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Wednesday, 17 April 1985
Page: 1301

Mr JOHN BROWN (Minister for Sport, Recreation and Tourism)(5.47) —I move:

That the Bill be now read a second time.

This Bill proposes to extend the bounty assistance currently provided to the shipbuilding industry in Australia to vessels constructed or modified for export from Australia. The extended bounty assistance is part of a new shipbuilding industry package announced by the Government on 11 October 1984, following consideration of the report of a task force on the Australian shipbuilding industry released in January 1984. The task force was established by the then Minister for Industry and Commerce following representations from the Australian Shipbuilders Association concerning the long term viability of the local shipbuilding industry and its grim forward order situation.

The task force made several recommendations aimed at increasing the throughput of Australian shipyards. Concern was also expressed at the substantial increase in the number of yards constructing bountiable vessels since the introduction of the current bounty scheme on 1 July 1980. It was recommended to government that it explore the possibility of prescribing conditions for the registration of shipyards. I am happy to report that since the task force report a series of discussions have been held between the industry and the Australian Council of Trade Unions and both parties have agreed that they will try to achieve an industrial agreement covering a range of issues. This agreement represents a significant contribution by both the industry and trade unions.

The Government, as part of its contribution, has decided to remove the 2 per cent revenue duty from imported goods used in the construction or modification of bountiable vessels, to introduce certain registration criteria for eligibility for bounty, and to extend to vessels constructed or modified for export the bounty assistance currently provided to the industry. It is proposed that the bounty be extended to vessels built for export for which construction was commenced on or after 10 December 1984. Bounty is currently payable at a rate of 25 per cent of construction costs for vessels commenced between 1 July 1984 and 1 July 1985. The bounty rate is to phase down to 22.5 per cent for vessels commenced between 1 July 1985 and 1 July 1986, then phasing to the long term rate of 20 per cent from 1 July 1986. There will be an annual limit on bounty payable on ships built for export, the limit being $6m in 1984-85 and $10m in 1985-86.

The Government believes that the extension of the bounty to vessels built for export combined with the recent improvements to the operating arrangements of the Export Finance Insurance Corporation will be very beneficial to the Australian shipbuilding industry. Exports should develop those sections of the shipbuilding industry most deserving of encouragement and should improve efficiency. There are significant export prospects for the type and size of vessel built by the local industry. It has also become apparent that local yards may have lost potential export contracts to third markets because competing overseas yards appear to have received government subsidies in addition to the usual export finance arrangements.

I mentioned earlier that part of the Government's shipbuilding package is the introduction of registration criteria for the purposes of bounty eligibility. These criteria will ensure that bounty is paid only to those shipbuilders with a clear long term commitment to the industry. The criteria will not, however, prohibit entry into the industry by a shipbuilder prepared to undertake the necessary commitment. It is proposed that the regulations prescribe the criteria to be met by applicants for registration and to this end clause 13 of the Bill includes suitable provisions in the new registration sections to enable the regulations to prescribe conditions to be met by applicants for registration.

There has been a significant increase in the number of registered shipbuilders since the introduction of the Bounty (Ships) Act 1980 on 1 July 1980. While it is difficult to estimate future domestic demand for ships, it is apparent that there will be insufficient work to maintain the number of yards currently registered. The criteria should have a significant impact on the structure of the industry and it is estimated that when it is fully operative the 80 shipyards currently registered will be reduced to less than 30. The result should be a smaller, but more viable industry structure.

The proposed registration criteria were announced by the Government on 11 October 1984 in the context of the new shipbuilding industry package. To qualify for registration on or after 10 December 1984 a shipbuilder must:

(a) be a registered Australian company or organisation;

(b) demonstrate financial and commercial capacity by way of an independent auditor's report to build a bountiable vessel;

(c) employ directly, or through nominated sub-contractors, or have demonstrated clearly that an average of 20 persons will be dedicated to shipbuilding throughout the period of construction for the purpose of building the bountiable vessel;

(d) have an ongoing apprenticeship scheme employing a ratio of at least one apprentice to eight tradesmen directly employed by the shipyard, and encourage all sub-contractors to maintain a similar scheme, and

(e) own or have access to shipbuilding facilities including a waterfront site which are assessed as adequate for building the vessel or vessels for which registration is sought.

Registration may also be restricted to vessels of up to a specified size and, if appropriate, of a specified hull material. It is also proposed that the registration be valid only for a period of 12 months but may be renewed. I should point out, however, that any registration in force at the date of implementation of the proposed criteria will remain valid until completion of any bountiable vessels currently under construction or modification. There is one other aspect that I would like to make clear. If a shipbuilder was registered prior to the introduction of the new criteria and was not successful in gaining a new registration because of the inability to meet one of the above criteria, the Minister will have the discretion to register.

The Government places great importance on continuing progress in the discussions between the industry and the unions. Because of the importance of these discussions to the long term viability of the industry a Shipbuilding Consultative Group-SCG-has been established to monitor rogress. This body consists of an industrialist, a unionist and a Government representative. The Group will report to the Minister at least every three months. If the reports from the SCG indicate that continual progress towards rationalisation is not being achieved, the Government will review the augmented assistance package. Whether the export bounty is paid beyond the 1985-86 financial year will depend on the degree of progress achieved. Subject to the combined industry and union response the Government will consider whether the general bounty assistance should also be reviewed. The SCG is also responsible for advising on applications for registration from shipbuildings under the new criteria but the Minister will decide whether to grant or refuse registration of premises after report from that Group.

Finally, the Bill includes a number of provisions particularly in Parts III and IV which are designed to update the administrative provisions in the existing Act. These provisions are modelled along similar lines to provisions in recent bounty legislation.

Financial Impact Statement

The cost of the bounty assistance to vessels constructed or modified for export is limited by the provisions of clause 8 to $6m in the period commencing on 10 December 1984 and ending on 30 June 1985 and to $10m in relation to the financial year commencing on 1 July 1985. The assistance, if any, beyond the 1985-86 financial year will depend upon the degree of progress achieved by the industry. I commend the Bill to the House.

Debate (on motion by Mr Braithwaite) adjourned.