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Wednesday, 30 November 1983
Page: 3030

Mr DUFFY (Minister for Communications and Acting Minister Assisting the Minister for Industry and Commerce)(10.43) —I move:

That the Bill be now read a second time.

This Bill is designed to give effect to the Government's decision, announced on 11 August 1983, that a Steel Industry Authority be established to monitor and facilitate implementation of the steel industry plan. The steel industry plan reflects the Government's commitment to the maintenance of a viable and efficient steel industry in Australia. This industry is strategically and economically important to the Australian economy. Output of the steel industry was valued at more than $5 billion in 1981-82 representing 3.4 per cent of gross domestic product. It is based on the processing of Australia's extensive reserves of iron ore and coal. The products which it makes are the basic material inputs into a large part of Australia's manufacturing industry.

The industry is of major significance to the economies of the regional steel making centres. Employment in the industry accounts for approximately one-half of the work force in Whyalla, one-third in Wollongong and about one-eighth in the Newcastle region. Apart from being an important direct employer of labour within these regions, the industry supports employment and economic activity in a wide range of other industries which are suppliers of goods and services directly and indirectly to the iron and steel industry.

The Australian steel industry, like many others throughout the world, has been in recession for some time. Production, sales, profits and employment in the industry have all fallen dramatically below the levels recorded during the 1970s . Steel production has fallen to approximately 25 per cent below that of recent years and steel employment by the Broken Hill Proprietary Co. Ltd is 27 per cent below the May 1982 level, representing a loss of around 10,000 jobs. The severe deterioration in the industry's competitive position resulted in BHP's steel division incurring heavy losses in both 1981-82 and 1982-83.

A number of factors can be identified as contributing to the deterioration in the industry's international competitiveness. Falling domestic demand for steel associated with the economic recession resulted in marked production cut-backs and rising unit production costs. In 1982-83 demand fell to around 5.4 million tonnes compared with around seven million tonnes in 1980-81. Demand has fluctuated in the past, reaching a peak of 7.3 million tonnes in 1973-74, but declining to around five million tonnes in 1977-78. The domestic demand situation was exacerbated by an excess in world steel making capacity leading to a significant increase in import competition and strong price competition which, in turn, placed further pressures on profitability. Whereas in the past the Australian industry offset the decline in domestic demand by exporting, the severely depressed world market and excess capacity inhibited such exports over the last year or two.

Other factors contributing to the industry's loss of competitiveness included a marked decline in labour productivity, sharply increased labour costs and problems with over-manning in the industry. Labour productivity declined significantly between 1980-81 and 1981-82, reversing the trend toward higher productivity during the early to late 1970s. In recent months there have been signs of a gradual improvement in the industry's situation. Production has picked up from the very low levels recorded in 1982 and early 1983. In fact BHP' s steel division operated at a small profit in the first quarter of 1983-84. Employment has stabilised, although it is still well down on levels of previous years. These signs of recovery are encouraging but do not remove the need for the kind of support which is to be provided under the plan. An assessment of the industry overseas indicates the likelihood of continuing overcapacity and low demand in the world steel industry, and hence continuing strong competition among steel producers to dispose of their excess output on the world market.

Against this background, the provision of no additional long term assistance, as recommended by the Industries Assistance Commission, would have led to a run down in the local industry's activity, resulting in further severe social and economic disruption in the steel regions of Wollongong, Newcastle and Whyalla. The plan is seen by the Government, the industry and the union movement as being essential to reverse the decline in the industry's fortunes and represents a new approach to industry policy in Australia. It is scheduled to commence on 1 January 1984 and will run for an initial period of five years. Its objective is to restore the long term viability of the Australian steel industry and to provide job security for its employees, while also providing inputs into a wide range of metal and engineering industries at internationally competitive prices.

The key factors in achieving these aims will be cost reductions and quality improvements through new investment in the upgrading of steel making facilities, tighter management, improved productivity, improved work practices, and containment of labour costs and State charges. The plan has been developed as a co-operative effort involving undertakings from all parties with an interest in the development of the industry, including the steel producers, the steel unions and the Commonwealth Government. The relevant State governments have also been asked to contribute.

In deciding upon its contribution to the plan, the Government had the benefit of the Industries Assistance Commission's report on the iron and steel industry and the report of the Steel Industry Advisory Council. The plan seeks to overcome the underlying problems confronting the industry and its success will depend upon the various undertakings being adhered to. The major assistance provided by the Commonwealth Government under the plan is the payment of bounties of up to $71.6m per annum on the production and domestic sale of certain steel products.

Following the introduction of this Bill I will be introducing two Bills to provide for payment of the bounties. Bounty assistance has the advantage over alternative assistance measures such as tariff quotas as it avoids an adverse price impact on downstream user industries. The bounties will operate on a sliding scale providing for maximum assistance at low production levels and will scale down as production reaches higher levels. In this way the industry will receive assistance when it needs it most. Conversely the Government is not committed to large outlays in times when market conditions are buoyant.

The bounties will be complemented by a safety mechanism to which I shall refer later. An effective import watch system and a 'fast track' anti-dumping mechanism for steel products will also be introduced as part of the Commonwealth 's contribution to the plan. In addition, imports from developing countries at preferential rates of duty will be subject to quota restrictions, limiting such imports to the average of steel imports from those sources over the five years ending 30 June 1983.

The industry has undertaken to provide job security for its work force at the three major regional steel centres and to introduce an investment program involving expenditure of up to $800m over a four-year period directed at upgrading facilities, reducing production costs, improving productivity, product quality and customer service. The unions' undertakings are in the areas of wages , productivity improvements and dispute settlements. They are contained in an agreement between BHP and the Australian Council of Trade Unions acting on behalf of the steel unions. The unions agreed that wages for the industry's work force will be contained within prevailing community standards, consistent with the prices and incomes accord. They undertook not to use the assistance provided under the plan to seek improved wages or conditions.

The unions and BHP also agreed to improve productivity with the initial target being to re-establish a productivity level of 250 tonnes per employee per annum in the major steelworks. Initial levels of productivity at other steel industry centres will be established, consistent with their best performance in the past. During the course of the assistance program, progressive increases in productivity will be sought by the company and the unions with the objective being for those increases to be higher than the trend rates in national productivity. Agreement has also been reached to adhere strictly to established grievance settlement procedures and for consultation to be held on changing work modes. All parties agreed that the contributions to the plan and the progress of the plan should be closely monitored.

This Bill provides for the establishment of a Steel Industry Authority. The Authority will be an independent body whose main functions will be to monitor and analyse steel industry matters and, where appropriate, conduct inquiries, report and make recommendations to the Minister on such matters. The matters which the Authority will cover include the level of steel industry investment, local production, imports, employment levels, productivity changes, wage settlements, steel prices, standards of product quality and customer service, levels of State government taxes and charges, assistance provided and to be provided to the steel industry and any other matters relating to the Australian steel industry which may be referred to it by the Minister. The establishment of the Authority will allow the Government to receive timely but comprehensive reports on a regular basis on all aspects of the industry's operations and on the success of the plan in achieving the Government's policy objectives for the industry.

The Bill allows the Authority to inform itself in such manner as it thinks fit. The Government's intention is that the Authority be in a position to react quickly to changing circumstances to provide advice to the Government, pursuant to the safety mechanism provisions of the plan. The safety mechanism provides for a review of the assistance arrangements whenever the local industry's market share in any of eight designated product categories falls below 80 per cent or rises above 90 per cent over any period of three months. The Bill further provides that the Authority continuously monitor imports and, in the event of a sustained increase in any of the areas not covered by the designated safety mechanism categories, report to the Minister on the need for changes in assistance or other appropriate action. In this connection the Bill provides that for the duration of the plan the Government will be able to vary assistance to the steel industry following a report by the Authority. I point out, however, that the sending of references to the Temporary Assistance Authority or the Industries Assistance Commission on the steel industry or particular steel products during the period of operation of the plan is not precluded by the provisions of this Bill.

The Authority will develop and maintain links with all parties involved with the steel industry, including local producers, unions, importers and users. It will develop a data file on the industry. These links will afford each of the parties ample opportunity to present information and views to the Authority. Similarly the Authority will be able to check out the various claims put to it with other interested parties. Thus the Authority will be well placed to identify changing circumstances, to analyse their significance and to react promptly. This prompt reaction is an essential feature of the safety mechanisms included in the plan.

In many instances the Authority will need do no more than seek comments from the parties as it will already be in possession of the relevant facts. However, over the period of the steel industry plan, matters may arise which properly should be the subject of public inquiry. Accordingly, the Bill empowers the Authority to conduct public inquiries and contains the appropriate provisions for the conduct of such inquiries. The Bill provides that the Authority report regularly to the Minister on its operations. Where those reports contain recommendations on the respective contributions to the plan those reports will be publicly released at the time that the Government's decision on those matters is announced. The Authority will also be required to present an annual report to the Minister who will be required to present the report to the Parliament.

It is proposed that the Authority consist of three part-time members, each appointed by the Governor-General, with one member to be appointed as chairman. A secretariat located within the Department of Industry and Commerce will service the Authority. The cost of the operations of the Authority, including remuneration of members and salaries for secretariat staff, is estimated at $188 ,000 in 1983-84 and $293,000 in each of the two succeeding years. Although no direct revenue will result from the operation of the Authority, the Government believes that the real benefit will be the improvement in the long term viability of the Australian steel industry. The Steel Industry Authority is considered by the Government to be essential to the effective implementation of the steel industry plan and its overall successful operations. I commend the Bill to the House.

Debate (on motion by Mr McVeigh) adjourned.