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Friday, 6 December 1985
Page: 3153


Senator HAINES(12.53) —The Australian Democrats will be supporting the Commonwealth Banks Amendment Bill on the grounds, as Senator Tate has already indicated, that it will extend the area of operation of the Commonwealth Development Bank.

The bank, since its foundation, has supported Australian industry when private institutions have failed or refused to do so. It is the bank of last resort to many people who need assistance in order to pursue development programs. The Commonwealth Development Bank has had a history of lending to those people who have been largely ignored by the rest of the financial system, namely people with new ideas and the drive and application to make those ideas succeed and be of benefit to the community both through the development of the economy and encouraging employment. Had the Development Bank not been created, I suggest that many hard working entrepreneurial Australians would have been denied the opportunity to help develop this country. That would have been a sad thing indeed. In the past, the Bank has been restricted in its ability to help entrepreneurs by legislation governing its activities. It has been allowed, for example, to issue only debt capital and much of its lending has been to primary industry. As Senator Tate said, it has played a very important part in helping those people involved in primary industry. As a source of last resort finance it has played a very vital and very real role for primary industry.

Certainly our agricultural and pastoral industries are very important in terms not only of the internal development and economy of this country but also export income. Therefore, in the broader economic sense our reliance on the agricultural and pastoral industries in this country in the past has been vast indeed. However, the time has now come when we have to look at additional areas to provide economic growth. The extension of the charter of the Commonwealth Development Bank through this legislation is one way of recognising that fact.

Sadly, of course, many of our primary exports are to markets that are greatly oversupplied. These exports must compete against highly subsidised output in some Asian countries. Their prices fluctuate wildly according to factors such as weather, market conditions and so on. They therefore have become a somewhat unreliable-I do not say this in any pejorative sense-source of foreign income. Of course, as time goes on primary industry is employing fewer and fewer people. With our balance of payments deficit running currently at over $11 billion, it is quite clear that we have to develop new industries to help us pay our way in the world.

The tertiary sector and the presently unfashionable, in some eyes anyway, manufacturing sector must provide the means for our economic rebirth. The lesson to be learned from successful exporting countries such as Japan, Korea and Singapore is that the economy can, and must, be given direction by the Government. This must be done not through some sort of Soviet style or communistic, bureaucratic planning but through direction and guidance by commercially based organisations with a long term view, such as that provided, for example, by the Japanese Ministry of International Trade and Industry. Australian culture of course is such that no government here could implement something in the manner in which the Japanese have. I think we have to use their example to provide incentives rather than simply trying to adopt their methods wholesale.

Certainly there is a crying need for incentives for development in this country right across the spectrum. I think the initiative shown in this piece of legislation goes some way towards implementing that. For example, the legislation will allow the Commonwealth Development Bank to lend to a far wider range of enterprise than is presently the case and to take up equity itself in companies for which investors cannot be found. Therefore, the bank itself will be able to take a much larger part in actively pursuing industrial development in this country. Of course, this is not going to be done in some sort of willy-nilly fashion. Projects will have to be commercially viable before the bank will invest. Projects considered to be ahead of their time by, for example, private investors-for all their talk about risk capital they do not particularly like taking risks-can now be taken up by the bank.

This is the sort of assistance we have to give to industry if it is to develop in the areas we want. It encourages and assists people who wish to develop efficient and productive enterprises, rather than being a licence to profit from inefficiency and lack of investment as, for example, is the current tariff system. Senator Tate has already mentioned that the Opposition thinks that the Commonwealth Development Bank and its parent, the Commonwealth Bank, are inefficient anachronisms which should be sold off to private enterprise. In fact, the Opposition seems to think that privatisation, in this as in other areas, is an end in itself. Like Senator Tate I beg to differ from that fairly strongly held position in the Opposition camp. The Australian Democrats take the view that privatisation should not occur unless it can be proved that the community could gain through the sale of particular enterprises and that there is a benefit in the long term rather than just through short term one-off Consolidated Revenue increases. The Opposition view would seem to be that if it is profitable one sells and if it is not profitable one leaves it in the lap of the taxpayer. So the poor old taxpayer loses in both cases. The most notorious example of this attitude currently being expressed by the Australian Federal Opposition is reflected in the Thatcher Government's sale of British Telecom.

This highly profitable enterprise, which is of tremendous strategic and social importance, of course, was sold off at what was virtually a bargain price. Shares have since rocketed on the stock market; employers have sold off the shares they purchased and, as a result, the Government has given a gift, I suggest, from the entire community to a group of largely wealthy investors. I would certainly-I think my Party would share this view-hate to see that sort of thing happen in this country. The Commonwealth Bank is a valuable institution which should be retained in the public sector.

Public ownership, certainly in this area, has a number of advantages. In our rapidly changing financial environment, it gives the Government the capacity to influence the workings of the system in a way it would otherwise not be able to do. Without a player in the market which is friendly towards it, the Government's regulatory job becomes much more difficult. The new banks which arrive in Australia may find the environment not to their liking at some time in the future and attempt to change the rules by not co-operating with the Reserve Bank of Australia. If the Reserve Bank has someone it knows will play by the rules -to continue the metaphor-it is easier to assess whether regulations are, in fact, hampering the system as a whole or whether the banks are simply trying to improve their own positions through non-co-operation, thereby often limiting services to the community generally. The Commonwealth Bank, therefore, has the capacity to be a stabilising influence in the Australian financial scene and this is indicated by its triple A rating.

In a world of liquidity problems and collapsing banks this is a significant attribute, notwithstanding claims made recently that the Commonwealth Bank is inefficient and a drain on the taxpayer. The bank, it is said, returns very little in the way of profits to the Government and lags behind other banks in terms of returns on assets. All I can say is that those who compiled that report make very selective use of figures. As Senator Tate pointed out a moment ago, the bank has been remarkably efficient and has performed very well for the taxpayer, although perhaps not quite as much in accordance with its founders' intentions as Senator Tate would have us believe. The bank has more staff than its competitors. This is something that its detractors claim and which nobody else would deny, but it has them for a very good reason. It employs some 35,000 people across Australia and, in doing so, is performing more than adequately its commitment to service all Australian communities, not only those that are profitable, urban and close at hand. This, obviously, will involve providing facilities in remote areas with small populations and that can only be done at quite significant cost. But it is something which can be done by a bank in the public sector, which is highly unlikely to be done by a bank in the private sector. Those sorts of facilities certainly will not be provided to ordinary people living in isolated areas by the foreign banks that have so far been admitted by this Government.

The Commonwealth Bank has some 1,300 branches scattered across the country. That, together with the number of people whom it needs to service, is more than sufficient reason for its return on investment being somewhat lower than that of the private banks. Given the capital that has been put into the bank, it has been remarkably efficient, Mr Deputy President. Private banks, as you would well know, raise capital on share markets to pay for expansion. The Commonwealth Bank cannot do this. It started in 1913 with something like a $20,000 loan. The only capital contribution made by the Commonwealth since then was a $15m grant in 1983. The bank has, therefore, performed a remarkable feat in expanding to its present size with virtually no outside capital infusions.

One of the functions it performs most admirably had already been well covered by Senator Tate. Given the time constraints on us today, I do not want to go over it all again, except to say that the role played by the Commonwealth Bank in the home loan area is vitally important to a large number of people on reasonably low incomes who may not be able to get their housing funding from anywhere else. The Commonwealth Bank accepts the fact that it has a responsibility in this area and managed to overturn its original intention a few weeks ago, for example, to charge service fees on loans.

The study criticising the Commonwealth Bank looked at its performance over a 10-year period. However, several years ago the bank was radically restructured. Its profits jumped by 55 per cent in 1983-84 and 24 per cent in 1984-85. These are the largest profit increases for any of the banks currently operating in this country. Last year over $100m in dividends and taxes was paid to the Government or, in essence, into Consolidated Revenue. The Commonwealth Bank has always given good service to the public both in this way and in the provision of normal banking services, and it has done so in a very efficient manner. Since its restructuring I suggest, Mr Deputy President, that it has become even more efficient, more worth while and of more value to the community generally. In the future it will return benefits to the community in money and social terms, and these benefits must be retained for all Australians through maintaining public ownership and not divesting into the public sector for some ideological ground or short term financial gain.