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Wednesday, 16 August 1972
Page: 100

Senator WILLESEE (Western Australia) - The Bill, as the Clerk has just announced, is the Industrial Research and Development Grants Bill 1972 which, honourable senators will recall, was postponed in the dying hours of the last session because the industry asked for this to be done. The Senate agreed to follow that course. I intend to move - and I will explain why - that this Bill be referred to the Standing Committee on Industry and Trade for examination and report.

The history of this matter is that in 1967, I think, the Government first introduced special grants to enable Australian industries to be financed and subsidised in respect of research work in the fields mainly of mining and manufacturing. This measure was introduced because -it was felt that Australian, industry was relying far too much on overseas technology and research. The Bill that was introduced, this year sought to amend that legislation because it appeared prima facie that the grants as they were being made were not having the desired effect. Accordingly, it was decided that the legislation should be recast so that it would do the things that the first Bill had failed to do. I am sure that all honourable senators have had correspondence from organisations such as the Victorian Chamber of Manufactures which has conducted a lot of research and inquiries into this new Bill. Some objections to this legislation have been raised. It seems to me that this is an ideal type of Bill to refer to a standing committee. Speaking for myself, I certainly envisaged - I think We all did - that standing committees would be distinct from other committees in that they would be set up to operate for a long period and to examine various matters referred to them including Bills of this nature. We know who the personnel of our standing committees are. An examination could be made of this Bill and evidence could be sought from all interested parties on which the committee could report to the Senate as to whether the Bill could be improved or on the other hand that the Government's original ideas are correct and that no improvement is possible. In other words, the committee would do what standing committees were set up to do and should set out to do.

I wish to quote from a very long letter, running into 8 pages, from the Victorian Chamber of Manfactures. I . do not intend to quote from all of the pages but I wish to give the Senate some idea of the letter's contents. If we tried to cover all aspects of this matter tonight' by arguing back and forth, we would be doing the job that a standing committee is far better equipped to do. I sympathise with bodies ' such as the Victorian Chamber of Manufactures in trying to put all . relevant thoughts in a letter such as this. 1 will quote portions of the letter. The. first quo- .tation I make gives some .praise to the Government. The letter states:

Many of the provisions in the Bill are considered beneficial to industry as whole. " '

This body is arguing that it wants to support this Bill but it wishes to overcome the problems that were contained in the original Bill. It goes on to state:

However, with a more detailed study, of the operating effect of this Bill has come the realisation that certain aspects of the legislation will prove detrimental to the achievement of its objectives.

We see that, although this body agrees that it wants this type of assistance, it is able with its experience to offer some advice to the Government. It states further:

Other aspects of the Bill are uncertain. It is not made clear how overhead items will be treated in the base period calculations.

The last quotation that I make from this letter is this: lt is considered reasonable that there should be some revision of the method of assessment of base period expenditure. In this regard the adding of a new 3 years period averaged as proposed may remove some anomalies which exist under the present system.

To summarise this letter as best I can without going into a very long dissertation on this subject, this Bill will require an industry which seeks grants continually to increase their level of expenditure on research and development. A company which maintains a fixed expenditure on research and development in a short period will receive no benefit at all. The concept of rapidly increasing research and development expenditure over a 3 year period favours the quite small company and the very large company. The very small company, because of the reduced sum it expends on research and development, could quite easily give a large percentage boost to its research and development expenditure without in aboslute terms a large increase in expenditure. Obviously, if a company is spending a small amount on research and development, it is easy to attract a Government grant by increasing that amount because this will not cost the small company very much money. A large company may also maintain a large percentage annual increase in its research and development budget because although the absolute sums of money involved are considerable they are quite small in relation to the overall expenditure of a company of that size. Medium sized companies, on the other hand, will find it difficult to sustain large percentage increases in their annual research and development expenditure.

A large proportion of the money granted under the present Act and proposed in the new Bill goes to foreign owned companies. There is some evidence to suggest that some of these foreign owned companies are increasing the amount of research and development performed in Australia. This is being done because these companies can get the Australian Government to pay half of the cost of research and development. It should be remembered also that expenditure on research and development is an allowable deduction in assessing companies for income tax. As company income tax is currently at the rate of 47i per cent, this means that research is almost wholly subsidised by the Government. The situation is that overseas companies, because of their size and because of these 2 provisions, can almost have the Australian Government subsidising and in fact financing the whole of their expenditure on research and development.

The current position is that the Government is trying to do something for research and development. The Opposition agrees that this is a good thing. At the same time, we want expert advice. It may be that if this Bill is referred to a standing committee contra evidence to the proposition that I have quoted mainly from the Victorian Chamber of Manufactures - I have information from others oh my file but I have chosen this body because obviously it is responsible and it must be knowledgeable on this subject - will be forthcoming from other organisations. Anyone who wishes to do so may put evidence before such a committee and that evidence may disagree with the proposition that I have quoted. This is the important thing: Perhaps the Australian Government even now is lagging behind other governments of the world because the evidence is that all governments - when I say 'all governments' I am speaking of those of the Western world of which we take notice, including the United States of America. Japan, Canada and West Germany - are increasing expenditure on research and development. Not only is this expenditure increasing but also it is accelerating fairly rapidly. There is evidence that in countries like Germany and Japan - these are developing countries with a high national product - the productivity rate is very great, and the morale in these areas is quite high. The latest available information on the development of our own country indicates the sort of achievements that have been attained. They are quite impressive as far as one can judge that they are impressive. One is in difficulty in dealing with a grant of $2,500 because one does not know whether in terms of the company involved that is a good deal of money or a small amount of money. One does not know the product but the amount seems fairly impressive.

This Bill is typical of those which could be referred to a Senate standing committee. This Bill would provide work of the type for which I think we set up these committees. As I see it, this would be a job of not long duration. I cannot speak on behalf of the Committee but I think that in a matter of weeks it could rapidly examine the matter and report to the Senate on its progress. After all, this legislation has been held up for the last 3 months because the industry asked that it be held over to give it a chance to examine the contents of the new Bill. It seems to me that it is most appropriate that my suggestion should be adopted.

What is the Opposition doing? It has agreed to support this Bill. The Government is seeking to amend its original ideas on this legislation. The Opposition has some worries about the Bill. One is that overseas companies seem to enjoy a pretty fair go, and probably a little more than a fair go, in respect of the money that is paid by way of these grants. Other matters that the Senate standing committee might well consider include what is the beneficial result of this research and development? Should this information be made available for the rest of Australia? Are grants of this type appropriate? It seems to me that the complaints are not on the grounds of the amount of money that is. being expended by the Government . but merely on the best way to expend that money.

As I say, with all the files that I am sure we all have on this matter, we could enter into a long argument and debate on this Bill. I do not think that this would be beneficial because each of us would be taking certain angles about which we probably would not know very much. I merely raise this proposition. The amendment that

I will put before the Senate will propose that this legislation be referred to the Senate Standing Committee on Industry and Trade under the chairmanship of Senator Prowse. That Committee could examine this legislation. I would not put a time limit on its examination because that might be unfair to the Committee, but I do not see any difficulties at all in such an inquiry because obviously the people who have made these complaints or suggestions are ready to give evidence on notice of a couple of days. It has been extant in Australia since 1967, and I suggest that an examination could be made within a few weeks. The Senate would then b.e in a much better position to suggest amendments. I am sure the Government is trying to do something about it, and I know that the Opposition is trying to assist. It would be in a much stronger position if it moved an amendment accordingly.

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