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Thursday, 4 June 1970

Mr MacKELLAR (Warringah) - As this is my initial contribution to debate in this chamber I would like to start by thanking the electors of Warringah for giving me the responsibility of being their representative in this place. I would also like to thank all those people who worked so hard to ensure I did have that responsibility. As we know, the situation obtaining in Australia's wheat industry over the past years has given rise to an immense amount of discussion, both objective and the complete reverse. In assessing the proposed legislation before the House 1 think it is fair to review the objectives and the mechanisms proposed to achieve these objectives as they affect not only the non-human problems of disposing of massive wheat surpluses in this country but just as importantly, as they affect the very human problems facing Australia's primary producers. In our pursuit of a realistic trading situation we must not forget our pursuit of a fair deal for those engaged in primary production, and vice versa.

Looking very briefly at the development of Australia's wheat industry since the Second World War, we have a primary industry in which steps were taken to stabilise the price received by the producer and to control the internal and external marketing of wheat by a central authority. A minimum guaranteed price for wheat consumed in Australia and for a significant proportion of the wheat exported was agreed upon. A stabilisation fund was established by means of a tax on wheat exported when the export price was higher than the guaranteed price. But if the revenue accumulated in this way proved to be inadequate, the Government agreed to underwrite the cost of the scheme. Looking at the price guarantee agreed upon, to my mind it is of great significance that this price was related to a cost of production which was to vary according to an index of production costs for each season. I hope the House will excuse this necessarily brief excursion into history but I believe it is essential if we are to fully appreciate the current situation. Broadly, the aim was to ensure economic security for wheat growers and a No to stabilise export earnings. More importantly, perhaps, comes the next question: What has been the effect of the legislation?

Initially the plan produced a situation where home consumption prices and guarantees were less than export prices. This had the effect of allowing industry surpluses to be paid into the stabilisation fund. But it also had the effect of discouraging new entrants into the industry and of discouraging those already growing wheat from growing additional quantities. This situation was added to during the early 1930s with land being set aside for wool production. However, since the early 1950s woo] prices have been dropping as has the export price of wheat. At the same time home consumption prices have been moving steadily upwards as the guaranteed prices have risen in reaction to increased production costs. In this situation the scheme clearly gave no warning to growers to grow less wheat. In fact, it encouraged wheat production regardless of whether a market existed or would continue to exist. This incentive to grow more wheat has been accentuated by such factors as low wool prices, improved technology both in machinery and through improved varieties and cultural methods, development of pasture improvement methods allowing conversion of grazing lands to arable lands, and the drought of the mid-1960s which encouraged land owners to grow a quick cash crop with a guaranteed price to alleviate their urgent financial problems. The combination of these factors produced a situation where wheat acreages grew from less than 10 million in 1956-57 to 26.7 million acres in 1968-69.

To add to the total amount of wheat being produced, the average yield per acre has been rising. Despite the seasonal fluctuations which have occurred, production, as we know, reached 540 million bushels in 1968-69. Although 1 believe there are certain important aspects of the stabilisation plan which are open to a deal of question, obviously the situation produced by the combination of factors which I have mentioned since the mid-1950s was capable of being resolved so long as the export markets for wheat continued to grow. The efforts of the Australian Wheat Board in securing additional markets during this period of greatly increased home supply must be recognised and applauded. However, it is in the context of world supply and demand patterns of wheat that I believe we must look at the present situation existing in Australia.

While wheat growers can justifiably argue that the level of protection or subsidy which they have been granted has been reasonable - particularly when one bears in mind the levels of protection given to certain secondary industries, some of whose products primary producers must use of necessity, and also keeping in mind the real economic problems confronting the man on the land - the fact that wheat surpluses have reached a level not before envisaged, and most importantly do not look like readily being disposed of, has of course given rise to a great deal of alarm. 1n making any statements about fu true markets we should look, as I have said, at the total world situation. Firstly, let its look at the wheat production situation. No. 32 of the 'Wheat Situation1 published by the Bureau of Agricultural Economics in late 1969 has this to say:

World wheal production in 1964 h climated to have continued at a very high level, only slightly below the 1968 record of 328 million metric Ions. The appreciable declines expected in output in the United Stales. Australia ami' Argentine will be largely affected by increased harvests n other countries, including Canada. l-rance, India anil Pakistan. All main producing regions shared in the increase of 25'iv- iti world wheat production thai occurred between 1 963-1968. but the United States, Canada and Australia have taken steps aimed at containing the level of production. The expansionary trend thai has occurred in the other main producing regions, however, seems likely lo continue, although annual harvests will be affected by unpredictable variations in seasonal conditions. The USSR. India, and Pakistan are placing considerable emphasis on ibc expansion of agricultural production and. at present, this expansion is centred mainly on cereal crops.

The Organisation for Economic Cooperation and Development in its publication 'Agricultural Projections for 1975 and 1985' deals with the production and consumption of major foodstuffs in Europe, North America, Japan and Oceania and predicts that grain production in the OECD area will rise substantially by 1975 and again by 1985. The survey additionally predicts that North America will substantially increase its exports and that production will rise in Western Europe, the United

Kingdom and Australia. Total world production is estimated to rise from approximately 112 million metric tons in 1961-63 to approximately 150 million metric tons in 1975 and a massive 170 million metric tons in 1985.

Mr Deputy Speaker,I think it is most important too for us to be aware of, and to assess the effect of, the so-called 'Green Revolution' in Asia. It is plain to see that the acreage of high yielding grain varieties in Asia is rising rapidly. It has risen from 200 acres in 1964-65 to 20 million acres in 1967-68, and this acreage will continue to rise. In addition, wheat yields are rising. India's yield rose from an average of 13.6 bushels per acre in 1964-65 to 17.5 bushels per acre in 1967-68 with similar climatic conditions prevailing. Grain production in India rose 35% for wheat, 26% for rice and 40% for maize over the same period. During this time, despite tremendous obstacles, the acceptance of improved agricultural technology by the farmers has been marked. To my mind, Mr Deputy Speaker, this is of particular importance because it has always been promulgated that peasant farmers would not accept improved agricultural technology, and in fact they are. Ceylon, Thailand, the Philippines, Malaysia and Indonesia also report increased home production. We should try to assess the probable world demand for wheat. The publication of the BAE, to which I have already referred, states:

World trade in wheat and flour fell in 1968-69 continuing the trend"* evident in the previous 2 years. Marked reductions in imports into India and Pakistan and also in those by Mainland China and the Soviet Union were the main cause of the decline in world trade in 1963-69.

However, the review suggested:

No further decline in world trade of wheat and flour is expected in 1969-70 and Australia's exports should at least be maintained at the 1968-69 level.

The review, in its summarised outlook, states:

While some countries in the traditional major importing regions of Western Europe are expected to import more wheat in 1969-70 compared with the previous year, the trend in imports is likely to be influenced both by the slow growth in demand and increasing availability of supplies from domestic crops.

The OECD projections, to which I previously referred, make the prediction that per capita human consumption of grains is tending to decline in almost all countries as incomes rise, so that total human consumption in the OECD area barely increases up to 1975 and again up to 1985. It goes on to state:

On the other hand, the consumption of grains by livestock is rising sharply as a result of increased output of livestock products.

Mr Deputy Speaker,other authorities have similar points of view, and we can find numerous considered warnings of persistent surpluses during the next 10 years if the present trends are allowed to continue.

In addition, we should especially be aware of the situation in China, which is a large and reasonably consistent buyer of our wheat. It has been suggested that China has purchased wheat from Western countries in order to accumulate locally produced rice for export. During the 1960s China was able to import low priced wheat and export more highly priced rice. With the export prices for Chinese rice now noticeably lower and the increasing selfsufficiency in rice production amongst its Asian clients, this source of revenue for the Chinese could be greatly affected. The implications for Western exporters of wheat to China are obvious. In Australia, with increased acreages, better technology and good seasons in 3 successive years, carryover stocks were 80.5 million bushels in 1967, 51.8 million bushels in 1968 and approximately 340 million bushels at 1st December 1969.

Whilst 1 would be the first to argue that Australia should maintain some surplus of wheat in stock, both to take advantage of any international market opportunities which may occur and also for domestic feed requirements in times of drought, obviously the levels of surplus, with attendant storage costs and amounts of interest foregone, have reached alarming proportions. Briefly then it would seem that the major exporting countries have the ability to supply enormous quantities of wheat to a market which is continually endeavouring to become self-sufficient, and showing every evidence of the capability to do so. Obviously any responsible government must take action to ameliorate the difficulties which at present bedevil the wheat industry in Australia. There is no doubt that the action taken to reduce supply was not only responsible but a brave and necessary decision.

That the Governments decided to adopt a quota system is now a matter of history but with the long term outlook in mind I think the action taken needs careful attention. Whilst there is no doubt that the imposition of quotas will have the effect of reducing the supply of wheat, I believe that the long term outlook of the industry could be jeopardised if the present system were retained for too long. I would be reluctant to see a situation arise where efficient producers were penalised in order to keep inefficient producers in production, or where those growing readily saleable wheat were penalised in order to retain in production those growing a type of wheat more difficult to sell. At the same time 1 think we must recognise, as the Government has recognised, that a very real human problem exists for those people on the land who have invested large sums, in both capital and human endeavour, in their properties.

We need a system whereby the harsh effect of economic reality is slowed down to give people affected by industry overproduction of their product time to adjust to the changed circumstances. At the same time, the necessity for this adjustment must not be masked or excessively slowed by over-protective legislation. To avoid potentially harmful effects on the future of the wheat industry in Australia I believe that there is a strong case to be made for making quotas transferable. Nontransferable quotas have the effect of inhibiting the industry from adjusting to technical and economic changes, with the consequent effect of inefficient production and misallocation of resources. Non-transferable quotas ignore the fact that some producers have readily available alternatives to wheat growing whilst others have not.

On the human level, those more dependent on wheat for their income would be less affected by the system if quotas were made transferable. They would be less restricted in the amount of wheat they could grow as they would have the opportunity to acquire additional quota allotments. Both economically and in welfare terms then I think transferable quotas would be beneficial. At the same time 1 believe the problem of surplus wheat could be more effec tively tackled if a more realistic price were agreed upon in allowing the Wheat Board to sell denatured wheat for stock feed and industrial purposes. To my mind the minimum prices are unrealistically high and serve to perpetuate the 'unofficial' wheat market at present operating across State borders.

In the long term 1 believe that we should not be perpetually wedded to a quota system for wheat production. For one thing the costs of administration by the States of the quotas are known to be heavy. The main areas of extra costs have been brought about by transference of senior staff from their normal duties to quota administration duties; extra hiring of the Wheat Board computer; extra staff hires, both on a full time and a part time basis; and printing and stationery to maintain the extra records necessary. The Bill before the House recognises that these costs should be borne by the industry'. This is an extra cost that the industry could well do without.

After the urgent, immediate problems of over-supply have been ameliorated, I believe the initial payment made to growers should be re-assessed with a view to its reduction. If it were reduced, the incentive to grow wheat, particularly to those who were the least efficient producers, would be greatly weakened. In addition, a more realistic price in comparison to world prices could be arrived at and a total production, without restraint, more closely attuned to demand would result. In other words the unwanted property of the scheme - that propensity to generate surpluses - would be curbed. Finally, I believe an urgent investigation should be undertaken to arrive at a system of grading which encourages the growing of readily saleable wheat whilst discouraging the production of those types facing a lesser demand.

I also would like to mention briefly the concept that we should give our wheat away to those countries with ill fed people, both as a humanitarian gesture and as a means of ridding ourselves of our surpluses. Although weil intentioned this suggestion ignores some overriding facts. Firstly, while there are many semi-starving people in the world, in the main their dietary lack is protein and increased amounts of carbohydrate as supplied by wheat does little to alleviate their condition. Secondly, even if the wheat was given free of charge to such countries the freight charges alone would make the wheat more expensive to the final consumer than would be the cost if the wheat was grown in the country itself, particularly as the off-loading facilities and internal transportation networks of most underdeveloped countries are such that the physical problems of moving the wheat in any worthwhile quantity are insurmountable.

In any discussion on wheat we should keep in mind always that it is - as with most of our agricultural production - a commodity which mostly has to be sold on the export market and therefore the amounts sold and the price received depend on factors largely beyond our control. In all our actions, therefore, the overall objective must be the healthy continuation of an industry capable of competing on world markets; an industry which has contributed, and will continue to contribute, provided sound and realistic policies are pursued, to the nation's economic welfare.

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