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Tuesday, 31 October 2000
Page: 21764


Mr O'CONNOR (9:18 PM) —The Wool Services Privatisation Bill 2000 continues the ongoing process of internal structural change within one of Australia's most important rural industries. The wool industry has been the subject of major reviews that have propelled it along a path that has seen the influence of government in the affairs of the industry gradually reduced over time.

This current initiative has its genesis in the landmark motion of no confidence in the board of the Australian Wool Research and Promotion Organisation, AWRAP, which was passed by wool growers on 30 November 1998. In response to that historic vote, the government established the Wool Industry Future Directions Task Force to inquire and report to it on future directions for the wool industry. That task force, chaired by Mr Ian McLachlan, produced a series of recommendations that have given impetus to the privatisation of AWRAP. The process that brought wool growers to that historic vote is, I think, well understood by producers in the industry. Persistently low prices for wool products, a veritable mountain of wool stockpiled in warehouses and on farms, a complex value adding chain not clearly understood by growers, and rapidly changing consumer tastes, confronted the industry, and particularly producers, with an enormous challenge. But it also generated huge frustration among producers, who watched as their product lost market share to competing fibres and substitutes in an increasingly sophisticated and discerning international marketplace.

Despite the hundreds of millions of dollars that had been poured from the public purse, and by the industry, into research and development and market promotion, the industry had not, in the view of growers, positioned itself well to cope with internal economic pressures on wool-producing enterprises and the changes occurring in the international marketplace with the collapse of certain traditional markets and the rise of new competition and fibres. Those pressures and frustrations gained expression in that historic vote in November 1998 and set in motion an evolutionary phase that has brought privatisation of certain commercial and R&D functions that up to this point had resided in the public domain.

Before debating the detail of this legislation, I acknowledge once again the special and very important economic place the wool industry occupies in Australian agriculture, in the economic history of the nation, and in the economy today. All members of this House appreciate the cultural and historic significance of the wool industry to Australia. Rather than trotting out some well-worn cliches about the contribution of the wool industry to our economic and cultural heritage, let me simply say that I am sure all members with an interest in agriculture want to see the industry restored to the economic fortunes and the pre-eminent position it has occupied in the past. The industry appreciates that, to achieve this, there is much work to do: in managing the constant change occurring to the industry's unique production structure, in making wool-producing enterprises more responsive to changes in the industry's marketing environment, in rationalising its complex value-adding chain, in meeting the quality demands of that chain and the increasingly sophisticated tastes of consumers, and, of course, in extracting more value from the industry's research and development effort.

I will now turn to the consideration of the bill before the parliament. As stated previously, the impetus for the privatisation of AWRAP's functions came from the McLachlan task force, established by the government to consider future directions for the industry following that historic vote of no confidence in AWRAP taken by wool growers in November 1998. A special motion passed at that meeting also required AWRAP to prepare a plan to enable the complete commercialisation of the operation of the Woolmark Co., independent of statutory levy support. It also recommended to the minister that the wool levy be reduced from four per cent to one per cent and directed away from promotional activities into the R&D area.

In that motion lies the genesis of the sentiment later reflected in the McLachlan task force recommendations that wool growers needed to take more commercial responsibility for the future of their industry. Their acknowledgment of the importance of R&D expenditure to their industry's future back in 1998 echoed a proposition that Kim Beazley and the Labor Party had already injected into the public debate in this country much earlier on a much broader front—that is, the proposition that Australia's economic future would be severely compromised if the Howard government did not change its policy settings to encourage the maintenance and expansion of both public and private R&D expenditure in Australia. Sadly for this nation and for its economic future, our calls were not heeded by the government. Research and development expenditure collapsed in this country, and Australia now pays the price of the negative perceptions of its new economic base—sentiments reflected currently in the low price of the Australian dollar.

Apart from its focus on research and development in the industry, the McLachlan task force recommendations also signalled the need to privatise AWRAP and the Woolmark Co. The government in September 1999 announced its plan for the implementation of the task force recommendations, which were endorsed by industry stakeholders through the National Woolgrowers Forum. In a poll known as Wool Poll 2000, conducted among wool growers by the Wool Working Party, growers expressed their preference for the establishment of a shareholder company, owned mainly by wool growers and funded by a two per cent levy, which would deliver research and development to the industry with little expenditure for targeted retail and marketing activities. The final structure agreed upon between the industry and government is the one reflected in the legislation we are debating in the parliament tonight.

The bill provides for the creation of a Corporations Law company, Australian Wool Services, with eligible wool growers as shareholders. Very little of the structure and operation for the new company is detailed in this bill. This is very much a bare bones piece of legislation. This parliament cannot be sure exactly how the new enterprise will operate or how it will be held accountable for the expenditure of research and development funding provided by the Commonwealth until the government sees fit to provide us with copies of the draft regulations, the constitution of the proposed body and the deed of agreement. It is anticipated, but not prescribed in this piece of legislation, that Australian Wool Services will form two subsidiary companies, R&D FundCo and CommercialCo, and that share registers would be set up to reflect this particular division.

Class A shares would essentially go to those who have paid a prescribed minimum amount of wool tax or levy in the previous three years and will be constantly updated with new entrants to wool production being issued shares and those who no longer pay wool levy losing their shares. Class A shareholders would control R&D FundCo and those shares would not be tradeable. R&D FundCo would commission research, manage the proceeds of the wool levy plus any R&D funds provided by the Commonwealth, and manage any intellectual property developed as a result of the research that it will commission. Class B shares would be issued to those who have paid wool tax in the three years prior to 30 June 2000 and, unlike Class A shares, will be tradeable. Class B shareholders would control CommercialCo, which would manage and commercialise the intellectual property associated with Woolmark and its sub-brands.

The model which has been adopted by the government and the wool industry and given expression in this legislation is one which I understand has emerged following extensive consultations between industry representatives in the Wool Growers Advisory Group and the minister. According to the brief provided to the opposition and non-government parties, it enjoys wide industry support. Wool industry representatives have also indicated to me their broad support for the service model contained in this legislation.

While the opposition understands and appreciates the industry's desire to pass this legislation as quickly as possible through the parliament, the opposition will not be supporting this bill at this stage of its passage through the parliament.



Mr O'CONNOR —We have not taken this position lightly, and I would like to take some time in this debate to outline in some detail, especially to the member for Corangamite, who has joined us here in the chamber at this time, the opposition's reasons for the position that we have taken. The service model contained in the legislation before the parliament today constitutes a radical shift in the way the wool industry will conduct its commercial and research and development functions in the future. It is fitting that this parliament subject this legislation to the closest scrutiny possible, as this represents the very last opportunity for not only wool growers but also the taxpayers of Australia, who will be major contributors to this privatised entity, to examine the commercial structures and the accountability arrangements that have been put in place by the government and the industry. It is the view of the opposition that this is very much a bare bones bill, and the government has not been as forthcoming as it should have been in providing the parliament with the necessary detail on the new arrangements governing the future operations of this new corporate entity.

I do note the strong desire expressed to me by wool industry representatives and individual wool growers to forge a new path independent of what they have seen in the past as government interference in their industry—an interference many of them believe has not been to the long-term benefit of the industry. I understand that sentiment and I hope the position that the opposition is taking in the House tonight is not misconstrued by the wool industry as a deliberate attempt to thwart or delay that process. I think I can be confident that the position we have taken tonight will be misrepresented by government members who are desperate to claw back some credibility in some of the rural and regional areas of this nation, but I am sure the goodwill that has been established by industry and the opposition over this period of great and momentous change within the industry's structure and its commercial environment will be maintained as this matter is thoroughly debated in both houses of the parliament.

Let me say that this government has not exactly covered itself with glory in the way it has involved itself, since it came to office, in the affairs of the wool industry. I do not doubt the sincerity of the current minister and the genuine attempts I believe he has made to engage the industry in a meaningful dialogue that has brought us all to the position that we are in today. He has, unfortunately, had to deal with the incompetence of his predecessors. That incompetence, as far as this industry is concerned, has been quite monumental.



Mr O'CONNOR —I am sure wool growers will recall—and government members like the member for Corangamite will wish to forget—the fiasco surrounding the halting of the wool stockpiles disposal, an issue that remains unresolved even as we debate the privatisation of AWRAP in the chamber tonight. More recently, the minister has had to conduct his dialogue with the industry against the backdrop of the uncertain financial parameters that have occurred as a result of the unresolved Cape Wools liability issue.

From an accountability point of view, the structure being proposed charts new territory. I would have thought that the government would have been in a position, in presenting this bill, to provide the parliament and the opposition with the maximum detail on new arrangements that are being proposed. I believe that is the very least we could expect when around $20 million of taxpayers' money will be expended by this new corporate entity. The simple fact is that this proposed privatised entity will not be subject to the normal processes of parliamentary scrutiny. For example, there will be little capacity for the parliament to directly question those responsible for the expenditure of those public moneys through the estimates committee process of the Senate. The auditing functions of the Commonwealth, as I understand it, will only apply indirectly to this new privatised situation.

This parliament has to clearly understand that it is being required to continue a significant funding involvement in the wool industry on an ongoing basis and, at the same time, it is being required to surrender the historical means at its disposal to provide effective scrutiny of those expenditures. I would have thought that, with such an important change, the government would have bent over backwards to provide this parliament with all the necessary information to enable members and senators to satisfy themselves that the Commonwealth's exit from the affairs of the industry are taking place on just terms for both the Commonwealth and wool growers.

For the public record, the opposition has not had an opportunity to view, even in draft form, the regulations that will govern its future involvement and relationship with the wool industry. It has not had the opportunity to view, even in draft form, the proposed constitution of the privatised entity to which the Commonwealth will be asked to commit millions of dollars of taxpayers' funds in the future. It has not had the opportunity either to examine the deed of arrangement between the Commonwealth and the industry in this matter. If the government argues that it is unable to provide that information to the opposition at this stage of considering the bill, it is a scathing indictment of its own administrative capacity as far as managing this rather significant transition is concerned.

Members would be aware that tomorrow the House will debate an important bill in relation to the horticultural industry. While it was like pulling teeth from a hen, the opposition has managed, at the eleventh hour, to obtain critical documents relating to the privatisation of statutory bodies that have been involved with those industries. The government, through the parliamentary secretary, at the eleventh hour, has provided the opposition and this parliament with copies of the memorandum of association between the industry and the government, the proposed constitution of the new corporate entity and the draft deed of agreement which sets out in detail the mechanism by which the new not-for-profit corporate entity will be held accountable for the public moneys that it spends. The opposition simply makes this point, and asks the question: if these documents are able to be supplied in relation to horticulture, even at the last minute—at the eleventh hour before we debate that particular bill in this chamber tomorrow—why has this information not been provided to the opposition and to the non-government parties, and indeed to the whole parliament, in the instance of the wool industry?

Let me now turn to a matter of great concern to the industry and to the opposition—the potential Cape Wools liability on the wool industry. It is important that I outline to this House and put on the public record significant matters relating to this issue so that all wool growers know the facts and are aware of the circumstances surrounding the Senate inquiry and understand fully the manner in which their new entity will be expected to deal with the potential financial liability arising out of this matter. It is very clear from the evidence presented to the Senate inquiry that, when funding models were put to the wool growers in Wool Poll 2000, the existence and the extent of the potential Cape Wools liability had not been disclosed to Australian wool growers. That was a very serious omission on the part of this government.


Mr McArthur —It was in the annual report.


Mr O'CONNOR —The honourable member for Corangamite shouts from the back bench that it was in the annual report. I suppose he forwarded the annual report to every wool grower in Australia with the particular section underlined for their benefit. I think not. It is not surprising that the government withheld that information from wool growers because its disclosure would have caused serious questions to be asked about the procedures and arrangements in place to resolve the potential conflict on this matter between Cape Wools and the Australian industry, the actual extent of the financial liability and, perhaps more significantly, the role of the then minister for agriculture and now Minister for Transport and Regional Services and Deputy Prime Minister, John Anderson, in structuring those arrangements.

So deep were the industry's concerns about the extent of this potential liability and the fact that wool growers had not been informed about it that the opposition was compelled to act and called on the Senate to examine the matter in the context of its consideration of this bill. Let me make it quite clear to the wool growers of Australia—and for the public record—that the opposition initiated the Senate inquiry in response to representations made by the industry and in response to concerns expressed by wool growers. The evidence presented at that inquiry makes for disturbing reading—a view shared not only by industry observers but also by coalition senators who were privy to the same public and in camera evidence that Labor Senators Forshaw and O'Brien and the Democrat Senator Woodley were privy to. Let me say that I have great faith in the good sense and sound judgment of the two Labor senators who have considered this matter. They are held in very high esteem and are respected by agricultural industries in Australia. They are senators who have integrity and who guard the processes of the Senate and protect its good name jealously. They would not break the confidence of witnesses who have given evidence in camera; however, they have publicly indicated that they would have great difficulty in passing this legislation at this point in time.

I read with great interest the recent calls by industry representatives that this parliament should immediately pass this legislation, regardless of the outcome of the industry's current conflict with Cape Wools on the matters raised in the Senate inquiry. Industry representatives need to keep in mind that it was not only the interests of this parliament but also the interests of wool growers that moved Labor to initiate that Senate inquiry. In fairness to those senators who produced the dissenting report—and I are urge all wool growers to read that dissenting report—elements of the in camera evidence perhaps ought to be released, ought to be tabled on the floor of the Senate and in this parliament for members to consider fully all aspects of this bill so that we can expedite its passage. Australian wool growers need all the facts about the assets they will receive, the debts they will inherit and the costs they will have to meet before legislation to privatise AWRAP is approved by this parliament. This parliament is also entitled to see all the details proposed by this privatisation process.

This bill has been the subject of an investigation by the Senate Rural and Regional Affairs and Transport Legislation Committee. That committee has reported and Senators Forshaw, O'Brien and Woodley have recommended to the Senate that this legislation not proceed until the parliament has considered all the material necessary to allow the AWRAP privatisation process to progress. That material includes the updated accounts for AWRAP, reports and correspondence relating to the Cape Wools liability, the regulations relating to the future relationship between the government and the industry, the company's constitution and the proposed deed of agreement between the Commonwealth of Australia and the new company R&D FundCo. The senators said they were being asked to approve the privatisation of AWRAP without seeing the detail of how the new arrangement would operate. They said they needed the whole picture before a proper assessment of the new privatised arrangements could be made. That is a position that I think should be shared by all members of this House. This information has been promised to the Senate committee, but it has not yet been provided. The legal position of the Commonwealth in relation to the Cape Wools liability must be clarified. I am advised that Senators Forshaw, O'Brien and Woodley have also written to the Wool Growers Advisory Group seeking approval for publication of evidence given in camera by industry leaders to the Senate committee inquiring into the legislation.

The request for approval to release the confidential transcripts is in direct response to a media release from the Wool Growers Advisory Group claiming that any delay in the passage of this legislation was against the interests of wool growers. The senators have said, and I think correctly, that they were and are entitled to rely on evidence from wool industry leaders in determining their views on the possible form of the legislation and the timing of its progress through the Senate. They have stated in their report on the Wool Services Privatisation Bill 2000 that it reflects both the public and the in camera evidence to that committee.

The senators have said the privatisation of AWRAP has strong support within the parliament, but the exit of government involvement in the wool industry has to take place on just terms for both the Commonwealth and wool growers. I do not think there would be a wool grower in Australia listening to this debate tonight who would not agree with the proposition that has been put by the senators who delivered that minority report. Indeed, if you read the evidence of the Senate committee, and you read the comments of the coalition senators who also were privy to the in camera evidence and the public evidence, you glean that there are significant matters that ought to be on the public record at this time. I challenge wool industry leaders who have gone into the public arena requesting that the opposition pass this bill immediately to consider very strongly and very deeply the issue of the release of the evidence that they gave in camera to that Senate committee. If they were to give that approval to the Senate, I am sure this matter could be expedited through the processes of this parliament.

I note also that many government senators have gone on the public record as saying that any delay in the passage of this legislation will halt the momentum towards much needed reform in this industry. The government knows, as I know, that there is great difficulty in determining the share registers and in verifying the share registers and that that task may not be completed according to the government's time line. If it is not completed, the minister will be in a position to proclaim as he sees fit the commencement date for this legislation. We do not buy that argument and we certainly put on the public record tonight in the debate on this very important bill for the wool industry our determination to see wool growers of this nation in command of all the facts—all the facts—before this privatisation proceeds. I am sure that when those facts are known we can reach an agreement with the government for an effective passage of this bill through the parliament. (Time expired)