61/ 07 1
SECOND READING SPEECH
by
THE PRIME MINISTER. THE RT. HON. R. G. Iva,.% Lms
IN THE HOUSE OF HEPFLS: E NTATIVES CANBERRA,,-THURSDAY. 19TH O& urix= 19
RAITJXAY AGREEMENT ( QUEENSLAND) BILL, 1961.
The purpose of' this Bill is to seek the approval of the Parliament to
an agreement between the Commonwealth and the State of Queensland covering the
provision of financial assistance to that State in the work of increasing and
improving the facilities cf the Collinsville-Townsville-Mount Isa Railway.
Mount Isa is just over 600 miles by rail from the coast at
Towtisville,* and the total distance from the Collinsville coal mines is more
than 750 miles. For many years this line has been the main transport link
serving the whole of North-western Queensland and in more recent times it has
acquired greatly increased importance because of the discovery and development
of rich and extensive mineral deposits in the Mount Isa area. The transport
task here is primarily a railway operation, but the existing railway has
become increasingly deficient in many respects so that it could not possibly
provide the capacity to move the tonnages in prospect from the developments
likely to occur in that region. Rehabilitation of the railway to the standard
now required includes extensive reconstruction of the permanent way to achieve
better grades and curves, replacement of one major bridge and a host of minor
bridges, considerable replacement of rails and sleepers, new marshalling yards
and crossing loops, improved methods of control and administration, the
provision of modern locomotives and rolling stock, and so on. This vast
project, which is already under way and scheduled for completion by December
1964+, has been estimated to cost œ 3Omillion. The provision of financial
assistance to Queensland by the Commonwealth, as in the agreement to which
approval is now sought, will enable this work to be carried out.
At this point I must emphaSi3e that the reconstructed line will retain
the existing gauge of 31611 so that the question of gauge standardisation is not
involved. It could be argued, of course, that the rehabilitation of a section
of a State railway system is purely a matter for the State concerned, and that
there is no parallel with other cases where, in the interests of moving towards
a uniform gauge link between the principal mainland railways, the Commonwealth
has provided financial assistance to certain States. But, in this instance,
the very nature and magnitude of the project compels a different approach. It
was obvious from the start that the State of Queensland would need some outside
help if the complete job were to be done properly and within a reasonable time.
Furthermore, the increase in export earnings that will undoubtedly flow from
the expansion of metal production at Mount Isa, made possible by an improved
railway, gave the Commonwealth good reason for using its best endeavours to
ensure that the rehabilitation project would be vigorously pursued. From the
outset we expressed a keen interest in the project, and this interest, plus an
amount of hard work, has now culminated in the present agreement.
Our approach to the form of the assistance to Quaeensland has however
been conditioned at all times by the fact that this is not a standardisation
work, and so should not attract the same measure of direct support as has been
accorded by the CommonwealIth to standardisation projects. I might add that
this view was strengthened when it was demonstrated by the most expert
investigations that the revitalised line should have no diffioulty in paying its
way, including the complete a-mortisation of its capital cost over a period of
twenty years, and making a profit.
The first approach for Commonwealth assistance was made in 1956 by
the then Queensland Premier ( Mr. Gair) and arose from the declared intention of
Mount Isa Mines Limited to increase greatly its production of metals and
concentrates provided that the necessary increased railway capacity could be
made available. Deposits of silver-lead-zinc ores were discovered at Mount
Isa in 1923, and the present Company commenced production in 1931, mainly of lead.
From the outset we contemplated an oversea borrowing, and with this
in mind suggested, and the State agreed, that independent experts should be
engaged to look at the rehabilitation plan and report on its economic
feasibility. This led to the appointment of the eminent American firm of
consulting engineers, Ford Bacon and Davis, who ma de very thorough investigatiaB
and reported, initially in November 1957 and finally in August 1958, that the
project was in fact economically feasible. Their calculations showed that the
rehabilitated railway should be able to pay its way, and as I said before,
completely amortise its capital cost from earnings over a period of twenty years.
I mention that Ford Bacon and Davis have been retained by the State to
supervise the project, and to undertake various other tasks associated with it
and with the genaral operation of the Queensland Railways.
On the financing side, wc had been able to interest the International
bank for reconstruction and development, and at the 1958 Meeting of the Loan
Council we sought and obtained unanimous agreement for the Commonwealth to
borrow moneys for the Mount Isa project. This opened the way for a formal
request to the Bank for a loan. Quite a lot has been said on this subject,
and it is well known that the negotiations with the Bank, which at the start
gave great promise of success, finally broke down because the Mount Isa Company
was not prepared to provide guarantees of freight revenues from the railway of
a kind required by the Bank. This was disappointing to us because in rearly
all respects the railway was a project admirably suited to finance by the
International Bank. I said at the time, and I now repeat, that we in the
Commowealth used our very best endeavours to ensure success. I did not then,
nor do I now, criticise in any way the Bank, the Mount Isa Company, or the
Queensland Government. It is understandable, of course, that the International
3ank must abide by whatever rules it lays down governing the loans it makes and
that, having regard to the numerous demands upon it from many countrirZ it
cannot readily make exceptions in particular cases, no matter how credit-worthy
it regards a particular project or a particular borrower. On the other hand,
the Mount Isa Company made its own business judgment as-to how far it could go
in guaranteeing the railway freight earnings.
When howaver the negotiations with the Bank ended in mid-1959, one
thing was perfectly clear. Money had to be found for the job. 4' either we nor
the Queensland Government were prepared to let the matter rest where it stood.
( Ale intended to try and did try to secure loan finance from overseas sources
other than the International Bank. Meeting, however, with no immediate success
in that direction and believing that the project was of the greatest urgency
and importance, we decided to offer to guarantee the Queensland Government the
money for it ourselves, even if our efforts to secure overseas finance should
fail. Towards the end of 1959, I therefore wrote to ' Mr, Niolin to
tell him the Commowealth was prepared to underwrite the provision of the
additional œ 2Omillion required ( that is, the amount over and above the
which the State had indicated it could finance itself), on
virtually the same terms and conditions as would have applied had the loan from
the International Bank boon forthcoming terms and conditions which, I might
add, Queensland had always indicated it would be quite happy to acc'; pt. In
effect, despite the burden that it would place on our resources, we undertook
to put ourselves in the position that the International Bank would have
occupied if it had provided a loan of œ 2Omillion.
The Premier of Queensland wrote to me a few days after I had made the
offer, accepting the offer and expressing satisfaction at what-was, for both. of
us, a very notable event. With one exception which I shall Lrention presently,.
the terme and conditions whnich were offered and accepted by Queensland were the
terms and conditicne which have ncw been embodied in. the Agreamvt which this
Bill seeks to approve.
As we intended, this offer assuring the State of the finance enabled
proper planning of the work to proceed immediately, and the work went forward,
without having to wait the results of any further efforts we made to borrow
overseas for the project. The lueensland Government wasted no time, and the
actual work commenced some time ago. I am plc asad to say that, on the
information I have, it is proceeding very satisfactorily. Queensland has been
able to meet expenditure so far from its own agreed contribution to the project.
However, the time is now approaching when the Commowealth will have to start
making its contribution, and it is, of course, necessary for this Agreement to
be approved before that can be done.
4 4.
I heavo monñ A. i. nod 4A-ext, -in olbr. i-ho pX-> opsed toi-n, of the
Commonwealth's assistance differ from what was offered and agreed at the oc1 of
1959. This is in regard to the matter of the interst rate on the
Commonwealth's advances. As I have said, our intention was to put ourselves in
the position that we had hoped the International Bank would occupy, and offer
Queensland the same terms as would have applied to a loan made by the bank. So
far as the interest rate was concerned, we offered to . charge Queensland whatevor
happened to be the ruling rate for International Bank loans of about the same
duration at the time we': provided the money, subject to a reduction in that rate
if we were successful in borrowing more cheaply elsewhere overseas. At the time
we were negotiating with the Bank, the ruling International Bank rate was in the
vicinity of 6 per cent per annum. Although the State accepted this arrangement
initially, we, following receipt of a later suggestion by the Premier,
reconsidered it. In an attempt to settle a firm rate once and for all and
avoid unnecessary complications and arithmetic later, we subsequently suggested
instead that we charge Queensland tho average rate of two particular oversea
loans then being raised, the full proceeds of which would, with Loan Council
approval, be allocated to the Commowealth, instead of being apportioned between
the Commonwealth and the various States in the normal way. The Premier agreed
to this, and the necessary Loan Council approval was secured. The average rate
of interest on these two loans was 52 per cent per annum and this is the
interest rate that the Agreement provides will be charged to Queensland on
advances made by the Commonwealth under the Agreement.
There were subsequent discussions with the Queensland Government about
other aspects of the financial arrangement but I feel that I do not need to go
into details of these matters here and I do not propose to do so. It is
sufficient to say that full agreement was eventually reached on the basis I have
outlined and when this Bill is passed these arrangements can be put into
operation. Apart from the interest rate, the other main terms on which the
Commorealth is proposing to provide financial assistance are
Amount Two-thirds of the actual cost, up to a maximum of œ 20million. As
I mentioned earlier, Queensland had indicated that it would be able to
provide up to œ 10million towards the cost of the project. The Commonwealtht
s advances will be made under Section 96 of the Constitution, and
are thus outside the provisions of the Financial Agreement governing
ordinary State borrowings.
Term The Commonwealth advances are to be repayable in fu1Lover twenty
years, commencing from 1st January, 1965, after the work has been
completed. Interest is to be capitalised during the construction period.
Twenty years is the period over which the expert consultants estimated the
railway would be able to repay the money from surpluses earned; it will be
most unlikely to impose any burden on the Queensland Government's finances.
On the contrary, the Queensland railways seem likely to show improved
results as a consequence of this undertakirg
This, then, is in br&.. f the story of how the Agreement which the
legislation embodies has come about. I am convinced that it will prove to be
one of the most successful and rewarding examples of co-operation ever undertaken
between the Commonwealth and, a State. For not only will it assist the effective
development of vast resources already known but it will almost certainly help to
unlock potentialities for growth exceeding anything we can now envisage. It is
much more than a State or regional undertaking; it is a national project in the
truest sense of that term.
I have great pleasure in commending this Bill to the House.