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Wednesday, 25 February 1987
Page: 678


Mr KERIN (Minister for Primary Industry)(11.33) —I move:

Clause 2, page 1, omit the clause, substitute the following clause:

Commencement

``2. This Act shall be deemed to have come into operation on 27 February 1987.''.

The reason for this further amendment is that it is essential, for legal reasons, that we get this legislation through both Houses by 1 March. This House cannot predict entirely what course the Senate will take and it is absolutely essential for me to make a proclamation under the Act before 1 March regardless of whether it gets through the Senate. I hope that it will get through the Senate, but this amendment will put the matter beyond doubt.

I should like to say a few words on what arose from the debate on the Bill. As most honourable members who contributed to the debate said, the wheat industry and associated grains such as barley and rice-rice for a slightly different reason from wheat-are the industries most affected at present by the collapse in world prices and the corruption of world markets. If I could give an example, the last sale of wheat I heard of to the Union of Soviet Socialist Republics was at $US75 a tonne from the European Commission, and the export subsidy, or restitution as the EC calls it, was $US168 a tonne. It probably paid farmers $US200 to $US300 to grow the stuff in the first place. The export enhancement program and export restitutions are certainly bringing the price down, but we should also recognise that the United States loan rate and the Secretary's discretion of 15 per cent a year, which has now been exercised for two years, is just as effective in bringing the loan rate down. But in a market with an enormous stock overhang-the United States has two and a half years of grain stocks in store-the combined effect of all this is disastrous. That is why we are focusing on the price adjustment gap and that is why we recognise that President Reagan's move to cut the target prices by 10 per cent a year to narrow the price adjustment gap is so important.

The wheat industry is in desperate shape. Of course some farmers will go to other crops as most wheat farms are mixed enterprises. This is not so much the case in Western Australia, but it certainly applies in the wheat belt in New South Wales and Victoria. Some farmers will swing to sheep if they can and some will engage in other enterprises. As honourable members have commented, about 50 per cent of the farm sector now has quite high levels of debt and 12 1/2 per cent of that sector-according to the latest Bureau of Agricultural Economics figures-has very high debt. Only the cotton industry's debts exceed those of the wheat industry.

These amendments all relate to the Wheat Marketing Act 1984 when the Government decided to go for 95 per cent net underwriting. That was a very generous move by the Government. The previous 95 per cent net underwriting under the 1979 Act was against a background of the United States loan rate then effectively holding up the world price for wheat and there was absolutely no risk of a payout. Also, world rates of inflation were relatively high, and again, there was absolutely no risk of a payout. Additionally, this Government gave the Australian Wheat Board the chance to borrow overseas and finance the crop at lower rates of interest. Now it borrows something like $1,200m a year. Since that measure was introduced the Wheat Board has been saved literally hundreds of millions of dollars. We are looking at a payout of about $200m in underwriting. The honourable member for Bendigo (Mr Brumby) says that this is technically a subsidy. That is true, but I would insist that is not a production subsidy or an export subsidy as there will be no payout in 1989-90. That puts it in rather a different position from that described by the United States agricultural attache at the Embassy here in Canberra.

A couple of other matters were raised. Before myths become facts I will mention this question of no consultation with the Grains Council of Australia. The Bill went through the legislative committee of Cabinet only this week. The honourable member for Gwydir (Mr Hunt) rang the Grains Council and then my Department had discussions with Mr Eakin who formerly worked for the Department of Primary Industry. Quite apart from the pressure of work, we felt that there was simply no need to cause the wheat industry concern. I only became aware of this when I was overseas and I received a phone call from Clinton Condon. I had to take action while I was overseas in order to get this matter rectified rather quickly.

Some people have said a lot about the all-party mission to the United States. I am not really in the business of working out who takes credit for what. The team worked together well over there; there are no two ways about that. The Minister for Trade (Mr Dawkins) suggested this quite a long time before I heard about it from the honourable member for Gwydir but perhaps it was an idea of the honourable member for Gwydir before I heard about it. I think it is nonsense to talk about that, but the very important thing about the mission was that at the time it was impeccable. The half-hour during which we met with the key Foreign Affairs Committee before its members went into the Congress itself was absolutely the crunch time. Again, I say in relation to any other visits to the United States, the timing must be impeccable. We must give this careful consideration. The Minister for Trade is over there now. The United States Ambassador has been over there recently, as has a lobbyist from the Australian Meat and Livestock Corporation. An officer from my Department, Mr Tim Mackey, is there and my Department is in almost daily telephone contact with him. Frances Cassidy, another officer from my Department, is with Mr Dawkins in Washington now. She was the agricultural attache there for three years, so we are mapping the matter very carefully indeed.

At present a trade Bill is on the floor of the Congress. This is a very general Bill, but it would cause us concern. It will be processed through the various committees and when the timing is right we will take a decision on what we should do. A marketing loan for wheat-and I think that the honourable member for Gwydir adverted to this in his comments-causes a different problem in terms of dealing with that. While the Secretary has the 15 per cent discretion in the loan rate, that will push the price of wheat down and a marketing loan will become almost academic from an arithmetical point of view. We must put pressure on the United States Administration and key people in the Congress-and Mr Dawkins is doing this-to adopt President Reagan's proposal for the target price. That proposal will take the target price down by 10 per cent in each of the next three years. These matters need careful consideration and I think we will need to jump into a plane at quite short notice if it is thought that an all-party delegation or just straight ministerial intervention is needed. The Prime Minister (Mr Hawke) has written to the honourable member for Gwydir. The question of another delegation is something that we have not put out of our minds at all, but again I stress that the timing must be impeccable.