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Tuesday, 23 November 1993
Page: 3477

Senator GIBSON (9.40 p.m.) —The CSL Sale Bill 1993 is concerned with the privatisation of the Commonwealth Serum Laboratories. It provides a framework for the sale of that organisation. I will not go into the detail. The organisation was established in 1916. It is Australia's only manufacturer of human vaccines and is one of only two manufacturers in Australia of biological veterinary products. It has been and is an Australian success story.

  The financial reports for last financial year had revenue at $171 million, which is up 8 per cent, and a net profit of $13.8 million. Its net assets from the previous year's balance sheet—last year's balance sheet has not been released yet—were $163 million. The balance sheet is in a healthy condition. CSL has 1,100 employees.

  This is a successful research oriented company. It spent $19 million last year on research and development. CSL's main laboratory is in Parkville at Melbourne's Medical Research Centre. CSL has invested $40 million in a new plasma products facility at Broadmeadows.

  As I said earlier, CSL is an Australian success story. In 1961 CSL became a statutory authority and it was then that it basically became more profit oriented. In 1990 it was made into a public company via the Commonwealth Serum Laboratories (Conversion into Public Company) Act. At that time the coalition argued for the immediate privatisation of the organisation. We are pleased to see that at long last the government is going to privatise 100 per cent of this company. The bill provides for various conditions in the articles of association prior to privatisation. I will not go into the details of those conditions at this late hour.

  One very significant thing that the Senate should be aware of is the possibility of a significant contingent liability by the company. With the sale of the company, as set out in this bill, the Commonwealth's contingent liability for claims against the company ceases. There are some existing claims and the possibility of future claims which relate to three areas: firstly, the Creutzfeldt-Jakob disease which is linked with a drug made by CSL in the past; secondly, AIDS and hepatitis which is concerned with blood products from some time ago; and, thirdly, the pertussis vaccine which is a component of triple antigen. We believe that the government must continue to indemnify the company against claims for past actions by CSL. We understand that the government has given such an undertaking to CSL.

  In the debate in the other place the coalition moved an amendment to the legislation. We also moved an amendment concerning employee share ownership. Those opposite are probably expecting us to move a similar amendment in the Senate. However, there are three reasons why we are not doing so this evening. Firstly, in the debate in the other place after the coalition moved an amendment, the Parliamentary Secretary to the Minister for Health (Dr Theophanous) incorporated in Hansard a letter from the Deputy Secretary to the Department of Health to Dr McNamee, the Managing Director of CSL. The letter stated that the asset sales task force:

. . . will recommend to the Minister that the Commonwealth provides an indemnity for any loss suffered by CSL arising from certain claims brought against the Company by any person as a result of the use of the following products:

The letter then lists the various products—A, B, C, D and E. This covers the matters I referred to before. The coalition expects the government to accept this recommendation.

  The second reason we have not moved an amendment—and I think it is much more important than the first—concerns the directors of CSL. They are currently going through the process of due diligence. They have to produce a prospectus for the sale of the company and they must sign that prospectus, thereby accepting personal liability for what is contained therein. Obviously, they would be mad to sign such a document unless they get a clear and unequivocal undertaking from the government to indemnify CSL and the directors against current and future claims arising from past activities. Given that situation, the coalition is persuaded that these matters are being addressed properly.

  The third reason for not moving an amendment to this bill concerns the employee share ownership. The coalition is very strongly in favour of encouraging employees to take up shares in all enterprises. I have been advised that the board of the company is currently examining in detail options for a proper employee share ownership scheme for the employees of CSL.

  I have said in this place before, with regard to another enterprise, that a proper employee share ownership scheme is the appropriate way to go because it means that the company can finance employees into shares in the company rather than being involved in an external way through the float. The coalition strongly supports such a move.

  The coalition has consistently initiated and led the debate in this parliament on the need for privatisation of government enterprises. All around the world governments have realised that there is no need for them to own business enterprises. Businesses work much more efficiently in the private sector.

  A recent publication from New Zealand entitled `The public benefit of private ownership. The case for privatisation.', published in June last by the New Zealand business round table, listed seven gains to be achieved by privatisation: firstly, clear objectives with more effective monitoring and accountability mechanisms; secondly, a greater consumer focus and an increased or improved range of products and services; thirdly, increased productivity with the same or fewer staff; fourthly, cost reductions and hence lower prices, which is good for all consumers; fifthly, improved remuneration structures for the people within the organisation which enhances the ability to attract and hold the appropriate staff with the right skills; sixthly, vastly improved profits; and, finally, more effective management information systems.

  Whilst corporatisation—that is, the changing of government business enterprises into the structure of private companies but still being owned by a government—can lead to very substantial gains, moves to full privatisation give by far the best results. It is interesting to note that both the World Bank and the International Monetary Fund independently, in recent reports, cited the New Zealand experience as a good example for other countries to follow. The IMF report stated:

. . . the case of New Zealand is particularly instructive for other countries contemplating a privatisation programme.

In Australia in recent years privatisation sales by both Commonwealth and state governments have amounted to only $6 billion. Over the two years to June 1992 the total value of assets of state and Commonwealth government owned businesses increased by $25 billion to $126 billion. There are a lot of government businesses in Australia.

  The slow pace in Australia should be compared with what happened in New Zealand. Over a period of only a few years its total sales of business enterprises were $US11 billion. That is for an economy which is smaller than the economy of Victoria. The coalition urges the government to speed up the privatisation process. We welcome the privatisation of CSL. We wish its board, management and all of its employees success. I commend this bill to the Senate.