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Tuesday, 12 September 1972
Page: 1151


Mr KEATING (Blaxland) - I also on behalf of the Opposition support the Export Payments Insurance Corporation Bill. The Australian Labor Party has consistently supported legislation relating to the Exports Payments Insurance Corporation from the inception of the organisation through all the amendments to increase the contingent liability and the capital of the organisation. The capital has been increased only once before. That was in 1965, when it was increased from $2m to 54m. Now this Bill has been introduced to increase the capital of the organisation from $4m to $8m. The Labor Party has been particularly pleased with the Exports Payments Insurance Corporation. As the honourable member for Melbourne Ports (Mr Crean) said, the legislation under which it operates is very much a piece of -socialist legislation. Nevertheless, over the period since the Corporation's inception it has grown considerably. In the 10 years from I960 to 1970 the face value of its policies increased from $52. 8m to $343m. Since then the face value has increased from $343m to $622m in 2 years. The contingent liability of the Corporation was 524.2m in 1960. It was $190m 10 years later. It is now $375m.

These figures give some idea of how the organisation is progressing. It is charged to be self-supporting. It operates like any other insurance company. A premium is paid for insurance given. The insurance in most cases is an insurance against nonpayment to Australian exporters. The type of cover is normal risk insurance, particularly against the type of risk which arises from buyer insolvency or default in the case of solvent buyers or political risks such as non-payment by overseas organisations in which investments have been made by Australian companies either because of the policy of a government or because of political disturbances. The overseas company can take out a cover against that.

The last report of the organisation, that for 1971, shows that the net premium income was $1,024,849. Against this, operating costs were $585,246. The operating costs are still very high. This means that the organisation has operating costs equal to 57 per cent of premium income, which in any language is particularly high. When I spoke on the last amendment to the legislation I incorporated in Mansard a table which shows that in 1958, at the point of the Corporation's inception, operating costs as a percentage of premium income were 172 per cent. In 1959 the figure went down to 50 per cent, naturally because in the first year of the operations of the organisation its commencement costs were very high considering that it had very little business to transact. Unfortunately, operating costs as a percentage of premium income moved from 50 per cent up to the high 80s. They were 87 per cent in 1961. The figure fluctuated from about 70 per cent to the mid-60s and then settled down at about 60 per cent or 57 per cent, which is the figure at the moment. It is still fairly high. I do not know the reason for this.

I know that the organisation provides other services such as an export rating facility so that exporters may check on the creditworthiness of organisations overseas. The expense of this service would naturally have to be met by the organisation, but operating costs are still fairly high, being 57 per cent of premiums. This is a very high price to pay to run an organisation. Offsetting that, the organisation ought to be congratulated upon the fact that in 1971, as shown by the 1971 annual report, there were claims totalling $939,000. Against this, recoveries of $693,000 were made. The report indicates that losses arose in relation to wool transactions with South Korea. The losses were so high that EPIC obviously took legal action in that country, and it has recovered $693,000 of the $939,000 claimed, which I think was commendable indeed.

As I said earlier, the Bill increases the capital of the Corporation from $4m to $8m. Like the honourable member for Melbourne Ports, I cannot really see why this is occurring. Suffice it to say that in his statement in the annual report the Commissioner states:

Capital remains intact at $4m. Thus, the financial resources immediately, available to the Corporation total $6,997,038 and these relate to outstanding contingent liabilities of $301,060,555.

He mentions that the Corporation's engagement in a number of the developing countries is now well in excess of its capital and reserves. As the honourable member for Melbourne Ports said, perhaps it might make the balance sheet look a little more acceptable, but an increase of $4m to $8m really does not offset contingent liabilities of up to $301m. It seems to be pretty much a case of window dressing.

I take up the theme which the honourable member for Melbourne Ports mentioned and which I also mentioned the last time I spoke on this subject. This organisation could be expanded in a number of areas. Firstly, it could be extended into the area of marine insurance, which is a very lucrative business in Australia. The latest figures available show that premiums on marine insurance in Australia paid to companies, most of them overseas owned - most of them British owned - was $46m. The premiums paid to EPIC total only $1.2m, so obviously there is a lot of business to be done in that area. Consistently the Labor Party has put the view that EPIC ought to be expanded to move into the field of marine insurance. Consistently the Government has rejected that view. I think it ought to be recorded here again that the former Minister for Trade and Industry, Sir John McEwen, had said that he had a lot of difficulty in even setting EPIC up in opposition to the views of the Liberal Party. He said:

The birth of EPIC was delayed many years-at least 4 - by the barrage of criticism and opposition raised against it from inside and outside government. Interests representing private institutions such as banks, insurance companies, associations and elements even within the governmental structure, attacked, criticised and blocked the provision of this new facility by a government corporation for at least 4 years.

He went on to say:

I was told with monotonous regularity and with singular unanimity by the opponents of the facility that there was no need for it - worthwhile and soundly based Australian exports should need no assistance of the type other countries had; it would merely provide at government expense a hidden subsidy to prop up 'lame duck' export ventures; it could not possibly work - the premiums would be too high, the losses too great, and exporters would prefer to take their own risk; it was a duplication of existing banking and insurance facilities which were willing and able to afford all the assistance needed; such a corporation was a Socialist conception and an unwarranted intrusion by government into private business; such a corporation would provide unfair competition to private enterprise institutions, and so on.

They are the words of the then Leader of the Country Party and then Minister for Trade and Industry in referring to the frustrations expressed by members of the Liberal Party in defence of their friends in the marine insurance field and in the field of insurance generally. The remarks are just as valid today. The Government will not expand the charter of the Export Payments Insurance Corporation into the area of marine insurance. Australia is an island continent. We are an exporting nation and we export mostly by ship. It stands to reason that we ought to have a government facility to provide marine insurance - a very lucrative type of insurance - and to assist our exporters through lower premiums. Any profits made by such an authority would go to the Commonwealth of Australia rather than to British insurance companies as happens today.

The honourable member for Melbourne Ports referred to an export credit facility, a matter that requires a lot of close attention. On this subject I asked Sir John McEwen when he was Minister for Trade and Industry:

Will the Government set up an export credit facility to provide finance at better than commercial terms to assist the export sales of Australian manufactured military equipment and other high value commercial exports?

He replied:

It is true that lower interest rates are provided by the governments of some countries that are competitive with us. It is quite clear that certain governments from time to time seek to give their exporters a competitive advantage by providing funds at lower interest rates. I have never felt that this Government could engage in an interest rate war in these circumstances.

That is a rather ridiculous viewpoint in the light of the fact that our exporters have been chopped to pieces in the marketplaces of the world when competing with exporters from other countries who are backed by import-export banks. I have in mind exporters of all the major trading countries such as the United States of America, Great Britain, West Germany and Japan. In contradiction to the attitude of this Government to an export credit facility is that of the Commissioner of the Export Payments Insurance Corporation as expressed in his annual report for 1971. In that report he said:

The use of credit in foreign trade has, over the last decade, progressively become a vital factor is winning business. The need to concede credit b fust as much a characteristic of trade with the advanced countries as it is of the developing countries where the reasons are usually more evident. Concurrently with the expanding volume of world trade conducted on credit terms, there is occurring a persistent relaxation in the duration of the credit conceded for all types of goods.

International concern is being more frequently expressed as to the long-term implications of these developments, in particular the possibilities of a credit race worsening which could act against the best interests of the major exporting nations as well as aggravating the existing heavy debt servicing burdens of many developing countries. The Union d'Assureurs des Credits Internatlonaux (Berne Union) and, more recently, the Organisation of Economic Co-operation and Development (OECD) are actively engaged in efforts torationalise credit-giving. Some success is accompanying these endeavours but so strong are the competitive forces operating, that Australian exporters are not infrequently faced with the alternative of either meeting the credit competition or foregoing the business. It is in this situation that the Corporation sees its duty to give them all possible support to retain existing business and win new orders.

They are the words of the Commissioner of the Export Payments Insurance Corporation on the need to provide our exporters with a marginal competitive advantage in relation to credit. His organisation cannot provide finance over extended periods of time at an interest rate of 5 per cent or 6 per cent, or even lower, as is done in other countries. Last year or the year before last Australia tried to sell Macchi aircraft to New Zealand. The assembly line manufacture of the Macchi aircraft is still operating in Australia. We did not get an order because New Zealand purchased from Great Britain aircraft not chosen on their merits but because the terms of credit offered by Great Britain were more acceptable. On high value military exports and high value manufactured exports it is often found that no payment is needed for 4 years and that the interest rate payable after that time is only about 4 per cent or 6 per cent.

We are competing on the export markets with goods which are not marginally better priced, on which we require one-third deposit and interest rates applicable immediately at the normal domestic overdraft rate of 74 per cent. We are not in the race in trying to sell our secondary manufactures to other countries when competing with exporters from Europe, North America and Japan who have the benefit of the backing of import-export banks and private banks offering extended credit at low interest rates.

Therefore there is a growing need to set up an export credit facility in this country. The honourable member for Melbourne Ports has mentioned that need for as long as I have been a member of this House and the Labor Party has supported that proposition. There is a crying need for that sort of facility to be created. Much to the consternation of the Liberal Party the Export Payments Insurance Corporation has proved that it can provide decent insurance services for very low rates of premium. Its premium rates have dropped consistently over the years. The same thing could happen in the field of marine insurance and an export credit facility. It is partisan and un-Australian to limit the Corporation to its present charter. It has to provide insurance against non-payment to Australian exporters for the goods they export to other countries. I personally and the Labor Party support the proposed amendment. We have always supported the principle it contains. We believe that the Export Payments Insurance Corporation is a very valuable organisation and when the Labor Party is in government next year it will extend its charter along the lines I have indicated in my speech.







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