purposes - which has been or will be manufactured during the period from the 1st July, 1940, to the 30th June, 1942, for sale for use in the Commonwealth. Bounty will not be paid to such an amount as may cause the net profit derived by a manufacturer from the manufacture and sale of bountiable cable and wire to exceed 8 per cent, of the capital actually used by him in such manufacture and sale. Furthermore, the maximum amount of bounty payable in respect of cable and wire manufactured during either of the two financial years covered by the bill is £25,000.

The manufacture of electrical cable and wire represents a new industry for Australia. Prior to 1941, Australia obtained most of its requirements of such goods from the United Kingdom, Belgium and Germany being the other important supplying countries, although the United States of America sometimes received large orders from local importers. These cables and wires are principally used for telegraph and telephone lines and for electric light and power purposes. In normal times the wholesale value of Australia's requirements of electrical cables and wires is approximately £1,500,000 per annum.

The establishment of the industry in Australia is due to the enterprise of a Melbourne company, Olympic Tyre and Rubber Company Limited, which decided early in 1939 to make plans for producing these goods in the Commonwealth. After executives of the company had inspected factories in Britain and America, it decided to build a factory in Melbourne capable of supplying about one-third of the normal commercial requirements of Australia. Machinery and equipment were purchased partly from the United Kingdom and partly from Australian engineering concerns. Production of electrical cables and wires actually commenced in June, 1940. By that time it had become difficult to obtain sufficient supplies of these goods from Great Britain owing to the preoccupation of British manufacturers with production for defence needs, and to the increasing shortage of overseas shipping. The company's original intention was to accumulate sufficient stocks to supply orders from all States simultaneously, and it intended to seek tariff protection from the Government before entering the market in that way. Before adequate stocks could be established by the company a survey of supplies of rubber-insulated cables conducted by the Department of Supply and Development disclosed a serious shortage. Considerable quantities of these cables were urgently needed by our fighting forces, for example, for field telephone cables, &c. Consequently, the company was officially requested to release its stocks for immediate consumption, largely for the Department of Supply and Development, the Department of the Army and the Royal Australian Air Force.

The Tariff Board has reported to the Government that this premature release of stocks resulted in losses to the company which would probably have been avoided had the company adhered to its original plan to enter the interstate market later on when higher selling prices for these cables and wires would have been obtainable. In this connexion I point out that goods of this nature arriving from the United Kingdom are not subjected to customs duty but they bear a primage duty of only 4 per cent. Even when electrical cables and wires are obtained from foreign countries, the customs tariff is only 15 per cent, plus a primage duty of 10 per cent. In these circumstances the company had to sell its products, at that time, at prices based on virtually a free trade import parity, so far as sales for ordinary commercial consumption were concerned. With regard to the substantial portion of its output sold to the Government for defence requirements, however, the question of fair and reasonable prices, having regard to Australian production costs, has been mutually arranged between the Commonwealth departments concerned and the company. No bounty will be payable in respect of cable or wire sold direct to the Commonwealth for defence purposes. The Tariff Board has given careful consideration to the losses suffered by the company for the reasons I have stated, and the Government has approved of its recommended solution, namely, that the bounty be paid retrospectively on all production for commercial consumption from the 1st July, 1940, at the rate of 4d. per lb. weight of copper wire used in the manufacture of these goods.

Since the industry was started in June, 1940, war-time difficulties, affecting manufacture in Britain and shipping between Britain and Australia, have increased so much that little if any supplies of electrical cables and wires will be obtainable from the United Kingdom during the future progress of the war. Consequently, Australia may have to rely almost entirely on local production for its requirements. In order to meet this serious position, the Olympic Tyre and Rubber Company Limited has already taken steps to increase its productive capacity, and a now company, Cable Makers (Aust.) Proprietary Limited, will start production in its factory at Liverpool, New South Wales, in a month or two. These two companies expect to provide the hulk of Australia's requirements of electrical cables and wires at no distant date, and it is likely that they will directly employ from 800 to 1,000 workers in this new industry. I have said enough to demonstrate to honorable senators that this industry has already proved of great importance to Australia's war effort, having already met many demands for electrical cables for use by the Defence Forces in Australia and in the various theatres of war. Moreover, after the conclusion, of the war, .the industry should be capable of taking its place among the permanent industries of the Commonwealth, being worth, on a wholesale basis, approximately £1,500,000 per annum, and doubtless capable of further expansion.

The Tariff Board has recommended Commonwealth assistance to this industry in its initial stages by means of the bounty specified in this bill. In this regard, whilst the local industry is able to supply only less than one-half of the requirements of the Commonwealth, the economic cost of assisting it is smaller under a bounty than under a customs tariff. As local production approaches market requirements, however, bounty assistance can be effectively and economically replaced by tariff protection. The Tariff Board has recommended that the Government review the bounty before its expiry on the 30th June, 1942, by which time both companies should be supplying the bulk of our requirements of electrical cables and wires. The Government will arrange for this review. Apart from the extensive direct employment which is assured by the establishment of this new industry, considerable indirect employment will be created by the requirements of local manufacturers for Australian copper wire, lead, tin, chemical ingredients and raw cotton. The only important non-Australian raw material used is rubber, which is obtained from British Malaya.

I commend this bill to the Senate, believing that honorable senators will welcome the action taken by the Government to assist this valuable new industry and the enterprising companies which have expended a great deal of thought and money in its establishment.

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