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Tuesday, 6 August 1946

Mr SCULLY (Gwydir) (Minister for Commerce and Agriculture) . - by leave - Advice has been received from London that the British Ministry of Food has agreed to an increase of the prices of butter and cheese for the third year of the contract, the 1st July, 1946 to the 30th June, 1947. The contract will remain in operation until the 30th June, 1948.

The return received for. butter exported on account of the United Kingdom for the first two years of the agreement, that is, up to June, 1946, was 161s.1d. sterling per cwt. This represented the total of that which was called a price of 147s. 9d. and value, or grant, of 13s. 4d. Our request to the United Kingdom for the third year was for payment to cover both price and value at 164s. 4d. sterling per cwt. This represented the. cost of production as determined after consultation with the industry by the Commonwealth Prices Commissioner on the basis of the figures submitted to him by the industry. The figure for value has now been abandoned and the total return called price. The price now agreed upon is 173s. 6d. sterling per cwt., which is the equivalent of that paid to New Zealand after allowing for the extra freight involved in the movement of the products from Australia, as compared with New Zealand.

The price of 164s. 4d. proposed to the United Kingdom Government, together with the home-consumption sales and the Commonwealth subsidy, brings the return to the farmer up to1s. 7½d. per lb. commercial butter equivalent. Following upon the increased return from the United. Kingdom above this figure of 164s. 4d. the Government will consider adjustments thatmight be called for. Its examination of the subject will probably involve further consideration of the subsidy and of the creation of a fund to assist in the stabilization of the industry over a period of years. Special consideration will be given to the question whether into this fund there shall be paid the sum received from' the United Kingdom in excess of that which was sought with the concurrence of the industry. The major factor in any stabilization fund would be the establishment of floor prices arrived at after consideration of cost of production data.

Higher prices have been secured by some foreign countries, but whilst the Australian Government stipulatedthe maintenance of relativity with New Zealand prices, it has not sought to secure prices in line with foreign countries in respect of either butter or meat. It is true that the Danish price f.o.b. will be higher than the Australian f.o.b. prices. It is to be remembered, however, that . Danish butter has always brought a higher f.o.b. return than Australian and New Zealand butter. Moreover the freight on the Danish product is so much less than that from Australia and New Zealand that the landed cost to Britain of Australian and New Zealand butter will closely approximate the Danish. It might be even less if relative freights were worked out. Apart from these details, however, the Government takes the view that the price paid by the United Kingdom to Australia is satisfactory and, if because of the United Kingdom's need, and the conditions in Denmark, the United Kingdom feels that it must pay a higher price to Denmark, it is not considered that Australia should question it.

The Government has not sought an extension of the current contract beyond 1948. It has reserved the right, however, when considering in May next the prices to be paid for the fourth year of the contract, to discuss with the United Kingdom Government the question of the continuance of the contract beyond 1948 either in its present form or in an amended form.

The increased prices now obtained provide an excellent opportunity to stabilize the earnings of the dairying industry. For the most part over the period of the contract, returns paid to the industry have been greater than those received from Britain, the Australian Government making up the difference by means of subsidy. On the other hand New Zealand has placed considerable money received under its United Kingdom contract into a stabilization fund. This is evident because the price paid to farmers has been approximately 3d. per lb. of butter fat less than that being paid to Australian farmers.

Although the negotiations on meat have not yet been completed, there is' reason for belief that the prices for beef, mutton and. lamb that will be agreed upon will be above current prices, particularly for lamb. Representatives of meat producers on the Meat Industry Advisory Committee have been kept advised, of the progress of the negotiations and as soon as agreement is reached with the British Government a conference with representatives of the industry will be convened.

I would emphasize that in our discussions with the Government of the United Kingdom we have been very frank, and I now desire, to be equally frank with * the honorable members and the industries' concerned. We have obtained prices for the third year of the agreements in excess of those anticipated by representatives of the industry. In view of the circumstances the Government feels that it should consult the industries with the idea of working out long-term plans of . stabilization which will have as their basic objective the creation of floor prices below which returns to producers will not fall irrespective of the fluctuations of world markets.

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