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Tuesday, 26 September 1972
Page: 1926

Mr SPEAKER - Is leave granted? There being no objection, leave is granted. (The document read as follows) -


Mr KEATING - I thank the House. The table shows that in the period 1969-72 a total of $181,985,000 was spent on the acquisition of aircraft imported into Australia. In that period the value of imports of aeroplanes, exceeding 5,000 lb or below that weight - helicopters, other equipment and parts for flying machines, which would be helicopters and aircraft- totalled $359,691,000. For years the Opposition has said in this House that invitation to tender documents for aircraft procurement should include a mandatory provision for offset orders to a certain percentage of the total value. We have talked in the area of 25 or 30 per cent. Government supporters have spoken loosely of 25 per cent or 30 per cent. On imported aircraft totalling $181,985,000 during 1969-72 working on the basis of 25 per cent offset orders would have secured for Australia work worth $45,496,250. Similarly, on imported aircraft and parts over the same period totalling $359,691,000, an offset provision of 25 per cent would" have meant orders worth $89,922,750 for Australia, or near enough to $90m.

The Australian aircraft industry has been denied a work load of that value because the Government has not considered it worth its while to force overseas companies selling aircraft to Australia to grant offset work to our aircraft industry. When italy placed a very large order for DC8 aircraft with the Douglas Corporation in the United States it was so tough in its bargaining that it obtained offset orders that gave the Italian aircraft industry a massive fillip. The production line set up by the Italian aircraft industry for those offset orders for DC8 parts still exists. Yet this Government has allowed overseas aircraft manufacturers to sell us aircraft and parts worth nearly $400m in the last 3 years while workers in our own aviation industry are facing retrenchment.

A technological gap is developing that could have been obviated had offset orders for about $5m to $6m been obtained for the aircraft industry. The Government has made absolutely no attempt to save this basic of all defence industries; that is, the capacity to manufacture aircraft and ancillary equipment. It all gets back to a basic lack of foreign policy. The Government has had no consistent or continuous defence and foreign policy. The Services have been unable to tailor their equipment needs to meet contingencies that have arisen. Instead, of giving our own industry the necessary lead time to develop and manufacture equipment, the Services have demanded aircraft and within 12 months.

Purchases have been made overseas and our own aircraft industry has been left to rot. If we do not act immediately our aircraft industry will completely disintegrate.

I asked the Minister for Supply (Mr Garland) today what the Government intends to do to supply an immediate work load for our aircraft industry. In reply I got the same platitudes that we get every time. We see groups of fifty or sixty workmen coming here as deputations from the Commonwealth Aircraft Factories and Hawker de Havilland Australia Pty Ltd saying that if something is not done soon they will all be dismissed. One of our basic defence industries is falling apart yet the Government still claims to be interested in Australia's defence. This Government is acting in the same way as its predecessor did before World War II. It also said it was interested in Australia's defence, but we moved into a war in a hopeless state of defence preparedness. We are in no better position today. Our defence industries are falling apart wherever one looks. Naval shipbuilding and design, electronics and the aircraft industry are all in the same position. Perhaps the aircraft industry is in the worst plight because it is literally extinct. The hardest hit are Hawker de Havilland Australia Pty Ltd and Commonwealth Aircraft Corporation, the 2 privately owned elements of the aircraft industry.

The Government Aircraft Factories still have a fair amount of work in developing the Nomad, the new utility aircraft, and producing the Turana target drone and the Ikara anti-submarine system and in doing modification and repair work on service equipment. The Government Aircraft Factories have the added advantage of having many of their overheads concealed in the expenditure of other departments. They are exempt from payroll tax and have the benefits of the Commonwealth superannuation scheme, the contract letting machinery of contract boards, insurance and relief from debt service charges and local government rates. The Government Aircraft Factories are therefore in a better position to compete than are Hawker de Havilland Australia Pty Ltd or Commonwealth Aircraft Corporation.

We should be trying to stimulate competition in the aircraft industry. Unless an organisation can show that it is economically competitive it cannot take on the sort of offset work from overseas that we envisage. At present Hawker de Havilland Australia Pty Ltd in Sydney is using its maintenance and repair facilities and has other work load in making wing ribs and tail sets for Boeing 727/ 200s as part of offset orders worth $7m. It is something, but it is not enough. There have been massive breakthroughs. For the first time the Australian aircraft industry has taken on sophisticated offset work. It has met the stringent specifications laid down by the Boeing Aircraft Corporation in the last 6 months and in the areas of production control and quality control the efficiency of the plant has been increased by about 200 per cent. The advantage has come through the importation of new techniques and technology, new metallurgy and new systems.

An additional benefit came because the company was able to purchase redundant aircraft manufacturing equipment at the time of a slump in the United States aircraft industry. It bought second hand equipment in good condition very cheaply. It has upgraded our technology. If we do not continue that trend and the time comes to defend ourselves and to develop aircraft, we will not have the technology when we require it. That skill can be gained through offset orders. We should be getting offset orders in lots of $10m and $I2m. I repeat that in the period 1969-72 offset orders for 25 per cent of our total imports of aircraft would have meant a gain of about $45.5m, and offset orders for 25 per cent of total imports of aircraft and parts would have meant a gain of over $89m. With such orders we could have long production runs through which the learning curve benefits would become evident; that is, the more that the same work force does the same job on the same material, the more efficient it becomes. The learning curve takes up a position in which the plant becomes competitive. The Australian industry can not only upgrade its technology but also compete with overseas industry. This is something I hope we are trying to achieve. Certainly the Australian Labor Party in government will do this. It will insist of overseas corporations that they meet at least 25 or 30 per cent of the value of aircraft sold to this country in offset provisions. When we look at some of the orders that could be forthcoming m the future such as the order for half a dozen Concordes, the value of which would end up being about $250m, we are talking about a lot of money, considering that this industry needs only $5m or $6m annually to survive.

Not only has the Government not planned to help the industry to survive. It has also hindered it. Recently it extended the charter of the domestic airlines to take on other commercial and service work. Basically the airlines are passenger-carrying organisations, and I feel that if there is any additional service work to be undertaken it ought to be undertaken by the industry. Even though there is excess capacity in the airline it ought to be undertaken by the industry,' and that would help the industry to survive.

The Government has failed to find any immediate work load for the aircraft industry. It has talked about reorganising and restructuring it. The Minister for Supply (Mr Garland) made a very big thing about going overseas to see whether the Dassault organisation in France and the Boeing organisation in the United States were interested in joining in- a consortium with Australian companies and the Government Aircraft Factories in one aircraft manufacturing organisation. But I believe from informed sources in the industry that the Minister went overseas without any notice to the local industry and without any advice from the local industry, and when he got to the door of the Boeing company in the United States to see the management he with the Secretary of his Department was virtually shown the door. This is not an intelligent way to restructure an industry when the local elements do not understand what the Government intends doing, and are not consulted. The result is that there is now some loose talk by the Minister about forming a consortium. He cannot form a consortium with something that does not exist. If he does not get some work load for the Australian aircraft industry fairly quickly it will not continue to exist. It is basically a defence establishment, whether he likes it or not. and it is incumbent upon the Government to find work loads for it to tide it over this period and then plan for its future.

The Government is always talking about the 5-year rolling programme for defence, but the only time that the 5-year programme gets a spurt on is every 3 years, which is an election year. The Government goes for the old cover of foreign affairs and defence by saying: 'You can trust only us with foreign affairs and defence'. That is the only time Australian industry gets a look in. It has not got much of a look in in the latest 5-year programme. So this question of rationalisation is to a very large extent a red herring. My Party and I would agree that it is important in the long term that we rationalise the industry. If it has a planned work load and if it has a job to perform, it would be better to perform it on a rationalised basis with new equipment and new technology, but for the moment it is a matter of sheer survival. This is why we have moved an amendment to the motion for the second reading of this Bill.

The other question that arises is this: The Government has talked about the Nomad aircraft, which is a light utility aircraft being manufactured by the Government Aircraft Factories; it talks about the Turana, which is a target drone; it talks about the Macchi, which is the one which is just finishing on the production line now. Whenever it tries to sell any of these highly valued military products overseas it faces a problem of credit facilities. In fact, it is not selling equipment; it is selling credit. Unless it can back up the sales of this equipment with decent marketing organisation and decent ExportImport Bank interest rates, which are 5 per cent or 6 per cent over extended periods - not normal overdraft rates - it has Buckley's chance of selling to anyone. We lost the sale of Macchi aircraft to New Zealand purely and simply on the basis that our finance was inadequate. We were offering the New Zealand Government normal overdraft rates when the British sold it the HS1 182 at Export-Import Bank rates.

I asked the Minister for Trade and Industry in September 1970, who was then Sir John McEwen, whether the Government would set up an export credit facility to provide finance on better than commercial terms to assist the export sales of Aus tralian manufactured military equipment and other high value commercial exports. His answer was this:

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. 1 have never felt that this Government could engage in an interest rate war in these circumstances.

How ridiculous. It has nothing to do with an interest rate war. It is a matter of giving our own manufacturers a righting chance. If we do not give them some access to decent export finance we cannot sell any military equipment overseas. So if the Government wants to keep waffling on about what if is doing, it is time it backed up what it is saying with a little bit of action. There is a great need for this amendment to be carried. It has been proposed by the Labor Party as a last ditch stand to see that we get some decent provisions for our own industry from the massive orders that are going to the United States aircraft industry. When we look at the price of $25m for one jumbo jet aircraft, considering we have already bought 6 and we have had virtually no offset provisions, it is a matter of very great urgency that the House agree to this amendment. I certainly hope that the Government sees the urgency to support it.

We have not very much time in which to save this industry, but action and continued pressure upon overseas organisations that are selling aircraft in Australia is the only way in which we will be able :o guarantee that offset provisions are maintained and that work is handed across to us. I think I can safely say that unless there is an election of a Labor Government at the end of the year there will be no aircraft industry in Australia as we know it today. This Government has failed in every area of defence and every area of economc planning. The aircraft industry is a technological pioneer industry in areas such as plastic development, carbon fibre technology, hydraulic design, metallurgy techniques, management, and production control - you name it. It is a forerunner of many technologies and it is a pioneering industry. Unless we save it there is no future for our basic defence industries. I can only commend the amendment to the House and ask honourable members to give it due consideration, lt is the last chance we have to save this very vital industry from extinction.

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