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Tuesday, 8 October 1985
Page: 838


Senator CHANEY (Leader of the Opposition)(9.23) —The Bounty (Metal Working Machines and Robots) Bill 1985 and the Bounty (Agricultural Tractors and Equipment) Bill 1985 currently before the Senate provide for substantial outlays of government money on two quite different manufacturing operations. The Bounty (Agricultural Tractors and Equipment) Bill is for the provision of bounty to the producers of an end product. The other Bill is for bounty payments to the producers of machines to make end products, including tractors. The Bounty (Agricultural Tractors and Equipment) Bill provides for bounty assistance to the industry to the end of 1992. The elements of the package provide for bounty at a rate of 45 per cent of value added to be paid for the first year, 35 per cent for the second year and 25 per cent thereafter. Twenty five per cent was the level recommended by the Industries Assistance Commission.

So the proposal being put forward by the Government is for substantial additional assistance to be provided in the first two years of the period which is covered by the legislation. In addition, the bounty period is to run for two years longer than that recommended by the Commission, which suggested that the assistance should be fixed to 1990. The Government has put forward legislation which provides assistance through to 1992.

The Opposition is concerned about the timeframe as well as the level of assistance during those first two years. The industry, which principally means Chamberlain John Deere Pty Ltd of Western Australia, received temporary assistance for a two-year period from June 1983 to June 1985 when the then bounty rates were doubled after a Temporary Assistance Authority report. The effect of the standard assistance package prior to that special assistance meant that since 1979-80 effective rates of assistance had fallen from about 32 per cent with the basic bounty to 15 per cent in 1983-84. However, the actual assistance received as a result of temporary assistance and the imputed interest on advances, which arose from the fact that bounty payments were being made in advance, has resulted in effective assistance increasing from 32 per cent in 1979-80 to 48 per cent in 1983-84.

It would appear that the Government's two-year additional assistance to be provided by this Bill is a continuance of the special temporary assistance received by the industry since June 1983. On behalf of the Opposition I will, at the Committee stage, move three amendments to the Bill to reduce the bounty payment to the 25 per cent recommended by the IAC and to reduce the period of the payment of that bounty to that recommended by the IAC, namely, to 31 December 1990. The IAC's recommended assistance package was based on the belief that under the previous arrangements the industry received effective assistance of less than 15 per cent. Because similar manufacturing processes are accorded assistance generally in the range of about 20 per cent, the IAC believed that assistance to the tractor industry should be increased to this average level. It is important to note, however, that in the past the IAC has recommended that, where assistance rates are higher and there are disparities between similar manufacturing processes, those processes with the higher rates of duty should be reduced to the lower rates, that is, assistance should be gradually reduced over time. Unusually, the IAC has recommended an a increase in the assistance levels to bring about uniformity in this case.

This industry has been receiving assistance by way of bounties since 1922. The principal recipients of that assistance over time have been Chamberlain John Deere and International Harvester Australia Ltd. The latter ceased operation as a manufacturer in 1982. Despite the dominance in the local industry of Chamberlain John Deere and International Harvester until that date, a number of new entrants have come into the industry. These entrants have been mainly producers of very large tractors, although the production runs are relatively small. The companies involved are companies such as Waltana and Acremaster. These producers of very large tractors have received little, if any, bounty assistance under the previous arrangements. Under the proposed new arrangements all manufacturers in the industry, other than those manufacturing tractors of less than 15 kilowatts power, will receive assistance by way of bounty provided they meet the necessary local content requirements. Producers of very small tractors will continue to be assisted by way of tariff.

The main producer in the local industry, Chamberlain John Deere, has had a number of years of loss making on its tractor operations. This information can be gleaned from successive IAC reports on the industry. In some years since the mid 1970s Chamberlain John Deere has made profits only as a result of the provision of government bounties. The Opposition is concerned that, despite increased levels of assistance for this industry, the major local producer may not have a viable tractor manufacturing operation at the end of the period of increased bounty. I would like to explain the Opposition's position and refer to report No. 348 of the Industries Assistance Commission, entitled `Agricultural Wheeled Tractors and Certain Parts'. The Opposition accepts the views which I shall quote from that report. The early part of the report under the heading `Summary and Conclusion' states:

In deciding on an appropriate level of support for the longer term, the Commission notes that broadly similar activities in the industry presently receive effective assistance slightly higher than the present basic bounty assistance.

In addition, manufacturers of large tractors with a power rating in excess of 150kW have received less support than manufacturers of medium size tractors and it is considered there is a case for achieving a greater degree of uniformity in levels of assistance. Further, the prospective level of assistance under the present bounty scheme is relatively low, which could affect the retention of resources in the industry.

While there is no compelling reason for a substantial increase in assistance, on the basis of the above considerations, the Commission judges that stabilisation of the level of long term assistance accorded tractor production in the range of 15 to 20 per cent, in effective rate terms, would reduce assistance disparities and thus production distortions, thereby contributing to improved economic efficiency.

I quote from page 29 of the report, which states:

. . . the Commission is concerned that the rate of assistance for tractor production should be set with a view to rates applying to closely related substitute activities in production. This is because disparities in assistance afforded closely related activities can lead to losses in economic efficiency. The scope for substitution of resources employed in tractor production and related activities is demonstrated by the rationalisation undertaken by CJD in recent years, with the result that a greater proportion of its resources are now engaging in activities other than tractor production. Mobility of resources is also indicated by the recent entry of manufacturers of large tractors whose total anticipated sales, if achieved, would represent a significant change in the structure of the Australian industry. These considerations suggest that the level of assistance for tractor production should be examined against the afforded related activities.

The Commission has taken the primary functions involved in manufacturing tractors and has examined what assistance in general is available to broadly comparable activities in the economy. The four main processes in tractor production are: foundry and castings work, machining, metal fabrication and assembly. CJD undertakes all these activities, while the other manufacturers undertake some of them. CJD and some other tractor manufacturers also use some of these processes in other activities they undertake. CJD and, to a varying extent, the other manufacturers also use resources associated with production design and engineering, marketing, general administration and management.

I quote from another section of the report, which is in part repetitive of the summary I gave previously. It states:

The main activities which the Commission considers are broadly comparable to tractor production processes are those associated with the industries producing basic iron and steel, fabricated metal products and industrial machinery and equipment. The effective rate of assistance for these activities ranges from 16 to 24 per cent but, overall, is of the order of 20 per cent compared with the prospective rate of about 13 per cent for tractor production.

The Opposition is prepared to support the maintenance of assistance to this industry in the form of a bounty which would effectively provide assistance in the order of 20 per cent, but it does not believe, given the history of manufacturing in this sector and the history of the remaining company which is fundamentally affected by this legislation, that the continuation of a special high level of assistance is justified.

Before raising a number of general industry policy issues which affect the operations of both industries, I wish to make some comments about the Bounty (Metal Working Machines and Robots) Bill. This Bill also provides for a bounty to manufacturers for what has been termed low technology and high technology metal working machine tools. These tools are those involved with the working of metal into some shape for inclusion in the manufacturing process. It includes tools which grind, saw and mill metal. The metal working machine tools industry has seen a number of remarkable advances in recent years, with the the inclusion of numerically controlled and computer numerically controlled equipment. The addition of computer technology to these machines has resulted in higher quality and more rapid throughput and hence lower production costs.

The current Bill provides for a bounty to be paid on low technology or standard metal working machines at a lower rate than that to be applied to high technology metal working machines. The Minister for Industry, Technology and Commerce (Senator Button) outlined in his second reading speech what machines would be included in the high technology category, including numerical and computer numerical controlled machines, flexible manufacturing cells and flexible manufacturing systems and robots. The provisions in this Bill differ in a number of aspects from the recommendations of the Industries Assistance Commission, which did not propose that exports of these goods be bountiable. It also did not propose that there should be a differential level of bounty provided in the way the Government proposes. The Government has decided to extend the bounty to the export of these goods. In the same way as the Opposition supported the extension of the shipbuilding bounty to exports, we believe that if a bounty is to be provided for domestic production and if the Government's approach, which we support, is that Australian industry is to be encouraged to be outward looking, it is appropriate that the bounty be paid on goods exported as well as those produced for local production. I will return to some of the factors I want to touch on in relation to the need for Australian industry to be outward looking.

Of importance to this industry is the defence capability it provides. This was highlighted by the submission of the Department of Defence to the IAC which stated, in brief, that it was imperative to the defence capabilities of the nation that at least a nucleus of a metal working machine tools industry be provided in Australia. In supporting this Bill the Opposition has paid particular regard to the views of the Department of Defence. Australian industry has substantial capacity to provide more of the defence requirements of this nation. Already about 70 per cent of the repair and maintenance work is done in Australia. We produce only about 30 per cent of the captial equipment needs of the Department of Defence. The report commissioned by the Minister for Defence (Mr Beazley) on the various aspects of the defence industry in Australia will be of particular interest when it is released in the next few months. The Opposition awaits Mr Cooksey's report and his recommendations on how Australian industry can better export the defence products it has developed.

This Bill contains a number of novel requirements, in particular the discretion granted to the Minister to vary the bounty rates on the products covered by those rates and also the provision to bypass the Industries Assistance Commission in relation to the variation of those bounty rates. The Industries Assistance Commission Act states in section 23 (4) that before duty or bounty rates can be varied a reference must be sent to the Commission and a report forwarded from the Commission to the Government. The Government's desire to see Australian industry develop and utilise its technological bases more thoroughly has resulted in the Minister wishing to be able to vary the bounty rates, particularly for high technology component goods, without having to go through the time-consuming process of an IAC inquiry. The Opposition has reservations about this mechanism. We would not like to see it become a standard provision in these types of Bills. I am pleased to note that any variations made by the Minister are subject to parliamentary disallowance. I give the Minister notice that we will watch closely his use of these provisions. We suggest that he should give an adequate public explanation for any changes he makes pursuant to the provision to which I have just referred.

If Australian industry is to succeed and survive it must become more internationally competitive and more outward looking. That form of words seems to have become blessed by common usage on both sides of the political fence. The Opposition believes that there is a very real need for Government to reduce the inflexibility of much of the Australian economy and to provide an environment free of the barriers to change which impose substantial costs on industry and the direct, often government-imposed costs which constitute an increased burden on industry. Neither of the two Bills before the Senate removes any of the barriers to change or increase industry's flexibility, which is becoming an urgent requirement for industry generally in Australia.

For a long period Australian industry has been encouraged to develop to meet the needs of the small domestic market under the cover of tariff or bounty protection. Understandably, industry which has developed under these arrangements tends to be inward looking; concentrating solely on supplying the needs of a small domestic market; relying heavily on imported technology; and doing very little in the way of private sector research and development. This attitude and the concentration on the local market were well publicised recently with the announced intention by Rank Industries Australia Pty Ltd to close its white goods manufacturing establishment in Sydney. The announced closure by Rank received very wide media coverage. The closure of the Rank factory is indicative of a much wider malaise current in Australian industry. This malaise relates to the dumping of products on the Australian market, in some part to the imposition by the government of substantial cost burdens; the rigidity of much government regulation; and, most importantly in the Opposition's view, the rigidities of the labour market.

In relation to the dumping issue, a number of manufacturers to whom I have spoken have indicated that they regard the current provisions and practices in relation to anti-dumping procedures to be far too slow and as a result as being ineffective. This is not a universal view but it is a common view. I have asked a number of manufacturers to provide me with details of where they believe that the dumping provisions are inadequate. I would ask that Government also undertake its own review of the adequacy or not of the provisions and procedures in relation to dumping activities. The Minister in August 1983 promised that as part of the steel industry package, fast track anti-dumping procedures would be put in place. The Opposition supported the Government on that and we now ask whether the new arrangements in fact are working effectively.

The imposition of additional costs by government are starkly illustrated in the Rank Industries case, where it was claimed that the cost of goods produced had risen by little over 10 per cent, electricity costs had risen by over 100 per cent in the same period. Another white goods manufacturer in New South Wales put the view to me that over five years its product costs had increased by about 5.3 per cent-that is, the cost that it could charge to consumers-whereas the cost of one of its substantial inputs, electricity, had risen by an average of 14.9 per cent per annum. I might add that when Premier Wran leapt out of his box and suggested, much to the chagrin of the present Government, that the solution to the problem of Rank Industries was to increase the protection provided to the industry, he notably failed to look to the cost loadings that his Government had imposed on industry, with respect to both the cost of electricity and the cost of such things as workers compensation. I am sure that any member of this chamber who has talked to any employer in New South Wales in the last 12 months will be aware of the enormous cost increases in that area in the last year alone.

The problem is very wide and it is consistent with a general situation where public sector costs are rising much faster than private sector costs. All these public sector costs add to the burdens placed upon industry. Costs imposed by government owned transport operations have also reduced industry's competitiveness and there are many other examples. The Government has over regulated at both State and Federal levels and this has been conceded by Senator Button personally and by his Department. The Government has said that it is addressing itself to the problem of business deregulation, but a great deal remains to be done.

The entrenched inflexibility of the labour market also adds substantial costs to industry. Calls by the trade union movement for the Government to save jobs and to increase protection are starkly at odds with the trade unions' demands for increases in wages on-costs through productivity and superannuation claims. Such demands highlight an absolute ignorance of the need for labour rates to be adjusted to the capacity of an industry or a company to pay. Unless the labour market adjusts to the capacity of industry to pay there will only be further job losses, further unemployment and further proverty for the unemployed and their families. It is increasingly recognised that the attitudes that have been prevalent in the post-war period are no longer applicable to the changing needs of the economy in the 1980s and beyond. More must be spent on research and development of new products and new processes. It is imperative that employees realise that many of the labour market practices of the past are no longer applicable to today's manufacturing environment and it is imperative to recognise that unless more flexibility is introduced into Australian manufacturing industries we will see a further deterioration of their fortunes.

The news is not all gloomy. It is possible as one moves around Australia to find people who are behaving in the way that the Minister has asked them to behave and in the way that the Opposition believes they must behave-namely, to show a great deal of entrepreneurial spirit and talent and be outward looking. In my last week in Perth I visited a number of manufacturers at different levels of operation who were showing that spirit. I visited a one-man firm which is exporting goods to Asia and the United States. I visited a tractor manufacturer, one of those who will be affected by this bounty extension, Acremaster, and saw an operation which has been growing without bounty assistance and which is pursuing overseas markets with great enthusiasm. There must be a great series of changes if Australian manufacturing industry is to prosper and many of those changes lie within the province of government; many lie within the province of employees and of course many others lie within the province of management.

The bounty on metal working machine tools and robots is an indication of the Government's desire to provide industry with access to metal working machines and advanced technology at competitive world parity prices. The Opposition supports the Government in this action although the Opposition has some doubts about the ability of the Minister and the Department to pick and choose which elements of this segment of manufacturing warrant the higher bounty. As I said before, we will watch with interest the Minister's administration of this legislation.

It is the view of the Opposition that as far as possible we should try to achieve a bipartisan approach to industry policy in this place. It is obviously in the interests of Australian manufacturers that they can proceed to invest in a stable policy environment which they would expect not to be disturbed by changes of government. In the same way as Minister Button reaffirmed the textile, clothing and footwear arrangements when Labor went into government, we have indicated in advance that we would expect to support the framework which was put in place for the motor industry by the present Government and which is scheduled to run through to 1992. This is not an area where we should be looking for difference for the sake of difference. There is, in fact, a very substantial reason why we should seek to get as much common ground as possible so that people can invest and create new jobs, new processes and new products with confidence.

Having said that and having indicated our bona fides in the last week in the general support which we have given to the Government's position that was adopted following the announcement of the closure of Rank Industries, let me say that the Opposition is totally impatient with the attempt by the Government, and by the Prime Minister in particular, to do no more than to say that Australian industry must be told to be outward looking and competitive and to suggest that tariffs and other forms of assistance are not the answer for Australian industry. That standing by itself is an attitude which much of industry is entitled to greet with great scepticism.

As I tried to point out in my earlier comments, there are many difficulties faced by manufacturing industry which are produced either by this Government or by its sister governments in the States. When one looks at the question of overregulation, at the costs of services provided by government, at the failure of the Government to come to grips with the need for more efficient transport in Australia and at a whole series of things which impact on industry, one can see a gross level of underperformance by the Government.

The Government softens industry's attitude to some of these areas by acknowledging that the problems exist. For example, Senator Button frequently makes speeches which acknowledge the considerable problem of on-costs for Australian industry. Yet this Government has entered into the accord mark 2 with the trade union movement and it has trumpeted that as a success and as a promise of stability for industry; but it has not trumpeted the fact that it has added to on-costs further with the so-called productivity increase which has been promised and the additional superannuation costs which have been promised. These costs will be imposed without regard to the capacity of individual industries to pay.

We face a very significant series of further difficulties for manufacturing industry in Australia which are substantially the product of the actions of this Government. I believe that all senators in this place, whether they be Labor, Liberal or National Party, would find a common response when they visit manufacturing industry establishments in this country. Some of the elements of that common response would touch on some of the issues that I have just raised. Certainly, many manufacturing operations would deny that they have the capacity to absorb further on-costs in the immediate future; yet that is precisely what this Government has imposed on them in respect of the accord mark 2.

The Opposition believes that Australian industry can be competitive and that it can be export oriented. There are very good examples here in Australia of industries which have achieved those qualities. We believe that industry can develop new products and processes and again there are many examples of that having been achieved. All these desirable goals will be achieved provided the entrepreneurial flair of Australian business is allowed to flourish in an environment which really does give it a chance to compete with the rest of the world. As I indicated earlier, the Opposition will move three amendments to the Bounty (Agricultural Tractors and Equipment) Bill in Committee but we will support the passage of both Bills through the Senate. We express the hope that they will add to and aid the successful promotion of a more competitive Australian manufacturing industry in the areas which they touch and we say again that we are happy to get behind the Government in areas where we believe that the problems of manufacturing industry are being genuinely tackled. However, we say to the Government that in too many areas it is failing to tackle the fundamental problems which are faced by Australian industry and which deny many sectors of that industry a genuine chance be competitive.