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Wednesday, 26 November 1986
Page: 3793

Mr BARRY JONES (Minister for Science)(5.27) —in reply-I thank honourable members for their contributions to the debate and I will try to reply to some of the points that were made. The Deputy Leader of the National Party, the honourable member for Gwydir (Mr Hunt), raised the question of prices. Fertiliser prices have all been reduced since the Budget decision and importers have matched these reduced prices. The users of domestic products will benefit, of course, and these are the vast majority of farmers. In the view of the Government competition will continue. There is no barrier to entry to the fertiliser industry in Australia. Local production is increasing significantly and increased throughput will lower unit costs, which will clearly be of benefit to farmers. The intention of the subsidies is to increase the use of fertilisers and the Bill continues this intention. It continues subsidies to the rural sector for the consumption of fertilisers at $55m a year. It removes an inconsistency of Australia subsidising imports as well as giving a bounty to domestic production, particularly at a time of severe balance of payments deficit-the subject of considerable interest to Senator Siddons, a former Australian Democrat senator.

Mr Spender —What happened to him?

Mr BARRY JONES —He resigned. The Bill provides the local manufacturers with indirect assistance through the potential to increase production. The Government, in reviewing the fertiliser scheme, has had to balance the interests of all parties involved-farmers, including the 25 per cent who do not use fertilisers, manufacturers, unions, importers and taxpayers. It was alleged that the result of the Bill will be to increase fertiliser costs. The problem of the farmers who must continue to purchase imports of especially high analysis phosphatic fertilisers, HAPF, we believe will diminish. The manufacturers have already stepped up their production and have committed funds to increase their capacity. Nevertheless, other factors, such as geography, climate, location of manufacturers and ports and transport, also impact on farmers' costs, as the honourable member for O'Connor (Mr Tuckey) pointed out.

It is important to note that all manufacturers have lowered their prices of all fertilisers and importers appear to be matching these prices. It has been implied that the local industry cannot meet the farming industry's demands for high analysis phosphatic fertiliser. The fact is that manufacturers are prepared to produce more high analysis phosphatic fertiliser. In any regard, phosphatic fertilisers are highly substitutable. The arguments as to which particular fertilisers to use are complex. They include price, types of trace element, ease of use and, indeed, what one's next door neighbour is using. Manufacturers have integrated plants. One could not expect single superphosphate to remain at the same price if large quantities of high analysis phosphate fertiliser were imported. The 66 per cent of farmers who use single superphosphate would be disadvantaged.

It is asserted that competition will be reduced because imports of fertiliser will be so much less and that this will lead to a monopolistic situation for Australian industry vis-a-vis imports. That has to be looked at very carefully.

The honourable member for Forrest (Mr Drummond) and the Deputy Leader of the National Party asserted that the measure effectively takes $55m from the rural sector and gives it to secondary industry. All Commonwealth fertilisers legislation subsidies are passed on in full, will need to be passed on in full and have always been passed on in full to the farmers. The Bill specifically requires the benefit of any subsidy payable to producers to be passed on to the end user purchaser. In addition, it makes registration of producers, which is a precondition to the receipt of subsidy, conditional on an undertaking by the producer that the benefit of subsidies will be passed on to the end user purchaser. Clause 10 provides that the Comptroller may direct that subsidy is not payable to a producer where the Comptroller is not satisfied that the price being charged by the producer in respect of sales of subsidised fertiliser is such as to pass on to a purchaser the full benefit of the subsidy.

In the years in which this subsidy package has been in operation no complaints have been received on the mechanism of passing on the benefit of the assistance from the producer to the end user consumer. This point is even admitted by the National Farmers Federation. Local producers are assisted by this Bill only indirectly through the potential to increase production. In fact, the $55m is not being shifted from the farmers to the local manufacturers. Again, as I said earlier, the aim of the subsidies is to increase consumption of fertilisers, not simply to assist the farmers, 25 per cent of whom, as I said, do not use the fertilisers. The honourable member for Lyne (Mr Cowan) suggested that the Government should model the fertilisers assistance on the diesel fuel rebate scheme. The scheme that is proposed assumes that either an import duty or an excise duty has been paid. It is these duties on which a rebate can be paid. No such duties are paid on fertilisers, so the analogy seems to fall.

The Government has made the decision to subsidise the cost of fertiliser in terms of a consumption subsidy payable to producers and then required, as I have said about four times, to be passed on to the end user consumer. The Government is constitutionally constrained, when it employs industries assistance via bounty or subsidy, to pay that bounty or subsidy on local production. The unique end use condition on this subsidy, however, ensures that the benefit of the government assistance is passed on.

At the moment we do not believe that there is a monopoly situation. Existing manufacturers compete vigorously where transport and other factors permit. Domestic industry, we repeat, can provide the full range of phosphate and nitrogen fertilisers. The honourable member for Wakefield (Mr Andrew) asserted that the original intention of the Fertilisers Subsidy Bill was to give a consumption subsidy to assist farmers and that therefore the status quo should be retained. The intention of the subsidies, as I have said, is much broader than that.

The honourable member for O'Connor takes the view that the Government's action on fertilisers has led to price increases for farmers, entrenches the monopoly of the local manufacturers, is anti-rural, and in effect ignores the Government's commitments on fertilisers given in the economic and rural policy statement. Again, we believe that this is one of a number of industries that will be restructured, that we hope will be more efficient and that we hope will be more competitive. It is often very difficult, when representing the interests of farmers locally, to say `Take the big picture; look at what is happening to Australian industry overall', irrespective of what the sector is. As the honourable member and many members of the Opposition would be aware, we are going through a period of quite remarkable, quite dramatic change, and a number of industries which have been very weak will, I think, become very much stronger. Certainly it is not the intention that any industry that is currently strong, such as the agricultural sector, will be weakened in any way. I ask for the support of the House on this very important measure.

Question put:

That the Bill be now read a second time.