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Tuesday, 23 October 1956

Mr McMAHON (Lowe) (Minister for Primary Industry) . - by leave - I move -

That the bill be now read a second time.

The purpose of this bill is to obtain parliamentary approval of an agreement made between the Commonwealth and the Queensland Government to regulate the production and marketing of sugar in Australia during the next five years. The Sugar Agreement included as a schedule to the bill continues the series of agreements between the Commonwealth and the Queensland Government which have existed for more than 30 years. Its terms are little different from those contained in the previous agreement which expired on 31st August, 1956. Indeed, the main principles of these agreements have remained substantially unaltered since 1923. Sugar is a protected industry in Australia. It is a protected industry in many parts of the world. Only about one-eighth of the annual world production of sugar, which amounts to 40,000,000 tons, is traded on the world free market. Most of the trade is covered by various protective and preferential trading arrangements. Under the new agreement the Commonwealth undertakes to continue to impose an embargo on the importation of sugar, and the Queensland Government for its part undertakes to acquire all raw sugar produced from cane grown in Queensland and New South Wales. The Commonwealth undertakes also to make sugar available in Australia at certain fixed prices; to control production; to accept respon sibility for losses arising from the export of surplus sugar; to pay rebates on the sugar content of goods exported; and to contribute to the funds of the Fruit Industry Sugar Concession Committee.

The effect of the import embargo in present circumstances is to enable the sugar industry to obtain a price for sugar in the domestic Australian market higher than the current world price. The domestic price is controlled under the agreement. The wholesale price at which the Queensland Government undertakes to sell sugar of 1A grade in State capital cities. Fremantle and Launceston, is fixed in the agreement al £82 ls. a ton, and a retail price of lOd. per lb. provides a profit margin of 13i per cent, on this wholesale price. This price has operated from 14th May, 1956. Prior to that date the wholesale price was £73 16s. lid. a ton, which was equivalent to a retail price of 9d. per lb. The increase of the equivalent of Id. per lb. in the retail price was agreed to by the two governments after a thorough investigation into cost increases of the industry subsequent to the previous price increase in October, 1952. The agreement contains a clause amending the Sugar Agreement 1951-1956 to authorize the price increase as from 14th May, 1956.

Another alteration contained in the current agreement as compared with the Sugar Agreement 1951-1956 concerns the method of financing the Fruit Industry Sugar Concession Committee. Under the previous agreement the Queensland Government, on behalf of the raw sugar industry, paid the committee £216,000 per annum. At the commencement of the agreement on 1st September, 1951, the committee's reserve fund stood at just over £1.000.000. and the agreement contained a provision that the monthly instalments would not commence until the fund was reduced to less than £500.000. This reduction took place at the end of April, 1954, and the monthly contribution by the sugar industry has, therefore, been paid from 1st May. 1954. However, due to heavy payments of export sugar rebate and special grants to the processed fruit industry, the committee's expenditure has exceeded £216,000 per annum and it has been necessary to meet the excess from the committee's reserves, with the result that, at 31st August, 1956, the fund was reduced to about £150,000. It is obvious, therefore, that the committee cannot continue to pay rebates as provided for in the agreement unless it receives increased contributions from the sugar industry. Accordingly, the new agreement provides that the committee shall receive a contribution of £120,000 per annum and in addition shall be reimbursed actual disbursements of export sugar rebate. On the basis of the present rate the export sugar rebate will total about £250,000 per annum. So the sugar industry's contribution to the Fruit Industry Sugar Concession Committee will be approximately £370,000 per annum as against £216,000 under the previous agreement.

Exporters of products which contain sugar at present receive a rebate which reduces the cost of sugar to the lower of (a) the lowest c.i.f. & e. cost in Australia of foreign sugar landed duty free; or (b) the estimated cost of refined sugar in Australia based on the price of raw sugar f.o.b. mill port received for sales of surplus Australian raw sugar for export. The first alternative ensures that exporters pay no more for their sugar than they would have to pay if they imported the cheapest foreign sugar duty free, and the second results in the raw sugar industry receiving no more for sugar used in goods exported than it would receive if the raw sugar were exported. The Government considers that this arrangement, which is included in the agreement, is equitable to exporters and to the sugar industry.

The agreement undoubtedly gives the Australian sugar producers a monopoly of the Australian market, and honorable members may well ask why the sugar industry should be placed in this privileged position, and why, in lieu of an import embargo, it should not be protected by import duties at rates based on the principle of reasonable competition with overseas suppliers as is the case with other Australian industries. The fact is that the world sugar trade is characterized by subsidies, high tariffs, and import embargoes; hence the free market for sugar is very much restricted. As a result of the relatively small proportion of the world production which is traded on the free market, the so-called world market price is subject to frequent and wide fluctuations. It would be impracticable, therefore, to determine equitable rates of import duties which would afford reasonable protection to the local industry. Rates of import duties considered equitable to-day could in a few months prove quite inadequate, or, on the other hand, due to a rise in the world sugar price, could become excessive. Under the present system, the Commonwealth and the Queensland Government, by agreement, control the price of sugar to the Australian consumer. Usually the domestic Australian price is higher than the world price, but from 1942 to 1952 the domestic Australian price was well below it.

The sugar industry has an obligation to maintain a high standard of efficiency and to keep pace with modern production techniques. I am satisfied that the industry is fulfilling its obligations in this respect. Various Commonwealth governments since federation have recognized the necessity and value of an efficient sugar industry, and their confidence in the Australian industry has not been misplaced. The protection afforded to the industry has resulted in the Australian community and sugar-using industries being assured of a plentiful supply of sugar at all times and in exports of raw sugar earning some £25,000,000 a year.

The Sugar Agreement 1956-1961 now submitted continues the arrangements contained in earlier agreements and will, I am convinced, be of mutual benefit to the Australian sugar industry and the people of Australia. I commend the bill to the House.

Debate (on motion by Mr. Edmonds) adjourned.

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