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Thursday, 29 October 1970

Mr CREAN (Melbourne Ports) (12:28 PM) - Mr Speaker, I am afraid that I must protest again about legislation coming on for debate at this time of night. However, I suppose that because of the way the business of the House is being dealt with this is inevitable. The Opposition intends to oppose the Bill which provides for the borrowing of $US125m for the purchase of defence equipment in the United States of America. The Opposition opposes the Bill for 2 reasons. As indicated in the second reading speech of the Treasurer (Mr Bury) the Loan (Defence) Act 1968 provided for the borrowing by the Commonwealth of an amount of $US75m to assist in financing the purchase of Fill aircraft. The Treasurer indicated that no drawings have yet been made against that loan. It seems a rather curious process that sanction has been given for a loan of $US75m which has not been utilised and it is now proposed to raise a further loan of $US125m bearing an interest rate of 7.375 per cent, which is a rather substantial interest rate. It is the view of the Opposition that a sum as relatively small as this could have been financed by the current international resources of Australia. It seems to be an utterly imprudent exercise to borrow $US125m at 7.375 per cent when there is no shortage of reserves if such sums are required for expenditure in the United States.

Defence purchases are expendable items. It is not as if one is building up an asset which will return something. These items should be paid for as they are bought. I ask honourable members to consult the document entitled 'National Accounting Estimates of Public Authority Receipts and Expenditure - August 1970', which was brought down with the Budget Papers. I refer in particular to Table 2 at page 9, which relates to net expenditure on goods and services overseas. The item 'War and defence' shows that an amount of $151m was spent overseas on this category in 1965-66. In 1966-67 expenditure was $220m; in 1967-68 it was $3 13m; in 1968-69 it was $292m and in 1969-70 it was $189m. A further expenditure of $186m in 1970-71 is projected. These amounts aggregate somewhere in the region of $ 1,200m, being the expenditure in a period of 6 years.

As I indicated in the debate on the defence estimates the other night, when one deducts from the defence expenditure the categories of wages, salaries and maintenance one is still left with a fairly significant defence expenditure on what might be called the capital aspect. I think that this only serves to highlight how dependent we have allowed ourselves to become on what might be called military procurement .overseas. We have allowed ourselves to become too dependent upon overseas sources to equip our forces. A lot has been said in recent times about what are called offset orders. It seems to me that more lip service than substance is being paid to this aspect. It is rather glibly said that the fourth arm of defence - besides the 3 Services - is the capacity of Australian industry to supply the sinews of defence capacity. It seems that each year we are allowing ourselves to become more and more dependent on overseas sources, particularly the United States of America, for the procurement of the necessary hardware, which I think is a term that is sometimes used, to equip our forces.

We all know about the Fill aircraft. I have said before that if a Labor government had been in office and had been responsible for this episode it would have been pilloried in every newspaper in Australia. Something which was asked for in 1963 as a matter of urgency has not been delivered even in 1970 and it has cost somewhere in the region of $300m. I rather gather that the reason why the 1968 loan which was appropriated for the Fill aircraft has not been expended is because satisfactory terms have not been worked out for the delivery of this aircraft. The excuse given when new equipment is ordered overseas is, of course, that it could not be procured in Australia at reasonable terms. When the Fill proposition was first put forward in 1963 it was said that it would cost somewhere in the vicinity of $100m. The cost has now risen to $300m, but we have not received the aircraft. At least this shows that, when it is suggested rather categorically that Australian industry cannot compete, consideration has not been given to the fact that there is a great deal of difference between the first price and the final price. That is true not only of Australia's experience overseas but also of European countries. There is a great deal of difference between the projected cost and the final cost. As indicated, the Opposition intends to oppose this measure for a variety of reasons. Firstly, at the moment there is no shortage of exchange to pay for this item and. secondly, the rate at which the borrow ing is to take place - in excess of 7 per cent - is very high for what are really expendable items.

Mr Bury - We earn 8i per cent on our overseas reserves.

Mr CREAN - That simply shows bow high interest rates are today. I wish some attempt was being made to get interest rates down instead of luxuriating on the difference between what we borrow and what we accumulate. If you are borrowing internally, at least you garner something from our usurers in internal taxation. That is not so in this instance. I stick to my point that it would be more prudent to pay cash than to incur interest payments. It would be better to become more self-reliant than to talk about offsetting orders. This was talked about when the former honourable member for Paterson was the Minister for Defence, and that is some time ago. It does not seem to me that we have done anything very practical towards achieving what is stated. If we are to buy equipment from overseas at least there is a case for the countries we buy from to give us orders within the capacity of our own interest. But at this stage of the night I do not want to labour the point any further.

When a similar measure was before us in 1968 the Opposition opposed it. On that occasion the loan was tied to the Fill venture. We said in 1968 - I think it was at about the same time of the year - that the loan should be deferred until better arrangements were made for the actual procurement of the Fills in February 1969. Since that time the situation wim the Fills has deteriorated even further. The particular equipment we are to buy with this loan is not stated in the Treasurer's speech. It seems that we go shopping around the world. If we find that the Export-Import Bank will lend us some money for some purpose that we cannot quite define at the time we say: 'Oh well, we will say it is for defence'. Defence does not come within the province of the loan agreement so we do not have to get the consent of the Premiers. We camouflage it on the pretence that it is for defence purposes. Indeed, the Treasurer concluded his second reading speech with this line:

Since the borrowing is for defence purposes the pproval of the Loan Council is not required.

I merely regard this as a rather convenient fiction which is being increasingly indulged in. In 1966 we had a loan of $450m from the United States of America. In 1968 we had a loan similar to this for $75m. Now we have this loan for $125m. The aggregate of these loans is $650m. As I have pointed out, in stark reality in the last 6 years we have actually spent overseas on procurement a sum of some $ 1,200m. I think it is time that we stopped this kind of folly. I make this protest on behalf of the Opposition at this stage. By opposing this measure we hope to draw the attention of the Government to the fact that we regard this sort of legislation as highly imprudent in all the circumstances.

Debate (on motion by Mr Giles) adjourned.

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