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Tuesday, 13 March 1973
Page: 522

Mr BURY (Wentworth) - I do not propose to follow in detail some of the arguments just advanced by the honourable member for Eden-Monaro (Mr Whan) because I regard this subject as sufficiently important in itself. I think it stands by itself without attracting arguments about the world foreign exchange position and many other things which one might easily draw in. What this Bill does, as previous speakers have announced, is to seek to expand the contingent liability authority of the Export Payments Insurance Corporation from $500m to $750m. As noted also, at first when authority was given in 1956 it was for a total contingent liability of $50m, and it has expanded stage by stage over the years until the last occasion when we dealt with it. That was to increase it to $500m in May 1971. At that time, the then Minister, the Leader of the Australian Country Party (Mr Anthony), who has just spoken in this debate, indicated that this was expected to be sufficient authority for the Corporation to carry on for the next 2 years. From the Corporation's report issued at the end of 1972 it is already obvious that the ceiling needed to be raised. It has for some time been bumping this ceiling. At the end of 1972 the maximum contingent liability on unexpired risks was $375m and the similar contingent liability on business which was insured at the risk of the Government itself was $258m. This made a high total and it was quite obvious that the ceiling needed to be expanded. We are now making that ceiling $750m.

I agree with the Government's intention in this regard but in a slightly different way from one of my colleagues who spoke earlier in the debate. I believe that this is a very important increase in contingent liability. It involves an increase of $250m contingently. This is a large sum which this House should watch carefully. If in fact it is necessary later to raise the ceiling still further to above $750m, it is an important matter of which this House should take full cognisance. The report issued at the end of 1972 makes clear that there are 2 ways in which the business of the Export Payments Insurance Corporation has expanded very considerably in recent months. One is that it has entered the field of buyers' credit. This is a new departure from an earlier experience and a very profitable and hopeful one which, so far, has proved a great success. The other expansion is of business which has been insured at the risk of the Government. This includes things which the Government felt from a national point of view should be insured but which the Corporation itself, if left to its own business judgment, would not have accepted as an ordinary commercial risk but has been induced to go further by a government guarantee. So, the Corporation has expanded its business considerably.

But this process in itself contains one or two matters at which we should look. We might note that, towards the end of 1972, this was becoming a significant institution. For instance, the Corporation now insures 10 per cent of Australia's export trade. That is a large volume of trade. Last year 87,200 individual shipments to 154 different markets were dependent on the operations of the Export Payments Insurance Corporation. The report also notes that, although we can still sell a large proportion of our primary products and minerals for cash, the credit and the insurance provided by the Corporation have made a big difference in the overseas sale of our manufactures, which is an important and expanding part of our exports. In this regard the report also notes that this is a highly competitive sphere of business in which the credit and terms that go with manufactured goods are highly competitive with those of other countries and in this field export insurance plays a vital part in whether Australia secures an order or fails to do so.

The fact that we cannot sell anything like all our exports, including even our mineral exports, for cash is indicated in the Corporation's report which shows a bigger variety of spread of different commodities. For instance, the Corporation has insured heavily exports of nickel and aluminium - a total of $137m out of a total of $622m - as well as a large number of miscellaneous items which include wheat, which was insured up to $81m and a series of other products such as meat, earth moving equipment, dairy produce, processed foodstuffs and a wide variety of mixtures of manufactured exports, processed exports and raw materials.

Mr Clyde Cameron (HINDMARSH, SOUTH AUSTRALIA) - How much do the various figures amount to? ] Mr BURY - If the honourable member cares to look at page 8 of the annual report of the Export Payments Insurance Corporation for 1972 he will see the figures set out in precise detail. About 20 items are listed and the total amount of insurance provided was $622m. As I mentioned, the articles vary from household appliances, washing machines, etc., which were insured to a total of SI. 2m, to primary products and all kinds or other items. These are set out in detail on page 8 of this report; I will not weary the House by reading the full list. But it is interesting and important for Australian trade because trade is highly competitive in these items and export credit is essential to secure the orders. At the same time we must also observe the dangers which the Corporation itself notes. For instance, the Corporation also notes - this would interest the honourable member for Eden-Monaro - the spreading increase of agreements to guarantee. The report states:

There is a growing practice for certain countries to make bulk purchases of primary products through central government buying agencies. To help cater for this type of trade on acceptable credit terms, the Corporation has devised a technique of providing a prior commitment to issue, on agreed terms and conditions, its insurance policies to exporters and its related unconditional guarantee to the Australian bank providing the finance. Such an agreement for the purchase of up to $A10 million of Australian primary products by Chile is already in operation. These arrangements have the merit of flexibility in meeting the needs of particular countries as well as enabling finance to be made available. Bilateral agreements of this kind appear to provide considerable scope for trade promotion.

A later paragraph in the same report indicates some of the dangers involved and why it is quite sound for the Minister not to go beyond this big step of raising the ceiling available to the Corporation to $750m. For instance, it recalls a statement made on Chile by the President of the World Bank to the United Nations Conference on Trade and Development. Honourable members, particularly the Minister for Labour (Mr Clyde Cameron), should listen to this. They would be interested to know that, since the mid-1950s, publicly guaranteed debt in Chile has been growing at about 14 per cent a year. At the end of 1971 it stood at over $60 billion - quite a large sum - and annual service of this debt exceeded $5 billion. Servicing of debt since the 1950s has been growing at the same average annual rate of about 14 per cent. This is about twice the rate at which the export earnings, from which the debt must be serviced, have been growing. Such a relationship cannot continue indefinitely. This is - obvious and it is what important customer countries of ours are doing.

A little while ago the Treasurer (Mr Crean) expressed some displeasure or concern, as well he might, at some of the lagging of payments on the debt which grew out of sales of wheat to the United Arab Republic. Obviously, this is the sort of thing which must be watched in this whole process. It is important that when we increase the contingent liability the House look carefully at what is involved for future public financial commitments. I was also glad to note from the Corporation's annual report that our experience is continuously being shared with that of other countries. Australia, through the Export Payments Insurance Corporation, is one of the 23 member countries engaged in export insurance which are members of the Berne union, which is a very specialist institution where all countries involved share their experience of underwriting and public and economic information about all their customers. It provides a kind of forum in which notes can be compared. This is what we all regard as a potential international rat race - that is, the extension of large sums of money at concessional rates with creditor countries which can ill afford to do so competing actively to obtain orders by this means. It is entirely healthy that they should compare notes and we should be in discussion with the other countries concerned. Since we have joined the Organisation for Economic Co-operation and Development we have belonged to another body through which it is possible to bring about some rationalisation of the extension of credit by the countries involved. This is a good measure. I support it and I also support the Minister in thinking that for one step he has gone quite far enough.

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