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Wednesday, 1 November 2000
Page: 21801


Mr St CLAIR (10:18 AM) —I rise today in very strong support of the Wool Services Privatisation Bill 2000 on behalf of my electorate of New England, one of the finest wool growing areas in Australia, if not the world. This bill is enormously important, and the previous speaker, the member for Eden-Monaro, really reiterated the fact that the wool growers out there need this legislation. They want this legislation, and they want it as soon as possible.

While the lower prices of recent times—certainly not in the last week or two—have reduced the relative importance of the wool industry, it remains the single most important industry throughout the region. New England is home to more than 6½ million sheep, many of which produce some of this country's finest and most sought-after fleeces—in fact, some of the world's most sought-after fleeces. Wool growers in my electorate are blessed with ideal conditions for fine wool production, with altitudes up to 1,400 metres spread across a significant part of the northern tablelands area of my electorate. It is vital for local communities that wool production once again become profitable and sustainable to encourage employment and growth in services, certainly in our small towns.

In the 1930s, wool accounted for over 62 per cent of the total export value of Australian primary products, which gave rise to the expression that Australia in those days `rode on the sheep's back'. While the national economic base has certainly broadened, the Australian wool industry still holds principal international standing. The national flock currently stands at around 115 million sheep, of which 75 per cent are merinos. Australia still supplies two-thirds of the wool sold on the world market, and New South Wales wool exports were valued at more than $600 million in 1998-99, a year of particularly low prices. This dominant position on the world market has been defended in the face of a number of recent economic storms, including falling demand, competition with other fibres and the abolition of the wool floor price in 1991. That brings me to the role of the Australian Labor Party in the mismanagement of the wool industry and to the broader economy in the late 1980s and 1990s. The House must be reminded of these things. It was the then Minister for Primary Industries and Energy, John Kerin, who oversaw the decline in the wool industry. Of course, prices were under pressure because of events in the Soviet Union and other parts of Asia.


Mr Horne —Just a minor detail!


Mr St CLAIR —I am pleased the member for Paterson is in here enjoying this speech. I know how he loves the wool industry! It was John Kerin's lack of leadership that allowed events to spin out of control. He committed the fatal sin of speculating in public about the future of the floor price scheme. This would obviously terrify any prospective buyers, and they stayed away in droves, waiting for events to transpire. John Kerin also created a huge amount of resentment among buyers of Australian wool because his actions devalued the stock held throughout Europe and Asia. No-one in their right mind would buy a commodity in the climate of uncertainty created by the Australian Labor Party. John Kerin drove down the market through his actions and then the Labor Party abolished the floor price scheme altogether. Naturally they were pleased with this outcome, because the Labor Party thought it was good to see those rich squatters brought down a peg or two.

Wool producers have had a tough time, but as with so much of the ALP revenge agenda, the real victims were the battlers. It was the shearers, the wool classers, the shed hands and the transport operators who suffered under that regime. It was the people who worked on the farms and the rural supply companies that felt the downturn because of those Labor Party policies. It was the transport operators and the people handling the wool along the chain right through to the ports who felt that. These were the people who suffered at the hands of Labor's incompetence. The sad part is that many of these people would be Labor supporters. They were betrayed because of the blind ideology of the party hierarchy.

The Labor Party was not finished with wool growers. They allowed the economy also to spin out of control and interest rates skyrocketed to record levels. Imagine the poor wool growers having to cope with depressed prices and then watching the interest rate on some farm loans rise to more than 25 per cent! In fact, many of them have not yet recovered and the ramifications of those events are still being felt throughout my electorate of New England. I am proud to say that the wool industry in New England and around Australia has shown great resilience in the wake of Labor's utter incompetence. They are rallying and fighting back.

The Wool Services Privatisation Bill 2000 is about the wool growers of Australia taking control of their industry and therefore their own future. The Wool Services Privatisation Bill 2000 is the final step to deliver privatisation of the wool industry services provider, the Australian Wool Research and Promotion Organisation, and its operating subsidiary, the Woolmark Co. It passes ownership of the management of wool industry services into the hands of wool growers and reduces government's involvement to oversighting statutory funding and accountability. The process to establish the most appropriate structure to replace AWRAP has been comprehensive and well supported by wool growers. It has been a strong example of government and industry working together to achieve a common goal that provides a future for the wool industry here in Australia.

The initial impetus for reform stemmed from the low demand and poor prices for wool over the last decade. In response to the uncertainty felt by many in the wool industry, this government appointed the wool industry Future Directions Task Force in December 1998, chaired by the Hon. Ian McLachlan AO, to define the issues facing the wool industry and to identify appropriate responses from government and industry on where they can support and help. The government supported the broad thrust of the recommendations in the task force report.

A voluntary wool grower ballot known as Wool Poll 2000 was conducted in March this year, with wool growers indicating their preferences for a two per cent wool tax to be invested in R&D, technology transfer and delivery and some information services. In response to the Wool Poll result, the wool tax rate was lowered to an interim rate of three per cent from 1 July 2000. This interim rate is to cover the costs of transition to a mainly research and innovation body and from a government authority to private ownership. The levy will be further reduced to two per cent as soon as these costs are met following the establishment of the new arrangements. Following Wool Poll, a process was undertaken to identify the most appropriate Corporations Law structures to replace AWRAP in conjunction with the wool Interim Advisory Board and the Woolgrowers Advisory Group. The preferred structure received unanimous endorsement from the IAB and from the Woolgrowers Advisory Group. Wool growers will be invited to apply for shares by providing evidence of wool tax paid over the three-year period through to 30 June 2000. The establishment of a voluntary shareholder register is a major logistical exercise. At this stage, the intention is that the minister will sign off on the list of wool grower shareholders in time for the company to be established on 1 January 2001, subject to appeal procedures and dispute resolution procedures being completed by the company over the following six months.

In relation to tax treatment, the government worked on the simple principle that neither the new company nor its shareholders should be disadvantaged in moving to the new privatised arrangements. To achieve this, the bill includes provisions which exempt the company and shareholders from certain taxes in relation to specific steps involved in the restructuring process. There will be a nil cost base for capital gains tax purposes for shares issued in the new arrangements. This was a decision based on two good reasons. Firstly, wool growers will not pay for the shares they receive and, in the payment of their wool tax for industry research and other services, there was no expectation that this would lead to realising equity. Secondly, growers have already been able to claim a deduction for the wool tax they have paid, which has resulted in their share allocation.

The process to privatise AWRAP is in response to industry calls for reform. We have certainly heard previous speakers speak on that particular issue and on the absolute importance and need for wool growers to determine their own future without the interference of outsiders. The new arrangements differ from AWRAP in a number of key areas which address some of those industry concerns. Wool tax payers will be the owners of the new arrangements. There will be full contestability and transparency between the receipt and expenditure of the wool levy and matching R&D funds.

The government's role will be limited to that required for accountability for the wool levy and matching R&D funds received and to ensuring efficient and effective service delivery. Shareholders in CommercialCo will have the opportunity to realise future capital gain as a result of share trading and the new companies will operate as commercial entities under the Australian Corporations Law. The privatisation of AWRAP is part of a larger process to enable the wool industry to assume ownership of its service delivery body and to be accountable to levy payers as shareholders. Industry and government have worked together closely to produce this important result for the wool industry. The good work done by the IAB, under the leadership of Mr Rodney Price, and by the Woolgrower Advisory Group, under the leadership of Mr David Webster, has ensured that the process has run smoothly and certainly to schedule.

I am pleased to report to the House that there are signs that wool has started to regain favour with consumers in the domestic and export markets and that prices are starting to rise. Certainly those superfine wool growers in my electorate of New England are now starting to reap benefits and rewards because of the turnaround in the market, because of the new genetics and because of the way they are treating their fleeces. Those benefits are being reaped through higher prices. As this recovery continues to happen—and it will continue to happen and grow—there will be broad benefits for the economies of regions such as the New England.

In the last week or two the Carr Labor government in New South Wales put out a survey reporting that the area of the Northern Tablelands in the northern part of my electorate would be a ghost town by the year 2016. I suggest to those who wrote that survey that they are obviously ill informed. They are obviously city based. They sit there and do nothing but number crunch. They have no intelligence in working out what is happening in regional New South Wales. They are taking their figures back to 1996 and earlier. They have simply taken out figures at the lowest level of wool prices over a period of time. I hope the member for Patterson passes the message on to his New South Wales counterparts that areas in New South Wales are doing well, that the little towns will survive—as he knows because he comes from those areas that do have smaller towns—and that they will not be ghost towns over the next 20 years, thank goodness. The only way that they might become ghost towns is if for some reason the Labor Party is re-elected. That really does concern me not only for our small towns but for all the industries that are out there in regional Australia. Investment and employment will grow through the wool industry, particularly in New England, and our young people will have more reason to stay there and work because there will be more opportunities for employment. Let us look forward to a very strong wool industry not only in New England but also in Australia. I commend the Wool Services Privatisation Bill 2000 to the House.