Mr ANDERSON (Minister for Primary Industries and Energy)(4.28 p.m.) —I move:

That the bill be now read a second time.

The purpose of this bill is to introduce amendments to the Offshore Minerals Act 1994, the Wool International Act 1993, the Australian Wool Research and Promotion Act 1993, the Poultry Assistance Act 1965 and the Laying Chicken Levy Act 1988. The bill will also repeal three acts and make consequential amendments to the Primary Industries Levies and Charges Collection Act 1991 and the Rural Industries Research Act 1985 because of the repeal of these acts.

The bill contains an amendment to section 15 of the Offshore Minerals Act 1994 to preserve the integrity of licences granted under the act, the boundaries of which might be affected by changes in the location of the territorial sea baseline. At present, the section applies only where changes to the baseline might be caused by natural processes such as tides or storms. The amendment expands the section to apply it to changes in the location of the baseline resulting from acquisition of new data or reconsideration of existing data. The amendment has been made necessary by a recent case where the integrity of licences has been brought into question by a change in the location of the baseline caused by reconsideration of old data.

This amendment to the Laying Chicken Levy Act 1988 is required following a change in the representative organisation of the egg industry and a subsequent request from the industry for acknowledgment of the recently formed Australian Egg Industry Association, AEIA, as the representative industry organisation on matters requiring industry consultation in place of the former industry body—the Australian Council of Egg Producers, ACEP. The AEIA now needs to be acknowledged in the Laying Chicken Levy Act 1988 to provide it with a legal basis to make recommendations on behalf of industry on levy related matters.

The act imposes a levy in respect of laying chickens hatched and provides regulations for the purposes of levy rates, with the amount of levy as recommended by the now defunct ACEP. Funds raised under this levy currently reside in the Poultry Industry Trust Fund, PITF, established by the Poultry Industry Assistance Act 1965. This act needs to be amended to facilitate the transfer of funds from the PITF to the Egg Industry Development Fund administered by the Rural Industries Research and Development Corporation for research and development on the egg industry. The Poultry Industry Assistance Act 1965 along with the Egg Industry Research (Hen Quota) Levy Act 1987 and Poultry Industry Levy Act 1965 will be repealed once the transfer of the funds has been made.

The AEIA has also requested an increase in the research and development component of the levy from 1 July 1996, subject to legislative amendment to the Laying Chicken Levy Act 1988 acknowledging the AEIA as the representative body for these purposes. The egg industry has not increased its contribution to research and development for a number of years and the proposed increase will have the effect of maintaining the real value of its research and development activities. It would be appropriate that any amendment to the act facilitate future changes in industry representative organisation status in a manner similar to the Primary Industries and Energy Research and Development Act 1989, eliminating the need for legislative amendment for any future changes in industry representative organisation.

The establishment of Wool International in 1993 was part of a strategy to develop a much stronger and commercially driven Australian wool industry, in more direct control over its destiny. The government believes the industry's long-term future lies in its continuing to move towards a market driven approach, closely attuned to the needs of customers and end users, and free from unnecessary government involvement.

The shadow minister for industry and regional development, the honourable member for Hotham (Mr Crean), who is at the table, at that stage was the minister and he and I interacted over a very considerably involved debate on the future of the wool industry in 1993. He will well recall it, I am sure—

Mr Crean —I do.

Mr ANDERSON —A very model of constructive dialogue, I would have thought, between you and me—

Mr Crean —Good to see you're still carrying on your plan.

Mr ANDERSON —That depends a bit on your shadow minister over there. This package of amendments to the Wool International Act 1993 is part of an evolutionary process, and includes, amongst other things, termination of voluntary, or additional, contributions of wool tax over and above 4.5 per cent of the sale value of shorn wool other than carpet wool. That will be widely welcomed by the industry and I think they await with great expectation that relief. I would note in passing that it is the result, easily lost sight of in the current circumstances that the wool industry is in, of the fact that wool prices recovered more strongly and faster than was anticipated following the passage of the 1993 act. In addition the amendments include setting the amount payable to Wool International in respect of the stockpile debt component of wool tax by regulation; and enabling Wool International to undertake a program to develop and evaluate the forward marketing of wool through its subsidiary, Wool International Holdings.

The bill also proposes two amendments to the Australian Wool Research and Promotion Organisation Act 1993. The first is consequential to the above amendment to the Wool International Act 1993 in relation to the setting of rates of wool tax. The other will provide for interim wool industry funding for the Australian Animal Health Council by the Australian Wool Research and Promotion Organisation.

Voluntary Contributions

The payment by growers of the compulsory 4.5 per cent debt component of wool tax from 1 July 1993 onwards entitles them to a share in any surplus from the sale of the stockpile by Wool International, to be made available once the associated government guaranteed debt has been retired. It also entitles them, should they so choose, to take up equity in any privatised Wool International.

The Wool International Act 1993 provides for eligible wool tax payers to gain additional entitlements by making voluntary contributions up to 5.5 per cent of the sale value of shorn wool, other than carpet wool, in addition to the 4.5 per cent stockpile debt component of wool tax. Nobody seems to want to do that at the moment anyway, but they did when things looked a bit brighter. The circumstances in the wool industry have changed markedly since the present statutory framework was put in place in 1993. For example, there is now anticipated to be a significant surplus arising from stockpile sales after the government guaranteed debt has been retired. There is, therefore, no need for voluntary contributions to repay debt.

Retaining the provision could also result in a small number of large, well-off, producers enhancing their entitlements at the expense of other eligible wool tax payers not in a financial position to make voluntary contributions. The proposed legislative amendments therefore provide for the cessation of voluntary wool tax contributions retrospective to 20 June 1995, the date of the announcement.

Setting the Debt Component of Wool Tax by Regulation

Currently, the amount payable to Wool International in respect of the tax imposed under the wool tax acts on shorn wool, other than carpet wool, is prescribed in the Wool International Act 1993 at 4.5 per cent. These payments go to service stockpile debt. A review of the 4.5 per cent component of wool tax payable to Wool International was conducted early in 1996 in the context of the significant projected surplus of funds in Wool International once the government guaranteed debt has been retired. The review found there was scope to remove this component of the tax from 1 July 1996.

The proposed legislative amendments will enable the setting of the amount of wool tax payable to Wool International by regulation which will, in turn, be set to zero. The amendments also provide for the maximum amount of wool tax to be 4.5 per cent.

A consequential amendment to section 51 of the Australian Wool Research and Promotion Organisation Act 1993 is needed to take into account the proposed amendments to the Wool International Act 1993. This section provided for a recommendation of the Australian Wool Research and Promotion Organisation to be put to a ballot of wool tax payers in respect of the percentages of wool tax payable under the wool tax acts for research and development and of promotion. The recommendation must have regard to the legislated percentage of wool tax payable to Wool International in respect of debt reduction. Under the proposed amendments, this amount will now be set by regulation.

Future Marketing Activities of Wool International

As part of its legislated functions, Wool International has been examining various options for further developing risk management mechanisms for the industry. As part of this examination, it has recommended that its subsidiary, Wool International Holdings, undertake a limited trading program to develop and evaluate forward and futures markets as a risk management tool.

This is surely greatly needed and I would have thought that everyone in the industry would acknowledge that in view of the removal of the old reserve price scheme, which was the mechanism by which growers in the past levelled their income flows, smoothed their income flows, and in an environment where currently growers are—to put it mildly—subject not only to low prices but to extraordinary volatility and uncertainty. Proposed amendments to the Wool International Act 1993 make provision for Wool International to hold shares in a subsidiary undertaking, such a program including the use of futures and currency contracts for hedging purposes.

Notwithstanding this provision, Wool International would require the prior approval of the Minister for Primary Industries and Energy before it could commence the trading program using Wool International Holdings. This approval will be tabled and its making advised in the gazette. Either house of parliament will be able, during a period of three sitting days, to disallow the approval.

The provision will be subject to a sunset clause such that if no approval has been given by the minister by 1 July 1997 the Governor-General may proclaim the provision as having no further effect.

Strict measures to limit the financial risk of the proposal and details of operational aspects, such as reporting requirements, would be specified in the conditions encompassed in the ministerial approval. The memorandum and articles of Wool International Holdings would also need to be changed to reflect these conditions.

Other key points regarding the program are:

.   It would have to be conducted as a commercial operation separate from Wool International with a two-year time frame commencing in 1996.

.   It would be funded from revenue received from the management of non-wool assets, as provided for in the existing legislation.

.   There would be no government guarantee involved.

.   Wool International Holdings would have access to the stockpile on a commercial basis only.

.   Regular reports to the Wool International board would be required to be provided, and through the board to the minister.

.   Rigorous risk management arrangements would be put in place to ensure the program was conducted within an agreed capital limit.

.   Separate and transparent accounting would be    required.

.   Subjection to all the requirements of Corporations Law and all forms of taxation would be required.

The use of a subsidiary such as Wool International Holdings or a separate corporate entity would ensure the trading activities were kept separate from those of Wool International proper, the main legislated responsibility of which will remain the management of the stockpile.

Such a separation is very important in the context of maintaining market confidence in Wool International's stockpile operations. I emphasise here again that there is no suggestion that the government will diminish any such separation. The point is therefore emphasised that the program undertaken by Wool International Holdings would in no way impact on the disposal of the stockpile under the fixed release schedule. Wool International Holdings would only have access to the stockpile on the same commercial basis as any other industry participant.

The proposed program, which has the support of the Wool Council of Australia, would represent a natural progression in Wool International's efforts to stimulate more effective management of risk in the industry, the need for which has been clearly demonstrated by the current price volatility in the wool market. Unlike most other commodity markets, the wool industry, particularly growers, does not make adequate use of risk management options such as forward selling and futures contracts to manage risk.

However, while the forward trading proposal is ultimately directed towards risk management and strengthening the forward and futures markets for wool, it would also provide valuable information in considering the options regarding a privatisation of Wool International.

It would assist eligible wool tax payers to evaluate the commercial viability of a priva tised organisation undertaking forward marketing operations and providing risk management services. In this way it would help eligible wool tax payers to make a more informed decision regarding privatisation.

The proposal does not presuppose the eventual privatisation of Wool International. Eligible wool tax payers, through the issue of a prospectus, will have the choice, based on their own commercial judgment, as to whether they leave their equity in a privatised Wool International.

Wool Industry Funding of the Australian Animal Health Council

The bill will also repeal the provision at section 79 of the Australian Wool Research and Promotion Organisation Act 1993 for wool industry funding of the Exotic Animal Disease Preparedness Consultative Council and substitute this with provision for an industry contribution to the proposed Australian Animal Health Council Ltd.

The Exotic Animal Disease Preparedness Consultative Council ceased operations on 30 June 1995, and the proposed Australian Animal Health Council Ltd has been established as a non-profit company, limited by guarantee, under Corporations Law.

The Australian Animal Health Council will be jointly owned and funded by the Commonwealth government, state and territory governments and the peak national representative bodies of Australia's livestock based industries. The council's mission will be to ensure the Australian animal health service system is capable of maintaining acceptable national animal health standards which meet consumer needs and market requirements at home and overseas.

The Wool Council of Australia has sought, and supports, the amendment. This is an interim measure which will cease to apply after the 1996-97 financial year. The Wool Council is considering alternatives for longer term funding and will advise its position in due course.

Complementary legislation to provide for the participation of other livestock industries in the proposed Australian Animal Health Council is contained in the Australian Animal Health Council Livestock Industries Funding Bill. I commend the bill to the House and I present the explanatory memorandum.

Debate (on motion by Mr Crean) adjourned.