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Thursday, 11 July 1946


Mr MENZIES (Kooyong) (Leader of the Opposition) . - It is impossible in one speech to deal with all the political problems of the wheat industry, not only because it is one of the greatest of Australian industries, but also because it provides uswith a considerable share of our export income. Its problems are, and for many years have been, far-reaching; as far back as I can remember politics, the Parliament has from time to time considered the needs of this industry and has endeavoured to do something for it. I propose to concentrate my remarks upon certain essential aspects of the bill before the House, which contains a portion, at any rate, of the Government's wheat stabilization plan. The first aspect with which I wish to deal is the relation of this bill, and the plan to which it refers, to the referendum for the alteration of the Constitution by including marketing powers in the list of those powers held by the Commonwealth Parliament. This is a question which gives rise to some curious considerations. In the course of the Minister's second-reading speech, which contained a full and fair statement of the Government's plan, he gave expression to some ideas which I desire to quote because they have a great bearing on the forthcoming referendum. The Minister for Commerce and Agriculture said -

Co-operation with the States is an essential part of the plan. The States control production, and production must be regulated according to the markets available for our wheat. In marketing, "Commonwealth and States must use their constitutional powers in harmony, if the plan is to be effective; neither can provide effective marketing unaided.

Later, he said -

The stabilization plan is intended to make the wheat industry" sound financially. Regulation of production, not restriction of production, has been recognized over the years as one requisite for any plan. It is recognized not only by the governments concerned, but 'by the growers; and growers are willing to co-operate in regulation of the industry to secure the wide benefits of stabilization.

Regulation of production is another feature . which was brought in as a war-time measure, and now can readily be adapted to peace-time needs. It is a State function, and Commonwealth and States will co-operate to secure uniformity in administration. The experience gained by State officers during the war years, while they were co-operating to carry out Commonwealth policy, will be invaluable in the future in carrying out the joint policy.

Special mention should be made of the need for co-operation between Australian governments on this question. Commonwealth and States have their separate powers, and, by using them together, the plan can be carried into effect. Used separately, the constitutional powers of the governments are not capable of dealing with the problem. The plan represents a high degree of co-operation between Australian governments, and it provides for a partnership in which all of them willplay an effective part, not' only in deciding the policy, but also in carrying it out.

Those observations by the Minister are, in my opinion, completely correct, but they are wholly at variance, I believe, with the basic argument that has been submitted for the marketing referendum. It was said from this side of the House, and in particular by those honorable members who sit behind me in opposition, that the problem of production could not be discussed quite independently of the problems of marketing and prices, and, accordingly, that the ideal system was one in which there was co-operation between the States, with their special authority over production, and the Commonwealth, with its special authority over interstate and international trade. If any justification were required for that argument it is to be found in the passages I have just quoted. Here is a scheme which, as I have followed the Minister's speech, is not regarded as being in any constitutional doubt. It is put forward as a valid scheme designed to last for a period of years, and it therefore cannot be regarded as depending on an affirmative vote at the marketing referendum. The Constitution amendment which will shortly be before the people seeks to concentrate all power in relation to marketing and prices in the hands of the Commonwealth, leaving the problem of production entirely in the hands of the States. Accordingly, if the power is to be used with any success exactly the same- type of co-operation will have to be achieved between the Commonwealth and the States as is exemplified in this bill with no constitution alteration at all.

I pass to the second consideration. The Minister has just introduced to the House a second measure, the Wheat Export -Charge Bill. It is perhaps unfortunate for the proper consideration of this plan that the House has not had before it from the beginning, first, the Wheat Industry Stabilization Bill, to which I am now addressing myself; secondly, the Wheat Export Charge Bill, which is an integral part of the plan ; and, thirdly, some outline of the legislationto be presented to the State parliaments, because we must have a knowledge of all three if we are to have an accurate conception of the plan as a whole..

I would like to say a little - not much need be said - about the case for the stabilization of the wheat industry on the basis of what I might call a floor price. There have been, over the years, differences of opinion about this matter - there are probably still differences of opinion on matters of greater or smaller detail - .but I believe that all parties agree that if we are to solve the problem of the wheat industry there must be a stabilization upon the footing of a guaranteed price.' That is just, because, of course, it would create a more balanced economy in Australia. The position might be different if we had an uncontrolled economy all round; but we have not had an uncontrolled economy. By our tariff policy, which I strongly support, we have accorded to manufacturing, industries a protection which is designed to enable them to sell . in competition at a price which will cover the cost of production and some reasonable measure of profit. In other words, we have in the case of manufactures assured the reasonably efficient manufacturer of a reasonable price upon the local market. In respect of wheat we should in the first instance afford a similar stability. But wheat is a commodity which, is not merely sold on the local market. In the past our manufactures 'have been almost entirely sold on the local market, a circumstance which many of us hope will change rapidly in the next few years. Wheat, on the contrary, has been one of our great export products. The wheat industry is one of the- chief industries on which Australia has depended for its overseas income, and it is now so constituted that we cannot say that we have given to it any degree of real stability if we deal only with that portion of the wheat crop which is harvested and sold in Australia. We must seek to give a reasonable measure of stability to the whole of what might be described as the average wheat harvest, whether it be sold in Australia or abroad. Therefore we must be prepared to potect the wheat-grower in re,spect of not only that portion of his crop which is sold here but also a reasonable volume of production for export. Whether the . latter should be arrived at by. control of acreage, or by some other means, is a matter which excites. some differences of opinion. I do not propose to discuss those differences of opinion at this stage because, fortunately, we have some reasonable assurance that, for the next few years at any rate, Australia will be able to sell all the wheat it can grow.

A stabilization scheme upon a proper price basis should not be looked at merely as if it imposed at some future time a potential liability upon the Treasury.. Looking at this plan we may feel con:fident, as 1 do, that in the next few years the contributions to the stabilization fund will come out of the realization of wheat and not out of the Treasury; but the object of the scheme is that if at some future time the moneys in the fund should be exhausted, in order to stabilize the price at the necessary level assistance will be forthcoming front the Commonwealth Treasury. That may be expressed as a future possible liability. Against such a potential liability there must be offset enormous advantages to Australia. The fact that we stabilize this great staple industry means that we are helping to produce a balanced economy and a proper spread of population in Australia - that we are doing something in the real sense towards the prevention of undue aggregation of population in the big cities. In a word, a. scheme of this kind represents practical -decentralization. Itmay not- be decentralization in the sense in which that word connotes the establishment of new industries, but it certainly will make secure an old and well established industry which is vital to the Australian economy. All these desirable things that I have referred to require solvent and progressive rural industries as the foundation of a modern and civilized life for our primary producers, with the necessary amenities to ensure that our country dwellers are able to resist the lure of city life and city occupations. It is proper that I should say, and I kp ow the Minister will agree with me, thai, the stabilization idea is not new. Attempts have been made to produce plans in the past. The present proposal, I say at once, appears very liberal when compared with the plan of 1940-41 at the time when the government of which I was Prime Minister was in office; but, in reality, the difference between the 1940-41 plan and the present plan is very, largely, apart from certain features which I shall discuss later, a difference of price. In 1940-41 world parity for wheat was substantially below the price which was to be guaranteed under the Government's plan. As honorable members will recall, the plan at that time provided for a guaranteed price, of 3s. lOd. a bushel f .o.b. ports. There was a provision that any receipts on realization of wheat above that price should be divided, as in this plan, between the fund and the growers. The guarantee was to be applied to a realized harvest of 140,000,000 bushels. That meant this : In 1940-41 the government of that day was accepting what looked like a certain responsibility to subsidize the plan heavily at the outset, because, as I say, world parity was below the price that was indicated. In 1946, the present Government is in a very much happier position because world parity is well above the guaranteed price proposed in the bill, and, consequently, there will be no initial liability upon the Government; that is something for the distant future. So far as we can judge, over the next few years the fund will be accumulating its reserves out of the plus difference between the guaranteed price and world parity. Therefore, for the first few years at least this will be essentially a growers' fund. Having regard to some references which are made occasionally to the 1940-41 plan - not by the Minister,' but I have heard contemptuous references to the 1940-41 plan - it is, perhaps, worthwhile reminding the House of two facts in relation to. that plan: First, that scheme provided for a guaranteed price of 3s. lOd. a bushel f.o.b. ports, and for the provision oi a fund into which surpluses were to be paid, the surpluses to be divided equally between the growers and the fund; and, secondly, the price then indicated was remarkably close to the price which had been asked for by the Australian Wheat Growers Federation. It is not to be thought that the government in those days was nominating a price completely out of harmony with the ideas of those engaged in the industry. It was not; because on the 27th August, 1939,. the Australian Wheat Growers Federation made certain proposals, all of which, if I remember rightly, found a place in the Government's scheme. But the price asked for by the federation was 3s. lOd. a bushel f.o.r. ports That is not identical with 3s. lOd. a bushel f.o.b. ports, but is remarkably close to it. I mention those figures in order to indicate that the proposals then made had all the essential features of a sound stabilization plan, whilst the price imposed, as we were reminded recently by the honorable member for Indi (Mr. McEwen), a very large immediate and potential liability upon the government of the day.

I turn from that, because I do not want to dwell unnecessarily on -matters of past history, to another question. Should there be a poll of wheat-growers before this scheme comes into operation? There is a fairly well-established practice in Australia - I can recall many instances in rural industries - that before schemes of this kind, which affect primarily the growers of commodities, are put into operation, the wishes of the growers should be ascertained. After all, their labour, skill and assets, their acceptance of risks, and in many cases their acceptance of hardships, have produced the harvest, and they are,therefore, the most interested people. Indeed, as we have seen, for the- next few years, they will inevitably be the major contributors to the stabilization fund ; and in those circumstances we believe that before legislation of this kind comes into operation it should require to be approved by a majority of the wheat growers voting at a poll taken for that purpose.


Mr Burke - Does the right honorable gentleman mean a poll on the subject of stabilization or on the conditions of stabilization?


Mr MENZIES - I am suggesting that the bill when passed, before it comes into operation, should be referred by poll as a total scheme to the growers in order to secure ' their approval or disapproval. It is not for me to say whether the growers approve the proposal. I am not in the least degree qualified to say what the view of the wheat-growers would be upon that matter. I have heard some honorable members who affect to know something about these things say that the wheat-growers were hostile to the plan. I have heard others say with equal confidence that the growers would be in favour of it. I offer no opinion about that aspect at al!, but I venture to offer tho opinion held by many people that when you are dealing with a large important industry of this country and you are establishing a scheme which, for some time to come, will involve large contributions by the growers themselves out of the realization of their own wheat, the opinion of the growers should be taken.


Mr Scully - Did the right honorable gentleman follow that course when his Government introduced its stabilization scheme ?


Mr MENZIES - Our stabilization scheme never came into operation.

Sitting suspended from 5.58 to 8 p.m. .


Mr MENZIES - Before dinner I had been ' addressing myself to the Government's wheat stabilization scheme and in particular to the general case for stabilization. I now want to refer to some aspects of the scheme requiring determination. The first is perhaps one of the most important questions connected with the scheme: Should the 1945-46 harvest be included; in this scheme? I want to say at once that the answer to that question is in my opinion and in the opinion of many other honorable members of this House, no, the 1945-46 harvest should not be included in the scheme. Indeed, it is difficult to .understand on what principle of justice a stabilization scheme of tha kind now before us can be made retro;spective, and that is, in effect, what the proposal of the Government amounts to. The 1945-46 harvest, that is the harvest of the last season, was acquired by the Commonwealth under regulation 14 of the National Security (Wheat Acquisition) Regulations. It was acquired, as preceding harvests during the war were acquired, by virtue of the Commonwealth's war-time power, and if I read regulation 14, which is the important one for this purpose, honorable members will 3ee exactly how it operates. It says this-

For securing the public safety and the defence of the Commonwealth and the Territories Of the Commonwealth, for the efficient prosecution of the war, and for maintaining supplies and services essential to the life of the community, the Minister may, from time to time, by order published in the Gazette, make provision for the acquisition by the

Commonwealth of any wheat described in the order, and that wheat shall, by force of and in accordance with the provisions of the order become the absolute property of the Commonwealth, freed from all mortgages, charges, liens, pledges, interests and trusts affecting that wheat, and' the rights and interests of every person in that wheat (including any rights or interests arising in respect of any moneys advanced in respect of that wheat) are hereby converted into claims for compensation.

It will be seen from the terms of that regulation and from the other regulations that the Australian Wheat Board was the body set up to sell wheat acquired by the Commonwealth under regulation 14. That power was exercised by the Commonwealth presumably under the well-known and much.quoted provision of the Constitution which, we find- in paragraph xxxi of section 51. It is perhaps as well to remind ourselves of its terms -

The Parliament shall, subject to this Constitution, have power to make laws for the |»?ace, order, and good government of the Commonwealth with respect to - (xxxi.) The acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws ...

Consequently, the wheat harvest, not only in 1945-46 but in previous years, was acquired by the Commonwealth. The rights of the wheat-growers were converted from rights of property in the wheat into right to receive compensation from the Commonwealth, and, as compensation is represented by the words " on just terms ", it is difficult, if not impossible, for me to understand how payment for that wheat can fall below the level of the actual market value of the wheat. When the wheat-growers' 1945-46 harvest was acquired and delivered the claim by the wheat-grower at once arose. We are now dealing with a scheme which seeks to include the 1945-46 wheat, though the rights of wheat-growers to be paid for that wheat came into existence, under regulation 14, months and months ago. So that when this scheme proposes to go back and take away from the grower some of the benefits' of the claim that he had, it is retrospectively depriving him of a right which was fully matured at the beginning of the year.

It is not disputed, as I understand it. that the price at which wheat was sold or saleable by the board was greater than the 5s. 2d. f.o.r. ports stated in this bill and it may very well be greater even than the larger sun] mentioned by the Minister in the course of his second - reading speech. It seems to me a most astonishing proposal that wheat already acquired, wheat in respect of which Commonwealth liability to an ascertainable extent has already accrued, should be included in a future scheme, the effect of the acquisition being to reduce the price to which the grower .otherwise would have been entitled in relation to the 1945-46 harvest. The proposed inclusion of the 1945-46 harvest is not only grossly unfair and retrospective, but it seems to me to deliberately cut across the constitutional protection to which the wheatgrower was entitled at the moment at which the wheat was acquired. I do not want to labour that. I put that view briefly as clearly as I oan. I have heard nothing so far from the Minister or the Government which would indicate that there is any answer to that argument at. %all. Certainly there is no answer satisfactory to the individual wheat-grower.

But there are other reasons, economic reasons, for excluding that harvest. The harvest was extraordinarily low, following a drought year. In many wheatgrowing areas in Australia that drought was not merely of one year's duration, it was of two. On top of. that the inevitable demands and circumstances of war have meant that a good deal of maintenance, repair and development work on farms has been postponed and plant has become obsolete or worn out. The result of all that may be a fictitious state of credit for some farmers, others may find themselves substantially in debt. If we add all those 1 circumstances together, surely they support the elementary justice of giving to the f farmer the full benefit of the full price of the 1945-46 harvest so that he may have proper opportunity of paying his debts, re-establishing himself, doing re; pair and maintenance work and buying plant for the future. If that were done the effect would be that the industry would be in a more solvent position, and the new scheme would not begin until the 1946-47 harvest. It would then operate entirely in relation to future harvests and deliveries.

The next consideration is the problem of how the guaranteed minimum price should be fixed. The bill fixes the guaranteed minimum price to be paid by the board to the growers at 5s. 2d. a bushel f.o.r. ports, and, as I understand the scheme, that is to be the price for a period of five years. The bill itself contains no provision that I have been able to discover for the variation of the price at any time during that term. On that state of affairs I have two comments to make. The first is this : It seems to me practically a certainty that over the next five years, the cost of producing wheat in this country will rise in terms of Australian money, because it is quite clear not only that the basic wage in Australia will bc due very shortly for revision, but also that when wage-pegging is relaxed, and it. will bc relaxed some- day. wages generally will rise, and prices and costs also will rise. If .that expectation be correct - and he would be a very bold-man who offered any other prophecy of the events of the next five years - a guaranteed price for wheat that seems quite fair in 1946 may have become seriously inadequate by 1948 or 1949. Therefore, it seems to me essential that there should be- some fair and accurate means of adjusting the guaranteed price in accordance with any increase of costs that may occur during the period of the operation of this scheme.


Mr Burke - What about a reduced world price?


Mr MENZIES - I am directing my attention, at present, to that element of this scheme that says, " Here is a guaranteed minimum price which is designed to make the industry solvent, and which is to last five years ". If the honorable member for Perth (Mr. Burke) believes that he can guarantee to the wheatfarmers not only a price for the next five years but also a level of costs, he will have an answer to my argument; but J. do not believe that anybody can guarantee the maintenance of the present cost level. In terms of Australian money this is certain to rise. We of the Opposition propose that there should be incorporated in this scheme some' means for a periodica] adjustment of the guaranteed minimum price to accommodate any increase of the reasonable cost of the reasonably efficient production of wheat. That, we believe, should be done- by means of a rural industries board which would make periodical investigations and reports. That is the first, comment that I make on this aspect of the matter. My second comment is this : If we do have machinery for the periodical revision of the problem of costs and the periodical reascertainment of a guaranteed minimum price, a period of five years seems unreasonably short. After ail, if we intend this stabilization scheme to be permanent so far as possible, and if we are really endeavouring to carry the problem of the wheat industry beyond mere annual or sporadic treatment, the obvious thing for us to do is to institute a longer term for the scheme, and to introduce into that longer term means for a periodical adjustment of the price to be paid. Therefore, we suggest that tho period should be ten years instead of five, to enable wheat-farmers to plan the development and use of their properties over a reasonably long period. I have referred to the need for a rural industries board. May I add just a few words about the purpose and function of such a board. With great respect to all honorable members, and particularly to those who are closely acquainted with the wheat industry, I suggest that the ' Parliament ' is not an effective tribunal for determining the cost of producing wheat. The great majority of us in this chamber are not qualified to attempt that task. The fixing of the price, therefore, must be either a matter of sheer bargaining from time to time between contending political elements, which is a very unscientific way of dealing with a great industry, or a matter of careful, accurate, and impartial investigation. Many years ago in this country we established the Tariff Board primarily to deal with secondary industries. That board consisted, and still consists, of specially chosen men with capacity for impartial investigation and with great facilities for such investigation.- The Tariff Board has established a very high reputation and a very high authority. I am sure that every member of this chamber will agree that the Tariff Board, in relation to secondary, industries, has achieved such public authority that its recommendations almost invariably are regarded throughout Australia as reasonable and having due and proper relation to the costs of Australian production. If an application is made for a tariff, the Tariff Board investigates the actual local industry or the potential local industry. It examines the efficiency and costs of that industry, and in due course makes its' recommendation. What we propose is that in relation to primary industries, particularly the wheat industry, there should be a board which corresponds in its function to the Tariff Board - a rural industries board competently manned, and with adequate facilities for investigation so that as a permanent body it would very soon develop a reputation and authority similar to that of the Tariff Board. Its prime function for the purpose of this scheme would be to determine periodically - I shall hot attempt to define " periodically but so far as I am concerned it would be annually - the reasonable cost of reasonably efficient wheat production, and the reasonable profit margin that should be added to that cost to arrive at a guaranteed minimum" price which would enable the industry to be carried on effectively and progressively. It is not only unjust but also useless to guarantee a price that falls below the total figure so determined by impartial investigation. We shall do nothing for the wheat industry if we fix a price and stick to it doggedly for five years, notwithstanding the fact that after, say; three or four years it has become apparent that the price is below the reasonable cost of production. That will not bring solvency to the industry; it will ' bring the scheme to ruin and precipitate once more further investigations and plans by this Parliament.


Mr Scully - It may be above the cost.


Mr MENZIES - Naturally. There would be no point in having an annual re-examination of costs unless we were contemplating the possibility of a price that altered from year to year. Theoretically the price could alter upwards; but I venture to say that the Minister will agree that that is a mere theory for the next five years at least. 8

Government supporters interjecting,


Mr MENZIES - I am delighted to know that some members of this Parlia ment believe that during the next five years, the value of money in Australia will rise and the cost- of production in this industry will fall." The wheatfarmer is entitled to an assurance - and this is the whole basis of our argument - that the price guaranteed to him under a scheme like this shall be adequate to cover his true average cost of production, and to give to him a reasonable margin of profit. That result, cannot be achieved unless we have the means of revision, and the means which are suggested and which I have been discussing for the last five minutes seem, to many of us at any rate, to be admirable and flexible means for arriving at a just result. We believe that by the introduction of machinery of that kind, and its effective use in a tenyear plan of stabilization, the Australian wheat-grower will, for the first time, have a feeling of proper security, and that wheat itself, instead of being, as it has been for many years, the subject of almost constant political controversy, will take its place as a settled, solid and highly valuable feature of the Australian economy.

Debate (on' motion by Mr. LEar,»ro.\) adjourned.







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