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Thursday, 21 August 1980
Page: 654

Mr NEIL (St George) - The Preference to Australian Goods (Commonwealth Authorities) Bill is one of the most important Bills to come before the House in many years. It is designed to assist in the development of the Australian nation, in particular as we move into the high technology areas. I am pleased that the Opposition supports the Bill. Surprisingly, the honourable member for Melbourne (Mr Innes) made some degree of sense in his remarks. I join the Opposition in adopting a bipartisan approach to the matter, particularly as it affects our defence industries significantly. I can assure the Opposition that honourable members on this side of the House take this legislation extremely seriously, that the Minister for Administrative Services (Mr John McLeay) and the Government view it as an extremely important piece of legislation. There can be no doubt about the real intent of this Government. The real intent of this Government is to assist Australian industry to move forward, to become more competitive and to have the opportunity to develop its industrial base in high technology areas in particular. The scheme will provide a preference of 20 per cent of the value of the Australian content in addition to duty. I appreciate that some honourable members and people in the community might say that if the duty is insufficient protection then it is a false approach to provide additional assistance. However, we must look at the overall state of Australian industry. Australia is an isolated country, a very important developing and developed country, that will move forward and must have a strong and vibrant manufacturing industry. We cannot rely upon overseas techniques and technology. We must be able to develop as much as possible a selfreliance in these fields. If it is necessary to provide a degree of preference, we will have to do this in the national interest.

I am not a complete, open, free trade proponent or a complete protectionist. I think most honourable members would look at each set of circumstances and try to adopt a reasonable middle course. The prime argument, of course, in favour of freer trade is world peace- the need to avoid economic conflicts between nations which might overflow into war-like activities. The prime argument in favour of protection of our industries is the need in our strategic interest to build up a balanced industrial base and to provide employment for our people. In the middle of this we have to find a proper balance of interests. Unfortunately, Australian industry, particularly in the high technology area, has been in a downward trend for some years. It is not uniform.

There are bright spots. Let us look at the bright spots at the outset and acknowledge them. In certain special areas we have developed very fine new ideas. The InterScan invention leads the world. The Mulloka system and the Barra sonar buoy led the world in their respective fields. We have in a small way developed some significant digital techniques. We have significant developments in the fibre optics area and in sonar and microwave techniques. But these have been in special areas where we have been able to research and develop to a degree. We are very limited in our capacity to transfer those developments into full engineering and full-scale production. We are limited in our ability to go out into world markets and promote those inventions in volume.

One of the problems is that we have small production runs in Australia. We suffer from competition from low wage countries in our vicinity, countries which employ workers in circumstances that would never be tolerated by the Australian trade unions. Therefore, we have to try to develop our industries fairly and reasonably, give them a reasonable level of protection without featherbedding them in such a way that they come to rely, in effect, on handouts and to become inefficient. I believe that the 20 per cent rule that the Government has adopted is a very proper rule and in all the circumstances is one that ought to be applied with success.

I will deal with a few points raised by Opposition members before moving on to matters directly related to the Bill. It is unfortunately necessary to criticise portions of the speeches of Opposition members because they attack the Government's economic policy. They compared our economic policy with the policy of the Australian Labor Party. They claim that our economic policy is not providing sufficient development of industry and employment. Let us be aware of the fact that under the Labor Government our industries took such a nosedive that it appeared unlikely some of them could recover.

In particular, the electronics industry which is absolutely vital to any modern society was all but destroyed during the period the Labor Government was in office. The reasons for that are well known. There was massive inflation which made the industry completely uneconomic. It could not compete. There was an horrendous acrosstheboard 25 per cent tariff cut and overnight the components manufacturers in Australia went out of business. We have almost no indigenous electronic component industry left in this country. This produced massive unemployment with a consequent lack of confidence in those industries. They were not able to invest. They did not have the profit or the capability to reinvest. Therefore their machinery and equipment became older. They were not able to compete with the more modern techniques being introduced in Europe, America and Japan.

The currency fluctuations under the Labor Government caused havoc for both exporters and importers. Of course, the wages explosion in this country was such that those factories that employed large numbers of workers, particularly when combined with equal pay provisions, simply found that they could not compete. As I said before, equal pay was a desirable objective and the community demanded it. However, it was introduced too fast and when combined with all the other aspects of the tremendous economic crash of 1974 or thereabouts, the electronics industry in particular almost went to the wall. In order to resurrect that industry, we have had to take very important steps and we are a long way from seeing the final results. The Sub-Committee of the Joint Parliamentary Committee on Foreign Affairs and Defence on which I had the privilege to serve, is composed of members of the Labor Party, Liberal Party and National Country Party. In the Sub-Committee's report in October 1977, it stated:

The industry in Australia -

I refer to the electronics industry - was now more heavily dependent on overseas sources for the supply of its defence electronic and electromechanical equipment and of the supporting spares than at any time before or since World War fi.

In fact, during the war we had developed an extraordinary capacity, relative to the rest of the world. We developed quickly off a fair base before the Second World War, but since the War we have had a downturn and in particular during the Labor years there was a serious crash. That matter, which I will refer to again in a moment, was repeated in other industries. Not the least reason was that many other industries rely upon the electronics industry for their major componentary today.

A modern defence aircraft is at least 40 per cent electronics. It is incapable of competing in high intensity environments without appropriate radar, without all forms of detection devices, without jamming equipment, electronic counter measures, radar and laser or other forms of directional equipment for its weaponry. Therefore, the electronics industry has become vital to that air capability. Equally, it has become vital to the modern navy. The capability of one of our modern destroyers far exceeds that of a World War II battleship. Its potential for offensive capability is many times that of a World War II battleship, but it will have far fewer crew members than a World War II destroyer. The reason is that there is much more sophisticated equipment on the ship, enabling the use of fewer crew members, but in the main that equipment has to be provided from overseas sources. Fortunately, today we are able to develop more of our indigenous capacity. However, unless that capacity continues to grow we will find that we are totally reliant upon overseas supply for those extremely important components.

A number of matters were raised by the honourable member for Port Adelaide (Mr Hurford). He spoke about the present Government not being serious and not purchasing sufficient Australian equipment. Let me give just one example of what the Labor Government did to knock the pillars ou* from under Australian industry. It was the Labor Government that cancelled the DDL destroyer project, a magnificent potential project in which we were to design and build in Australia our own destroyers. Then in about 1974, when the Labor Government was in all sorts of economic trouble, because of its low priority for defence matters it cancelled the project outright. This caused despair in the shipbuilding industry. It set that industry back years. It accounted for many of the difficult problems this Government faced, and it prevented the industry from obtaining new equipment. Of course, a few years ago there was a very serious crash in the shipbuilding industry. Equally, it created tremendous tremors in the electronics and other systems areas. The Labor Government then ordered American ships - the FFG patrol frigates. This Government was faced with carrying on those orders. When the Government under the present Prime Minister (Mr Malcolm Fraser) came into office there was no alternative. I cast no reflection on those American ships - they are good ships - but obviously it would have been preferable to have had our own ships built in Australia, providing work for our own people and developing our own indigenous capacity. So much for the Labor Party's argument.

This Government is intent on trying to resurrect Australian industries and return Australia to full employment. Indeed, in the St George electorate, in the Commonwealth Employment Service offices at Campsie and Hurstville and the sub-office at Rockdale there have been very substantial reductions in the unemployment figures in the last three years. Unemployment is down by an average of 22 per cent, and the number of people on unemployment benefit in the St George electorate has dropped by about 30 per cent in the last three years. The variations in the figures, of course, are brought about because there are two sets of figures and we check one against the other to see the trend. The trend is one of very substantial reductions in unemployment, and the reason for that is that medium industry is getting on its feet again in that area. Indeed, one firm that came to me in 1976 seeking some assistance because it was almost broke is an electronics component manufacturer. It came to me only recently to say that it had got out of its problems and was expanding and looking for another factory. The firm had just entered into a contract to purchase another factory and would take on more employees. It was hopeful of starting an enterprise in Singapore, not to manufacture off-shore and export back to Australia but to develop into the Asian market. I am sure the honourable member for Melbourne (Mr Innes) would welcome that. Other industries in the area are doing exactly the same thing.

Only recently, as a result of the Government's policies, I was informed of a very valuable potential development. It is possible that we could develop an indigenous hybrid industry in this country. Hybrids, of course, are microcircuits; they are different from microchips. They are essential to the new small-scale, high performance technology equipment. The potential for a hybrid industry has come about directly because of the Government's insistence on a strong Australian industry participation program in the tactical fighter force arrangements.

The honourable member for Melbourne raised four points in his speech, and I will deal with them briefly. Firstly, he asked why there had been some delay. The reason for the delay is set out in the Minister's second reading speech. The Government assessed the situation and found that there was inconsistency in the activities of various statutory corporations. We are eliminating that inconsistency, and I commend the Minister for that. Those comments answer arguments two and three put forward by the honourable member. He talked about exemptions, and we should be clear about this. I believe that there should be very limited exemptions from this Bill. I can see the point of exempting corporations that are under State law, I can see the point of exempting corporations that have to compete, but I do not see any great reason for exempting monopoly corporations.

The honourable member for Port Adelaide raised the question of Telecom Australia, and it is a disturbing matter. If Telecom should seek an exemption, I think it would have to discharge a very strong onus to obtain an exemption. I cannot imagine why Telecom, having a monopoly, should be entitled to an exemption. In broad terms, Telecom purchases about the same amount in value per year as the Department of Defence purchases. It purchases massive amounts of equipment. There should be no reason at all why Telecom would be entitled to an exemption. It is, I think, our largest purchasing statutory corporation. Indeed, one of the great virtues of this legislation is that, under the amendments, Telecom will have to refer any purchases above $100,000 if preference is an issue. At the moment, it has to refer only purchases above $500,000. There have been regrettable examples of Telecom purchasing overseas instead of within Australia. That does not assist us to build the vital electronics capacity in this country, not only so necessary to the civil side of our activities but also so absolutely vital to Australia's defence capabilities, as I have outlined.

I wish to finish with a brief reference to the Committee to which the honourable member for Melbourne referred, the sub-committee of the Joint Committee on Foreign Affairs and Defence. It is a sub-committee that has a good record. The Chairman is the honourable member for Kennedy (Mr Katter), and in fact the sub-committee is known as the Katter Committee. He is a very industrious Chairman. The honourable member for Corio (Mr Scholes), who is in the House, is also a member of that Committee. In the two reports presented in 1977 and 1979 the Committee emphasised the need for extra assistance to Australian industry so that the long term investment in upgrading facilities and manufacturing techniques could go ahead with confidence. We pointed out that the electronics industry needed greater exposure to update defence electronics and avionic-type equipment. We reaffirmed that in 1979. I remind the House that the Committee recommended a buy-Australian policy, and this legislation is a direct result of that recommendation. I support the legislation. It is very much in the interests of Australia and the Australian people. I congratulate the Opposition for supporting the Bill.

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