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Wednesday, 16 November 1983
Page: 2760

Mr DUFFY (Minister for Communications and Acting Minister Assisting the Minister for Industry and Commerce)(11.09) —I move:

That the Bill be now read a second time.

This Bill proposes to amend the Australian Industry Development Corporation Act 1970 to implement the Government's election commitment to extend the role of the Australian Industry Development Corporation-AIDC-to enable it to allocate additional finance for the restructuring and revitalisation of industry and for high technology and other growth industries. This commitment was made in recognition of the need to take a more positive approach to industry policy and to create the most favourable environment possible for the growth and development of Australian Industry. There is a need for a variety of measures to be adopted to strengthen and improve the competitiveness of industry if this country's natural wealth and the wide range of skills available in our workforce are to be utilised to their best advantage.

Several major reports on industry policy, such as the Crawford, Myers and Espie reports, have noted the shortage of finance, particularly in the form of equity, for the development of industry. The changes proposed to be made to the functions and capital structure of the AIDC by this Bill will enable the Corporation to increase very significantly its provision of both equity and loan finance for industry.

The Government recognises that since the establishment of the AIDC in 1970, it has played an important role in providing industry development funds. It has become a significant provider of medium to long term finance, in particular it has been instrumental in the formation of lending consortia for industrial and resource developments requiring loans too large for any other single lending institution. The Government believes that still more needs to be done. It has, therefore, acted to increase the resources available to the AIDC with an additional $12.5m capital allocated to AIDC in the 1983-84 Budget.

This Bill will allow for a $50m increase in AIDC's statutory capital to $150m. The AIDC will be able to call upon this additional capital in amounts of up to $ 12.5m per annum. To expand AIDC's lending potential further, it is proposed to increase its gearing ratio so that it will be able to borrow up to 15 times the level of its capital and reserves, compared with eight times at present. Provision is made for the AIDC's borrowings to be guaranteed by the Commonwealth . This should improve the Corporation's access to funds on both domestic and overseas markets.

AIDC's capacity to provide equity finance is proposed to be increased by relaxing restrictions on the investment of its capital. This investment restriction was originally imposed as a means of reassuring potential investors. The Government believes that this is now unnecessary because of the AIDC's established track record and government guarantee of its borrowings. In the future it is proposed that the AIDC will be able to invest in any industry and will continue as a general supplier of development finance on commercial terms.

Clause 3 of the Bill, however, proposes that priority is to be given to manufacturing and internationally tradeable services, including tourism and the development of new technology industry. These areas are the most in need of an improved source of finance to enhance their position in the economy. The legislation also requires the AIDC to place greater emphasis on the strengthening and restructuring of existing industry and promoting new industries with good growth prospects. These are of particular importance to the Government and to the development of a strong and viable industry.

AIDC will usefully complement and supplement other sources of finances for high technology. In particular it will assist in the commercialisation of government sponsored innovations, an area of considerable potential which the Government believes is worthy of greater attention. The AIDC's operations will continue to be largely independent. The Bill, however, introduces a procedure, similar to that applying to the Commonwealth Bank, which will impose a modest degree of government guidance and will enhance the Corporation's accountability.

The provisions of clause 7 of the Bill require the Corporation to report annually on its policies in relation to the exercise of its powers and the performance of its functions. A consultative mechanism for resolving differences is also proposed.

The Government considers that this is appropriate as the AIDC is established to serve national purposes.

I re-iterate, however, that the AIDC will retain the independence to make its own commercial judgements on projcts.

Because the AIDC Act has not been substantially revised since 1975, the Bill incorporates a number of administrative changes designed to improve the operation of the Corporation.

The most important change relates to the procedures which allow the Government to fund certain projects considered to be in the national interest.

Clause 6 of the Bill, while preserving ultimate parliamentary control, simplifies these procedures by removing the requirement for a national interest committee and telescoping the reporting requirements. I commend the House of Representatives Standing Committee on Expenditure for its valuable contribution to the consideration of the AIDC's future role.

The Bill gives effect to the thrust of the recommendations of the Committee's report on the AIDC in January 1980. The Committee recommended that the AIDC be allowed to invest in service industries, that it be guaranteed, that restrictions on its investment of capital be removed, that it be required to pay a dividend, that changes be made to the Board structure, and that it no longer be required to locate its head office in Canberra.

The Committee also recommended a freeing up of the AIDC's gearing and a clarification of the AIDC's operating guidelines. The Government has not implemented the Committee's recommendations that uncalled capital be counted for the purpose of gearing and that future capital calls be by way of subordinated loans. These recommendations have been largely overtaken by the decision to give the AIDC a substantial injection of capital to perform its new functions. The increase in the AIDC's capital will cost the Government $12.5m this financial year and up to $12.5m in successive financial years.

The Government will, however, obtain revenue through the requirement for the AIDC to pay 50 per cent of its net profits as dividends. In this regard, the AIDC made a net profit of $15.3m in the 1982-83 financial year. The Government considers that the revised role of the AIDC, including the increased funds available for equity and loan finance, will be of considerable benefit to industry in increasing its overall efficiency and profitability. I commend the Bill to the House.

Debate (on motion by Mr Braithwaite) adjourned.