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Thursday, 8 August 1946

Mr ADERMANN (Maranoa) . - This is a bill to continue a guaranteed payment that has been made for a number of years to the cotton industry. It seeks to amend section 9 of the Raw Cotton Bounty Act 1940-41. Before the war the Tariff Board investigated the cotton industry on five occasions - 1922, 1926, 192S, 1933 and 1938. Another investigation was concluded in October, 1945. There seems to be no justification -for the procrastination on the part of the Government in announcing its decision, following the receipt of the latest report. Australia needs more industries, both primary and secondary; it certainly cannot afford to lose any of its existing primary industries. Consequently, there is need to give a sufficient guarantee to the cotton industry to enable* it to survive and expand. Some primary industries are faced with the problem of finding markets at good prices, because exportprices for primary products are not always satisfactory. That problem doesnot confront the cotton-growing industry because there is an unlimited market for cotton in Australia. The manager of the Queensland Cotton Board has said that cotton-growing is the only Australian industry with considerable, potentialities waiting to be developed in. order to meet the requirements of the Australian people. The Australian textile industry now uses 32,000,000 lb. of raw cotton each year. In addition, there is a local market for 5,000 hales of lowgrade cotton suitable for the manufacture of bedding, upholstery, padding, wadding, &c. An additional 15,000 bales of raw cotton would produce valuable byproducts, namely, 820 tons of edible cotton seed oil, and 3,000 tons of high protein cotton seed meal. If textile factories were . fully manned, and worked two shifts, the local market would be capable of using 60,000,000 lb. of cotton a year. Evidence tendered on behalf of the textile industry before the Tariff Board showed that it is possible to expand the local production of cotton piece-goods to provide 40 per cent. of. this country's requirements. In other words, about 112,500,000 lb. of raw cotton would be needed for that section of ' the textile industry alone. It will be seen, therefore, that the pre-war production of about 5,000,000 lb. of cotton annually represented only a small percentage of Australia's potential needs in this sphere of primary production. The record Australian production of cotton was in 1934-35, when the yield was 8,769,510 lb. Production was fairly well maintained until last year, when there was a great decline. Very little cotton was grown in Australia last year. For the ten years from 1935 to 1944 the average yield was 10,127 hales of cotton, but in 1945 the production amounted to only 1,305 bales. The reasons for the fluctuations are set out by the Tariff. Board as follows: - (1) The method of Government assistance; (2) the net return per lb. of raw cotton and per acre planted; (3) the stage of development of rural industry in cotton-growing districts ; (4) climatic fluctuations; (5) competition of other crops; and (6) government encouragement and discouragement. The assistance which is guaranteed under the present act will expire on the 31st December next, and therefore further assistance is necessary to enable the cotton-growing industry to continue and expand. The Government should have announced its decision earlier. I contend that the decision should have been made much earlier, because if the growers are to prepare their land they should have- known long before this of the Government's proposal. The granting of assistance to the industry is necessary because of the absence of sufficient protection to ensure that those engaged in it shall secure a price equivalent to the Australian standard. Indeed such action is required in most of our industries which are not receiving tariff protection. Consequently the Cotton Board, which is the growers' own marketing board, has sought a guarantee of stability and has asked for a. fixed price of 7d. per lb. over a period of ten years. I emphasize particularly that this action was endorsed by the Queensland Department of Agriculture. In other words, the Growers Marketing Board and the department considered that guaranteed returns should be provided for a period of ten years. In its original application to the Tariff Board, the Cotton Board did not suggest the level at which rates should be fixed, but at a later hearing it amplified the original application so that growers could be guaranteed a price at a stated level by a parity-price system. Whilst the Cotton Board preferred protection by Customs duties, it did not request a change; it did not desire to upset the conditions in the industry. It is notable also that .secondary industry supported this primary industry's application for assistance, on the understanding that the method of assistance would not hamper the rapidly expanding cotton textile industry of Australia. We would be in agreement on that matter because no primary industry should be supported in a way which would be detrimental to any secondary industry. In the same way, no secondary industry should have any benefits that would detract from the advancement of a primary industry, because both of them are inter-dependent. The assistance . granted before the outbreak of World War II. was based on Liverpool middling spot prices. The Minister stated that those sales have not been held in recent years, and are not likely to take place again under present conditions. Therefore the government of the day accepts the same basis - a. straightout guaranteed price - as that provided under the act introduced by a previous government. In my opinion, that basis is satisfactory, provided the price is acceptable to the growers and the industry generally. The Minister made, much ado of the fact that the proposed price was considerably in excess of the amount recommended by the Tariff Board, but I point out that that prevailed under previous governments. The Minister's self-bestowed praise will give no consolation to the cotton-growers.

Let me analyse the position. The Tariff Board's recommendation, made in 1933 and confirmed on subsequent occasions, has never been accepted by the Parliament. This time, the board made the ridiculous recommendation that a guaranteed price of 3¼d. per lb. should be paid on the basis of 6d. Liverpool middling spot, for a period of only two years. How can we secure stability on that basis ? When I study the hoard's recommendation, I am convinced that it has not, a full appreciation of the costs and needs of primary industries. Its recommendations more than justify the attitude of the Australian Country party in recommending the establishment of a board to determine the actual marketing costs of primary industries. On the figures submitted by the Tariff Board, the. results per acre received by producers would not encourage anyone to grow cotton. For the period 1936-40, the average production was 97 lb. an acre. During 1941-44 the average was 9S lb. an acre. But, instead of taking the average in its calculation the board stated -

If scrub burn were eliminated, then 120 lb. would be the yield.'

The board considered that the method of development recommended, namely, dry farming, depended upon achieving average yields of 163 lb. an acre. It is all very well to have that aim - we agree that farmers should improve their methods in order to get better results - but the Tariff Board based its calculations on an assumption that farmers should get a return of 163 lb. an acre under certain conditions, and 120 lb. an acre under other conditions. If the board's objective were achieved, the returns would produce, at Hid. on a yield of 120 lb. an acre, an amount of £5 12s. 6d., and at 10½d. on 163 lb. an acre, a return of £7 2s. 7|d. an acre. Those are gross prices and cannot in any circumstances be considered satisfactory. The Tariff Board proceeded -

The development plan on which the board's recommendations are based demanded considerable reductions- in production costs so that the net .incomes to farmers from cottongrowing should be materially higher than, before the war.

I direct attention to the fact that this notable board suggests 'that farmers should reduce their costs. Does the board consider that primary producers are serfs? How can growers reduce costs when ' their gross income is £7 2s. 7£d. an acre, and one-half of that amount is absorbed in picking costs under the award? That justifies my earlier contention that the Government should appoint a board, with status, equal to that of the Tariff Board, to determine a proper method of computing the actual costs of primary industries. The Tariff Board's whole theory is utterly stupid. Its attitude, as revealed in its report, shows that it has no appreciation of the value of primary industries to Australia. The board considered that -

It is, not proved that cotton-growing, i* essential to land settlement.

And added -

Farmers should be convinced to grow cotton.

Farmers will require a great deal of convincing when they do not receive any return for their labour. Let us examine the position on the basis of the guaranteed price as submitted by the Minister. I take for the 1941-44 period the average of 98 lb. an acre. . That, yield, at 15d. per lb., gives £6 2s. 6d. an acre. The cost of picking 98 lb. at 4s. 7d., which is the award rate, is £1 18s. 4d. The net return, after deducting picking costs, is £4 4s. 2d. Out of that money tie farmer must provide for preparing his land and maintaining his family. "Now we begin to understand why cotton production is declining. This can be confirmed by figures relating to a period of 24 years. The average yield is 109 lb. On the basis of the guaranteed return of 15d., the gross income is £6 16s. 3d. an acre. The cost of picking is £2 2s. 8d. an acre, leaving a net amount of £4 13s. 7d. I take the average which, it is assumed, should be the result of the use of good farming methods as suggested by the Tariff Board. The assumed average of 163 lb. an acre at 15d. per lb. gives a net yield, after the deduction of picking costs,-of £6 19s. lid. an acre. Who would attempt to grow raw cotton, maize or peanuts for a net return of £6 19s. lid. an acre, out of which harvesting costs and living expenses must be met?

Mr Anthony - What is the size of a

Cotton farm?

Mr ADERMANN - The area is not nearly so large as a farm producing wheat or maize. That is another reason why the grower should have a guaranteed price; without it he will not be able to make a livelihood.

So much for the Tariff Board's recommendations. It will be difficult to convince primary producers . that they should grow cotton just because the Tariff Board suggested that they should. The Minister praised the Government's proposal because it exceeded the Tariff Board's recommendation. Whilst the price is in excess of the board's recommendation, it is not equal to the amount requested by the growers' representatives on the Cotton Board, namely, 17d. per lb. for raw cotton, or the equivalent of 6d. per lb. for seed cotton. The price of 15d. per lb., which the Government proposes is not sufficient to cover the cost of production and ensure to the producer a reasonable livelihood. The price makes no allowance for the increase of costs since 1940, when the act came into operation. According to the Commonwealth Statistician, costs have increased by 25 per cent. What provision has the Government made to meet them? On many occasions, the Government has referred to the decisions of previous Governments for assisting primary industries. Why does not the Government give assistance equal to that given to the industry by previous Governments, ' and thus enable production to equal the output in 1940?

Sitting suspended from 11.J/-5 p.m. to 12.15 a.m. (Friday).

Friday, 9 August 19J/6.

Mr ADERMANN - The proposed guaranteed price is less than the price of 17d. per lb. which the growers' representative on' the Cotton Board requested on behalf of the industry. That price is equivalent to 6d. per lb. for seed cotton on the farm. The price of 15d. per lb. which the Government proposes to guarantee will not enable growers to recoup costs of production and earn a reasonable livelihood. The price of 15d. per lb. was fixed by a previous government, in 1940 with the object of increasing production. In the meantime costs under all headings have increased. Therefore, a price of 15d. per lb. will not encourage growers to increase production under present, conditions. Obviously, if cotton-growers have better prospects in other industries they will turn their attention to such industries. They, certainly, will not attempt to grow cotton when the guaranteed price is not sufficient to cover increased costs. ' Therefore, the Government's proposal will not encourage the expansion of the industry, and, consequently, will fail to meet employment requirements in rural industries. Cotton- f rowing is a seasonal industry, and itits in with the sugar industry, because cotton-picking is done just prior to the commencement of cane-cutting. Seasonal workers are thus able to go from one industry to the other, with great advantage to both. If the cotton industry Ls permitted to remain in the doldrums, the effect will be very detrimental to other rural industries al.=o. Another point is that the Australian price of imported raw cotton is somewhat higher than- the price at which the Prices Commissioner has authorized the purchase of the Queensland crop. We must remember also that raw cotton is imported free of duty. Dealing with the overseas price, the Minister stated that with a home price of 15d. per lb. it was not necessary to pay a bounty to the industry. The Government is keeping down the price to lod. per lb. instead of granting the price of 17d. per lb. requested by the industry, and, at the same time, is refusing to subsidize it. If the Government believes in protection, it must be prepared to pay a bounty to the industry, because, as I have already said, raw cotton is imported free of duty. In this instance the Government wants to have free trade, 'and, at the same time, avoid payment of bounty to an industry which it professes to encourage. I understand that when the Tariff Board took evidence the Cotton Board stated that the parity price was 18. 8d." per lb. ; and from information I have received, the price has since risen. Evidence given to the Tariff Board showed that at that time world parity of lS.Sd. per lb. was worth more than the' price then requested by the industry. A price of 18.4d. per lb. c.i.f. spinners' ports, would return to the growers 17d. per lb., whereas the price at that time was lS.Sd. per lb. Thus, the industry is suffering loss, because it is not allowed to reap the benefit of world parity prices. Cotton enters largely into the clothing regimen used in the compilation o'f the basic wage index. The raising of funds by means of a sales tax upon cotton goods would have far more beneficial effects upon our economy than the payment of a bounty from Consolidated' Revenue. This is a matter of financial policy rather than one of assistance to the cotton industry; but in this instance the level of Australian economy is determined by the price the Prices Commissioner has ruled the growers, are to receive. Because growers are' unable to take advantage of world parity, the cotton industry, like other industries which we have discussed recently in this chamber, will have no chance of returning a payable price having regard to the increase of costs during the war when cotton growers, unlike wage-earners, in this country, did not receive any war loading; yet no allowance is now being made to enable growers to meet increased costs. At the same time, the industry is not to be allowed to benefit from world parity. I reiterate that point. Therefore, it would appear that the industry is to be ground down to a level which experience has shown will offer no encouragement to growers to expand the industry. The outlook of the Tariff Board has not been favorable to the industry. All governments have refused to accept the prices recommended by the board. The guaranteed price of lod. per lb. in 1940 encouraged growers to increase production to a certain degree, but, to-day, production is declining. Yet, the Government refuses to meet the present position, with the result that growers will not be able to maintain present production let alone increase it. One must conclude, therefore, that the Government is no more concerned about the prosperity of the cotton-growing industry than it if about the tobacco-growing industry which has been allowed to decline until to-day practically no tobacco is grown in this country. The Minister admits that there is only a remote possibility of a considerable decrease of the price of imported cotton during the next three or foul years at least, yet even with the prospect * of not having to pay a bounty to the industry the Government is not willing to grant stability to it by means of a longer term than five years, as has been requested by the Cotton Board, with the endorsement of the Queensland Department of Agriculture. It has to be admitted that the Cotton Board has attacked production in a practical, way, and has co-operated with the State Department of Agriculture. It has made arrangements for- irrigation plots, and has improved dry-farming methods, both of which have proved worthwhile in aiding production. How can the growers be expected- to provide additional finance in order to meet the costs of irrigation and dry-farming methods when they are notassured of a commensurate return? The Minister has drawn attention to the effect of the abandonment of the industry, which would mean the closing of ginneries and a cotton seed oil mill, in which £160,575 has been invested. In 1940, the employment in the industry consisted of 2.700 growers. 1,000 field workers, 2.000 pickers and 170 ginnery employees. The failure to increase the guarantee to 17d. per lb., as requested by the Cotton Board, will mean the loss of another industry, because the cotton industry will then be in the same category as the tobacco industry, to which I have previously referred. An increased crop is the only means, apart from the additional production brought about by irrigation and improved methods, of reducing the costs of handling. It is obvious that when production declines, costs must increase. If the Government will guarantee a satis-" factory price, there will he confidence in the industry and the resultant stability will lead to expansion of production, which in turn will increase the employment that will be available at a satisfactory wage. A much-desired product will then become available to the home market, which is unlimited in its demands. The textile industry has stated that it could provide up to 40 per cent, of Australia's requirements. Our greatest production has been 8,000,000 lb. a year. That 40 per cent, would involve a production of 112,000,000 lb., consequently we are far short of the mark. In addition, security of supply would be given to the textile secondary industry. I repeat, that I cannot understand the Government's refusal to increase the price, and thus enable the additional costs to be met, when, on its own admission, there is small likelihood of a bounty having to be paid for at least the next three or four years. I hope that it will raise the price from 15d. to 17d. per lb. Another request that I emphasize is for an extension of the term from five years to ten years.

The Government has decided to allot £170,000 for the encouragement of this industry, which can be of great value to Australia. We have just passed a bill authorizing the immediate expenditure of £50,000,000, and an eventual expenditure of £250,000,000, for the standardization of railway gauges. In the present measure a meagre £170,000 is offered as a sop to an industry that could be worth millions of pounds to Australia if it were properly encouraged. I ask the Government to increase the amount to £250,000. This represents only another £S0,000, and surely a primary industry of such consequence is worth that. If the growing of cotton is encouraged in Australia, the position of our textile industries will be made secure. I ask the Minister to give an assurance that he will accept my suggestions; otherwise I shall move- amendments to have them incorporated in the bill.

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