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Tuesday, 16 March 1971

Senator LAUCKE (South Australia) - I appreciate that this Income Tax Assessment Bill is an anti-inflationary measure, but I am dismayed that it has been introduced. The 20 per cent investment allowance for manufacturing plant and equipment has been of real value in maintaining productivity in industry. I am pleased to note that the suspension of the allowance is not to apply to plant and machinery required for primary industry. I believe that the need for this special tax deduction of 20 per cent of capital expenditure is as present today for efficiency in production as it was when the concession was first allowed in 1962. Back in 1962 when the then Treasurer, Mr Harold Holt, introduced this new idea he said:

In proposing the allowance the Government aims to encourage greater investment in our manufacturing industries and thus ensure, in both the short and the long term, a greater volume of both output and employment. It seeks also to promote greater efficiency in manufacturing production from which should flow the advantages of lower costs which will benefit the Australian consumer and help our industries to seek export opportunities in markets overseas.

The employment situation thai obtained in 1962 is not present with us today. We have a temporary incidence of a high degree of inflation in Australia today but this does not call for any inhibition to be placed on efficiency. Yet such an inhibition wm follow the withdrawal of this concession. Whether we think of a big industrial complex or small privately conducted organisation, this allowance has meant greater liquidity for the organisation that has required machinery to keep abreast of the times and to produce the lowest unit figure possible. In my opinion it is a retrograde step to get away from this basic ability to keep productivity reasonably in line with costs.

I have a very keen awareness of the need for small industrial organisations in Australia to be given all the encouragement possible. A huge sector of our manufacturing interests is in the hands of the comparatively small man and he is the one who at all times is short of capital to do the things that are necessary to enable him to grow and to compete in both the local and the overseas markets. Those of us who have had practical experience in running a business know that the depreciation allowance and the investment allowance have been of real assistance in enabling us to keep abreast: of those things which we regard as - vital to maintaining an efficient industry.

Finance always is the limiting factor with many of our industries. This is the case even if we look at the largest complexes in Australia, even the Broken Hill Pty Co. Ltd. How often that organisation has been maligned because in the minds of those who have condemned it there has been no appreciation of the relationship between capital investment and the return on it. But to that organisation, as well as to the small organisation, the depreciation and investment allowances are very important. The chairman of directors of BHP, Sir Colin Syme, said in his half yearly report on 23rd February this year.

The suspension of the investment allowance has important consequences for BHP. These allowances have been a valuable source of cash flow when it was most needed - at the beginning of operations of qualifying new projects. 1 do not regard that statement as having been made by Sir Colin Syme with his tongue in his cheek. The big organisations in Australia have expended huge amounts of money for the benefit of our nation. When we hear references such as that to the need for the continuation of these allowances in that sector, and in the sector which I know more about personally, I say that the word suspend', which was used in the second reading speech when this Bill was introduced, becomes very important. I hope that the suspension will not be of long duration. 1 hope the concessions will not be eliminated altogether. In the last 12 months investment in manufacturing plant and equipment in Australia has advanced by only 10 per cent. That is not a big advance at all. There has been huge capital investment in mining but in the manufacturing sector it has only represented 10 per cent, which actually was a decrease on that in the previous 12 months up to February this year. If we are to keep a buoyant economy and to give encouragement to those who are prepared to lay out capital in order to keep modern and competitive I hope that the word 'suspension' is real when it is applied to this legislation.

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