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Tuesday, 14 May 1985
Page: 1943

(Question No. 79)

Senator Jones asked the Minister representing the Minister for Primary Industry, upon notice, on 20 March 1985:

(1) Has the Minister for Primary Industry's attention been drawn to reports that the 1985 United States Farm Bill is likely to include grain price cutting to prop up the massive United States trade deficit, and to take the pressure off America's inflation and interest rates; if so, (a) what effect will this forecast action, by the United States, have on Australian wheatgrowers; and (b) what is the general economic threat to Australia of this action.

Senator Walsh —The answer to the honourable senator's question is as follows:

(1) The Minister for Primary Industry is fully aware that the United States Farm Bill presently before Congress includes provisions to progressively reduce the extent of price support to United States farmers thus encouraging market oriented decisions. Under the current proposal, the United States loan rate, which is generally accepted as providing a floor for world wheat prices, is to be reduced by 25 per cent.

(a) In the current oversupplied world wheat market it could be expected that a reduction in the United States loan rate would lead to a reduction in world wheat prices. Market forces would place upward pressure on prices only if other major world wheat producers also adopted market oriented policies and world wheat stocks fell to significantly lower levels.

As Australian wheat is priced in United States dollars, actual return per tonne to Australian farmers is influenced by the value of the United States dollar relative to the Australian dollar as well as world market prices. As final decisions have not been taken on the loan rate by the United States and any loan rate variations will not affect Australian wheatgrowers until the 1986 wheat harvest, reliable estimates cannot be made of the effect of United States policy decisions on Australian wheatgrowers.

The Minister recently visited the United States specifically to emphasise to Government and industry leaders the export dependency of our primary industries and to stress that Australian wheat marketing arrangements are already market oriented.

(b) In view of the importance of the wheat industry to the Australian economy, rural and national income are sensitive to variations in returns from wheat growing. While the impact of United States agricultural policies on Australian grower returns should not be understated, wheatgrowers' incomes are very significantly affected by climate. The record 1983-84 crop, for example, was almost a 300 per cent increase on the drought affected 1982-83 crop. In view of the uncertainties attached, it is not possible to quantify the effect of United States policy decision making on the Australian wheat industry or to reliably estimate the industry's economic contribution in future years.