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Thursday, 4 June 1970

Mr KING (WIMMERA, VICTORIA) - In other words, the honourable member would upset the whole of the Wheat Board by differentiation?

Dr Patterson - No. Do you not agree with that?

Mr KING - There are big wheat growers, there are medium wheat growers, and there are small wheat growers. How do you differentiate? These things are all very confusing. If I had plenty of time I could go on and quote many more of these remarks. I want to know just what is the policy of present Opposition members in relation to wheat. I think it is pretty fair to say that they are so confused amongst themselves they do not know where they are going. They make conflicting remarks. Consequently the wheat industry as such certainly has no confidence in them. The honourable member for Riverina this afternoon made some reference to the New South Wales Minister for Agriculture. He quoted from a Press statement. I presume he quoted the Minister in context. I cannot dispute this because I do not have the Press statement in front of me. He said that the introduction of quotas will hurt. Of course it will hurt those wheat growers who are being affected. It hurts them because they are not growing the quantity of wheat that they wanted to grow. Of course it will hurt them. But it would hurt them much more in the long term if we did not have some form of quota and we just gave them an open go. What would the position then be?

The honourable member for Dawson agrees that we must limit the amount of advance that we can give the wheat industry. If we were permitted to grow 500 million or 600 million bushels each year and we were able to sell only half of it, what would happen? We would have a storage problem. We would be spending millions of dollars on storage. As I said, the honourable member for Dawson, if he were in office, would not permit an advance from the Reserve Bank to cover it. What would happen? There would be no advance at all after a few years. So I think that it is about time that Opposition members brought themselves up to date. The honourable member for Riverina also said that quotas were initiated from Canberra but implemented by the States, or words to that effect. I want to quote from a statement attributed to a Mr K. McDougall, the then president of the Australian Wheatgrowers Federation. It was published in the 'Australian Financial Review' of 6th May 1969. The first 2 sentences of that report stated:

On 13th March, the Australian Wheatgrowers' Federation decided to restrict the production of wheat in Australia. The initiative was taken without prompting by the Commonwealth or State Governments.

Mr Grassby - That is not true.

Mr KING - The honourable member for Riverina says it is not true. I think he should do a little more homework. Of course the initiative was taken by the Australian Wheatgrowers' Federation, which is a very responsible body. The Minister for Primary Industry has said on numerous occasions that the initiative was taken by the Federation. Yet the honourable member for Riverina says it is not true. To my mind this is another occasion on which he is completely wrong, completely out of step with the legislation and completely out of step with the views of the people. Let me return to the Bill. Of course, we all realise that this Bill is rather simple and is confined to two issues. It is confined on the one hand to the question of implementing virtually complementary legislation as a result of the introduction of quotas by the State governments, and on the other hand giving the Australian Wheat Board permission to dispose of wheat other than for human consumption within Australia at a price below 171c per bushel, which was originally set out in the stabilisation plan, down to a guaranteed price of not less than 145c per bushel. They are the fundamental purposes of this Bill.

As I said, the quota system is a very contentious issue in the minds of some people, particularly those people who try to ridicule the Minister for Primary Industry, the Government and the industry for which we are trying to implement something that it believes to be worth while. The Government's position is perfectly clear and always has been. While the Liberal-Country Party coalition remains in office it will certainly continue to be clear. We recognise the views of the industry. In this instance, of course, it is the Australian Wheatgrowers' Federation. It put forward the plans to introduce quotas and it laid down the guidelines. It even went as far as to suggest to the various State Ministers for Agriculture and the Minister for Primary Industry the quotas for each State. It is entirely up to the States to implement the suggestion. 1 believe they have done a reasonable job in this regard. As a Victorian, naturally I am not satisfied with the quantity of wheat that the Federation allocated to Victoria. But that is history and I will leave it as such.

I think the next question we have to ask is: Why do we have quotas? It appears that honourable members such as the honourable member for Grayndler do not have a clue as to why we introduced a form of restriction. They seem to forget that in years gone by the average production of wheat in Australia ranged between 200 million and 300 million bushels. It was just over 2 years ago that we reached a level of about 540 million bushels. However, we could dispose of only approximately half this amount. Yet some of these people seem to think that we can just go on continually increasing production. This of course is completely impracticable. That roughly is the situation.

The next question we must ask is: Why did the industry expand? This was brought about by 3 factors. The first, naturally, was the general development programme brought about not by the Commonwealth Government saying: 'You will grow more wheat', as the honourable member for

Grayndler tried to suggest a few minutes ago, but simply because of the economic policy of this country. People have been encouraged to develop land and produce wheat and other commodities. The second reason is that certain States had rather bad seasonal conditions. We had severe droughts and when the seasons came good the people who had been affected endeavoured to get a quick cash crop and they grew a bit more wheat. Of course, the third reason is very simple, and that is the low wool prices. Many honourable members opposite, of course, would blame the Government entirely for this. They forget that we are working under a free auction system.

The next question we should ask is: What will be the results of this curbing? It will affect many wheat growers financially, particularly the younger grower, the new grower, the small grower and the grower who has no alternative but to grow wheat or cereal. I am fully conscious of this, particularly in the State of Victoria. There is a huge tract of country in Victoria for which there is literally no alternative but cereal growing. Many of these properties have now become uneconomical because the quantity of wheat that they are permitted to sell is restricted. We must remember that in many instances the newer and younger growers have very large overdrafts. They also have to continue to pay rates. Even though the income may not be there, the rates still have to be paid. Consequently they are finding themselves in a rather difficult financial position.

I have any amount of correspondence in my files to prove this. Many growers are in real financial difficulty. One fact that proves this is that land values in the wheat area in Victoria have fallen by about 50%. I know of cases where values have fallen not quite 50% and others where they have fallen below 50% of the value of a few years ago. Perhaps indirectly this is a good thing but we must consider the liquidity of a property. A person may have paid $100 an acre for a property now worth S50 an acre. He finds it pretty difficult to borrow or to retain his overdraft at a rate that may be higher or equivalent to the present sale value. This concerns a lot of people. It does not apply to most of the trading banks, because they were very conservative in their allocations of overdrafts some years ago when people were purchasing properties. But there are many wheat growers who borrowed finance privately. Unfortunately many borrowed in excess of the present day value of their properties. In many cases the equity in these properties has almost disappeared. In some cases it has completely disappeared and the wheat growers concerned are in real trouble.

Coupled with this is the fact that many wheal growers have the added expenditure of storing the wheat until such lime as the Grain Elevators Board or the receiving authority in the various Stales can receive it. I have with me a letter from a very reliable constituent of mine in which he has set out the extra cost he faced through having 10 store wheat for only a very limited period. This matter relates to a request that the former honourable member for Riverina, other honourable members of my Parly and I made to the powers that be in an endeavour to get them to erect more community wheat storages. We believed, and we still believe, thai this is the most economic way of storing wheat. I can prove this. It cost the constituent to whom I have referred $2,450 to store 5,500 bushels of wheat. He has se. out the various rates and expenditures in his letter. The Minister for Primary Industry is well aware of these additional costs because I have presented details to him. So also is the Treasurer (Mr Bury). That letter is only a sample of others I have put away in my liles.

The question is: What alternative faces these people? Either they have to gradually go broke or they have lo try to dispose of their wheat in the best way they can. I do nol dispute the statement by the honourable member for Riverina (Mr Grassby) that there have been over the border sales. We know there have been over the border sales. But I do dispute his statement thai some 50,000.000 bushels of wheal has been traded over the border, lt is expected that many wheat growers will do this sort of thing because they have little or no alternative. The burning question is: Whit is the danger of this practice? The first thing is that they will kill the principle of trying to reduce wheat production in Australia. Naturally producers who do this avoid the contributions being made by the remaining wheat growers to the various research programmes within the wheal industry. Far more important than either of those things is the breaking down of uV principle of wheat stabilisation. That is the point that concerns me and, 1 am sure, the wheat industry as a whole.

I have mentioned just those 3 anomalies created by over the border sales. Naturally we have to do everything possible to prevent such sales. However, section 92 of the Constitution prevents interference with over the border sales of any commodity, but we still have to try to find a solution to this problem. The canned fruits industry created a precedent some time ago by introducing a levy on the production of cann a) i'm l: All the canned fruits people were issued with licences before they could operate I am informed thai this system is running satisfactorily. What I want to know is w.iv this same principle cannot be applied to the wheat industry. A proposal at present being discussed within the wheal industry is the introduction of a levy or a duly - call it what you like - of up to about 50c a bushel on ali wheat sold. Only licensed receivers could purchase wheat. Persons would have to register as licensed receivers and they would be responsible for the payment of thai 50c par bushel. Consequently, if receivers had to pay 50c per bushel to the Australian Wheat Board they would not be able to pay a very high figure to the grower. That is the broad principle involved. I will not spell it out. Suffice to say that the return from the levy would go to the Australian Wheat Board which would then in turn pass it to the wheat pool for that season. Eventually it would b. paid back lo the individual grower. I believe (hat this method could well succeed provided that we gel round any constitutional problems that may be involved. Naturally I want the Minister to have a very close look at this proposition when he has the opportunity.

The second and final proposal involved in this legislation deals wilh the authority of the Australian Wheat Board to sell wheat for purposes other than human consumption in Australia at a Lower price than that for wheal sold for human consumption. I agree that this is essential. This wheat would be used mainly for stock feeding, lt would bc impossible lo compete with other products, such as the coarse grains, if this wheat had lo be sold at the old price of $1.71. However I issue a warning. There must be a minimum price. I think all honourable members agree that to a large degree the price of coarse grains is based on the price at which you can purchase wheat. I think it was the honourable member for Grayndler who suggested on behalf of the Opposition that we reduce the price of wheat. This sounds very good in theory. We would be able to get rid of some wheat, but the principle would be a disaster to the industry. The price could eventually become as low as 50c for a bushel of wheat. Consequently oats and barley would be selling at a very much lower price than they are being sold today. I issue that warning. My interpretation of the Bill is that it will allow the Australian Wheat Board to bring the price down to $1.45 as a minimum. The honourable member for Dawson indicated that he would move an amendment at the Committee stage. He said that he wanted to have no minimum. If there is no minimum the principle will bring down the price of coarse grain so far as to ruin the whole industry. If we can sell half our commodity at a reasonable price surely that must be better than selling it all at half of a reasonable price, lt is as simple as that. I have much pleasure in supporting this legislation.

Mr KELLY(Wakefield) [5. 12 J- 1 find myself in some difficulty in this debate. Mine is a rural electorate and most of the people I represent are wheat growers. I was uncertain whether 1 should set out to get more votes from my electorate or to tell the people of my electorate and the House what I think. With some difficulty I weighed up this matter. I have decided that my electorate and the House, being of the quality they are. deserve to hear what I think and rot just something that will make me more popular. It is true that the wheat industry is in what might be called a mess. The signs of the mess are that we are growing more wheat than we can sell. There are 2 fundamental or recognised ways of stopping people growing more than they can sell. One is to lower the price and the other is to have some kind of government quota or control to prevent more wheat, for instance, being grown.

T am glad that the Minister for Primary Industry (Mr Anthony) paid a tribute to the industry for its courage and for taking the unpopular step of applying quotas. I would like to add my congratulations for the courage that the Minister has shown in doing something which was unpleasant and inevitable. But the fundamental fact we have to realise is that the actions of the past made the actions of the present inevitable.

There has been a lot of buck passing during this debate. Everybody has been blaming everybody else for the situation in the wheat industry. I guess that people get some satisfaction from this. The one I blame is myself. 1 think that 5, 6 or 7 years ago I should have shown more wisdom and more courage in pointing out to the industry that it was heading on a disaster course. I tried this on some occasions. One occasion was a meeting of wheat growers in my electorate. There was a discussion on whether the stabilisation plan should be increased. I remember Mr Tommy Stott, who is no mean performer at these meetings, saying: 'If I can find a Federal member of Parliament who is not supporting this application I shall deal with him'. I remember getting up mildly in the back of the hall and saying: 'There is no need to get into a state, lt is me. I think you are making a fundamental mistake. If you continue on the course you are on it will inevitably lead to increased quantities of wheat and wheat being grown in areas where it has never been grown before, and it will become increasingly difficult to sell the crop'. There was a painful pause in the meeting. Then everybody with one accord devoted the rest of the meeting to knocking me into shape. If I had continued on that course and convinced the industry at that stage that it was doing something fundamentally wrong 1 would have been able today to turn round to everybody in the House here and blame them. But just because I did not continue on that course, 1 cannot do that.

I will just look at the problem as I sec it now. Everybody in this House pays lip service - and means it - to orderly marketing. But it is worth remembering that orderly marketing should be divided into 2 components. We have the orderly marketing component of single authority selling by the Australian Wheat Board. I would like to pay a tribute to the Board for the amount of work it has done and for the difficult job it has done and how it has done il in recent years. But there is the other component, the stabilisation component, which is a different matter. I heard the honourable member for Grayndler (Mr Daly) claiming credit for the stabilisation scheme for the Labor Party. It is true that we have all supported it. I above all should have perhaps been more critical in the past. There is in this stabilsation plan, despite all its advantages to the industry and its political advantages, the inevitable problems that stabilisation plans always have unless they are governed with more courage than usually have. The first component in the stabilisation plan is the cost of production. This is a figure to which we have all paid lip service. All or us in the industry have known that it has been a wrong figure. I knew it and I think everyone else in the industry did. But we have become so used lo beating the cost of production drum that we do not know how to stop.

We have the stabilisation plan with all its advantages of continuity and certainty of income. But it has within it certain basic problems, lt encourages people to keep on growing wheat as the market falls and as the demand falls. Because there is a stabilisation component there is a certainly that the grower will be paid for his wheat. When h's component of stabilisation is fixed to a cos; of production which is higher than the true cost of production there is a green light for increasing the production of wheat. lt is true that the wheat industry, possibly more than any other industry, has a right to demand to have its cost of production covered. Secondary industry demands it and gets it through tariff protection. We say that we have an equal right to that.

There is in the public relations credit balance, if we can call it. that, a considerable amount of money which the farmers have contributed to the economy in the past. There is some disagreement about how much it is. lt is hard to measure how much it is. The honourable member for Dawson (Dr Patterson) said that it is $400m. The honourable member for Riverina (Mr Grassby) said that il is S300m. I do not know what it is. But I know there is plenty of money in the public relations credit balance, lt is true that equity demands that we ge: assistance, that we get stabilisation and we gel a subsidy. But the fundamental fact is that it does not help us in the end. It does us harm in the end. Let me tell the story of a chap being rushed to hospital in an ambulance after an accident and saying in a muffled voice through his bandages: 'I was in the right anyway'. But he was still going to hospital. He was in the right, maybe, but it did not help in the end.

What is wrong with the wheal industry? One of the problems is that the home consumption price is too high. I should like to see it come down. I realise that what I am saying is not going to be popular in my electorate but the home consumption price is too high and we have inbuilt in it an incentive for black marketing. People say: Farmers ought not to be like that; they ought not to black market: they ought to be a different kind of people". I am a farmer and 1 have the same kind of cunning that a lot of my farming friends have. When I am on a tractor at night sowing a crop r have a big start on any civil servant who is sitting in an office trying to work out some way of stopping black marketing, because nothing fertilises the mind quite so much as being out in the middle of a paddock at night alone sowing wheat and not being quite sure how you can sell il.

There is another illustration of this aspect. There is something inevitable about difficulties when governments are involved. Honourable members probably remember the story of 2 doctors who were exchanging experiences during the war. One doctor said to the o.her: 'I have 3 cases of meningitis in my area' and a chap sitting behind him tapped him on the shoulder and said: Look, I'll take the lot*. There is this kind of inevitable pressure once we fix a difference between prices, so I should like to see the home consumption price come down to some extent. Quotas now have become inevitable. I should have made the point earlier that it is not true, as some people say. and as some people have tried to pin on me, that stabilisation is the only component that has led to (he production of increasing quantities of wheat which we have increasing difficulties in selling. Certainly the fall in the price of wool is a large component but it is also true that stabilisation encouraged us to continue to increase wheat production at the very time when we ought to be cutting it hack. This is a fundamental thing that we did wrong that

I, perhaps above all, did wrong. I am not trying to make political capital by blaming someone else. Now we have quotas, how do we make them work?

The easy way to get votes out of this exercise is to say, firstly, that we are going to protect the small farmer, because obviously there are more small farmers than big farmers and so there are more votes in the exercise. So, let us protect the small farmers they say. Let me give another illustration. I have a friend in England who is a big farmer. He comes out to Australia fairly regularly to avoid - I think that is the word he uses - income tax. Every time we exchange our figures and when he shows me great swags of subsidy components in his figures I say to him: 'Look, you cannot justify this kind of assistance from the government' and he always replies: Look, Bert, if there are enough small struggling farmers around me I should be all right.' We cannot solve the social problem of the small farmers unless we are terribly careful, cunning and capable, without encouraging the big farmers unnecessarily.

The other way to get votes is to say that we are going to help safeguard the position of the traditional wheat grower. The argument runs something like this: He has subsidised the economy in the past, therefore it is he who should receive most of the subsidy from the Government in the future. That sounds convincing, except that we will probably find that he has died in the meantime and someone else is running his farm. More important than this, an industry like wheat growing has to change continually. It is an efficient industry which is producing the cheapest wheat in the world because it has changed to meet changing demands and to meet different kinds of tractors, different kinds of fertilisers and different kinds of farming techniques. One of the great dangers in the quota system is that it may not be sufficiently flexible. Goodness knows, the quota system will be difficult and unpopular, but we have to make it flexible and we must not set out to safeguard, at any price, the position of the traditional wheat farmer, because the traditional wheat farmer has always changed in the past and if he does not change in the future it will be the kiss of death for the industry.

All of the things that I have said will bc unpopular but I think it has been necessary to say them. I have been glad to hear many people say. and I echo their statement, that we must evolve a system of transferable quotas. As an industry we must stop asking the Government to supply us with storage at Government expense. I know my farmers, and I know myself. If storage is provided we will fill it. So we have to stand firm against pressure for additional storage. There is almost nothing in what I have said that will help me win votes in my electorate. The one thing I hope will come out of what I have said is that the House and the industry will learn that there are dangers in the way we have acted in the past, so that the next time we come to an industry such as this we will look a little more clear eyed at it and not be so quick to seek popularity. Here again I blame myself before anybody else because I should have warned the industry 5 years ago that it was heading for trouble. In the meantime we have got ourselves in a mess and the industry and the Minister have set about getting us out of it. I wish them the best of luck i a very difficult assignment and I can assure them, particularly the Minister, of my support. The Minister has my understanding, sympathy and admiration for the job he is doing.

Debate (on motion by Mr Pettitt) adjourned.

Sitting suspended from 5.28 to 8 p.m.

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