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Tuesday, 5 December 2000
Page: 20686


Senator FORSHAW (4:39 PM) —I rise to speak on the Wool Services Privatisation Bill 2000. I am sure honourable senators will be relieved to know that, given the discussion about whether the Gene Technology Bill should be dealt with at this time, I will not be talking about Dolly, the cloned sheep. Rather, I will be talking about the privatisation of the Australian Wool Research and Promotion Organisation. The purpose of the Wool Services Privatisation Bill 2000 has been canvassed in the report of the Senate Rural and Regional Affairs and Transport Legislation Committee, which was tabled and debated in this chamber on 30 October this year. I will not go through all of the details of the bill because they are familiar to honourable senators. There has been a long history of discussion within the wool industry and in the parliament about the various changes that have been occurring in the wool industry over the last few years. I want to make a couple of brief comments. Firstly, this legislation will lead to the privatisation of the Australian Wool Research and Promotion Organisation. It follows on from earlier legislation—the Wool International Privatisation Bill 1999 and the Australian Wool Research and Promotion Organisation Amendment (Funding and Wool Tax) Bill 2000, which was passed earlier this year.

The history of the wool industry, particularly in more recent years, is well known to honourable senators. It has been canvassed in the report on this legislation and on other legislation. It is a history of some upheaval in more recent years. This was brought to a head in November of 1998 when a motion of no confidence in the board of the Australian Wool Research and Promotion Organisation—I will refer to it as AWRAP for short—was carried by a large meeting of wool growers. I That led the then minister, Mr Vaile, to call for the resignation of all of the board members and the subsequent establishment of the Wool Industry Future Directions Task Force, chaired by former minister Ian McLachlan. The meeting at which that no confidence motion took place also carried resolutions requesting the minister to prepare a plan for the complete commercialisation of the Woolmark Company and further a reduction in the statutory wool levy from four per cent to one per cent.

By way of explanation, the Woolmark Company was established effectively as the successor company or organisation to the International Wool Secretariat. The International Wool Secretariat, IWS, was set up some years ago. It was established with the involvement of the major wool producing nations of the world, namely, Australia, New Zealand and South Africa. The role of the IWS was to promote the use and production of wool throughout the world, particularly having regard to competition from other fibres and products. The Woolmark Company was the successor body to the IWS and, indeed, we are all aware of the development of the Woolmark brand and label. That is an important piece of history because I want to come back to one of the key issues involved in this legislation to privatise AWRAP.

I spoke earlier about the establishment of the Wool Industry Future Directions Task Force, which was chaired by Ian McLachlan. That task force presented a report and recommendations. Those recommendations and that report have been the subject of a lot of discussion in this chamber and in the committee. There is no need to go into that in detail, but two key recommendations of that report were, firstly, that there was a need for wool growers to take control of their industry and the promotion and marketing of it and that that should come about by virtue of the privatisation of AWRAP with new company structures and, secondly, that there should be a new levy struck following a vote of wool grower members. Wool growers throughout the nation ultimately voted for a levy of two per cent, which was half what they had previously been paying.

As I said, the legislation we are dealing with privatises AWRAP, and it does so by establishing a new company called Australian Wool Services, or AWS. That company in turn will have two subsidiary companies. The first one will be called CommercialCo. Effectively, it will take over the areas that were previously dealt with by the Woolmark Company. The second subsidiary company will be called R&D FundCo. It will be established to manage the funds raised by the new two per cent wool levy, which will also be topped up with contributions from government. Shares in Australian Wool Services, AWS, will be allocated according to wool growers' tax payments over the last three years up to 30 June this year. There will be two types of shares: A class shares, where votes will be allocated proportionate to wool tax payments over three years; and B class shares, where the allocation of shares will be frozen and based upon historical payments.

As I said earlier, the issues surrounding this legislation were canvassed widely and in detail in the report of the Senate Rural and Regional Affairs and Transport Legislation Committee, which was debated on 30 October. At that time we in the opposition and also Senator Woodley raised some concerns about the passage of this legislation. We made it very clear that we supported the principle of the legislation—that is, to move to a privatised company with greater grower ownership and control—but that we were concerned to ensure that that took place in an orderly fashion and with no issues still unresolved. Therefore, in our minority report, we indicated that we had concerns about issues surrounding the outstanding liability to the South African company, Cape Wools Ltd, which was the successor company in South Africa to the South African Wool Board. Senators will recall that, earlier in my remarks, I referred to the fact that the South Africans were a partner with Australia and New Zealand in Woolmark. In our report we indicated that we believed that this issue needed further examination and, in our view, should be resolved before this legislation was passed by the Senate. It was clearly not our intention to delay this legislation unnecessarily. We were conscious that the industry and the government wanted the legislation introduced as soon as possible to allow the new companies to start operation from 1 January next year. But, having recognised that, we were also very concerned about this outstanding issue, which was still unresolved at the time of the report being tabled. There were other issues that we raised concerns about, including the fact that we had not been provided with a range of documents such as constitutions and other agreements that would sit side by side with the legislation.

I will now deal with the issues surrounding the outstanding liability to the South African company, Cape Wools. This issue was covered in our report, but at that time we were constrained because evidence presented to us by AWRAP, Cape Wools and industry representatives had been taken in camera and we were not able to release that evidence or comment upon it. We were also concerned, of course, that there were negotiations going on between AWRAP and the South African company, Cape Wools, to try to resolve this outstanding liability. I understand—and this is something that we will be asking the parliamentary secretary to report on in the committee stage or when she makes her closing remarks—that this issue is essentially resolved. That is the information I have been provided with, but I would like some confirmation on that in due course. But it is important to put some things on the record.

As a result of concerns expressed in our minority report, Senator O'Brien and I, and Senator Woodley from the Democrats, were attacked quite strongly by some representatives of the wool industry. Indeed, in a media release issued on 19 October 2000 entitled `Woolgrower anger if legislation delayed', representatives of the Wool Growers Advisory Group made a number of quite strong and strident attacks upon us. The article said:

Federal politicians would be ignoring the wishes and the interests of woolgrowers if the legislation to privatise the Australian Wool Research and Promotion Organisation (AWRAP) and The Woolmark Company was blocked by the Senate, according to the Woolgrowers Advisory Group (WAG).

The article further stated:

The three spokesmen said that any suggestion that the passage of the legislation should be delayed until the Cape Wools matter is resolved would be contrary to woolgrowers' interests.

"Nobody knows how long it will take to resolve the remaining contractual issues with Cape Wools. There have been discussions for three years and who knows how long the negotiations will continue."

I interpose there to say that, whilst having made that statement that there had been discussions going on for three years, we were told during the hearings—and I will come to the evidence later—that the industry were really kept in the dark about this issue for quite some time. It had come to their notice only in recent months. It was also noted in the report of the committee that members of the committee, indeed the Senate, were unaware of this outstanding issue, and certainly we were not aware of it at the time we had debated the earlier legislation that I referred to. The article goes on to say:

"As far as woolgrowers are concerned, it is `all systems go' for the privatisation to proceed."

"The very suggestion that the privatisation be delayed until the government appointed AWRAP Board resolves the Cape Wools matter is exactly the sort of political interference and paternalism we're trying to put behind us."

"Woolgrowers' message to Parliament is clear: pass the legislation. And let us get on with the job," Mr Nicholls, Mr Gooch and Mr Wolfenden said.

Those gentlemen represent the Woolgrowers Advisory Group. Their in camera evidence to the committee has now been made public by decision of this Senate. I think it is important to put on the record what those same gentlemen said to our committee in camera, because it tells the true story and it refutes the attack made upon us in that media release. In evidence on 2 October, Mr Wolfenden, the President of the Wool Council of Australia, said:

As most of the senators explored the issues with us, we found ourselves in a very unenviable position of having a public position and a private position. Obviously, our position publicly stands and that is what we endorse and we are not in any way stepping away from that. However, as you have all correctly identified, there are basically only four sources of money or ways to fund the South Africans: there is equity; there are assets with the company—selling them off; there is the levy; and then there is a contribution by others. What we are quite clearly putting on the table is that wool growers will explore what is a fair or reasonable contribution as to their liability of having to buy out a partner in IWS. Obviously, to buy out that partner or to give them equity, that is a benefit to Australian wool growers; therefore we are prepared to look at what is a fair price. I would have to say at this point that I have not had time to read the chronology of the AWRAP Cape Wools, to see whether that sheds any light on it. But we also believe that the parties to the agreement and the position of the government in that agreement, in that setting forward of a process, does make them party to this agreement and they therefore have a liability to this process.

I suppose that, within our own groups, we have talked about limiting the liability of wool growers to what is, let us say, fair. We believe that there is a liability on the government to examine the outcome of the settlement, accept that liability and look at how they can ensure that the privatised CommercialCo does have a future, because obviously there is some speculation that the size of the liability to South Africa is big enough to put at considerable risk the privatisation and the floating of CommercialCo.

Here are some further comments from Mr Gooch in evidence:

I do not think that the support will be totally unqualified ... I do not think that there will be unqualified support should the ongoing levy payers—

that is the industry or wool growers—

be involved in the process of repaying this liability. I think we have to find some mechanism where the liability should be quarantined to the participants in the original agreement. The participants in the original agreement were AWRAP, the Woolmark Company and, by virtue of their representation, the government ... If the ongoing levy payers were to be involved in the settlement, I do not think that the unqualified support would be there.

There are further parts of this Hansard that I could read, but time does not permit. But the position that was being put to us by the industry representatives, these industry leaders, in the in camera committee hearings was that, whilst they supported privatisation and whilst they wanted us to pass that legislation, at the same time they wanted us or the government—they could not really identify who it was—to give them a guarantee that any liability owing to the South African company should not have to be picked up by levy payers and, further, that it should be picked up by the government. They were concerned because at that stage nobody knew what the liability would be, whether it would be $1 million, $10 million, $40 million or $100 million—figures that we had been told—and that, if this went through and the new companies were established, they could end with a settlement or, if by this stage litigation had commenced, some determination that visited a huge liability upon wool growers to have to pay, and that threatened the viability of the company. It is for that reason—that uncertainty—that we said we believe this needed to be pursued further and this legislation needed to be delayed. In our view, there is clear evidence also, which I know Senator O'Brien will go to, about the lack of management by the minister on this issue which allowed it to run on. Our position is that we will be supporting this legislation, but we do so because we understand that this issue has now essentially been resolved—there has been agreement between AWRAP and the South African company; I hope that has been confirmed—but there are still other matters that we will take up through the committee stages.