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Wednesday, 1 November 2000
Page: 21793


Mr HAWKER (9:31 AM) —As I was saying last night, it is a great disappointment to find the opposition not supporting the Wool Services Privatisation Bill 2000. The opposition have some unfortunate form on this matter. Many of the problems the wool industry and the wool growers face today are the result of some very poor decision making by the previous Labor government. It is to their shame that, when the government have gone to so much trouble and come up with such an excellent outcome, we still get that opposition from Labor; they still demonstrate a total lack of understanding of the importance of wool growing to Australia and what these changes are going to mean not only for wool growers but for wool growing regions and, indeed, for country people generally. I think it is to their eternal shame that they have done that.

I would like to again commend the Minister for Agriculture, Fisheries and Forestry for the work he has put into preparing this bill. As has been outlined already, the Wool Services Privatisation Bill 2000 is all about establishing Corporations Law company arrangements to replace the way wool industry services are delivered by the Australian Wool Research and Promotion Organisation. On 8 August the government announced the detail of the new arrangements. This means that AWRAP will be converted from a statutory corporation into a Corporations Law company limited by shares. The shares in the company will be issued to Australian wool tax payers—which generally means wool growers. It will have two main subsidiaries: one will be responsible for commercial activities, including the commercial development of the Woolmark and its sub-brands and their intellectual property; and the other subsidiary will manage the proceeds from the wool tax, and outsource research and development and the management of future intellectual property. It is expected that there will be greater transparency and greater accountability, and we believe certainly better outcomes.

There is no doubt that, in the area of wool growing as a whole, AWRAP and future development, a couple of things stand out. The first is the excellent work done by the task force headed up by Ian McLachlan, the former Minister for Defence and someone who has a lifelong interest in wool growing, which produced a landmark report. The report contains many excellent points, most of which have been picked up in this legislation; but, more importantly, many of these ideas will be the province of the new organisation. Clearly, it gives it a great starting point.

I would like to elaborate on a few telling points raised by the task force in its executive summary. The first one emphasises the need for a fundamental cultural and attitudinal shift among wool growers. It talks about how wool growers individually must take more responsibility for their business and for their fibre and, most importantly, move away from the term `the wool industry'. The wool industry as a collective term can mean all things to all people and, in the end, means a lack of proper focus. In many cases, it has been an excuse for people not to take action on their own behalf or collectively within a region or whatever; instead, they wait for others to do it.

The second point made in the report is that the diversity of wool should be celebrated, not lamented. Too often people lament the huge variation in wool. But, as we know in one very successful industry—which you know only too well, Mr Speaker, because of the area you represent—the wine industry has demonstrated how that diversity can be a very valuable asset and exploited to the advantage of the industry. Over the last decade or more, the wine industry has had an enviable record not only domestically but also as an exporter. The third and another very important point made by the report is that the future success of wool depends critically on continual innovation and quick implementation. This is something that the new organisation clearly will have as one of its major focuses and, most importantly of course, its success will be measured on how well it can not only do the innovation work but implement the outcome. The fourth point talks about the need to avoid, wherever possible, government intervention.

I would like to remind honourable members of a couple of important conclusions the report made. One was the need for truth in labelling for Australian wool. This is something that the wine industry has developed. We have seen how the Europeans, and the French in particular, have developed `appellation controllee' as a way of ensuring that consumers can buy with confidence because they know what they are getting. Also in the conclusions, the task force identified some of the serious processing problems that have befallen wool growing. One of these was the problem with top making. There has been a tendency for many top makers to blend down to a price and not up to a quality. Clearly, while this may be profitable for the top maker, it is not the way that wool growers are going to get maximum value, particularly those who are trying to produce a superior quality. If I could use the wine analogy again, it is a bit like trying to blend all your wine into a cardboard box type quality rather than trying to get into the premium bottle end of the market. I believe fervently that for wool growers to be successful they have to aim at the quality end. That means not allowing top makers to blend good wools with inferior wools and produce an FAQ product, which may be profitable for top making but which does not promote the best attributes and qualities of wool.

The report also made some interesting criticisms of the Woolmark Co., pointing out that it has been a blockage to more effective communication between processors and wool growers. This is going to be a critical factor that has to be overcome with the new organisation. The current board of AWRAP are only too conscious of this. It is essential that that communication blockage is removed so that the consumers of wool are communicating properly with wool growers. It is only by doing this that both can benefit from providing a product that the market actually wants in a way that it wants and at a time that it wants. Too often there have been those blockages. The Woolmark Co. is identified as one, but it is certainly not the only one. This is another challenge that wool growers and others involved in the pipeline of wool have to face. They have to make sure that the communication chain is opened up rapidly in such a way that the benefits flow both ways. I will come back to that point later.

There was also some criticism of AWEX, the Australian Wool Exchange. It was seen, far from being a catalyst for reform, as an inhibitor of reform. That demonstrates some of the problems that have been faced in wool growing. As most people would be aware, the last decade has not been a happy one for wool growers. I can speak from personal experience of the difficulties that people are facing in my region. Certainly there have to be changes.

I would like to go into a little more detail on a couple of the points that the wool task force outlined. One of them involved the costs associated with getting wool from the farm to the consumer. The second chapter of the main report went into some detail about the transport costs. In the report the task force pointed out:

The transport, handling and marketing system from farm to domestic scouring/top making mill or ship for export has been exhaustively analysed over the past 30 years. Indeed, the degree of scrutiny seems inversely proportional to the changes which have occurred. While it may be that the large claimed benefits in some of the theoretical studies could not be confirmed in practice by those whose capital investments were on the line, an industry-wide consensus style decision making process added lead to the saddlebags of potential reformers.

It goes on to compare the costs of producing wool to the costs of producing cotton and artificial fibres:

... cotton and artificial fibres have significant competitive cost advantages over wool. This occurs at various stages, including fibre delivery to the mill, cleaning and combing, and spinning.

An analysis was done and it was pointed out that these delivery costs:

... account for over 80 per cent of the 83c/kg clean cost differential between wool and cotton. At least 20 per cent (or 25c/kg) of total wool delivery costs are attributed to price discovery ...

So the transport costs in the supply chain are around 83c a kilogram clean more expensive for wool than cotton. As has also been pointed out, many studies in the last 30 years have identified how these costs could be reduced, but to date very little change has resulted from those studies. The criticism of AWEX is probably due to the fact that 25c a kilogram of total wool delivery costs are attributed to price discovery. There is no doubt that there are superior systems available for price discovery, for the selling, of wool. There has been great reluctance by some of those who have a vested interest in the status quo to adopt some of these new technologies and new techniques. One of the most obvious of these techniques is electronic selling. There has been a lot of talk about it to date, but the results have been very limited in terms of it being applied.

Another point that the task force emphasised, which has been spoken about many times but is still a problem, is the cost of contamination. The CSIRO have put this at 14c a kilogram clean. Again, it is a fairly serious problem that has been talked about a lot. So far the results have not translated into cleaning up what has been done, although the move to the use of nylon wool packs is a very important step in the right direction. As someone who was myself involved in the task force and in recommending that, I believe that we have moved to get rid of one of the sources of contamination, although, as always, it is unfortunate that it has taken so long to get those results.

I turn to a couple of points in the AWRAP report, which was tabled here yesterday. In the chairman's report, Tony Sherlock makes some very telling points about what is happening with wool at the moment. It is to his credit that Tony has taken on the job at a fairly difficult time because of all the changes that have been occurring, but he has done it with enthusiasm and, I think, great skill. As he points out in his opening remarks:

This has been a remarkable year for AWRAP/The Woolmark Company ... Perhaps, in time, it will be seen as the turning point.

He then lists all the things that happened:

An enquiry into the wool industry ended, a poll of all woolgrowers was taken, the woolgrower agricultural associations remained united, an Interim Advisory Board was formed and a new structure for a wool services company was developed.

On the brighter side, he said:

Wool prices went up, wool stocks reduced, and there was clear evidence of increased grower response to and acceptance of market demands.

At the same time, The Woolmark Company increased its focus on delivering innovations to customers throughout the wool industry pipeline, developed plans for the Interim Advisory Board whilst restructuring itself to meet the decreased levy levels six months ahead of schedule and ended the year with an increased level of reserves. It was a remarkable year.

One of the points he made was that during the year, in March, a poll of wool growers voted to halve the amount of wool tax levy they pay. This has been quite a year of change in wool, but I believe that it will be change for the better. It is unfortunate that it has taken so long to bring about these changes, but it is very much to the credit of this government that we have moved to make them. Clearly, they will be changes for the better. We are seeing a very positive response from those who are serving the wool industry, many of whom will be involved in the new corporation when it gets up and running. The report of the managing director of AWRAP points out:

... the company delivered on their Operating Plans, ensuring greater adoption and higher success rates for R&D investment and the faster delivery of innovation to growers and the textile industry.

The report focuses on one particular point, which is quite exciting, and that is the Sportwool development. In July 1999, over one million Manchester United player and supporter shirts hit the global markets, less than 12 months after the finalisation of this development. Sportwool obviously is going to play a very significant role.

As I have said, this bill is a very important step in revitalising a very important part of the Australian agricultural scene—in fact, the whole Australian scene, when you think about the role that wool has played. It is of great disappointment to find that the Labor Party cannot find it within themselves to support this after all the work that has gone in, the excellent consultation, the work of the wool industry task force, and the work of people like Rod Price and David Webster in developing what is going on. The Labor Party stand condemned for their lack of support for what is clearly so desperately needed to take the next step in making wool growing a commercial and successful operation in Australia. (Time expired)