PRIME MINISTER PRESS RELEASE NO. 235
23 April 1974
STRUCTURAL ADJUSTMENT ASSISTANCE
Cabinet today considered the policies to be pursued in future
by the Australian Government in times of str'icl-lviral change. The
details of the manpower program are currently being finalised by the
Cochrane Committee, but the broad outlines of the ultimate scheme
are clear. In the area of structural adjustment assistance to
firms the Interdepartmental Committee has now reported and the
Government has accepted their advice.
Assistance to Individuals
In the case of employees affected by structural change a combination
of income maintenance, retraining and re-location expenses is to be
allowed for. As foreshadowed in the case of the 25% tariff cut
procedures, displaced employees are to be paid an amount equal to
their average weekly earnings for the previous six months subject
to a limit of 1 times average weekly earnings for a period of
up to six months. As an alternative there will be available, on
a voluntary basis, an early retirement scheme. In addition, there
will be a comprehensive retraining program designed to equip
employees with relevant skills. During the training period
generous income maintenance is to be provided. Details of the
retraining and the removal aspects of the scheme must await the
Cochrane Committee Report.
The scheme will be administered sufficiently flexibly for owners
of small scale enterprises to be treated, if they so desire, as
employees. Where it is possible, in terms of a simple set of
criteria, for an employee to prove that he is unemployed as a
result of a structurai change induced by Government policy,
these benefits will supersede the usual unemployment benefits.
The program will be administered flexibly and humanely by the
Departments of Labour and Social Security. It will be of
particular benefit to residents of country towns and to persons
currently employed in declining industries.
Assistance to Firms
Assistance to firms in the Secondary Industry area will be
administered by a special Adjustment Assistance Agency responsible
to the Minister for Secondary Industry.
Structural adjustment assistance is an innovation in industrial
policy for Australia. The Government has decided to continually
monitor the program at IDC level with a view to deciding whether
the criteria for assistance decided upon today are adequate. In
particular, the IDC will be charged with deciding, from time to
time, whether structural adjustment due to Govdrnment initiatives
should constitute the sole basis for justifying assistance. .2/
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The scheme will involve closure grants where relevant,
consultancy grants to help firms adjust to changed circumstances
when that is relevant, or loan guarantees.
Criteria for Assistance to Firms
The criteria for eligibility for individual firms will be
that the structural change had adversely affected, or
was adversely affecting, the firm to the extent of
rendering a significant separate part of its assets
incapable of economic production; or that the desired
change was unlikely to occur at a reasonable speed and
at a reasonable economic cost without assistance to
the firm; and
that the firm had taken reasonable steps for self-help,
but that this was unlikely to enable complete adjustment
by the firm that the firm was unable to obtain
finance on reasonable terms and conditions from normal
commercial sources); and
that generally-available measures had been utilised to
the full but were inadequate.
Consultancy grants for firms will be available on the basis of
consultancy cost to a maximum of $ 10,000.,
Closure compensation payments to firms will be subject to the
following'conditions: closure compensation to be paid in respect of the loss in
value of fixed assets and stocks rendered unproductive
by the structural change and incapable of economic use
elsewhere in the firm or an associated firm.
claims for compensation to be within one . year of the
occurrence of the structural change;
payments to be on the basis of 85% of the difference
between the written-down value of the assets for taxation
purposes and their realised sales value.
Loan guarantees will be available to firms as a special measure
and subject to the following conditions:
the provision of such guarantees to be covered by legislation;
the concurrence of the Treasurer to be obtained;
in relation to a particular line of activity loan guarantees
to be subject to appropriate conditions 4nd should not be
available in addition to closure compensation.
This program will supersede all programs currently in existence. 3/
Since coming to office, the Labor Government has been concerned
to improve the allocation of resources in the Australian economy.
It has sought to do this for two main reasons:
inefficient allocation of resources, especially if it is
due to unduly high tariff levels, induces high cost
industries to proliferate, with attendant injustices to
consumers; and
( ii) an economy built on an inappropriate structure, given
its resource base and pattern of skills, adjusts to
changes in the economic climate too sluggishly.
Good economic management in Austr~' lia will from time to time,
therefore,' dictate Government-inspired moves which will require
resources to move.-from one use to another. We have seen this
in the past year in the revaluations and tariff cuts announced
by the Government. In future, there will be similar transfers
of resources needed to accommodate the Government's urban,
regional, defence and technological goals.
For sound economic and social reasons, the Government realises
a mechanism is needed both to promote and make easier the process
of structural change. Worthwhile economic development will be
more rapid if a scheme exists to promote, via various incentives,
the resource flows needed to implement the desired changes. For
a Labor Government, however, there is a more important point. If
changes are desirable in the national interest, it is essential
that the nation, not the individuals affected, should foot the bill.
Accordingly, in February 1973, the new Australian Government set in
train two events. Under the leadership of the Department of Labor
an expert group was set up to study the manpower programs essential
to an efficient and humanitarian policy of economic. change. Under
the leadership of the Department of Secondary Industry, a working
group was established to study the needs of industry in times of
structural change. Both groups were charged with the task of
evolving a set of policies which would make the process of change
more efficient, combined with the requirement that the individuals
affected by change in the national interest should not be required
to suffer financially.
Some urgent structural changes could not wait on the deliberations
of these two working groups. As a matter of principle, therefore,
whenever during 1973 the Australian Government thought it necessary
to initiate change by way of revaluations or tariff cuts it
established generous, short-term specific adjustment programs.
Notably in the case of the 25% tariff cut program, it was announced
that the appropriate assistance measures were a prelude to a more
general, permanent scheme. .4/
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S . A eature of the Government's Adjustment Assistance
Program is that related to employers. The Government has already
spelled out its general philosophy with respect to industry.
Continuing assistance is to be provided only after detailed and
public inquiry by the Industries Assistance Commission.
Efficiency and enterprise is to be encouraged by a variety of
measures, notable among which are the establishment of a National
Management School at the University of New South Wales and the
setting up of a Small Business Bureau. The former, based on a
report commissioned by the previous Government but never acted
upon, is designed to foster new management skills in Australia,
while the latter is intended to assist businessmen in marshalling
the resources available to them.
In the context of structural change the Government's new policies
fit into the same philosophical frame-work. Emphasis is on
encouraging the process of change, rather than simply compensating
for loss of income.