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Thursday, 13 September 1984
Page: 1304

Mr TUCKEY(9.50) —In this cognate debate the Bill to which I am most interested in referring is the Bounty (Agricultural Tractors) Amendment Bill 1984. I wish to comment, firstly, on the circumstances that apply. The original Act giving a bounty for tractors is dated 1966. For many years the bounty paid to tractor manufacturers was fairly static. In recent times the Act was extended . At that time the bounty assistance was doubled. From my reading of the original Act, as amended, that meant that a tractor of 150 kilowatts or over which previously attracted $3,480 would now attract $6,960. In this day and age that is not a very large sum when one considers that a tractor of that power rating would cost about $70,000. My great concern is that within the Australian manufacturing sector there are manufactured a number of tractors that are much more powerful than tractors of 150 kilowatts. In fact, that is a veritable toy in this age of dry land farming.

We hear daily of the cost pressures that have been applied to the farming industry. Of course, these are cost pressures and downwards price pressures as well. Consequently, farmers have had to look to bigger and bigger equipment so that they are able to operate their farms practically as individuals. Thereby hangs another tale. I think of my early years in the 1950s and some of the farming areas that are now parts of my electorate. The amount of farm labour that visited my hotel at night time was substantial. Today those people are missing. They have been replaced by big machinery. Of course, the union people who created that situation still do not seem to know why.

Nevertheless, the difficulty that I have confronted is that within my electorate, as the honourable member for Wannon (Mr Hawker) in his electorate, are manufactured these very large tractors. They are tractors which range in horsepower, using the old terminology, from 200 to 525 horsepower. These are the type that are very much in demand. I am speaking of tractors whose prices range from $100,000 to $250,000. Many of these tractors, firstly, are not receiving the benefit of this legislation or the amendment which proposes to extend the bounty until the end of the year. The reason they are not is that section 6 (4) of the Act states:

Where the factory cost of the materials and parts of a tractor that were wholly produced or manufactured in Australia is less than fifty-five per centum of the factory cost of the tractors, no bounty is payable.

That means that one has to have a 55 per cent Australian content. However, under section 6 (7) one finds that pneumatic tyres or tubes, air conditioning equipment, radio equipment, sound reproducing equipment or sound recording equipment or winches are to be excluded-irrespective, I presume, of where they are manufactured. Most of the tyres that are fitted now to our large tractors are manufactured in Australia. So one can see the great difficulty of a manufacturer in achieving a 55 per cent Australian content if he has to exclude those factors.

The companies of which I am aware were never in the first place able to attract a bounty because they could not achieve a 55 per cent local content; but, secondly, they were grossly disadvantaged in terms of their competitors. Under the trade arrangements that Australia has made from time to time all fully built up tractors entering Australia do so incurring no duty whatsoever, I emphasise that, because often it is said of things coming into Australia that they attract no tariff. Nor do they attract a tariff; but they attract what was originally introduced, the 2 per cent tariff, which was introduced more as a revenue measure than as a protection measure. But fully built up tractors entering Australia do not attract that 2 per cent tariff.

The particular tractors about which I am talking are manufactured in Merredin, within my electorate. They are manufactured, strangely enough, by two manufacturers. One is known as Farmers Tractors Australia Pty Ltd, which produces the Phoenix tractor, and the other is a firm called Don Zanetic and Company, which used to manufacture a tractor known as the Acre-Master but today, as I understand it, sub-contracts and manufactures these large tractors for International Harvester. The problem is that these firms, as I say, attract no bounty whatsoever because at this stage they are unable to meet the 55 per cent local input. But they are obliged to pay the 2 per cent revenue duty on all the components that they import to put in that tractor.

The type of components that naturally come to mind are the engines, transmissions, gearboxes and drive axles. Therefore, their competitors, for instance, Steiger tractors, are coming into the country from America with no duty whatsoever. The local manufacturer has a 2 per cent duty applied to his imported components irrespective of the fact that by comparison he is putting a substantial Australian content into his product. In the type of tractor that I have mentioned the cost burden is between $800 and $1,000 per tractor, depending on its size. That seems to be the height of the ridiculous.

It is not something that has just appeared on the scene. One of my many files is about three-quarters of an inch thick and contains letters that I wrote to Ministers of the previous Government begging them to do something about it. The previous Minister responsible for Customs and excise and such matters, the present Leader of the Opposition, Mr Andrew Peacock, was eventually getting something done. He had seen these tractors manufactured and was doing something about it. But he was confronted with considerable difficulties, particularly with his Department which, to my mind, always saw the problem as too hard. Maybe it is too hard to create a situation in which one has to say, 'That engine can come in free because it is going into a tractor, and that one cannot do so'. Then, of course, does the engine come in for a tractor and end up in a truck, or something like that? I can see those difficulties.

However, under the bounty arrangements and with these amendments to the legislation, clearly, by an increase in the size of the bounty, it would be a simple matter to overcome these difficulties. In other words, one takes the money on the engines as they come in and gives it back to the tractor manufacturer at the time of the completion of his product.

People may ask why we should worry about this sector of the tractor market. Strangely enough, it is probably that sector of manufacturing industry most likely to succeed. The simple evidence for that is that it is succeeding already . It is managing to meet foreign competition, in both price and quality. In regard to quality, the four Australian tractor manufacturers are all companies which are generally very close to the Australian agricultural industry. They know what is wanted and they have a great deal of experience. The company that makes the Phoenix tractor-I have here a photograph of one on a brochure-is called Farmers Tractors Australia Pty Ltd. There is a very good reason for that. Fifty per cent of it is owned by Farmtrac Pty Ltd. That company happens to comprise 70 farmer shareholders, previous clients of the gentleman Mr Laurie Phillips who manufactures these tractors. Quite clearly those gentlemen, who also participate in the board of directors, have a very good knowledge of the type of equipment that is needed.

So, firstly, we have an industry in the local scene that meets all the requirements of local farmers. I add that at one stage the Merredin tractor industry was selling more tractors in Queensland than in Western Australia. We have an industry that can survive in the tough international market. Surely that industry does not want to carry the burden of a government tax of $1,000 when its overseas competitors do not have to pay such a tax. Generally, however, that company has managed to compete. One of the reasons for this is that Steiger Tractor company, well known for tractor exports to Australia, has an international throughput of only about 2,000 tractors a year. These very large tractors are not mass-produced, unlike the tractors we are setting out to protect most here; that is, the tractors made by Chamberlain John Deere Pty Ltd in Western Australia. It is subject to intense competition from overseas companies because it produces high volume demand tractors, in an international sense. Of course, there are huge companies around the world able to mass produce such tractors and to be very competitive.

We are looking at an industry that warrants support. In fact, it is clear from the report of the Industries Assistance Commission that the IAC agrees with that . I am hopeful that by the time this amendment to the Act expires in December the Government will have taken the advice of the IAC. To my mind the IAC put forward a very sensible proposition when it stated:

It is proposed, therefore, that assistance should continue to be provided by a bounty. Several problems with the present bounty scheme were identified, however , and a bounty based on 20 per cent of domestic value added is proposed to overcome most of these. This would provide assistance at the level of 15 to 20 per cent in effective rate terms . . .

I hope that the Minister will read that to mean, as I do, that a manufacturer would get a 20 per cent bounty on the local content of its tractor-there would be no minimum. I think that is sensible. None of these manufacturers are interested in buying from overseas what they can get locally. I am well aware that the fern extractor, for instance, is soon to have an Australian-made radiator. Currently it uses an imported radiator, but local manufacturers are now coming into the market. That company has talked with the Chamberlain company to see whether it can make axle components. It understands that Chamberlains can . Mr Phillips has told me that when he can get an axle made to his own design it will be a substantially better one because it will better meet the actual specifications needed for that tractor. These companies are anxious to improve their local content component. Of course, as they do, under the proposition put by the IAC, they will attract a larger bounty. That is so much better than the relative lump sum arrangement existing in the present Bounty (Agricultural Tractors) Act, which entirely ignores the progressive value of tractors that exceed 150 kilowatts. As I said, those tractors are veritable toys in the market today.

To me it is most important that the Minister for Industry and Commerce (Senator Button) and the Government firstly consider the amendment moved by the Opposition which suggests a mechanism to do something about the disadvantage that these tractor manufacturers suffer now. However, that would be only in the short term. Clearly, if the Government accepts the excellent recommendation of the IAC that problem will be overcome. I am extremely hopeful that that will be so.

The honourable member for Wannon when talking about tractor cabs indicated some of the problems for local manufacturers. I think that is something we have to recognise when we talk about the cost of inputs for local manufacturers. At the Dowerin Field Day-one of the biggest field days in Australia-the other day a manufacturer informed me of his situation. Australia design capacity and technology had produced excellent equipment in the ploughing area, in particular blade ploughs. So good were these ploughs that a Canadian manufacturer came over and sought licence to manufacture this equipment in Canada. That was given and at one stage the Western Australia manufacturer had to turn to that Canadian manufacturer for stock because he had more orders than he could fill. The Canadian fellow sent him out a couple of his ploughs, built under licence in Canada. When the Australian manufacturer got the bill they were 30 per cent cheaper than he could make them himself.

Honourable members can imagine the temptation to that man to sack all his Australian workers, sit down and import Canadian duty free equipment and take the 30 per cent. However, he is not that type of bloke. He had no intention of doing that. Nevertheless, he was smart enough to ask the Canadians to send out one of their senior people to find out why they could make them so much cheaper, and they did. They went through the manufacturing process here bit by bit. It is interesting to note that labour was not the problem. His labour costs were competitive. When they had gone through it all they found that the entire extra cost was tied up in steel-the input.

Of course, we are well aware of what is going on in the steel industry at the moment and how the Government is trying to save the industry with taxpayers' money. The reality of the situation is that we had a tractor industry built up to a point where overseas people had come knocking on our door for our technology. Yet that industry is being destroyed by the cost of steel. Clearly, companies such as Broken Hill Proprietory Co. Ltd have to get their act into gear if this is what they are doing to our manufacturers. There are thousands of opportunities such as that one around the world. I put it to honourable members again that this very large equipment, be it ploughs or tractors, are things Australia can use its well paid work force on because, although the manufacturing process is labour-intensive, there will never be mass production. We should encourage such manufacturers. However, it is no good going along and saying: 'BHP steel is too dear and this is too dear, here is some taxpayers' money'. We have to put pressure on the producers of the raw materials, if you like, to enable our manufacturers to be on the ball.

I put to honourable members that it is not just a case of international competition. If and when we open wide the steel markets of Australia BHP, producing the amount of steel it does, would be the price-setter. Not one company that imported Korean steel or any other raw material would halve the price of BHP steel. Nobody is that silly. If a manufacturer can buy the steel for one-third of BHP's price it will sell it for 95 per cent of BHP's price because that is all that is needed to get the sales. That is the other issue we have to consider in terms of Australian manufacturers.

The matter is serious. I am sure the Minister is aware of this small problem which is attacking the tractor manufacturers in Victoria, at Waltanna, Baldwins in New South Wales, Farmers Tractors in Merredin and Mr Don Zanetic's products too. In fact the Farmers Tractor company employs 18 men in the workshop and five in administration. That is only 23 people at this stage, but Mr Zanetic across the road from that company would employ a similar number. The industry in Merredin has always employed about 50 people. That is not a lot of people but it involves a lot of families and it is a lot of people in a small town like Merredin. These are people in work and people minding their own business. They are doing all the right sorts of things for Australia.

I tell the Minister that if he would like to go back through the files he will see some of the letters I wrote to previous Ministers. I was highly critical of them for not being able to resolve this simple problem. The Minister daily presents himself to us as a man of great ability. He has certainly proved that in his private business interests. I hope he can demonstrate to us within a week or so that he has tackled this little problem and, in fact, there is a mechanism -be it a special refund of bounty or a by-law arrangement-that allows these Australian manufacturers to compete internationally on an equal footing with their competitors. These tractor manufacturers are not even asking for special help, although they would like to have it. They are just asking not to have to pay $1,000 in duty which the importers to Australia do not have to pay. This is the situation we have to look at.

I add in my last few moments that Farmers Tractors have suggested that the Steiger tractor arriving here is being dumped. In fact, Farmers suggest that at the moment tractor dealers are getting an extra discount of $29,500 a tractor. It is pretty hard for the local boys to compete with that type of discounting. However, there might be a warning there for potential tractor purchasers. I have been told that the reason for that dumping is that in Canada Steiger's have produced a bomb, that that company has put an unsuitable motor in the tractor and it is giving the farmers over there a lot of trouble. The farmers over there will not buy the tractors and they are being sent out to Australia at a massive discount. As anybody who has had anything to do with engines and machinery would know, $29,000 is no discount for a machine that will give a lot of trouble. A person could spend that in a year, particularly in down time. Today's farming technique is all about getting the crop in in the shortest possible time. A broken down tractor is no good when a farmer has to put a crop in. So there is a good reason to buy Australian. We have very good equipment and all Australian companies need is a little bit of help. I am hoping that that will occur in the short term and in the long term with the acceptance of the Industries Assistance Commission recommendations to government.