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Tuesday, 28 August 1973
Page: 439

Mr O'KEEFE (Paterson) - We have just listened to a very lucid speech by the Deputy Leader of the Opposition (Mr Lynch) particularly in regard to the matter of export incomes and the continuance of the export incentive scheme. The Export Incentives Grants Bill as it is presented to us in a machinery measure. The first 2 items relate to amendments to marketing boards and gold pro'ducers. We consider that the second portion is the most important section; that is the one which continues the present export incentive scheme for another year. Of course what will happen after 30 June 1974 is anybody's guess. This is the section of the legislation with which we are vitally concerned. Export incentives are essential to our manufacturers to maintain their overseas trade, and Australia lives by exporting goods. The economy of our nation is very seriously involved with our export trade and it would be most detrimental indeed to interfere with that trade by adopting a suggestion that export incentives should be abolished.

Over the years we have built up a great export trade in primary products. However, this Bill deals with our manufactured goods. If we examine our manufacturing industries we find that over the years they have developed considerably. One of the reasons for this is that they have been assisted by export incentives. Many industries producing manufactured goods depend upon overseas earnings. I refer to our motor car industry, our heavy earth moving and agricultural machinery industry, our electrical goods industries and many others which have been helped by this export incentive. It is in the national interest that export incentives be maintained and applied to all manufacturing export companies based in Australia. The national interest will be best served only if the existing scheme is reviewed and upgraded in the light of such factors as revaluation and increased shipping freight costs.

The jobs of many thousands of Australians who are employed directly or indirectly in producing and marketing export products will be in danger unless the present scheme is at least maintained. We say that an extension of only 1 year is not sufficient to give the manufacturing concerns in this country time to p'an their capital investment and their staffing to take care of their whole industry. I urge the Government to reject any recommendations which suggest that the incentive scheme should be applied selectively, such as by excluding companies with any degree of overseas ownership. Companies established in Australia, even those with significant overseas ownership, should not be unduly penalised as they provide employment, government revenue and products for the Australian market. It must be remembered that the manufacturing workforce is distributed among both Australian owned manufacturing companies and locally based foreign owned companies, which are in exactly the same position as are our Australian companies as, in many cases, exports have become a vital element in the economics of their total operation. If those companies lose markets, production and employment in this country must be affected, and not only in the individual companies themselves; the effect would extend also to their suppliers.

It has been due largely to the export incentive scheme that Australian based companies with overseas affiliations have been able to break franchise restrictions imposed by their principals. There have been many instances where this has been of great benefit to Australia. If these companies lose their incentives, they will to some extent vacate markets which again will be served by overseas principals. I have looked at what the incentive scheme is costing the revenue of this country in budgetary terms. In 1971-72, the loss of revenue to the Federal Treasury from this export incentive scheme was of the order of $58.7m; in 1972-73, it was of the order of $58m; and, it is estimated that in the current fiscal year of

J 973-74 it will be of the order of $74m. Of course, this takes account also of a rebate of payroll tax and special grants made under this legislation. So I think honourable members will agree that the benefits that are derived from the increased export income produced by our manufactured goods, together with the great employment that the increased production provides in this country and the economic benefits which accrue to us, far outweigh what I have quoted as being the cost to the Australian Treasury. Those figures are rather illuminating when one considers that there are many thousands of millions of dollars coming into Australia from the export of our manufactured goods. Our export income has increased year by year and, if we retain our export incentives, this will be the story in the years ahead. However, if we damage the manufacturing companies which produce goods for export, this expansion could be severely curtailed.

It has been interesting to look at the present Government's thinking on export incentives and to note the varying opinions of the Prime Minister {Mr Whitlam) and the Minister for Overseas Trade and Minister for Secondary Industry (Dr J. F. Cairns). The Minister for Overseas Trade said recently that the decision to extend the export incentive schemes until 30 June 1974 would stimulate increased business confidence with beneficial effects on investment decisions and employ- ment prospects in Australia. He said that the Government's decision to extend the incentives, therefore, should be welcomed by both employers and employees alike. He said also that the export incentives were designed particularly to encourage the export of manufactured goods. The manufacturing sector is a significant employer of labour - almost 30 per cent of the work force is engaged directly in the manufacturing sector. The Minister for Overseas Trade went on to say that the benefits which flow to the economy and to the country from a high level of export activity in a manufacturing sector include improved economies of scale and reduced unit costs, the safeguarding of local employment, the development of new skills and technologies and the development of a more competitive and innovative approach. The Minister concluded these few words by saying:

The nation can only benefit from the increasing competitive experience of exporting industries.

The same gentleman was interviewed on the television program 'Federal File' on 17 June this year. I arn quoting statements made by Dr J. F. Cairns because there is a difference of opinion in the Cabinet of the Australian Government as to whether this scheme should be continued or abolished and I believe that it is important that these things should be brought to light. During the interview the Minister was asked the following question:

Take motor cars as an example; this would possibly mean that our motor car industry would be cut by about 20 per cent.

In reply to this question, the Minister for Overseas Trade said:

It could mean that. About 20 per cent of the motor car industry is exported and if they in fact depend upon the export incentives - and I'm not sure they do that level of exports - now if we remove completely the export incentive provisions, then it might mean that the production of motor cars in Australia would fall 20 per cent. And if they did a lot of people who work in the motor car industry would be out of work.

That is the opinion of the Minister for Overseas Trade and Secondary Industry of this country. He has made several other similar statements. On 22 June he reaffirmed that he wanted export incentives to continue.

There is no doubt that this issue has caused friction between the Minister, the Treasurer and the Prime Minister. What has the Prime Minister to say? In Canberra on 19 June he made a stinging criticism of the incentive scheme under which the Federal Government this year will pay to Australian industries more than $90m to encourage exports. The latest figure that I quoted here a few moments ago was of the order of $74m, so the Prime Minister has apparently extended that figure to suit his own purpose. He disclosed for the first time that in Cabinet discussions last March he had supported the Federal Treasurer in attempting to end the export incentive scheme.

These are the things with which we are concerned. These are the things with which the Country Party is vitally concerned because they indicate to us an extension of only 12 months in the export incentive scheme, which could at the end of that time be cut out altogether, with very drastic economic results to Australia and to our manufacturing industries. We have for years in this country been endeavouring to assist and promote our manufacturing industries to create employment for a growing population, and we certainly do not support anything that adversely affects that objective, lt is good to know that Australian manufacturers are planning to submit proposals to the Government for a new highly selective system of export incentives. I am not saying that the old scheme was perfect, so it is good to see that the manufacturers organisations themselves are coming forward to the Government with some suggestions about a replacement for the existing scheme, which has come under heavy criticism from the Prime Minister.

A spokesman for the Associated Chambers of Manufactures very recently said that manufactures recognised that it was up to them to come up with some alternative suggestion. The various State chambers of manufactures are working on new proposals. These manufacturers' organisations hope to have their proposals ready to hand to the Government by September or October. I hope there will be some meat in these proposals that will persuade the present Government to continue the export incentive scheme far beyond 30 June 1974. With the Government committed to including the existing scheme in the next Budget manufacturers have until 30 June next year to press their case for the need for incentives. I have already stated that.

Under the current system payments can be made to selling organisations which are not manufacturers. This is one of the weaknesses of the present scheme. Under the present scheme payment is calculated on the value of an exporter's overseas sales over a 2-year period. The exporter receives a grant worth 10i per cent of the difference between his first year's sales and his second year's sales. Manufacturers would argue that the payment was in no way a reward for exporting, that instead it was an important incentive to develop new export markets even if it meant losing money on the first year of operation. As an initial move to back their case a combined manufacturers export council is having a booklet published and circulated to members of the Governnent - 'and I have no doubt it will be circulated to members of the Opposition - which should give further valuable information as to why export incentives should be continued.

Exports are running at $5,000m annually and export earnings represent about 14 per cent of Australia's gross national product. When the 1972-73 figures are known the figure as a percentage of gross national product is likely to reach 17 per cent. But for this vital sector of the economy there are as yet no clear cut government policies. The manufacturers have warned against relying on primary products and minerals for export earnings. World demand and prices for primary products and minerals are notoriously unstable and subject to wide fluctuations, but of course as a member of the Country Party I support an extension of the export of our primary products. They are now our most important export earners, but they have to be supplemented by the exports of our manufacturing industries. Commodity prices are much more severely influenced by international currency fluctuation than are the prices of manufactured goods. In 1971-72 Australian exports totalled $4,727m and imports were of the order of $3,790m, leaving a credit balance of $937m on our trading account. But after the net cost of invisibles was deducted the balance of payments on current account was in the red to the tune of $434m.

This fact leaves very little room for complacency. As I said earlier in this speech, we are very concerned that the present export incentive scheme has been extended only to 30 June 1974. This gives our manufacturing industries no opportunity to plan for staffing and for provision of capital expenditure on new machinery to improve their product. It gives them no incentive to develop the industry with resultant profit to Australia by increased exports. Let the Federal Cabinet get down to some good sane thinking. In this instance we are on the side of the Minister for Overseas Trade and Minister for Secondary Industry against the Prime Minister and the Treasurer. It is quite evident from the facts that I have given this afternoon that there is a wide difference of opinion between these 3 top men in the Cabinet, but there should be no difference in opinion as to the benefit to Australia by continuing the export incentive scheme. We support the legislation as it is brought down and we urge that this matter be looked at very carefully indeed.

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