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Wednesday, 26 November 1986
Page: 3785

Mr DRUMMOND(4.37) —The speech of the honourable member for Calare (Mr Simmons) shows the difference in attitudes between honourable members on the Government side and honourable members on the Opposition benches. I suggest that most of the honourable member's speech was hollow rhetoric, rather than that of the honourable member for Gwydir (Mr Hunt), the Deputy Leader of the National Party of Australia and the shadow Minister for Primary Industry, who put the position of rural Australia quite clearly and succinctly. He described the problems quite accurately, yet the honourable member for Calare suggested that this was just `hollow rhetoric'.

I am appalled at the decision that has been made in the Senate on this Fertilisers Subsidy Bill 1986. At first glance this measure seems quite reasonable. Some form of subsidy has been provided to Australian farmers for the use of fertilisers since 1930. It has always been in Australia's interest to encourage farmers to use fertilisers to increase production. In recent years the emphasis has drifted from the intention to increase crop and animal production to the provision of some direct form of assistance to the farmer. Our agricultural industries receive little assistance compared with our manufacturing industries. Our farmers, who are on the end of the export cycle, have not been able to increase their prices, while their costs of production have risen out of all proportion. This is now the main reason for the subsidy. This legislation seeks to remove the subsidy paid to farmers on imported fertilisers and direct that money back to the locally produced article. I must admit that the rationality of that argument appeals to me. There is no reason why Australia should subsidise imports of products into Australia. The whole thrust of the Government's monetary policy is to reduce imports by encouraging import replacements and this legislation is consistent with that.

Unfortunately what has been happening in the field destroys the purity of that argument. Again I must emphasise that the $55m fertiliser subsidy is intended for the farmer. As it has panned out in world markets, it is a superbly targeted assistance. Thirty per cent of all the phosphatic fertilisers in Australia go to the wheat belt farmers in Western Australia-a group of farmers with one of the highest levels of debt in this country. I believe that the Deputy Leader of the National Party quoted a figure of the average debt of those farmers of some $230,000 at the moment. They have the highest level of debt in Australia with the exception of the sugar cane farmers who use about 30 per cent of all the nitrogenous fertilisers used in Australia. Until now there has been no argument that the fertiliser subsidy has not been successful at delivering assistance to the right areas. However, the fertiliser industry in Australia is virtually a monopoly with one fertiliser manufacturer in each State. Two have merged. If we want to maintain competition in that industry it is the imported product that keeps our local producers honest.

There has been quite a checkered history between imported and locally-produced fertilisers. Around 1982, when local manufacturers started experiencing difficulties they started importing and re-selling the product back to the farmers. A number of independent importers set up and undercut the manufacturing companies. The manufacturing companies then lodged a complaint that dumping was taking place and dumping duties were imposed on the imported product but returned so that the producer could still receive the cost advantage of the dumped product. The farmers-I believe they have a certain amount of history on their side-would say that by removing subsidies on imported fertilisers the cost of fertilisers will rise and the local manufacturers will eventually use that price as the competitive market price. Before long the $55m will be a subsidy to the fertiliser manufacturers and not a subsidy to the farmers. Whatever the Minister for Primary Industry (Mr Kerin) says about the strength of the legislation to make sure that the manufacturers will continue to pass on the full benefit of the subsidy to the farmer, the legislation goes against the natural tendency of companies and individuals to follow the market forces.

This legislation sets up a conflict. Presently we have a conflict between the manufacturers and the farmers in the farmers' favour. Under the legislation the conflict will still exist, but it will be in the manufacturers' favour. Clearly, the Government has not resolved the problem. As I said earlier, at first glance it appears reasonable, but under closer inspection the problem has not gone away, it has been shifted further down the line. The problem needs to be addressed in grander terms and then we might achieve what we are after.

Our fertiliser manufacturers produce about 80 per cent, in terms of content, of phosphate fertilisers and 75 per cent of nitrogenous fertilisers. The fertiliser industry is not a heavily protected manufacturing industry. In fact, the Industries Assistance Commission in recent years has stated its effective rate of assistance to be zero to minus 2 per cent which is around the same level of assistance given to wheat farmers. In the meantime our fertiliser manufacturers are forced to use Australian National Line ships at an extraordinary cost and participate in Australia's notoriously inefficient industrial relations climate and yet they still compete well with the imported product, as the consumption statistics suggest.

I do not think there is much to be gained by squabbling about two efficient industries. The IAC makes this point quite well in its 1985 fertiliser report. Our main aim must be to raise the real net value of agricultural production. To raise that by one per cent could be achieved in the following ways: Firstly, a 0.2 per cent reduction in real wages throughout the economy; secondly, a 5.1 per cent reduction in real government expenditure; thirdly, a uniform 6.1 per cent cut in nominal assistance to all manufacturing industries; and fourthly, a 0.6 per cent devaluation of the exchange rate assuming zero wage indexation. By comparison we would need a reduction of 18.1 per cent in the price of all fertilisers. Clearly, there are many ways to skin a cat.

If this legislation is passed-I appeal to the Government even at this late stage to reconsider-it is likely that the imposition of dumping duties on high analysis imported fertilisers will be dropped as the domestic manufacturers will be receiving increased subsidies. I do not quite know where this will lead us. The IAC has claimed that all subsidies should simply be removed. I am sure many people would agree with that approach as long as a trade-off in other areas would be acceptable to the farming organisations. If we can substantially reduce the high transport costs to our farmers, the level of tariffs on machinery, the cost of petrol or reduce the stifling level of interest rates, we will begin to make a valuable improvement in the structural nature of our economy. But this approach of shifting $55m from farmer control to manufacturer control at a time when our farmers are suffering a cost price crisis and at a time when we are substantially reliant on our export income is ludicrous. It is on that basis that I do not believe that the Minister has found the best solution to the problem of maintaining the viability of our fertiliser manufacturers while at the same time giving our farmers the benefit of the cheapest fertilisers. I deplore the action taken in the Senate. I will continue to oppose the Bill. Even at this late hour, I ask the Government to reconsider its position on the Bill.