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Tuesday, 28 August 1973
Page: 435

Mr LYNCH (Flinders) - The Export Incentive Grants Bill 1973 seeks to continue the existing export incentive program until June 1974 and amends the existing Act in respect of statutory marketing authorities and gold producers. The provisions in the principal Act enable marketing authorities that would not otherwise be producers for export of the goods they export to elect to be treated as producers for the export of these goods. However, as the Treasurer (Mr Crean) pointed out in his second reading speech, such an election can now only be made in the first 60 days of existence of an authority. In addition, an effective election cannot be made by an authority in relation to a class of goods which it does not own at the time of export or sale for export. The amendments contained in the Bill seek to remove the time limit within which an authority may make an election to be treated as a producer for export of the goods it exports or sells for export and will also permit an authority to be so treated even though it does not acquire ownership of those goods. Furthermore, the amendments will enable a marketing authority to issue export certificates to a person licensed by it for purposes connected with the marketing of goods.

The Opposition supports these provisions which give greater flexibility to statutory marketing authorities and we agree that the application of these provisions should be made retrospective to 1971-72 as is intended by the Bill before the House. Similarly, we support the amendments in respect of producers and users of gold sold for industrial use in Australia which remove the existing barriers to the passing of export grant entitlements from exporters of gold in fabricated form to the actual producers of that gold. The Bill proposes provisions to enable a prescribed company, when as a supplier of gold it receives an export certificate from an exporter, to pass the value of that certificate on to the actual producers even though the company has acquired the gold from the Reserve Bank and not the actual producer. Yet this concession pales in significance against the context of this Government's recent decisions to remove the gold subsidy and apply standard taxation rates to the profits of gold mining companies. This will, of course, be a serious setback to the Australian gold mining industry. This is clear from a thorough review of Budget decisions affecting the mining industry generally and Western Australian gold mining companies in particular. The drying up of private sector funds for the operations of high risk com panies has already severely curtailed gold mining activity. It is, in fact, a great blow at a time when increased gold prices have given promise of allowing some companies to operate on a profitable basis for the first time in many years through the development of new gold deposits and the re-opening or expansion of mines around Kalgoorlie. If gold mining companies are to be taxed by this Government gold will need to reach a price of approximately $100 an ounce to provide sufficient incentive to encourage those companies to continue in operation. This Government is giving no thought to companies that have committed themselves financially to developmental projects. Some of these companies already have arranged the necessary loan funds but their orders for capital equipment will now have to be aborted. Mining industry leaders have informed me and other members of the Opposition that some operations will have to shut down with disastrous results to the Kalgoorlie area and to the Western Australian economy.

On top of the removal of the subsidy and the application of standard taxation rates, the imposition of higher fuel, aviation and telephone charges are the straw designed to break the camel's back. In this case the camel is not only the gold mining industry but also the thousands of workers who will suffer, directly or indirectly, through increased prices in isolated areas or through loss of jobs in reduced or cancelled mining operations. This, I believe, is a useful debate in which to take these points as the general context on which one can observe the marginal concession which the Government has been prepared to bring down in these Bills.

The Opposition supports the amendments to the Pay-Roll Tax Assessment Act contained in the other Bill before the House as those amendments are consequential to the Export Incentives Grants Bill. As I mentioned at the outset, the basic intention of the Bill is to extend the export incentives grants program until June 1974. This is a scheme which, since 1961, has played a valuable and integral role in encouraging the growth and diversification of Australia's export trade. It is not my intention in this debate to deal with the operation of the program in detail. The program is not above the criticism that its application discriminates against companies whose wages bill forms only a small proportion of total assets. I emphasise that the Opposition believes in the continuing importance of the principle of incentive for Australia's export program. We do not argue. that there should be no change to the existing scheme. We believe the Government has a major responsibility to bring before this Parliament a clear statement as to its intentions, short and long term, in respect of export incentives. There is, at present, notwithstanding the provisions of these Bills, considerable uncertainty, apprehension and concern among exporters who are involved with the long term planning of their operations, particularly with regard to investment in capital equipment. Of course, companies will necessarily hesitate to invest in new equipment and develop firm export plans while uncertainty and apprehension about future government policies are allowed to continue. The Government's failure to outline a clear and detailed policy does not reflect a proper and responsible understanding of the manner in which industry must pursue forward planning objectives or the problems involved in establishing and maintaining export markets.

In the absence of policy initiatives or clear guidelines, the Australian business community has been forced to witness yet a further public battle between the Prime Minister (Mr Whitlam) and the Minister for Overseas Trade and Minister for Secondary Industry (Dr J. F. Cairns). The Prime Minister's view is well known. He is on public record as having stated that the scheme is 'atrociously expensive' and 'no longer relevant'. The Minister for Overseas Trade and Minister for Secondary Industry has strongly supported the retention of the program and there, of course, lies the real kernel, which is of tremendous concern to companies involved in Australia's great export program. That concern arises out of the public debate, the unseemly dialogue, which this country has been witnessing over the export incentives program issue. In a speech to the Australian Manufacturers' Export Council, the Minister for Overseas Trade emphasised the value of manufactured exports in these terms:

Australia must adapt more to an international approach to the manufacturing sector. The benefits to the economy and to the community from export of manufactures go well beyond those of the immediate gains in export revenue. The benefits which flow from a high level of export activity in the manufacturing sector include a larger market with improved economies and reduced unit costs of scale. They also include the safeguarding of local employment, the development of few skills and technologies, and the development of a more competitive and innovative approach. I am firmly of the belief that Australia can only benefit from the increasing competitive experience of export industries.

On the other hand, the Treasury would put the view, as in fact it has done to this Government in private, that the trends in trade balance, the balance on current account or the overall balance of payments means that a continuation of the export incentives scheme merely contributes to the addition of reserves. The Treasury view is that the only way we can convert those reserves, or part thereof, to real reserves for use in assisting the growth of the Australian economy is by running a current account deficit.

Dr Gun - Let us hear your view.

Mr LYNCH - Clearly the Government must take a balanced judgment. The honourable member for Kingston (Dr Gun) has a great passion for interjecting and it would be interesting to hear what is his own personal view because one thing that one notices about honourable members opposite is that they do not have any personal views on matters of importance to this country. The honourable gent, in particular, is forced to sit behind Ministers whose controversial approach to this question calls for comment. I should have hoped that the honourable member might have participated in this debate. Clearly, the Government must make a balanced judgment. This judgment must take into account the effects of the recent revaluation of the Australian dollar and the subsequent revaluation of the United States dollar. It must also take into account the problems associated with regaining export markets if they are lost. The immense resources of labour, finance and time which have built up markets for Australian producers over the past 10 years cannot be instantly re-applied to regain markets. It must be remembered also that major manufacturing nations such as Japan and the United States of America provied positive encouragement to exporters. Australia's favourable overseas balances do not exist by some form of prior right but because of positive action and because of the incentives which have been provided. The Associated Chamber of Manufacturers of Australia expressed its view to the present Government in the following terms:

The fact is that exports of manufactured goods cannot be turned on or off like a tap. It took 20 years hard effort, and a big input of capital to gain an entry onto foreign markets for Australian manufactured goods.

If these markets are neglected, they will soon be lost. It will be difficult, probably impossible, to recover them.

It seems to be fundamentally wrong to attempt to control essentially short term situations through basic changes in established longer-term economic policies that have been vindicated over the years. Abolishing all export incentives fits squarely into this category.

Business confidence is a matter of paramount importance for the economy. If the Federal Government's ambitious program is to be achieved, there must be a sustained period of economic growth which in turn requires major investment decisions by manufacturing companies. A climate of uncertainty, punctuated by frequent statements from Government sources that often create genuine (if, hopefully, unfounded) alarm in industrial and commercial circles, is not conducive to making major investment decisions, especially when risk capital i< involved.

The Chamber went on to comment:

The removal of the export incentives scheme, combined with the recent currency realignments, could cause a major re-examination of expansionary plans by Australian companies. This would affect the level of employment in those industries, as well as pricing policies for locally produced goods. For instance, it has been suggested that the removal of export incentives in the vehicle industry could cause a drop in motor production of 20 per cent, which would have a significant impact on the employment levels within the industry, and on the pricing policy of domestic vehicles.

But in taking the balanced judgment of which I have spoken the Government must not, as outlined in the view I have just given, succumb to the proposition that an incentive scheme can be used as a form of economic regulator. There are other economic policy instruments which are more appropriately applied to the problems of a build-up of overseas reserves.

Australia requires a sound manufacturing base, and this cannot be achieved with the uncertainties which have been created 'by this Government. If hopefully, the manufacturing sector looks forward to the continuation of this program until 1974 what it really needs is an indication of the present Government's long term economic philosophy and policy. We on this side of the House believe it is imperative that the principle of incentives be maintained, and we would urge the Government to reach finality in its long term programming. Of course that statement is made in response to the interjection of the honourable member for Kingston (Dr Gun). As I said before, we do not necessarily support the scheme in all of its detailed objectives, but we believe that a rejection of the principle of export incentives will do serious harm to Australian indus try. The Opposition is prepared to guarantee Australian exporters that under a Liberal Party-Country Party administration export incentives will remain as an integral part of our policy towards Australian industry.

The issue of export initiatives and incentives highlights the division of opinion within the present Cabinet on matters of great economic substance. It is a further illustration of this Government's entirely irresponsible stop-go approach to Australia's economic management. That comment is made against the background of the Budget, which fails to solve or seek to solve or to bring any redress whatsoever to Australia's major economic and fundamental problem - inflation. It is a denial of the concept of responsibility that a Federal Treasurer should bring down in this House a Budget which so ignores the fundamental problem facing not just the business sector but all sectors and sections of the Australian community.

We recognise that this is a government bringing down a Budget which provides antiincentives for the business sector. I do not think here of overseas companies or of the large Australian corporations, but of the small entrepreneurs and small private companies. It is in this area that we have seen a sense of discrimination. We have seen a concept which penalises small private companies and small entrepreneurs, which is the antithesis of and totally inconsistent with the needs of this country in the short and long term. I regret to say that that philosophy is embodied in all the Bills before the House. It is stop-go. lt ignores the real problems. The Government brings down Bills which do not foreshadow any long term philosophy or policy and it ignores the problems which realistically ought to be brought to this House, which is anxious to know what is the economic philosophy and planning of the present administration.

The Australian business community, against the context of these Bills, is being penalised whilst the Prime Minister and his Minister for Overseas Trade (Dr Cairns) continue to argue their ideological and economic differences. 1 can see the Leader of the House (Mr Daly) sitting at the table smiling because he knows what bitter debates take place in the Australian Cabinet. I wish he would tell the House perhaps in a later speech the side that he might have taken so that the House may judge what is the position. No business community can be expected efficiently to plan its forward commitments in these regrettable and regressive circumstances.

What Australia requires and what it has not received from the present administration is firm and responsible economic leadership - something that the present Government is either unprepared or unable to bring forward. I call on the Treasurer (Mr Crean) in the course of this debate to outline the nature of the current examinations of the export incentives scheme which one would hope this Government has under active consideration, the extent of the consultation taking place between the major departments involved and the extent to which the Government proposes to consult and to involve itself in a meaningful dialogue with the principal parties concerned in the Bills before the House.

As I mentioned, the Opposition supports the Bills so far as they go, but that is not good enough. It is not good enough for Australia. It is but a further reflection of a government which is barren of economic policy and philosophy, which is incapable of long-term planning. I confess the wry thought that this is a government which came to power on so many delusions. The Australian public will recall one major delusion. The concept that it was a government which would effectively plan for Australia's future economic prospects. This it has failed to do.

While the Opposition supports the Bills to tha extent to which they program the continuation of the export incentives scheme until 1974, we say to the Government, and I say in particular to the Leader of the House who has sat opposite during the course of this debate: 'Can the Government let us into the secret of what apprehensions the business community may have beyond the period of 1974?'

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