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Tuesday, 10 December 1974
Page: 3269

Senator Douglas McClelland (NEW SOUTH WALES) (Minister for the Media) - I move:

That the Bill be now read a second time.

I seek leave to have incorporated in Hansard the terms of the second reading speech.

The DEPUTY PRESIDENT (Senator Webster)- Is leave granted? There being no objection, leave is granted. (The speech read as follows)-

This Bill seeks Parliament's approval for the first legislative expression of the Government's intention, announced by the Prime Minister (Mr Whitlam) on 23 April this year, to provide structural adjustment assistance to assist changes in Australian industry. Virtually all features of the Government's program for structural adjustment assistance are already in operation, including the recently announced measures in relation to non-metropolitan areas which have particular difficulties in adjusting to structural change. There is a need to give the whole program a more defined and permanent form through legislation to establish the Structural Adjustment Board. This will take some time to prepare, but there is, in the meantime, a particular requirement for legislative authority within which loan guarantees may be provided as part of the program. It is for that reason that this Bill is being introduced.

To help progress towards the community's social and economic goals, the Government sees it as desirable in appropriate cases to promote and make easier the process of structural change in industry. There can be particular times when growth, and even strong growth, of the more viable sectors of industry may not be enough to offset weaknesses that develop in other sectors. There are undoubtedly rigidities in the structure of industry which it takes time to overcome. The change from existing investments and existing employment patterns to others which would be more productive must be a gradual process. At the same time, there are very great gains to be made from shifting industrial activity at a manageable pace from areas and forms which involve high costs to the community to others where industry needs less support or can stand on its own feet. Greater net value accrues to the community.

The costs of inadequate ability to make these changes can be very high. Estimates have been made- and I stress that the precise figures are very much a matter of debate- which suggest that the total cost of support of Australian industry in its present form may run into hundreds of millions of dollars each year. The encouragement of structural adjustments which will reduce this cost has been one of the central aims of this Government. Over a period, if movement into more viable industries and particular sectors of industries can be encouraged, or indeed even if their growth can be fostered while investment in other less attractive sectors is not encouraged, steady and worthwhile progress can be made towards a more soundly based industrial structure.

It must be remembered that we are not talking about wholesale or overnight changes to industry structure. The larger part of the assistance I have mentioned goes to relatively few industry sectors, and within those areas there is a wide variation in the degree of dependence on that support of particular activities and particular firms. Indeed, in most cases, structural adjustment can be left to occur naturally as a continuing process of adaptation by individual firms.

However, where the Government judges it necessary to facilitate a structural change arising from a decision in the broad national interest, but beyond the normal adaptive capacity of the economy, there is another reason for providing assistance to changes of this sort, and one that is particularly important to this Government. Such a structural change is clearly likely to involve some degree of upset to the lives of particular people and the business operations of particular companies. The industrial structure that we have is partly a product of past policies- perhaps not always policies that have been in the best interests of the community, but nevertheless policies to which business and in turn employment have simply responded as being the policies of the government of the day. In the circumstances I have described the Government recognises that it is for the community generally, through the Australian Government, to bear the burden that these changes involve, and not for those particular businesses and employees which may be more seriously affected.

I have given this background to the Bill to show the general basis for the Government's structural adjustment programs. Those programs provide for assistance in a number of ways. The Government has made generous arrangements to assist individual employees who may suffer as a result of these changes. It has also provided for assistance in a number of ways to businesses which are affected; through arrangements which the Department of Manufacturing Industry is already operating pending the establishment of the Structural Adjustment Board. Firms which have to cease operation or close a substantial part of their operations, in circumstances where the Government has decided the structural change involved should be assisted, can receive substantial compensation for the loss or realisation of their assets. This compensation can assist the firm, if it chooses, to start a new business with better long-term prospects. Firms can also obtain grants for consultancy studies to provide them with advice on restructuring of their activities.

There is, however, an understandable reluctance on the part of many firms- and also of employees- to leave areas of activity with which they are familiar, even if those activities may be costly to the community or may not be contributing fully to national welfare. Encouragement may be needed to induce these firms to reorient their activities in more productive directions. If their choice of a new activity is wisely made, there is no reason why, in a country with Australia's undoubted potential for growth, they should not enjoy a prosperous future. If this can be done then the community generally will benefit. Loan guarantees can be particularly effective in encouraging firms to adopt such a course, since they assist firms to finance the initial cost of a significant transformation of their activities.

Both the firm and the lender will have, of course, a strong interest in ensuring that the restructured operation will in fact be sufficiently productive to meet the costs of its establishment and to show adequate profits. The loan guarantee essentially primes the pump- to start the process of restructuring which, once it is established, can be self-sustaining. The objective of the legislation providing for loan guarantee for structural adjustment proposals is set out in clause 4 of the Bill and is consistent with the objective of the structural adjustment program generally.

Since decisions on the provision of structural adjustment assistance will need to take account of the circumstances of particular cases, the Bill provides in clause 5 for the prescription of particular adjustment situations by regulations under the Act. There is also provision in clauses 5 and 14 for details concerning particular decisions, including the class of firms to receive assistance and the period for which assistance will be available, to be determined by regulation. Clause 6 authorises the provision of loan guarantees, and is subject to clause 7 which sets out the broad criteria under which a firm may receive a loan guarantee. These criteria are broadly affected by a prescribed adjustment situation to such an extent as to render a significant and distinct part of its assets incapable of 'economic use; that the firm itself has taken all reasonable steps to adjust to the situation; and that the loan moneys are to be used in a way consistent with the intention of the Government in taking the decision which gave rise to the need for the particular structural change. Clause 7 also provides, in effect, that a firm may not receive both a loan guarantee and closure compensation.

Cases might arise where the Government's intention is to encourage a particular structural change which would not, without assistance, be likely to occur at a reasonable speed and at a reasonable economic cost to the community. In these cases the Government may wish to assist and not have the test of adverse effects on the firm applied. It would normally be the case that only one guarantee would be provided to any firm or group of associated firms. However, there is provision for this requirement to be waived where it would have unreasonable effects. This might be the case, for example, if 2 members of a diversified group of firms were affected by reason of adjustment situations affecting entirely different areas of industry.

A further provision is that guarantees may apply to as much as 90 per cent of the loan guarantee, but not more. This provision is intended to ensure that the lender exercises his own responsibility for assessing the viability of the proposal. Further clauses of the Bill provide for the application of conditions to guarantees, both to meet normal financial and administrative requirements in relation to the provision of loan guarantees and to ensure that the conditions under which the assistance is provided are complied with.

Other clauses of the Bill provide that payments under guarantees are to be met out of moneys appropriated by the Parliament and available for the purpose, and provide for machinery matters in relation to the operation of the Act. Penalties are provided for misrepresentation in relation to matters concerning the provision of guarantees, and for breach of the secrecy provisions of the legislation.

The introduction of the legislation provides clear evidence that the Government intends that desirable structural changes in Australian industry should not be impeded by lack of adequate measures. In the past structural change in industry has been largely a matter of a chance. This is not good enough. Structural change effects us all for good and bad and there should be the opportunity for Government to influence change for the good and not the bad. This Bill will assist in that regard. It will enable steady progress to be made towards achieving an industrial structure more attuned to the Australian environment and contributing more fully to the effective use of our human and physical resources. I commend the Bill to the Senate.

Debate (on motion by Senator Cotton) adjourned.

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