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Thursday, 9 May 1985
Page: 1669


Senator GRIMES (Minister for Community Services)(4.57) —I move:

That the Bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows-

AUSTRALIAN DRIED FRUITS CORPORATION AMENDMENT BILL 1985

The purpose of this Bill is to provide for the number of specially qualified members of the Australian Dried Fruits Corporation to be increased from two to four.

Following receipt of the Industries Assistance Commission's report of 11 October 1984 on the dried vine fruits industry, the Government considered the arrangements applying to the industry. In view of the increasing complexity of international marketing of dried vine fruit, and in line with its objective of enhancing the effectiveness of statutory marketing authorities, it decided to provide for the appointment of two additional specially qualified members of the Corporation. The additional members are to be selected for their skills in commerce, finance and/or marketing matters.

Currently, apart from the Chairman, the Corporation has four members to represent producers of dried fruit, a Government representative and two members with special qualifications in the marketing of dried fruit. The addition of two members with special qualifications will considerably widen the expertise which can be brought to bear within the Corporation in the performance of its functions. The quorum for Corporation meetings is being increased from six members to seven.

This legislation has no financial implications for the Commonwealth. The Corporation's administrative costs including member's remuneration are met by a charge on exports of dried vine fruit.

The opportunity is being taken in this Bill to make certain minor amendments of an administrative nature. In accordance with arrangements adopted by the Government about a year ago for the approval of borrowings by primary industry statutory authorities, the Bill provides that Corporation financial borrowings will be subject to approval by the Minister for Primary Industry, not by the Treasurer as provided in the current Act. The Minister will however consult with the Treasurer before giving any such approval.

The Bill also amends gender-specific references in the present legislation, and provides for repeal of a redundant section of the Act relating to the rights of Corporation staff, which are now provided for staff of statutory authorities generally in the Superannuation Act 1976. I commend the Bill to honourable senators.

DRIED SULTANA PRODUCTION UNDERWRITING AMENDMENT BILL 1985

The purpose of the Bill is to amend the Dried Sultana Production Underwriting Act 1982 to take account of recent Government decisions on future assistance arrangements for the dried vine fruits industry.

The present underwriting scheme for sultanas covers the 1982 to 1986 seasons, relates to the average ex-packer returns for the whole dried sultana production of a season, and guarantees a minimum return at a proportion of the estimated average of equalised returns for the current and two preceding seasons.

This Bill will continue present arrangements up to and including the 1985 season only. Between the 1986 and 1990 seasons the Government will underwrite the overall production of each season on the basis of the average export return at the free on board-f.o.b.-level.

The guaranteed minimum export return rate for a particular season will be 80 percent of the average of the f.o.b. export returns for the preceding three seasons. If the average export return for the particular season is less than that guaranteed minimum, an underwriting payment is payable over all sales at the amount per tonne by which that average export return falls short of that guaranteed minimum.

The new arrangements are expected to provide roughly the same amount of assistance on average as at present. However, with the system being based on returns from exports only rather than returns from all sales, underwriting will be more sensitive to sharp falls in world market prices and thus will be more effective in providing the protection intended. Basing the system on f.o.b., rather than cost including freight-c.i.f.-as recommended by the IAC, removes the freight and insurance costs, which are not specific to the dried vine fruits industry, and enhances this sensitivity. Also the new arrangements make it possible to determine the guaranteed minimum return for underwriting much earlier than under existing arrangements.

It is not feasible at this time to estimate reliably dried sultana production or average export returns for the 1986 season, or the average return over the three seasons 1983 to 1985 inclusive. Accordingly no reliable estimate is available of the cost of the new arrangements to the government through any underwriting payment in respect of 1986 or later seasons. However, a comparison of the new and the current systems on the basis of data for the 1982 season, the latest for which an underwriting payment has been made, indicates that an underwriting payment of $61 per tonne would have been payable under the new arrangements. Under the current arrangements, $16.38 per tonne was paid. As the 1982 production of sultanas was 80,655 tonnes, $4.92 million would have been payable under the new arrangement, compared with $1.32 million actually paid. I commend the Bill to honourable senators.

DRIED VINE FRUITS EQUALIZATION LEVY AMENDMENT BILL 1985

The purpose of this Bill is to amend the Dried Vine Fruits Equalization Act 1978 to take account of recent Government decisions following a report on the dried vine fruit industry by the Industries Assistance Commission. The Government had requested the Commission to inquire into the assistance needs of the industry because world market prices had fallen sharply under pressure from a major surplus of fruit and the industry was experiencing considerable financial difficulties.

At present returns for each variety of dried vine fruit-sultanas, currants and raisins-are equalised by imposing a levy on domestic sales and distributing the proceeds over all sales. The levy has in practice served to defend a particular level of domestic price by reflecting the difference between the domestic and estimated average export returns. Until recently the domestic price has been able to move roughly in line with CPI movements irrespective of prices on export markets.

In the 1984 season for sultanas, the dominant variety, the expected domestic return was 120 per cent above the expected average export return and the equalised average return at packer level is expected to be 37 per cent above the average export return. The difference between domestic and export prices made sales on the Australian market highly vulnerable to import pressures.

The present equalisation arrangements provide for levels of assistance that fluctuate widely and that in recent times have been very high. The Industries Assistance Commission commented that these arrangements enable domestic prices to subsidise export sales, disguising the true return from exports and encouraging a greater level of dried vine fruit production than is most profitable for the industry. The industry itself recognises the need to reduce the level of production to that which can be sold profitably. The Government considers that assistance provided through equalisation payments should be more stable and should make the industry more responsive to market signals. To achieve this the Government has decided to progressively reduce the maximum proportion of equalisation payments to average export returns.

From the commencement of the 1986 season equalisation asistance to the industry will be reduced at uniform rates for each variety so that the equalised returns at the ex-packer level in 1990 will be no more than 15 per cent above the average export returns.

There is considerable misunderstandings concerning the proposed amended equalisation arrangements.

While they will enable clearer market signals to be provided to producers, the arrangements will continue to provide for a considerable consumer transfer, even at the stage where the equalised returns over all fruit are no more than 15 per cent above the average export return. The following example illustrates the amount by which the equalisation arrangement could enable domestic returns to be above average export returns at the 15 per cent level.

If it is assumed that Australian production is 65,000 tonnes and of this 45,000 tonnes are exported and 20,000 tonnes are sold on the domestic market, similar to the expected 1985 season situation, and if it is also assumed that the average export return is $1,000 per tonne and thus at the 15 per cent level the maximum equalised return would be $1,150 per tonne, this would enable a domestic return of $1,488 per tonne, almost 50 per cent above the average export return. The working is as follows:

Overall equalised return of $1,150 per tonne x total production of 65,000 tonnes gives an overall return of $74,750,000.

Deduct the return from exports of 45,000 tonnes X $1,000 per tonne or $45,000,000 and this leaves a return from domestic sales of $29,750,000.

Divide the domestic return of $29,750,000 by the number of tonnes sold on the domestic market ie 20,000 tonnes and this gives $1,478.5 per tonne.

This level of return from domestic sales is equivalent to an average wholesale price of approximately $1,766 per tonne.

With a higher proportion of fruit being exported the domestic price allowed by the arithmetic is higher and the converse applies.

After careful consideration the Government decided against adopting the Australian Dried Fruits Association's market entitlement proposal. The Government was concerned in particular that the immediate effect of the industry scheme would be to transfer substantial surplus production onto the winegrape market which is already in surplus.

These measures will encourage ongoing adjustment within the industry to place viable producers on a stronger footing in the long term. However, numerous producers of dried vine fruits earn very low incomes from their farms and, for reasons such as inadequate farm area or excessive debt structure, have no prospects of becoming economically viable in the future.

To help such growers adjust out of the industry the Government intends to provide, in conjunction with the Governments of producing States, on a $2 Commonwealth $1 State basis, up to $5m total funding for adjustment assistance additional to that being provided through the rural adjustment scheme.

These funds are intended primarily to facilitate a vine pull program, but could also be used for other adjustment purposes. Half the funds will be made available forthwith, and any amount unspent in 1984-85 and the balance of the Commonwealth commitment will be available in 1985-86 and 1986/87. I commend the Bill to honourable senators.

Debate (on motion by Senator Kilgariff) adjourned.