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Wednesday, 4 June 2008
Page: 4387

Mr COMBET (Parliamentary Secretary for Defence Procurement) (9:16 AM) —This is in fact a profoundly important bill for the future of wheat export marketing and does implement another one of Labor’s election commitments. Wheat growers have faced great uncertainty for a number of years now due not only to the effects of the drought but also because of the destabilising effects of the AWB Iraqi wheat scandal. That scandal saw almost $300 million worth of secret payments made to the Iraqi regime led by Saddam Hussein and irretrievably destroyed the credibility of the AWB’s export marketing monopoly for Australian wheat. It also underscored, of course, an appalling failure by the Howard government to take responsibility for its own incompetence in the oversight of export wheat marketing policy. Who could forget the then Deputy Prime Minister, Minister for Trade and Leader of the National Party, Mr Vaile, I think on no less than 42 occasions in his evidence to the Cole royal commission, indicating in response to questioning that he could not recall or did not remember? Australian wheat growers deserve far better than this from their government, and this bill provides for much-needed certainty concerning marketing arrangements for wheat growers.

Under arrangements installed by the previous government, the minister for agriculture’s temporary power of veto over wheat exports expires on 30 June this year, and, without new arrangements, the Export Wheat Commission would be responsible for issuing export consents, and AWB (International) would remain exempt from seeking such consent and would retain its privileged position in the wheat market. The Liberal Party’s decision not to oppose this bill is a welcome clarification of their position after all this time, but the National Party does not appear to be able to recognise the reality and necessity of change. The National Party does not seem to understand, importantly, that the current legislation, once 30 June has passed, changes everything.

The concept of the single desk that the National Party claims they wish to keep would actually effectively disappear if the current arrangements were to continue, but there would be no effective and appropriate alternative regulation and oversight of wheat exports. If this legislation is not passed, the Export Wheat Commission will become effectively the sole determinant of whether or not an export permit should be issued, and the test it will have to apply is the one in the existing act, which is whether or not the application for a bulk permit will complement the objectives of AWB (International) in the running of the national pool or whether it develops niche markets. This, of course is an extremely restrictive position. That aside, however, the retention of the existing arrangements would also mean that the Export Wheat Commission would have no clear obligation to assess the probity of potential wheat exporters, and this is a fundamental objective of the bill.

The legislation establishes a new industry regulator, Wheat Exports Australia, with the power to develop, amend and administer an accreditation scheme for bulk wheat exports. The bill will set the broad policy parameters under which Wheat Exports Australia will design and administer the accreditation scheme. WEA will only accredit companies that meet stringent probity and performance tests. Key criteria that the WEA will consider include the financial resources available to the company, its risk management systems, and the demonstrated behaviour of the company and its executives. In light of the AWB’s performance over recent years, these are extremely important accreditation criteria. Wheat Exports Australia will also have the necessary investigative powers to perform its regulatory, monitoring and enforcement responsibilities. There will also be severe penalties for breaching the conditions of the scheme or individual accreditations. WEA will also be able to suspend or revoke accreditations. In the end, the new arrangements contained in this bill are designed to benefit the entire wheat industry, particularly growers, by providing greater contestability and selling options for growers, more cost-efficient marketing services, greater transparency of price and cost information, and reducing the risks associated with relying on a single seller.

There were, of course, many problems with the old system. There was no effective separation of the management of the listed company, AWB Ltd, and the subsidiary, AWB (International). Secondly, the export monopoly resulted in a lack of contestability in services, to state the obvious. This means that returns to growers from the national pool were not effectively maximised because there were poor incentives to minimise the costs of operating the pool. The Nationals continue to maintain that the export monopoly or the single desk delivers for farmers. But you have to look for the evidence for this. Neither the 2000 national competition policy review, the 2006 ACIL Tasman study, nor a more recent ABARE analysis could find compelling evidence that single-desk marketing could deliver price premiums in the international marketplace.

What these studies did find is that the export monopoly had an inhibiting effect on both innovation in marketing and the realisation of cost savings in grain transport and handling. The single desk increased the risk for wheat growers by forcing them to rely on a single exporter. This was seen in the aftermath of the wheat for oil scandal when Australian growers were effectively locked out of the critically important Iraqi market. But why didn’t the previous government make the necessary changes after the Cole commission revealed the flaws in the previous system? You can only conclude that it is because both of the parties within the coalition were divided over this issue. Of course the coalition are still divided and disunified in their policy response to this important question. Even the AWB has described the current temporary arrangements as unworkable. The AWB Ltd managing director has stated:

No responsible Board of Directors would agree to continue running a National Pool in these circumstances and in the current US sub-prime environment.

This government is not going to be blinkered, as the previous government was. It has proposed that the Productivity Commission will conduct an independent evaluation of these arrangements, commencing in 2010.

The other important consideration—there were some comments about this in the House last night—is the level of consultation that the government has undertaken in relation to the formulation of this bill. The minister for agriculture has undertaken an extensive series of consultations, and in this industry, with the significance of this change, this is extremely important. We have seen the release of an exposure draft for public comment. The Senate rural and regional affairs and transport committee has held an inquiry and the government has established a wheat industry export group. Minister Burke has also met with all of the major state farming organisations and the major bulk handling and trading companies, especially in relation to the issues of access and storage infrastructure. Demonstrating that this is genuine consultation, which of course it is, a number of amendments have been made to the draft legislation to reflect the comments made. The government has gone about the business of trying to build consensus and support and take on board criticisms in the formulation of this legislation.

Changes that have been made include the addition of an objects clause, a civil penalties regime and enabling cooperatives to be eligible for accreditation. This government is committed to a viable rural sector and has worked very cooperatively with the industry to refine the legislation and examine the future of wheat exports in a rational manner. I have been around this industry too, although it surprises some of those opposite from time to time, given they seem to see me in a particularly singular role from my former career in the union movement. I have been around the wheat industry for a long time as well, and I know the importance of this to wheat growers. Even though it is a difficult transition—

Mr Windsor —Why didn’t you listen to them?

Mr COMBET —I have listened—these are extremely important and meritorious changes, which I support. Just as farmers continue to benefit from the trade reforms and the deregulated domestic wheat market introduced by the Hawke-Keating government, I firmly believe and the government believes that the industry will benefit from the reforms contained in this bill. Effectively, for the first time since 1948, Australian wheat growers will be able to choose who they sell their grain to and at what price. The fact is that once again it falls to the Labor Party to implement important industry reforms. I commend this bill to the House.