Senator O'BRIEN (12:57 PM) —It is interesting to talk about matters related to agriculture in this country. I intend to return later to some comments made by Senator Johnston, but today I want to address some matters related to this government's Sugar Industry Reform Program, the relationship between that program and the government's ethanol policy and the latest instalment of the agriculture minister's US beef quota bungle.

The Australian sugar industry has been doing it tough and the Howard government has done little to assist it. More than 12 months after the Hildebrand process concluded, the sugar industry lacks the certainty it needs because the Howard government has failed to fully honour its commitment to the sugar industry reform process—and I remind the Senate that the Minister for Agriculture, Fisheries and Forestry, Warren Truss, received Clive Hildebrand's report in June last year. Sugar growers had to wait until September for the Howard government's response to the Hildebrand recommendations. At that time, a $150 million package was announced, with the Commonwealth's $120 million of the package to be fully funded from a new tax to be imposed on sugar.

Right from the start, the Howard government sought to avoid its responsibilities to the industry by forcing sugar growers to wear responsibility for a brand new tax on food. Labor supported assistance to the sugar industry but we oppose this tax. Income support for sugar growers was instituted in October, along with the promise that money for industry reform would be forthcoming as needed. On this matter, Mr Truss said that the centrepiece of the assistance package was $60 million for adjustment, diversification and rationalisation. He also said that urgent, high-level discussions would be held in the weeks following the announcement in order to finalise the details of each of the initiatives in the assistance program. Of course, Mr Truss's notion of urgent action is different from that of most others and the sugar industry is paying the price.

Everyone agrees that reform of the sugar industry is needed. When announcing the assistance program Mr Truss stated that income support was a short-term measure that would last no more than 12 months. Well 12 months is almost up and he has done little to get the promised reform process under way. While the membership of the central industry guidance group was named in January this year, the engine room of industry reform— the work of regional guidance groups—has not proceeded. As recently as last month the Prime Minister said:

... we want to help the industry but there has to be reform. You can't have open-ended help; there's got to be reform.

The problem is the incapacity of Mr Truss to advance this issue. I understand that Premier Beattie wrote to Mr Howard in June seeking to advance sugar negotiations between his state and the Commonwealth. I understand that Mr Howard has failed to respond to that correspondence. Today Mr Howard returns from his latest overseas trip and, I understand, will attend a coalition sugar task forcemeeting that will discuss the government's failure to fulfil all elements of its promised assistance package. I urge the Prime Minister to give sugar growers the certainty they deserve and to deliver on his promise to the industry in full. Last year the government told the Australian people that it was changing the tax treatment of ethanol and imposing ethanol import protection, on the pretext of supporting the sugar industry. When announcing that package in September, the leader of the National Party, Mr Anderson, said:

... today's steps offer a more sustainable future for primary producers whose crops can be used as feedstock for ethanol production.

On 25 July this year Mr Anderson said:

The expansion of the biofuels industry will be great news for regional Australia, because it will open the way for new ethanol and biodiesel plants or expansions in regional areas. The plants will create jobs and increase the viability of many farm industries, including the Queensland sugar industry.

And earlier this month, on 12 August, Mr Anderson said the government's ethanol package supports an industry that:

... offers a worthwhile alternative use of rural product such as wheat, sugar or wood waste and will reduce the nation's reliance upon imported fuels ...

Strangely enough, the benefits for sugar growers did not make it into the second reading speeches for the ethanol legislation recently introduced into the Senate and the other place, but that has not stopped the government backbenchers—including the members for Leichhardt, Dawson and Richmond—joining the leader of the National Party in pretending that the government's ethanol package assists sugar growers.

Regrettably, those members have forgotten to tell their constituents what is plainly obvious: the ethanol package provides disproportionate support for one company, Manildra, and that company uses wheat, not sugar cane, to produce ethanol. Manildra receives more than $2 million a month in production subsidies and has done since September last year. For the 10 months to 30 June those payments totalled $20,857,998 and represent 96.1 per cent of all payments made under the subsidy scheme. Of course, the cash register did not stop spinning on 30 June. Based on payments in 2002-03, I expect Manildra has now raked in $25 million or more. That company will further benefit from the receipt of a special $10 million concession on subsidy payments, the services of an exclusive commercial facilitator and a good share of the $37 million of capital grants available for sustainable ethanol production facilities. At the same time as Manildra has been enjoying this largesse its only competitor in the fuel ethanol business, CSR, has received less than four per cent of subsidies. Unlike Manildra, CSR produces its fuel ethanol from molasses, the sugar by-product.

It is regrettable that the deal that emerged from the Prime Minister's secret meeting with the Manildra chairman on 1 August last year resulted in serious damage to the future of Australia's alternative fuels sector. That deal damaged the future of the industry in two ways. Firstly, it meant that the government unnecessarily delayed the imposition of caps on ethanol fuel blends. While the delay allowed Manildra to continue to market fuel containing ethanol blends of more than 20 per cent, it did terrible damage to consumer confidence in ethanol as a fuel additive. Tragically, the loss of consumer confidence hit ethanol fuel trials in Queensland involving fuel containing an ethanol blend produced from molasses. Secondly, it reinforced the market dominance of the Manildra Group. If you were interested in intervening in the ethanol market to produce a sustainable and diverse industry, the last thing you would do is enhance the market position of an existing near-monopoly producer. And if you were genuinely interested in a link between ethanol and the sugar industry, you would not provide all this assistance to a wheat based ethanol producer.

The government has withheld funding and sacrificed industry reform for the sake of shabby politics driven by the desire of the Queensland opposition to maintain some relevance. It is ironic that the current Prime Minister would allow a program worth $120 million to be used as a plaything of the Queensland National Party, the same party that went close to destroying the federal coalition a little over a decade ago. But worse than that, the Howard government is prepared to put the self-interest of the Queensland opposition ahead of the future of the sugar industry and thousands of Australians who rely on that industry for their livelihoods. So far, cane growers have derived not one cent from the government's ethanol package. This is no surprise to Labor, and certainly no surprise to the government. Last year Treasury told the cabinet that it opposed linking the development of the ethanol industry with assistance for the sugar industry and said that `such development will do nothing to assist sugar farmers and will only raise false hopes'. Cynically, the Howard government has been prepared to trade on those false hopes.

The sugar industry has received no benefit so far and is most unlikely to enjoy any future benefit from the government's Manildra-friendly package, because even if CSR and other companies risk capital in expanding sugar based fuel ethanol production in competition with Manildra, there is little evidence to suggest that they would pay more than the world price when buying sugar as a feedstock and, indeed, some would suggest that in certain circumstances they would not pay even the world price.

The Howard government has stacked the cards in favour of Manildra and against everyone else interested in a viable alternative fuels industry, including sugar growers. One of the primary industry groups that has had the cards stacked against it by the government is the intensive industry sector. As Senator Stephens told this place late last week, Labor supports the development of an alternative fuels industry but we do not support a policy that works against the interests of other well-established agricultural industries.

Manildra's ethanol production is based on grain, just like the feedlot, chicken, dairy and pork industries. The subsidies directed to Manildra impose direct and prohibitive costs on those other industries. The Executive Director of the Australian Lot Feeders Association, Mr Rob Sewell, has recently described the government's ethanol policy as `the Howard Government's Feedlot Industry Disintegration Program'. Mr Sewell says that, while his industry has been forced to accept a level playing field, grain based ethanol producers have got an unfair leg-up. In Mr Sewell's words, it is `hardly fair when one team has their legs cut off'.

Independent research commissioned by the Australian Lot Feeders Association has found that the ethanol excise and subsidy arrangements now in place provide an indirect subsidy on grain and molasses inputs of $152 per tonne for sorghum and $98 per tonne for molasses. That means industries that add value to grain start $150 per tonne behind when they go into the marketplace to buy grain. It is disappointing that the agriculture minister lacked the capacity, courage or foresight to defend the interests of these key industries in relation to the government's flawed ethanol policy.

I also want to make some brief comments on the matter of Mr Truss's administration of Australia's US beef quota allocation. On the first day after the winter break, the government tabled its response to the Senate Rural and Regional Affairs and Transport Legislation Committee's report on the Australian meat industry's consultative structure and quota allocation. Those recommendations represent the collective view of Labor and Liberal members of the committee based on the evidence we received. Not surprisingly, Mr Truss has rejected the evidence based report of the committee and reaffirmed his commitment to the recommendations of his own quota panel.

Regrettably, Australia is likely to fail to fill the US beef quota this year and this is made more and not less likely by the minister's quota allocation model. Next month Mr Truss's department will write to quota holders inviting them to return quota that they are unable to use before the end of the year. I would be most surprised if anyone responded positively to that request.

Senator Ian Macdonald —How do you know he's going to do that?

Senator O'BRIEN —Because he is required to. In October AFFA will write again to quota holders seeking unused quota and the department will reallocate any returned quota some time after 1 November. Unless shipments are on the water by mid-November, they will not arrive in the United States in time to be counted as part of the 2003 quota year. So the process of recovering unused quota, together with the time frame in which the quota must be reallocated, will perversely work against maximising the benefits of the quota.

As at 18 August there were 116,500 tonnes still remaining in entitlement accounts. That is, with only 12 weeks remaining in the quota year to get product on the water, 116,500 tonnes are sitting in accounts unused. We have shipped only 69 per cent of the annual quota. In my view, it is in the interests of the whole beef industry, and the processing sector in particular, that Mr Truss immediately investigates how best to transfer unused quota to ensure the value of the quota is maximised. I also urge Mr Truss to re-examine the question of whether the rigidities in his current system will impact on the most effective use of the quota in the coming quota year. Sadly, based on past performance, Mr Truss will only move to act on this issue when his action will be all too late.