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Tuesday, 5 May 1987
Page: 2607

Mr TUCKEY(5.42) —The Sugar Cane Levy Bill and the Sugar Cane Levy Collection Bill, which are to be debated cognately, each refer to the imposition of a levy on all sugar produced in Australia for the purpose of funding research. The Liberal Party of Australia supports the Government's action in this regard. The levy is proposed to be set at 5c per tonne and will be paid into the sugar industry research fund, which will seek competitive tenders from research organisations willing to undertake valuable research into the development of sugar cane.

That is a commendable move. It is not too long ago that, for instance, in the wheat industry in Australia the research funds paid by growers were divvied up by those who were going to undertake the research projects. The result was that, on an international comparison, Australia had the lowest return in terms of increased productivity of wheat per dollar invested in research of all major wheat-growing countries in the world. That was something of which we could not be proud. Quite obviously, by giving the research fund the right to seek competitive tenders, we will put some pressure on the researchers to perform on behalf of the industry which, under present circumstances, must get higher productivity and must gain efficiencies if it is to survive in the present world market, a matter to which I will refer a little later.

It is expected that in the first year of operation the millers and the growers will each contribute about $625,000, and the Federal Government proposes to match that amount on a 50 per cent basis; that is, a dollar per dollar contributed by both the millers and the growers. This means that they, too, will contribute approximately $625,000, giving a total for research investment in the first year of some $2m. That is a substantial amount of money to get this scheme off the ground. There has been some research activity organised by the State governments in Queensland and New South Wales, but quite obviously they have not had the opportunity to raise the sorts of funds that can be achieved by this legislation. The industry supports the move, as it feels that the scheme is the only way it can obtain extra funds from the Federal Government. The industry is hopeful that the legislation will be in place and working by 1 June 1987.

There is not much more to be said about the legislation, as it is a machinery-type Bill, many of which pass through this House at different times, normally, of course, with the support of the opposition of the day. The sugar industry is one that warrants government support. It is a substantial earner of export income. What is more, it is an import competing industry. It provides a huge amount of sugar for the local market. That assertion is borne out by looking at the figures for 1982-83, when the industry exported 2.6 million tonnes of sugar for a value then of $557.4m, but when total production was 3.5 million tonnes. In any case, we are seeing almost a million tonnes of sugar consumed within Australia.

Over the years the export quantity has not changed greatly, varying between 2.4 and 2.6 million tonnes between 1982-83 and 1985-86. We have seen, nevertheless, a substantial difference in the export value in that time. In 1982-83, 2.6 million tonnes of product brought in, as I said, $557.4m. As prices rose in 1983-84 a lesser quantity of 2.4 million tonnes brought in $621.2m. The next year we saw an increase to 2.5 million tonnes and yet a fall in gross return to $575.4m. Fortunately, the 1985-86 figure shows a return of $601.6m on exports of 2.6 million tonnes. We have seen, in fact, just in recent times, a move from a position where, at the bottom of the market, sugar was bringing some US2.6c per pound on the international market to a situation where it is drifting back up now to about US7.78c per pound, and there are some predictions-which I hope will be proved correct-that it might even rise to US10c a pound.

The main point I make is that the sugar industry is a major export industry which should certainly get the support that we provide here. The problem, of course, is that the industry has had a lot of problems in terms of cost. On the reason for the upturn, it is interesting to note, for instance, that the Soviet Union is expanding its imports by a predicted five million tonnes. To date Australia has benefited by sales of 180,000 tonnes, although it has been out of the Soviet Union market for many years. We are advised that the reason for this growth in sugar consumption in the Soviet Union is that Mr Gorbachev is attempting to convince Russians to stop drinking vodka and instead drink more cool drink. I am sure the producers of Queensland will say amen to that. We too believe, I am sure, that they could get off the alcohol to their great personal benefit and to the benefit of our export effort, which would assist the industry. It is interesting that another reason for increasing international consumption is that Brazil, with its foreign exchange problems, is choosing still to use sugar cane to produce a gasahol for the vehicles that people use in that country. Australia still remains the No. 1 supplier to the countries of Canada, Japan, Malaysia, Korea, New Zealand and Singapore. The reason given is that in those markets we are still considered an extremely reliable supplier in terms of getting the goods there on time and in terms of quantity.

Unfortunately, with all that relatively good news around, we still have bad news in terms of the very lucrative United States market. The United States of America, to protect its own industry, operates at much higher prices than most other parts of the world. Unfortunately, we see that any efforts that were made by the United States-and I am not sure, from what I have read on this subject, that they were as energetic as they might have been-have resulted in the United States cutting back our quota for this coming year from 142,000 tonnes to 75,000 tonnes, which represents a 47 per cent cutback or a $A37m loss of exports to that country. Of course, the United States dollar is very attractive in terms of addressing the great problems that this country has with its overseas indebtedness and its current account deficit. Much of this indebtedness today is created by the huge amounts of money we have to repay to other parts of the world, as this Government has allowed our overseas indebtedness to drift from $35,000m under the Fraser Government, to over $100,000m today. Consequently, 44 to 45 per cent of the value of everything we export-whether it be sugar, wheat, iron ore or coal-must go to servicing that indebtedness.

It is interesting today to hear the Treasurer (Mr Keating) and the Prime Minister (Mr Hawke) boasting about 750,000 new jobs. Not all Australians are so foolish as to think politicians can create every new job in the country. But if they could have the credit for that and we divided the growth of our international indebtedness during that time by that number of jobs, we would have borrowed from the rest of the world something like $90,000 to create each of those 750,000 jobs. I am not sure that that is very good management. We have still to visualise the problems associated with the sugar industry. It is encouraging to know that things are improving. Sugar comprises 5 per cent of our total rural exports and approximately four times the value of live sheep exports, one-fifth the value of our wheat exports and one-fifth the value of our wool exports.

But the problems in the industry are with the growers. Figures for an average cane farm for the 1985 season supplied by the Queensland Cane Growers Council show an average return to growers of $500 to $600 an acre, depending on the sugar content of the cane. This works out at some $20 per tonne-$19.73 to be exact. Fertiliser costs based on that return are between $450 and $500 per tonne, which converts to between $120 and $150 an acre of cost. Harvesting costs are also of the order of $150 an acre, and fuel costs about $30 an acre. Other charges, including land taxes, rates, interest rates and existing levies, of 47c a tonne leaves some $3 to $4 a tonne retained by the grower. This does not include the opportunity cost of property if money were not tied up and were able to be invested elsewhere. If one has an investment of $500,000 in a farm, one can imagine the sort of interest that money would return. A farm valued at $440,000 at 15 per cent would return the grower some $66,000 a year in interest. One can see that farmers stand to lose substantially by having their money tied up in sugar.

The total production per farm is around 4,422 tonnes and cash receipts are $87,231 per farm. The total cash costs are $74,949, leaving a cash operating surplus of around $12,280 per farm. This figure is now half average weekly earnings, and in most cases a family must struggle to survive on this low return. It can be seen that the industry at home still has substantial problems which are being reflected in every part of the rural industry today. I have pointed out on a previous occasion in relation to nearly all these industries that if we examine two of the great costs mentioned in the figures I have just produced-the costs of fuel and interest-we see that internationally the cost of interest on money has reduced from a very high level of around 20 per cent all round the world to a figure in many parts of the world that is below 5 per cent, and in most countries below 10 per cent. In other words, it is reasonable to say that in other parts of the world the cost of money has dropped to 25 per cent of its cost a couple of years ago. The cost of fuel has dropped to half, and yet our rural industries-whether they be sugar, wheat growing or others-are still being obliged to buy their money and fuel at old-fashioned prices. Our people are still obliged to pay 20 per cent. We are unique in the world in having interest rates as high as 20 per cent. Australia and the banana republics are the only countries with those sorts of interest rates.

Any suggestion that these interest rates are some aberration of good government policy is false. The interest rates in Australia are running at these high levels because big brother government has existed in the last four years and has borrowed $24,000m to prop up the difference between the extravagance of its spending programs and its courage to raise taxes. That has meant that while big brother has been in there fighting and scratching for an average of $6,000m a year of borrowings, every other sector in the Australian domestic borrowing market has had its prices forced up, as always occurs when there is demand for a particular product. Our farmers, our sugar growers, are paying huge interest rates on that sort of outlay and cannot afford to do so. If one took away the interest charges and similar items to growers, there would be a reasonable chance of their making ends meet. The same can be said of fuel. The rest of the world has benefited from the breakup of the Organisation of Petroleum Exporting Countries cartel and the governments in the rest of the world have passed that benefit on to their communities. As a result we see inflation in all those countries falling and in many cases nil inflation rates. The reality is that that has not happened in this country because this Government has increased its expenditures from some $48 billion in the last Fraser Budget to nearly $75 billion in this Budget. We are not sure what the exact figures will be. The Government does not seem to be able to keep to a balanced budget. It is constantly letting it flow out. Last year the Government, having predicted a $3,500m overrun on what it was to tax, found that it needed a mere $800m at the end of the year. This year it looks as though it will be $500m over the predicted $3,500m of borrowings. This is quite unbelievable.

Mr Kerin —I rise on a point of order, Mr Deputy Speaker. This debate is about a sugar levy Bill. If the honourable member wants a general debate on the economy, I am sure that the Treasurer will accommodate him.

Mr TUCKEY —I would love the Treasurer to accommodate me, but he bolts out of this place every time I get up. He does not seem to like me.

Mr DEPUTY SPEAKER (Mr Drummond) —Order! Ruling on the point of order, I had thought that the honourable member for O'Connor had tied his remarks well and truly to the sugar industry up until this point. I am not too sure how much further he will go on the general economy.

Mr TUCKEY —I have a deep concern for the welfare of all people in rural industry. I am aware of the cost of money and interest rates, for which I entirely blame this Government. I remind you of the uniqueness of Australia's position in the interest rate market. We are paying four times as much as other parts of the world are paying, which did not happen in previous times of high interest rates.

Mr DEPUTY SPEAKER —Order! I think that the honourable member has made that point.

Mr TUCKEY —I thank the Chair. There are other aspects of the sugar industry over and above the obvious benefits of the research levies which are being imposed and which are matters of some concern. Sugar is produced mainly in Queensland and in that State the industry is very highly regulated and there are problems. The Government, to its credit, if belatedly, eventually managed to work out a deal with its arch-enemy, Sir Johannes Bjelke-Petersen, by which sugar growers could be assisted out of some of the plight I have identified. Eventually, to the Government's credit, a package which has a total figure of some $250m-I think we shall wait a long time to see all that in the hands of growers-has been negotiated. On 18 October in the Courier-Mail it was reported:

The Federal and Queensland Governments have finalised arrangements for cane grower adjustment assistance that forms the last part of the $150 million assistance package.

Over the next three years, growers will be able to apply for grants to reconstruct debts, build up farms or improve properties.

About $25 million-$18 million of it from Canberra-will be available.

It will be paid in lump sums equivalent to interest subsidies of up to 75 per cent on present loans over seven years.

The Government is to be congratulated on that move. As I said, it was belated. The sugar growers were the victims of politics. While Sir Joh and the Government fought each other over what was reasonable, more and more sugar families found themselves in extremely difficult financial circumstances and some were obliged to leave their properties and many suffered very badly. I sincerely hope that that particular project is working well and better than the sorts of proposals you and I deal with, Mr Deputy Speaker, in terms of the Rural Adjustment Finance Corporation arrangements that exist in Western Australia where similar assistance is available. I see farmers queueing up in Perth trying to get assistance, but given all sorts of ridiculous reasons why they do not qualify. It seems to me that that may happen in Queensland. More importantly, the other matter of great concern is the application of politics in general to the sugar industry, which is a move I deplore. I refer to the recent closure of the Goondi mill. I note that the Minister on 19 March denied any involvement whatsoever. His media release stated:

Legislation rushed through the Queensland Parliament on Tuesday night to provide rationalisation of sugar milling in the Far North sugar region of Queensland was entirely a Queensland Government action, the Minister for Primary Industry, Mr John Kerin, said today.

On 10 December 1986 he put out a media release that stated:

The Commonwealth has agreed to provide $4.6 million for the Sugar Milling Adjustment Committee's proposed sugar mill merger plan for the Goondi, Mourilyan and Babinda areas, the Minister for Primary Industry, Mr John Kerin, announced today.

Under the proposals, the SMAC recommends the retention of the Babinda Mill, particularly because of the social disruption that would result if that mill closed.

We can only read into that that at that stage he approved of the closure of the Goondi mill. There is some contradiction in those two Press releases which the Minister may explain to us in his response to this debate. The Australian Financial Review of 19 March 1987 stated:

Shocked sugar growers who supplied Goondi mill in North Queensland protested loudly yesterday at the `politics' of Queensland and Federal Governments alike after waking up to find their mill had been closed overnight by legislation.

The protests were all the louder because the legislation, introduced into the Queensland Parliament on Tuesday night and pushed through in two hours, reassigned Goondi cane against the growers' wishes to the Babinda and Mourilyan mills.

. . . .

Tuesday's legislation pre-empted an imminent Central Sugar Cane Prices Board examination and a related Supreme Court hearing set down for next week on Goondi's future and that of its canegrowers.

The people of Innisfail, whom I have visited frequently, will suffer most from that decision. We know that there had to be some rationalisation. It is reported that the legislation could represent a loss of some $6m to people growing cane in the areas previously serviced by the Goondi mill and that matter should also have been taken into account. We are aware of the politics of the situation and of the political representation of those two areas. It is a great pity that while the Government is coming forward with positive measures to assist the industry, those sorts of steps are being taken in such a brutal fashion. That is something for the Australian electorate to contemplate in the future.

The Opposition does not oppose these Bills. It completely and totally supports the sugar industry of the north of eastern Australia. We sincerely hope that it will grow-some predictions now seem to suggest this-and that the cost structures that the Government imposes can be addressed. Consequently, we think the industry has a future as a major contributor to the export income of Australia.