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Tuesday, 3 December 1985
Page: 2744

Senator GRIMES (Minister for Community Services)(10.08) —I move:

That the Bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows-

This Bill proposes assistance by way of subsidy on grain harvesters and certain parts for grain harvesters produced in Australia. The subsidy period is 21 August 1985 to 31 December 1990. The Bill also contains provision for the payment of a special subsidy on certain imported grain harvesters and parts. The Treasurer announced in the 1985-86 Budget that, as one of the important initiatives to assist the rural sector, tariffs on grain harvesters were to be replaced by a subsidy on local production. The Industries Assistance Commission was subsequently asked to advise on the assistance level and conditions that should apply over the next five years, consistent with the level of assistance accorded producers by way of tariff. The objectives of the Government are to reduce the cost of grain harvesters to farmers whilst maintaining assistance to local producers by means of a subsidy rather than a tariff. The Government accepted the IAC's finding that, of the options available, a composite two-part scheme would best approximate the structure of assistance to local producers under the 15 per cent tariff.

The need for such a scheme arises from the difficulty of devising uniform and equitable arrangements for an industry which, as the IAC found in its inquiry, has patterns of production and cost structures varying widely from producer to producer. As a consequence clause 13 of the Bill provides for substantial local manufacturers of grain harvesters, whose value added in production of complete machines is not less than 40 per cent of ex-factory selling prices, to be eligible for subsidies at the rate of 12.5 per cent of ex-factory selling prices. For other manufacturers of grain harvesters and parts classified to sub-item 84.25.9 of the customs tariff subsidies will be at the rate of 25 per cent of value added. The new arrangements will also result in grain harvesters and parts classified to sub-item 84.25.9 imported on or after 21 August 1985 being duty free. The necessary action is being taken to alter the Customs Tariff to coincide with the other assistance arrangements.

Clause 23 of the Bill includes a provision designed to promote the orderly development of the local grain harvester industry and to avoid fragmentation of production. The Comptroller-General of Customs will not register the premises of any applicants for registration that were not in production of goods eligible for subsidy on 21 August 1985 (the operative date of the proposed change in assistance arrangements) if, in the opinion of the Minister for Industry, Technology and Commerce, such registration would not permit the orderly development of the industry in Australia. Parts III, IV and V of the Bill contain administrative provisions modelled on similar provisions in recent bounty legislation. The arrangements I have outlined will remain in force until 31 December 1990, but will be reviewed by the IAC before the end of this period. Provision has been made to enable the Minister to extend the scheme for up to 6 months beyond the terminating day to cater for any unforeseen delays in determining the assistance measures (if any) beyond 31 December 1990.

This brings me to the special subsidy to be paid on imported harvesters. This is a temporary measure designed to deal, in a manner fair to all interested parties, with a special problem affecting sales of harvesters which, if left unresolved, could exacerbate an already difficult market situation and reduce the benefits to the gain growing sector flowing from the Budget decision. Prior to 21 August 1985 a substantial number of grain harvesters were imported for sale in the current season. Most of these harvesters have yet to be sold. Importers would therefore have been faced with the prospect of having to sell duty paid machines in the 1985 season in competition with other harvesters which will be duty free or with locally produced machines on which the subsidy under this Bill will become payable. This would have seriously disadvantaged some suppliers in a fiercely competitive market, already depressed because of other domestic and world factors.

In order to deal equitably with this situation and remove some of the uncertainty in the market, the Bill contains special provisions at clauses 11 and 14 whereby subsidies will be available in respect of domestic sales of imported grain harvesters cleared for home consumption before 21 August 1985 and sold on or after that date. These subsidies will also be extended to parts for grain harvesters classified to sub-item 84.25.9 cleared before 21 August 1985 and incorporated as original equipment into grain harvesters sold or otherwise disposed of on or after that date. The subsidy will be equivalent to the net duty paid on the subsidised harvesters or equipment.

The Government considers that the provisions of this Bill will meet the twin objectives of reducing the costs of grain harvesters to end-users and maintaining the structure of assistance to local production. The subsidies available to producers will enable them to remain competitive against imports and grain growers' input costs will be reduced. This reduction in costs, when taken into account with the other cost reductions for farmers made possible by the package of measures announced in the Budget, will alleviate the pressures that grain growers have been experiencing and increase the returns to an important sector of the rural economy.

Financial Impact Statement

It is expected that these subsidy arrangements will involve costs of approximately $5.65 million in 1985-86 and of the order of $3.75 million per annum thereafter during the life of the scheme. Total costs, including revenue forgone as a result of the related tariff change, will be approximately $9.75 million in this financial year and $12 million annually thereafter.

I commend this Bill to the Senate.

Debate (on motion by Senator Kilgariff) adjourned.