Mr TUCKEY(10.12 a.m.) —The Wheat Marketing Amendment Bill 1997 is an interim measure which, in my mind, is a very doubtful necessity, which is aimed at establishing a holding company to become the company owned by the Wheat Industry Fund holders—otherwise know as WIF—and controlled by Australian wheat growers. It is an interim measure that the second reading speech tells us is necessary to allow the Wheat Board to start to get a commercial base out there in the real world. The only bit of real world that it does not confront today is the fact that it has a government guarantee to its borrowings. Funnily enough, this legislation does not remove that guarantee. It is proposed to be removed in 1999, so one would wonder why it is necessary that the Wheat Board get into the commercial arena at this particular time when its cosseting is to remain. In fact, there is a proposal in this legislation to create a holding company, a pool sale company, which would deal with the export of wheat and a domestic trading company.

The interesting thing is that, by doing this at this stage, the parliament sets a process in concrete which I think will be difficult to get out of when the second round of legislation comes forward. The major concern I have is that it is proposed that, within this structure, the companies will be the holders of this single desk monopoly.

The second reading speech makes some suggestions that might not be the case, but we have got to understand that the proposal has grave difficulties in what it sets out to achieve. This is not necessarily a criticism of the minister or the government, which is responding to the requests of the grain industry. I might add that it is the industry who got itself into this mess in the first place.

Therefore, I wish to point out to the House and particularly put on the record my objections on behalf of my constituents—and, in a single electorate, I represent between 60 and 70 per cent of the total grain exports of Australia. Furthermore, in that regard, I point out that that is the only component of the grain industry where the Commonwealth has any interest. We control the grain market in Australia through the export powers of the constitution. If it were not for that export sector, we would not be passing this legislation. The domestic market, which is significant to the company that is going to operate under this legislation, is a deregulated market open to all comers.

This is a grower model, yet as they presently propose, the structures are totally unworkable. The problem is that the proposal is to create a company that is run by its customers but which seeks over time to attract non-customer share capital. This creates a massive conflict of interest that will, at least, probably deny existing WIF contributors any chance of recovering their forced contributions through the sale of the proposed B class shares.

I refer the House consequently to a news release from the Grains Council on 29 September, headed `GCA pushes on with AWB restructure'. In this they say:

Growers have also been seeking advice from the council regarding our support for the public listing of the new company structure post-1999. `This issue is pivotal to ensuring that growers can have access to their wheat industry fund post-1999 and ensuring that the AWB has a mechanism to maintain an adequate capital base,' Mr Stewart said. The council has resolved that listing should occur as soon as commercially possible after the revocation of the government underwriting of AWB Limited's borrowings on 1 July 1999, and that a mechanism be put in place to guarantee capital value at conversion.

That sounds pretty interesting, seeing that we are going into the field of commerce.

But the point of all this is—and I think it is well recognised in those words—that the problems are as follows: the AWB, which has been a statutory authority, cannot exist, as a private company, without the WIF capital base. Many grain growers today—and with the current El Nino effect, drought and everything else, this situation is being aggravated—cannot afford to continue to provide these funds. I have wheat growers in my electorate who every year go to their bank and borrow money to put in a crop, yet they have WIF funds of up to $200,000 which they cannot access.

The solution proposed—and Mr Stewart makes it quite clear—is to list the holding company on the Australian Stock Exchange, thus allowing those WIF or B class shareholders as they become, to recover their forced contribution by disposing of their shares to interested investors. It sounds nice and simple. The question is whether the proposed structures will achieve this outcome.

Firstly, there is the problem that the Australian Stock Exchange rules oppose company structures that restrict access to the board of directors. Recognising this is a proposed company in which you must be a wheat grower to be a director and must be elected by wheat growers, I do not think the Stock Exchange will be too keen about that. I have had correspondence with financial advisers who recognise the problem but say that they think they can get around it.

If this obstacle is overcome, then the question arises of investors being interested in shares when the directors' main interest is in returns to their customers. Is the AMP going to go and buy a lot of my farmers' shares when they desperately need their WIF money back? Are they going to buy their shares and say, `This is a great investment. The directors do not want to make a profit. They want to return all the money to their customers, the wheat producers.'

Of course, there is another aspect to all that, and that is the fact that company law provides that the directors' first responsibility is to the shareholders. So how can they represent the interests of the customer, the wheat grower, and the shareholders at the same time? Under the proposed structures—as I will read to you, they have a solution to this which is equally alarming—the reality is that outside investors are not going to be interested in buying shares where there is grave doubt over what sort of returns they might get. So this is a problem. In recognition of the problem, the Grains Council of Australia proposes dividends to shareholders based on—to use their words—`a commercial rate of return'.

Let me read to you what Mr Stewart said about that:

The council was also able to support the principle of a commercial rate of return which included the establishment of a service agreement between the pool subsidiary and the AWB holding company.

The commercial rate of return must be commensurate with the risk borne by the capital providers, the competitive market for capital, and will fluctuate over time to reflect market circumstances.

Mr Stewart also said:

The council support for the principles of a commercial rate of return protected by the service agreement is contingent on the acceptance by government of the council's pool subsidiary board structure.

What they are saying there is that to overcome the problem that no-one wants to buy shares in a company run by its customers, they will be guaranteed a commercial rate of return—10 per cent—on their investment. That will certainly attract investors.

But what if the company, this free enterprise business operation out there in the real marketplace where we are sending it, is grossly inefficient? What if it is a poor performer? The normal response to a poorly performing company is for its shareholders to flog the stock, they devalue the shares. That is a discipline over the directors. But, suddenly, the shareholders under this proposal are going to be in absolute comfort. They can buy shares and they are guaranteed a return.

Where is that money going to come from? From one place only: wheat growers returns. So you could end up with a mob of mugs, of no-hopers, running a company and paying themselves big salaries, and the shareholders are not going to go crook. So all the normal disciplines of the share market disappear. How can we have that? It is silly—and that is what we are talking about.

And, as I said, it gets worse. We are going to have a group of farmers who have just had this big fight, which is resolved. As an issue of fine detail, which I think is worthless, I have supported my constituents in arguing for their voting rights in the election of directors, which primarily resides with A-class shares—and these are applicable to wheat growers. You can grow 30 tonnes of wheat a year for three years and you get a vote for a director. But the argument now is that if you are a substantial grower of wheat, wherever you live—and they particularly reside in my electorate—then in fact you will get additional voting rights. There is nothing wrong with that, except that when you send the bloke there, someone is going to drop the company law in front of him and say, `I know that you have gone and made all these promises to your wheat grower constituency but, mate, your responsibility now is to the shareholder.' And it is, legally.

Here is the dilemma: people desperately want their WIF money back. There are people going off their farms with a residue of money in the Wheat Industry Fund. That is how bad it is in some situations. This is recognised by the Grains Council; they say so in their press release. Their solution is to say, `Yes, we will get you your money back. We'll guarantee the AMP or, for that matter, Cargills or whoever buys it, a commercial rate of return with your money.' That is what we have got.

There is a solution. I have argued it extensively in my electorate. I have even brought with me and made representations to the Senate committee on all the places I have run this story, and not one person has criticised my solution. It is not beyond achieving.

Mr Fitzgibbon —What about the minister?

Mr TUCKEY —I have talked to the minister. But the reality is this: the minister is still trying to respond to what the grain industry wants. The grain industry is out there cutting its own throat. I do not think it uses halal slaughter; it may as well! But the reality is that the solution lies in retaining the single desk at total arms length from the company, not as is proposed in the bill—and they talk about transparency, which I could refer to as well—in not giving it some involvement of any nature with the AWB commercial structure.

The export monopoly is a creature of government and it should be retained in a statutory authority to which we elect wheat growers on some representative production basis. We say that is yours. It is your property. It is the decision of all your people that you want an export monopoly. You sit there with only two functions. The first is to let a contract to a marketer which, I believe, would be the AWB in its corporatised form. Your second responsibility—and we will give you some resources for this purpose—is to monitor the performance of that contract.

The contract can have benchmarks in it. It is not difficult, in the international grain industry, looking to the Chicago futures exchange and whatever other indicators are available, to say these are the levels of performance that we expect you, Mr Corporatised Wheat Board, now owned by the AMP and all sorts of other people and it does not matter, to deliver. What is more, we will give you a bonus if you exceed those benchmarks which will give the company the right sort of profile out there on the stock exchange because it can say, as it constantly reminds us, that it is better than the rest of the world. It will achieve above those benchmarks and make additional profits by doing it.

Similarly, it can trade, as it presently does, in the domestic market provided, as the Grains Council suggests, that business is at arms length and it is not discounting export wheat to itself so that it can make major profits in its domestic trading. I believe they have been making $17 million or $18 million per year out of domestic trading and that is good. That is a commercial function.

Their asset becomes their contract and not a government provided export monopoly. Just imagine anyone else knocking on our door and saying, `We want you to grant us an export monopoly. We are BHP; we want to be the only people in Australia to export steel products.' We would laugh them out of the room.

That is what we are talking about. We are talking about corporatising a body and letting it hold the export monopoly. I say the export monopoly should stand in total independence of the commercial structure. There should be a contractual arrangement and then it does not matter. The growers do not need to press for wheat growers on the AWB—the marketing arm. They should be people determined to maximise the profits of their shareholders, whomsoever they may be over time and to do so by being super-efficient marketers which return the best possible benefit to the customer but the customer is represented by the holders of the export monopoly.

It is not a difficult thing to do. It is still possible as a flow-on from this legislation. That is why I will not oppose it although I am criticising it strongly. I think these issues should have been set in concrete and, as I think the opposition is trying to say, one piece of legislation would have been better than two. I am not convinced that there is any great advantage to the wheat industry in passing this legislation at the moment but I will not be opposing it because a lot of the outstanding issues have been settled. I just do not think that the people in the Grains Council know what they are talking about. I think, as we have found in so many of these commodity councils over recent times, they do not understand the views of their constituency. They have become too distanced from them over time.

I might say I am disappointed to see in the second reading speech that there are certain matters which are going to be done in the future, and we have selected the Grains Council for that purpose. I have been reminding people that there is a simple opportunity for plebiscite on some of these major issues and that is by running these elections concurrent with local government elections. It is always a major problem when one sets out to have a plebiscite to decide issues in agriculture because it is a very expensive process but if it was brought in with local government elections, in truth the only cost would be the ballot paper. I think local government, considering it is their own constituency that they are servicing in this, should be prepared to do it for nothing or, at most, no more than a very minimal cost. It could be done through their postal ballot arrangements or it could be done through their polling arrangements. It would be just another vote that people cast at the time. I would encourage people to think about that in the broader sense.

What I am really saying is that the proposals that the Grains Council talks about are simply not practical. They will not achieve what the Grains Council says it wants to achieve. That is to create a mechanism where there is adequate capital for this export marketing operation which is the WIF funds and an opportunity for wheat growers who need that money, or do not like that sort of investment, to get their money back.

To achieve those two goals you have to be able to list on the stock exchange—you have to have a vehicle that is listable—and you have to have a vehicle that stands on its own two feet and does not go running around enticing shareholders to buy shares on the basis of robbing the people you are servicing, that is, the wheat growers. That is what a commercial rate of return will do.

Trevor Flugge will ring me and say, `I'm going to be perfect. I'm going to be so good to all these people. You'll have no doubt and worries about my efficiency.' There is no discipline on them under that arrangement to perform—none—yet there has got to be a process whereby they perform. There is the cost of managing the process and there is the financial return by way of wheat sales. They are both extremely important but if it has cost an extra $1 a tonne to sell wheat, that is one thing, but if you lose $10 a tonne on one million tonnes, that is a real problem.

The disciplines are not there, and they will not be there while the AWB holds this export monopoly. There is a suggestion the government is going to control it. If that is the case, why are we changing anything? There is no point, we may as well just leave the existing statutory authority in place, and a lot of my wheat growers would argue for that.

The reality is that if you are going to have a market situation, then have a market situation. Have proper contractual arrangements at arms length and then the company stands on its own feet and its share price reflects its ability to make profits for its shareholders. It will only do that if it is properly servicing its customers.