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Thursday, 7 November 1996
Page: 6889

Mr HAWKER(11.30 a.m.) —I would like to support the words of my good friend and colleague the member for Parkes (Mr Cobb), who has outlined some very important challenges that face the wool industry. I join this debate as a wool grower and also as someone who represents one of the great wool growing areas in Australia. I am very proud to represent that area, but I have to say that it has certainly suffered over the last six years with some of the problems that the wool industry has been facing.

I believe that this bill, the Wool International Amendment Bill 1996, does go some way towards alleviating some of the immediate pressures that the wool industry is facing. What it does has been outlined, but it is worth repeating that the quarterly disposal mechanism for Wool International from the stockpile is to be altered as of 1 January to a minimum of 135,000 bales for each of the next two quarters, and then from 1 July next year it will lower to a minimum of 90,000 bales. As well as that, there will be an upper limit of 350,000 bales per quarter, and there is a target date of the end of 1998 for the debt of Wool International to be completely paid off. Also, there is another target date, the end of December 2000, to completely get rid of the stockpile.

Another very important and significant point about this legislation is that Wool International's charter will include a requirement that its sales objective be to improve the net return, not only for the stockpile wool but also for the whole wool industry in Australia. I think that is a very important aspect of this change. It is one that growers have been looking for, and it is certainly one that I believe, with the flexibility that is coming about through this new stockpile arrangement, will allow growers and Wool International the opportunity to look at how best to maximise the value for the industry in the coming years.

As has already been outlined, the industry certainly has been going through a very difficult period. I feel that by addressing this immediate problem of the stockpile disposal—and unfortunately this is not the first time that this has been addressed—we will allow the industry to really focus on what I see as the biggest challenge; that is, how to create additional demand for wool. There is no doubt that wool has had some difficulties over recent years, many of them brought about through factors beyond the control of the industry—for example, the collapse of the former Soviet Union and the recession in much of Western Europe in the early 1990s. The compounding of all these things has certainly, with the overhang of the stockpile, made it very difficult for the market to return to the sorts of prices that are desperately needed in order to make wool growing a profitable business again.

So, all in all, it has been a very difficult period. But from the work that the minister has put in at two very productive meetings of the round table when representatives of all areas of the wool industry came to Canberra, there was very strong agreement to proceed down this path with the wool stockpile management proposal that is in this legislation. It is also very heartening to know that the proposal has strong support right throughout the parliament. I believe that it will pass through fairly quickly, as expected, so those changes will be able to be implemented from 1 January, which of course is not very far away.

I say that the big challenge now is to increase demand. I think it is time that we put that challenge in perspective by looking at what a couple of other primary industries have been through. In both cases there were similar difficulties, and they have now come out much stronger. I am talking about the dairy industry and the wine industry. While there are many parallels, there are quite a few differences, but nonetheless I think it is illustrative to look at some of the figures that show what has been done with those two industries. I would like to quote a few statistics to show just what has happened. As everyone knows, it was only about 12 years ago that the dairy industry was on its knees, and yet today it is an industry that has pulled itself up to become a very successful exporter.

If we go back to 1970, the production of milk per farm was around 240,000 litres per year; by 1994-95, the production per farm had nearly trebled to 610,000 litres; and this year it is estimated to be around 650,000 litres. Interestingly, from 1970 to 1994-95 the production per cow increased by 37 per cent. In fact, I heard a researcher saying that in the last 25 years the potential has increased by significantly more than that; in some areas, the production per cow has literally doubled. More significantly, there is an expectation that the production will double again in the next 25 years. What I am saying is that there is a challenge for the wool industry to see what production improvements can be made on farm; I do not believe that the limit has been reached. We have opportunities to make some significant increases.

It is also significant to note the impact that the dairy industry has had on exports. While Australia produces just two per cent of the world milk production, it has 10 per cent of the world trade. Just 20 years ago, dairy exports were $250 million; today, they are in excess of $1.3 billion—of that, $1.2 billion actually comes from Victoria, so I am very much aware of the significance of the exports in a local way. That is an increase of 430 per cent. The dairy industry has achieved that not only by continuing to export what we might call the traditional products—dried milk powder, basic cheese and butter—but also by going into all sorts of value adding products. The increases in exports to some of the Asian countries have been truly staggering with an increase of at least 15 per cent per year being quite common.

It is interesting to note that if you go to the waterfront in Melbourne more than half the container exports out of Melbourne are dairy products. By this example I am attempting to show that here is an industry that took up the challenge. Dairy farmers were on their knees 12 years ago, but they took up the challenge and moved into exporting a whole lot of new products.

I also draw attention to the wine industry where, again, we see some very interesting similarities. In the mid-1980s, there was a chronic oversupply of wine. Our exports were relatively small with an emphasis on premium varieties. What Australia has done in the wine industry has been to concentrate on value adding. Since 1966, wine production has actually tripled and, more significantly, the industry adds over $900 million to purchased inputs, which is seven times the farm gate value of what it has been producing.

Not only that, the wine industry has demonstrated that it can succeed overseas on quality—something that, as an analogy, I believe the wool industry is also very well placed to do. This success has led to higher margins and the Australian product is seen as quality wine. There is a push towards consumers trading up to quality wine, and the actual sales of bulk wines are declining. These are all significant factors. If you look at the industry's strategic plan, by the year 2025 it plans to achieve $4.5 billion in annual sales—a very significant figure. I point out that that is on a par with the total value of wool production.

The wool industry is very much at a crossroads. We have already seen a decline in the national sheep flock by a third; it is down to its lowest level for about 40 years. The challenge now is to take up this demand creating opportunity—while we still have some stockpile there—and turn the stockpile into an asset. The way to do that is to generate more demand and I believe that a number of very significant things will be happening down that track. For example, the IWS is now taking a much more forward approach to its marketing.

I am also very heartened to note that the IWS is likely to be subject to more accountability from the Wool Council, which is something that I happen to think is long overdue. I believe that these are the sorts of challenges and pressures that have to be placed on the marketing arm of the wool industry to really start to get some results.

I know that time is limited here: I could go on for much longer, but I will not. I would like to say again that I am very pleased to speak in support of the bill. I believe that it is a positive step forward in the management of the stockpile. The wool industry has indeed been through a very difficult period. However, there are still plenty of wool growers who are keen to see it recover and are working very hard to do so.

I hope that, through the opportunities that are going to come in the next few years, the wool industry will indeed become the premier primary industry in Australia again. I certainly believe it can do so. Looking at the way some of the other primary industries, such as dairying and the wine industry, have turned around after a very difficult period, I certainly believe that the opportunity, the challenge and the will are there. There is the chance to make it happen, and this legislation is the first step in setting it down on the path of recovery.