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Thursday, 15 October 1970

Mr CREAN (Melbourne Ports) - I would like to support my colleague, the honourable member for Kalgoorlie (Mr Collard), in his plea on behalf of the gold mining industry of Australia. As he indicated, this Bill renews for a further 3 years what is known as the gold mining industry assistance scheme. Since it came into operation in 1954 according to the Treasurer (Mr Bury) about $28m has been paid by way of subsidy. This Bill will continue at least until 1973 the assistance currently being given. As my colleague and the Treasurer have stated, representatives of the gold mining industry requested continuation of assistance at increased rates of subsidy.

Whilst the Government carefully considered the proposals, finally it decided to continue the subsidy but not to increase it. The honourable member for Kalgoorlie is primarily concerned for his constituents in this matter. The sixteenth annual statement on the Gold-Mining Industry Assistance Act shows that for the year ended June 1970 subsidy totalling $1,859,000 was paid in Australia, and over 90 per cent of that amount was in respect of gold mines in the Kalgoorlie area. It is clear that the bulk of the gold mining industry remaining in Australia is in that area.

The honourable member for Kalgoorlie indicated that last year production had fallen to about 600,000 ounces. Apparently production had declined considerably even between 1969 and 1970. The figures published in the Fortieth Annual Report of the Bank for International Settlements for the year ended 31st March 1970 show world gold production for 1969. This is the latest complete information available. Australia's production was 700,000 fine ounces. A table set out by the Bank shows that in 1940 Australia's gold production had been 1,644,000 fine ounces, so that production has been more than halved in that period of 30 years.

The gold mining industry is of significance to Australia for 2 reasons, the first of which was stated by the honourable member for Kalgoorlie, namely, that it is a supporter of employment, particularly in the Kalgoorlie area. Kalgoorlie would not be what it is had there been no gold mining industry. Some people have indicated the prospects of nickel to be more golden than they have turned out to be, at least if the Tasminex story is significant. I think my friend from Kalgoorlie was probably wise in suggesting that it is better to put your trust in gold than to be too certain about the likely impact of nickel in the Kalgoorlie area, whatever the glittering prospects of Poseidon might be.

The industry's second contribution is as an earner of foreign exchange. By producing 700,000 fine ounces to be sold at S35 an ounce, the industry either earns or saves Australia between $24m and $25m annually on foreign exchange account. The great problem that faces the gold mining industry is that the price of its product is fixed but the costs of production are rising. The gold mining industry is not the only Australian industry so affected at present. That is basically the situation in the wool industry. Costs of production are rising but the people in the industry do not have much say in determining the price of their product when it is sold on an external market. In the case of gold, we can be fairly certain about its price. It has been fixed at S35 an ounce for over 30 years. It was fixed originally by the United States of America as the principal buyer of gold, and was subsequently written into International Monetary Fund agreements at that figure. Of course, a price of $35 an ounce in 1932 or 1933 was a very much different proposition from $35 an ounce in 1970, bearing in mind the cost of production in that period.

My colleague is a little more optimistic than I about a likely alteration in the price of gold. I turn again to the annual report of the Bank for International Settlements, which covers the period from 1st April 1969 to 31st March 1970. This very sober document describes the situation in this way:

As regards the development of prices in the free gold market, 1969 came in like a lion and went out like a lamb. The year opened with the London fixing price at about $42 an ounce of gold and the upward trend continued until the end of April, when the price stood at $43.6.

The report goes on to refer to fluctuations, and then states:

The free market price subsequently recovered from its $40.6 low in early June to nearly $42 around the middle of July. Then, towards the end of that month, the announcement of the Croup of Ten's agreement on the creation of SO Rs-

They are special drawing rights - led to a renewed easing of quotations. By early August the price was at $41 an ounce and it stayed close to this level until the middle of October, when it began to fall sharply, reaching a low point of $34.75 around the middle of January 1970.

The report goes on to note the factors that in essence have helped to determine the price of gold.

Mr Collard - it changed again last month.

Mr CREAN - The price goes up and down. The report continues:

The pronounced fourth-quarter weakening of the gold market was not a consequence of current South African sales.

According to the figures I have cited, South Africa is responsible for more than three-quarters of the annual production of gold in the world. Of an annual production of 40 million oz, South Africa produces over 30 million oz. The report goes on to say:

On the contrary, the total amount of new gold marketed in the last 3 months of 1969 was less than 60 per cent of what it had been in either the second or third quarter.

This is the significant part:

It was rather that a number of factors - the ratification and prospective activation of the SDR scheme, the parity changes in France and Germany, the improvement in the situation of sterling and the continuing high level of Euro-dollar interest rates - combined to produce a marked reduction in net demand.

I quote that only to show the variety of factors involved and these factors can, of course, operate in an upward or downward direction as far as the price of gold is concerned except that there is still the very large buyer, usually the United States, on the one hand, and the very large seller, South Africa, on the other. South Africa is, I suppose, the preponderant determinant of the market according to whether it chooses to sell gold for monetary purposes or industrial purposes according to whatever suits it best. The likelihood is that the SDR scheme will expand. 7 for one hope it does. To my mind it is a curious circumstance that in 1970 this scheme is very significantly dependent upon the mining of gold; however, that is a curious relationship which still exists. The SDR scheme appears to have begun reasonably successfully in this field and it can be automatically extended. Last year the expansion was about 3 per cent of the existing liquidity totals. If that trend is allowed to continue year by year the scheme will place less reliance on gold as part of the backing for monetary reserves. Other factors such as the parity of other currencies including the mark, the franc, sterling and the dollar all have significance in terms of the future price of gold.

I am not as optimistic as my colleague the honourable member for Kalgoorlie is that the price of gold will rise. That forecast only brings to light the difficulties which face the industry in his electorate. I think that this is a problem about which he is rightly concerned. Surely to goodness an extra $lm, say, would be a very small price to pay to assist the industry. There are some difficulties as to the level at which this additional assistance could be given and they arise out of Australia's membership of the International Monetary Fund. The degree of assistance that can be given to a local industry is related to the nation's contractual obligations to the IMF. It is not possible, for instance, to pay a subsidy equal to the price of gold. There are certain barriers or limits within which a country can operate. It seems that this Government holds the view that it is now at the top of those barriers.

I think that the honourable member for Kalgoorlie and I on a previous occasion suggested other methods of costing. Sometimes these sorts of arrangements can be got around. I think that we made a suggestion about sales tax and payroll tax and some other things. One of the conditions of assistance is that the mine applying for assistance must have at least 50 per cent of its total activity in gold mining. Whether that condition is rigid or not I do nol know. 1 join with the honourable member in asking the Government to re-examine this matter. The Opposition is grateful for the continuation of the subsidy but the suggestion that it ought to be increased is worthy of further consideration by the Government. I do not think the Government has given us sufficient information as to why it turned down the pleas which have been made in regard to gold mining. I would have been interested to have seen the submission of the gold mining interests on the one hand and on the other hand the official explanations given by the Government for refusing to grant extra assistance. It may be that the Minister is in a position to supply that information. But surely one should stop and ponder this sort of thing. Even accepting the pleas of the honourable member for Kalgoorlie and the difficulties which face the Government in terms of its arrangement with the IMF perhaps another kind of subsidy altogether could be paid for Kalgoorlie whether it be to the gold mining industry, the municipality or in some other way. To my mind this is the sort of thinking which has to be advanced in future particularly in a State such as Western Australia.

I have had the good fortune, in company with the honourable member for Kalgoorlie, to travel to those areas in the north west of Western Australia where iron ore mining is taking place. There is no doubt that the existing financial arrangements that apply in the 3 levels of government - Commonwealth, State and local - are no longer adequate for the booming State of Western Australia because the additional responsibilities placed on the local governing authorities are really those of national development and not merely local development. I hope that some consideration will be given in the future to this sort of problem. I suppose that nobody would have thought 20 years ago that Port Hedland, Mount Tom Price and Mount Newman - which were only odd names in the geography books to most of us at that time - would have been boom areas and would bring thousands of people into the districts. Development is a good thing in itself, but the local governing arrangements are not adequate to meet the demand in terms of town construction, water supply and so on. I ask the Minister to give these matters his consideration and that in doing so he should not look at Kalgoorlie in the narrow confines of the industry. I am aware of the difficulties which face him, but 1 ask him to look at the matter in the broader national perspective and do something to save this very significant industry in that part of Australia.

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