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Monday, 16 June 2008
Page: 2135

Senator McGAURAN (8:30 PM) —In a place and a profession where momentous legislation often occurs, the Wheat Export Marketing Bill 2008 and the Wheat Export Marketing (Repeal and Consequential Amendments) Bill 2008 we are now debating must rate very high in historical moments. The bills before the Senate have the effect of ending the single-desk marketing arrangements in wheat. It is the last of the significant, certainly national, orderly marketing arrangements in the rural sector. It is certainly a significant event for the rural sector, both economically and culturally. It is also the last real icon of our coalition colleagues, the National Party of Australia, that clearly defines them in politics from every other political party, and arguably it is the most endearing icon of the National Party—and like brave Mohicans they make their stand tonight.

I respect my National Party colleagues’ conviction as being one founded in their economic belief in what is best for the wheat growers and equally in what is a strong cultural and political attachment to orderly marketing, to the single desk and to the old Wheat Board. However, on all aspects I cannot agree. In short, times have changed and there is a difference between remaining true to an idea or to an ideology and clinging to an obsession.

Given all the circumstances that have prevailed over the past decade and more, in particular the findings handed down by the Cole royal commission and the advent of the Labor government, it has now become impossible to breathe life back into the single-desk arrangements. It is my firm belief that it is in the best interests of wheat growers now and into the future to proceed with the principles outlined in the legislation. I have taken a particularly studied interest in this legislation, given that in the parliament in the past I have been a strong defender of the single desk, to the point of having crossed the floor on one occasion myself. However, when this occurred there was still a wool floor price, a regulated dairy industry and high tariff barriers over agricultural products—and the Berlin Wall had not fallen. It was a different time.

Since then, every rural industry right through to the farm gate has faced some form of restructure and deregulation. Either the old arrangements have imploded, such as the wool floor price, or restructure has been brought on with the advent of the National Competition Policy, such as in the dairy industry. The National Competition Policy reform of 1995 was introduced as an imperative doctrine for Australia to meet the future challenges of an increasingly competitive global market. Factors such as the communications revolution in the latter half of the 20th century, the turning of all the formerly communist states to market economies and the establishment of the World Trade Organisation have all influenced global changes—and to Australia’s credit we were prepared to adapt to the changing world.

I add that all major parties supported the tenets of the National Competition Policy. With its introduction it was inevitable that greater scrutiny over orderly marketing arrangements would occur. In fact, orderly marketing and national competition are just about mutually exclusive. In recent decades the Commonwealth and state governments have deregulated single-desk style arrangements such as those for sugar, rice, barley, cotton, dried fruits, eggs and, as mentioned, wool. In the coalition’s time in government, the largest rural sector that experienced deregulation was the dairy industry. It was a deregulation facilitated by the coalition government through the states. It is worthy to note that the dairy industry restructure was supported by an exceptionally large restructure package.

It has always been understood by the coalition that these rural restructures do bring short-term upheaval, economically and socially, because of the predominance of family farmers and the challenges they have to meet. The Liberal Party’s position with regard to the single desk has always been up-front and honest. On 22 May 2007, the then Prime Minister, John Howard, said:

If growers are not able to establish the new entity by 1 March next year, the government will propose other marketing arrangements for wheat exports. Let me make this clear to the House. The options available would include further deregulation of the wheat export market.

In stark contrast, as other speakers have mentioned, the Labor Party’s policy platform and Mr Rudd’s own personal commitments before the last election led farmers to believe they would maintain the single desk if elected. Well, they have been elected and they are abolishing the single desk.

While this is the macro influence over the marketing arrangements, I return to an earlier point which was effectively the downfall of the single desk. The findings of the Cole royal commission utterly discredited the operations of AWB(I), particularly those that managed the public company, and from the commission’s report came the collapse in public and grower confidence in the marketing arrangements being held by AWB(I). As a consequence, the coalition government issued the power to issue export licences to the minister of the Crown. While this was necessary, it was only ever going to be short term. The changes implemented by the coalition were unsustainable. So in truth, like the wool floor price, the single desk had imploded—regrettably.

Moreover, since the election of the Labor Party to government, they have made it clear that there is no going back. Perhaps with no Cole royal commission or Labor government the single desk would still be in place, but reality bites. Equally, from the Senate inquiry into these bills, the AWB itself made it clear that it neither sought nor desired, nor believed it financially possible, to revert to a single-desk arrangement. Therefore, the Liberal Party must deal with the reality of the new government’s proposed wheat-marketing arrangements and the consequences of using our majority in the Senate to reject the bills.

Firstly, the coalition will only hold the majority vote in the Senate until 30 June 2008. The rejection of the bills will simply see the government re-presenting the new marketing arrangements post 30 June to the new Senate, which the coalition does not control. In short, the coalition’s actions could be short-lived tokenism. Secondly, a rejection of the bills in the Senate before 30 June will create uncertainty in the wheat market, to the detriment of growers, grain merchants and financiers. It was clear from the committee hearings that all parties involved in the industry believed it was critical to have certainty as to the marketing arrangements for the forthcoming harvest and beyond. It is not perfectly clear what arrangements would be reverted to should the new arrangements be rejected in the Senate before 30 June. The most likely scenario would be the Wheat Export Commission issuing unaccredited licences. This would be unsatisfactory and particularly detrimental for wheat growers.

Further, within the context of the modern economy, there is a philosophical matter that drives me to support the principles of this legislation, and that is the freedom of the individual to choose how and to whom he or she wishes to sell their wheat. This is a principle which all growers already undertake in the domestic market. It is also a principle all growers undertake when they choose to rotate their crop. For example, many wheat growers also grow canola and sell the canola into a deregulated export market. Added to this there is the abundant evidence that individual growers have taken up with entrepreneurial spirit the changes to sell their wheat in a deregulated container market, or bags and boxes market, as it is called. Figures show that this market is bursting at the seams after its deregulation a few years ago by a coalition government. This is an export market that wheat growers are selling into at premium prices. It is proof that wheat growers are capable of self-marketing and of making individual financial decisions in their best interests in international markets. In fact, the growth of this market undercuts any contemplation of a return of the single desk, which requires a near 100 per cent delivery to the pool. The new export market would have to be shut down. It would be a case of trying to unscramble the egg.

Ironically, though, all is not lost for the true believers, who I see have left the chamber. The choice to collectively bargain still exists through the Trade Practices Act. It was an amendment moved by the previous government to make it easier for small business and farmers to legally group together as sellers. Where it is deemed advantageous I am sure this will occur, as it has already been mooted by farmer representative bodies such as the Victorian Farmers Federation. Obviously a block of sellers acting in a market of many buyers will increase farmer market power.

Having outlined the principles of my support for this legislation, there is nevertheless a serious danger that the new arrangements of multilicensing, with its existing industry structure, may fail. The danger is that the grain merchants will gain undue market dominance, rendering the growers vulnerable to predatory pricing. This is the worst nightmare for growers. A central feature in the committee hearings was the question of access to ports by exporters. Given that port terminals are in the control of a few bulk handlers, industry stakeholders—in particular AWB—believe there is a distinct possibility of these bulk handlers limiting access to their port terminal facilities or undertaking other anticompetitive behaviour such as discriminatory pricing. The Senate committee hearings, in which I was a participant, bore out the potential problem, witness after witness. The only group who believed there was no problem were the bulk handlers themselves.

The Allen Consulting Group, in their submission to the committee, made the following comments, which adequately explain the serious concerns regarding access to ports:

There is no export grain terminal within Australia where there is separate ownership or management of receival, storage and ship-loading assets. At each grain terminal, these various assets are owned and managed by a single entity—

other than in one instance, which is in Victoria. They go on:

If the BHCs were to receive accreditation to export bulk wheat, and hence compete directly with AWBI, there will exist a strong incentive for them to use their market power to reduce competition in the downstream marketing of export wheat.

They go on to say:

… it is necessary to consider more broadly those factors that have the potential to limit competition in the export wheat supply chain (as discussed in Chapter 2). This is to ensure that the objective of producing a more competitive export wheat market is not stifled due to the characteristics of the export wheat supply chain itself.

In short, regional monopolies could occur unless there is a proper access to port regime. While the bills refer to an access undertaking as accepted by the Australian Competition and Consumer Commission, there is a distinct lack of detail and criteria relating to the objectives of the access test. Without the government addressing this matter in more detail, the new marketing arrangements are subject to failure. The wheat growers’ livelihood would be severely affected by anticompetitive behaviour at the ports. Therefore, it is critical for a fair access regime to be implemented and for the regime to be overseen by the ACCC. Added to a fair access regime must also be greater detail about the terms and conditions to be provided with respect to price, identification of wheat stored and its location, and loading times. Regulators, growers, traders, farming organisations and the Senate inquiry have expressed concern about the impact of the bulk handlers having greater access to information than other industry participants.

The benefits of providing transparent and timely data to industry participants are obvious. Growers and other industry participants, especially small to medium sized operators, will be able to use their increased access to data on wheat stocks in storage throughout the supply chain to manage both supply and risk. The reduction of market distortions is another benefit. For example, the provision of timely and transparent industry data to growers will enable them to avoid holding wheat for later sale when, had they had access to the relevant information, it would clearly have been better to have sold it earlier—in other words, transparent market signals.

In conclusion, open, transparent and monitored competition is the key to the new wheat marketing laws. It is therefore incumbent upon the parliament and the government of the day to establish a review of the arrangements in some two years so as to be assured that the intent, and indeed the objectives, of the restructure are being met. After all, the livelihoods of some 27,000-plus wheat growers and a vital export industry are at stake.