Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard   

Previous Fragment    Next Fragment
Tuesday, 5 May 1987
Page: 2614

Mr BRAITHWAITE(6.22) —I understand that the Minister for Primary Industry (Mr Kerin) intends to move an amendment to the legislation before us. Although the National Party of Australia does not intend to oppose that amendment, we would like to put on notice the fact that it will have been properly considered by the time the legislation reaches the Senate.

The Sugar Cane Levy Bill and the Sugar Cane Levy Collection Bill are probably the initial result of an Industries Assistance Commission report in June 1976 which made a recommendation in respect of the research facilities available to rural industries. This was followed in the 1980s by the report of the Balderstone Working Group to Provide a Policy Discussion Paper on Agriculture which included rural research as part of its major recommendations. A working party of the sugar industry-the 100-day report committee-made two recommendations in this regard. The report stated:

The Working Party considers that the industry's research effort must be maintained and strengthened through improved organisation arrangements and additional funding from the Commonwealth Government under its rural research program.

It went on to state:

The Working Party recommends that the sugar industry enter into discussions with the Commonwealth Government at an early opportunity with a view to securing additional funding, under arrangements similar to those which apply to the wheat and barley industries, and that the Commonwealth Government respond favour- ably to these representations.

We now see all of those efforts of the last 10 years coming to fruition. Levies will be collected for use by the sugar industry research council. Contributions will be made by millers, growers and the Commonwealth under the guidelines of the Rural Industries Research Act 1985. The administrative framework for the research council and the selection committee was established under the Rural Industries Research Act, but the Bills now before us are now needed to formalise levy collections. The levy will be struck on sugar cane and matched dollar for dollar by the Commonwealth up to 0.5 per cent of the gross value of industry production. The industry contribution will be shared, initially on a 50:50 basis between growers and millers. Levies will be struck initially at 5c per tonne of sugar cane delivered and accepted by a raw sugar mill for milling but the legislation sets a maximum levy of 10c. Provision is made for the 50:50 split between grower and miller to be varied by the Minister in consultation with the industry.

Under normal seasonal conditions, the levy will raise some $1.25m, so the annual research effort should approach $2m. Although a full year program will not begin until 1988-89, the levy will be struck from 1 June this year, which may enable some preliminary research to begin in 1987-88. Some doubt has been expressed within the industry as to when the actual research will commence, bearing in mind that the levy will commence on 1 June. The Minister for Primary Industry might oblige the House and the National Party by assuring us that these funds will be made available at the earliest opportunity to allow the research to commence. There is a suggestion that the research funds will take the place of some of the subsidies or grants that are already made available to the industry. I am particularly thinking of the funds made available to the Sugar Research Institute through the Commonwealth Scientific and Industrial Research Organisation. Of course, the legislation begs the question that is often in the minds of many people about the sugar industry being very highly subsidised. Of course, this view is contrary to the facts. However, it is unfortunate that the ill-informed opinion prevails that the sugar industry is highly subsidised.

The research effort which is the subject of this legislation is only a small part of the research that is already carried out. These levies may in some part reduce future increases in existing levies. For instance, cane farmers and millers already contribute 19.2c per tonne to the Bureau of Sugar Experiment Stations. Cane pest and disease control costs another 8c per tonne. Sugar millers pay 8c per tonne to the Sugar Research Institute. In the 1986 season the cost of self-help programs already provided within the industry amounted to approximately $8.5m. This is quite apart from the levies that are paid additionally as part of their organisational commitments. The sugar industry must be one of the last industries to have sought funding relief from the Commonwealth. The Queensland Government makes a contribution of $803,000 towards sugar research, while the Commonwealth makes a contribution of $580,000. As I mentioned earlier, it is my hope that the additional research funds proposed will not relieve the Commonwealth Government of its present commitment in this respect.

It has to be said that the sugar industry survives solely by efficiency and increased productivity, which it alone provides. Eighty per cent of sugar production is sold on the world market. Some is subject to long term contract but most is sold on the open market where the price at the moment is a shade short of 7c a pound. The industry contributes 20 per cent of its production to the domestic market. While I have to say that the industry enjoys a preferential price on the domestic market as compared with the open market, this arrangement allows it to maintain a place in the world market. It has been claimed that the industry is receiving a preference or consumer subsidy in respect of the domestic market. Over the last 10 years it has been estimated within the industry that the consumers of Australia have benefited to the extent of over $400m because the world price has at times fluctuated below and above the set domestic price. The sugar industry of Australia has subsidised the consumers of Australia to the extent of over $400m.

It is sometimes claimed that in the current trade and pricing environment for Australia's primary industries the sugar embargo is a direct subsidy paid by the Australian consumer against the low world price. Perhaps that is correct if looked at in the light of today's prices. However, as I have just mentioned, there has been a subsidy of $408m to the Australian consumers. An Industries Assistance Commission report on assistance to Australian agriculture puts the myth of protection into its proper prospective. That report indicates that assistance to sugar growing in 1970-71 was 38 per cent. Within two years, assistance decreased to 13 per cent and a further two years later it was minus 19 per cent.

Sitting suspended from 6.30 to 8 p.m.

Mr BRAITHWAITE —Before the suspension of the sitting for dinner I was indicating the type of assistance that had been given to the sugar industry. I quoted from an Industries Assistance Commission report which indicated that sugar grown in 1970-71 was given 38 per cent support, within two years assistance decreased to 13 per cent and two years later assistance was minus 19 per cent. By 1980-81 it stood at minus 13 per cent-so much for the subsidisation of this industry. In overall terms, primary industry had an effective protection rate of 8 per cent. In 1970 it had been 28 per cent. Today, manufacturing industry has an effective protection rate of 24 per cent. This is only 12 per cent lower than the 1970 figure of 36 per cent. So the suggestion that the sugar industry is heavily subsidised is a myth, proved by those figures.

What I want to do now is compare the positions that our sugar competitors overseas face. Production of United States of America farmers is subsidised to an extent of over 18c a pound. This is three times the world price. Within the last six months Australia's quota to the United States has been drastically reduced to 75,000 tonnes. Over a period of years, Australian industry has adjusted to this decrease, but it is indicated quite clearly in what I just mentioned that the effect of that subsidy will be to increase production in the United States. We fear that within a short time the Americans will be exporters and not importers. In fact, the Minister for Trade (Mr Dawkins) in a statement on 16 December 1986 said:

It is ominous that Secretary Lyng forecast in his statement that if current trends continue-

that is, in the United States-

in another two years the existing sugar program will make the United States self sufficient in sweetener production for the first time in history.

That will have a consequence for Australian industry but the industry in the past has been able to accommodate such problems. What is the reality of this subsidy in the United States? Who have been the losers? A special document has been prepared on behalf of the Australian sugar industry which identifies the losers from the United States sugar policy as follows: First the United States consumer who paid a premium of $15 billion during the last five years to support domestic sugar producers; secondly, the United States taxpayers who have paid $85m to subsidise losses on sales of forfeited United States production; thirdly, the United States sugar refiners who have closed nine of the 23 cane sugar refineries since 1981; and, fourthly, foreign suppliers to the United States, such as Australia. By 1986, the net benefit to them of higher prices in the United States market had been eroded as a result of massive reductions in the import quota and a subsequent erosion of the world free market price for sugar. That is the situation in the United States.

It is interesting that the honourable member for Gwydir (Mr Hunt) and the Minister for Primary Industry were part of a parliamentary delegation on wheat sales to the United States Congress last year. It has been suggested on more than one occasion that a similar delegation should have been undertaken on the sugar situation by parliamentarians. It is too late to do much good but a belated delegation will go to the United States this month or next month.

Mr McGauran —Without a Minister?

Mr BRAITHWAITE —As I understand it, the Minister is not even going to Washington to be part of that delegation. That is where the point has to be made, before congressmen of the United States.

Mr McGauran —But the Deputy Leader of the National Party is going.

Mr BRAITHWAITE —Yes, or perhaps the Leader of the National Party (Mr Sinclair) could go. It is interesting that had that delegation visited the United States at a suitable time it could have been enhanced and enriched by sugar producer representatives. Mr John Andrew, the Chairman of the Sugar Board, and Mr Roy Deicke, President of the Proprietary Sugar Millers Association and Mr Fred Soper of the Queensland Cane Growers Council undertook, at their own expense, a recent visit to the United States. I understand that they have come back feeling that the quota the Minister mentioned in his December statement is very much under threat. As I said, the Australian industry has adjusted to a quota from a peak of well over 200,000 tonnes to what it is now. But this is an indication of what the massive subsidies in the United States are doing.

I turn to the problem of the European Economic Community on which a Bureau of Agricultural Economics report about 18 months ago suggested that because of subsidies there is a $1 billion loss to Australian farmers. That was an excellent BAE report. Unfortunately, there were not sufficient funds to go forward and make that publication available within the EEC. I understand that the effective subsidy on sugar in the European Community is over $400 per tonne. A recent survey was taken of the agricultural policy of the European Community which indicated that the European Community sugar arrangements are estimated to result in the level of EC production being 1.3 to 2.3 million tonnes higher and exports being 1.6 to 2.5 million tonnes higher than if no arrangements for subsidies existed. The survey also indicated that levy rates applying before 1981-82 had the long run effect of depressing the world free market price for sugar by 7 to 12 per cent while rates applying after 1981-82 reduced prices by 5 to 11 per cent. Obviously, that has resulted in the dreadfully low price in world markets today.

The survey also indicated that if the community did not support its sugar industry, sugar exports of other countries would be an average of one million tonnes a year or 7 per cent higher in the long term. The cost to the Australian economy as a result of the European Community sugar support regime with the levy rates applying prior to 1981-82 was between $US95m and $US150m in 1982 values. With the higher European Community levy rates since 1981-82 this cost to Australian farmers is now estimated to be between $US72m and $US139m. When we compare assistance to Australian industry with what has happened overseas and the consequences, we can easily relate that to the fact that the Australian sugar farmer and sugar miller has to be efficient, productive and innovative to relate to this world.

I will now consider Brazil's situation in the world market. Brazil has the ability to transfer its sugar production into ethanol as it can dictate to its market on whether it is better to offset fuel imports by conversion to ethanol or sell sugar on the overseas market. There is a need through this research legislation for Australia to make that move to alternative fuel production of ethanol whenever the need might arise. Self-sufficiency in fuel is decreasing from 100 per cent at the moment. There is nothing surer than that under the policies of this Government this figure will decrease further. It is interesting to note that Brazil is able to supply 40 per cent of its fuel requirements through changing sugar into ethanol. I believe, as was indicated by the honourable member for Herbert (Mr Lindsay) earlier, that there should be vigorous research in this area to make that conversion.

Australian farmers and millers and the sugar industry are not subsidised. They have no alternative but to trade in the world market and can do so only on the basis of efficiency. The Australian sugar industry contributes $600m annually to export income. This figure truly reflects the net foreign exchange benefits to Australia through this industry. It still plays a very important part in world trade as far as Australia's requirements are concerned.

Part of the package that this research is attached to was also part of an underwriting of the sugar price of $230 for the 1986 season. It is interesting to note that the trigger for that support price will not be reached in either the 1986 season or the following season. Thus, there has been no assistance from that package, except in the first year. Funds have been made available for mill rationalisation. I understand that Bundaberg has rationalised its industry to some extent by amalgamating two mill areas into one. Goondi will now transfer to Mourilyan and Babinda with assistance from rationalisation, but the Mackay mill proposal, which was voted on at the beginning of this year, unfortunately failed. Had it succeeded it would have been part of that rationalisation. There is also an interest subsidy area so that farmers faced with high interest rates which are well above those originally contracted can get some relief and debt reconstruction.

This Bill is little enough return for what this Government has done to the sugar industry and other primary industries over the past four years. I mention once again the high tax factor and high interest rates. These have had a material effect on the fortunes of the industry over the last four years. The propped up dollar does not allow the industry to reap its just rewards on international markets. I also suggest that the Bill is a poor return for the imposition of fringe benefits tax, capital gains tax, the assets test and also the fact that income equalisation deposits have been gutted to such an extent that they are of very little use to any industry in the primary industry sector. In this regard the industry has had many uphill battles. I believe it has won many of them and the support of the levy at this stage will be most welcome.

I also mention the alternative effect of government policies, particularly in the health area. The Commonwealth Department of Health seems to be determined to put sugar on the endangered species list whereas the Minister for Primary Industry, who is at the table, has spent so much of his own time trying to promote the product. Our Department of Health seems to find great delight in decrying the sugar industry at every point. The National Party supports this Bill as it is something for which the industry has asked, but comments relating to the amount of reward given to it from the point of view of the levy and the expense incurred by the industry should be noted.

Mr DEPUTY SPEAKER (Mr Leo McLeay) —Order! The honourable member's time has expired.