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Wednesday, 10 June 1970

Dr PATTERSON (Dawson) - The principal object of the Bill which is before the House is to amend the Wool Industry Act in certain respects. The wool industry is without doubt the most efficient major export industry in Australia, but it is in serious economic trouble at present. In his second reading speech the Minister for Primary Industry (Mr Anthony) has set out in quite elaborate terras the various amendments which are proposed. The Opposition supports in general the Government's proposals. This Bill is a move in the right direction in that it will clear up some of the anomalies which have crept in over the years, particularly in respect to the allocation of funds to the Commonwealth Scientific and Industrial Research Organisation and the Bureau of Agricultural Economics for research purposes.

The Bill has 3 main objectives. The first objective is to provide a greater amount of money for research and promotion purposes. At the same time there will be a reduction in the contribution which wool growers make to the research fund. The reduction will be from 2% of the gross proceeds of the clip to 1%. The second objective of the Bill is to change the procedure adopted in relation to the appointment of the Chairman of the Australian Wool Board and the 3 members of the Board with special qualifications. The third objective is a widening of the borrowing powers of the Wool Board itself in the field of the reconstruction of wool stores and the construction of integrated wool complexes.

I shall specifically deal with certain aspects of the proposals in the Committee stage. I shall be moving a minor amendment in the Committee stage with respect to salaries and travelling allowances being determined by the Parliament and not by the Governor-General. This amendment is consistent with other amendments which have been moved and accepted in this House recently. I shall move this amendment because I believe that the Parliament and not the Governor-General should decide the level of travelling expenses and salaries of people employed by statutory authorities.

One of the provisions of the Bill is for the actual determination of the apportionment of money contributed by the wool growers and the Government for wool research and promotion purposes. The Bill provides that the apportionment will be determined by the Minister for Primary Industry after consultation with the Australian Wool Industry Conference. At present the apportionment of the money is made by the Minister on the recommendation of the Conference. Another aspect of the Bill is that the Minister for Primary Industry will appoint the Chairman of the Wool Board after consultation with the Board itself. I do not know what the term after consultation with the Board' means in terms of the legislation and the application of it. I submit that this expression is almost meaningless. I suppose it means that the Minister for Primary Industry will have to consult the Board before deciding who will be the Chairman. It would seem that the Board has no influence whatsoever - no legal influence, anyhow - as regards the appointment of the Chairman.

The same argument applies in regard to the appointment of the 3 members with special qualifications to the Board because these 3 members with special qualifications will be appointed in the future by the Minister for Primary Industry after consultation with the Wool Industry Conference. Really all this provision means is that the Minister for Primary Industry will have to consult with the AWIC before appointing the 3 members with special qualifications. Once again I do not think that the AWIC will have any legal right in this matter.

Another provision of the Bill is that the allocation of research funds to the CSIRO will be determined by the Minister for Primary Industry in consultation with the Minister for Education and Science. The Minister for Primary Industry will determine the level of grants to the Bureau of Agricultural Economics. This is, of course, desirable because what it means is that the officers employed in the CSIRO and in the Bureau of Agricultural Economics are responsible to the Minister for Primary Industry through their respective divisional chiefs and permanent heads. They are, in practice, responsible at present but really the master who decides whether or not this type of research will continue fa the Australian Wool Board. It has almost complete say as to the amount of money to be allocated to the CSIRO and the BAE. However this particular provision in the Bill gives the Minister for Primary Industry the right to allocate funds to the CSIRO and the BAE; in the first instance in consultation with the Minister for Science and Education and in his own right in respect of the BAE. This is to be applauded because not only does it give security of tenure to the employers in both organisations but it also gives them greater freedom. They do not have to set out deliberately, as one might say, to be careful that they do not offend the Wool Board or certain members of the Wool Board. I am not suggesting that this would have any influence on the allocation of funds, but it is implicit in this type of legislation.

Earlier I said that the Wool Industry is the most efficient large-scale exporting industry in Australia. It also is the industry which, in terms of paramount importance, is the one which is in the most economic trouble today. The importance of the wool industry is hard to measure in terms of the economy. It is difficult to explain simply how important it is. One of the best criteria for illustrating its importance is the contribution it makes to our export income which is the economic lifeblood so important to the health of our society. Approximately 25% of the total of export earnings from all sources originates from the wool industry. Last year the value of its exports totalled $853m. This, in itself, is not the end of the road because in arguing why it is essential that the Commonwealth Government must support to the hilt the wool industry one could ask what would happen if the wool industry collapsed. One of the best ways to answer the critics of the wool industry is to take an extreme and absurd case and ask if we abolished all tariffs and subsidies which industries in Australia would survive in their own right. Not too many would survive. The wool, grains, beef and mining industries would survive, but not too many other industries would survive. I doubt whether I could instance one major manufacturing industry that could survive. Manufacturing industries just cannot compete with the large through-put industries of other countries. If we abolished all subsidies and tariffs the beef and wool industries would survive and the people of Australia would have to become wool or cattle farmers or else leave the country because they would not bc able to secure jobs. There would be no major manufacturing industries. However, no-one expects this type of situation. We accept the principle of tariffs and we must accept, therefore, the equivalent of tariffs as they apply to primary industries. We should accept the principle of subsidies whether they be on inputs or direct subsidies, ft is essential that this be put in perspective. One of the most difficult things is to convince the critics of the wool industry the importance of that industry to the economy of Australia. We can forget about the influence of local consumption on the wool industry, because this is negligible. 1 want to deal with some of the issues in this debate. I take first the Australian situation. Let us have a quick look at it. In recent years wc have seen a remarkable expansion in wool production, but if there had not been this remarkable expansion the wool industry would have been sunk long ago. One only has to look at the increase in costs in the post-war years and relate them to the increase in prices or the decrease in prices - the so-called cost price squeeze - to realise that if it had not been for the remarkable and magnificent increase in productivity the wool industry could have been sunk long ago. Wool production is still increasing. The latest estimates show that production is now around the 2,000 million lb greasy wool level. This has been due, as many have pointed out. to higher lambing, the increased cut of wool per head or per acre and lower mortality. The importance of this industry to Australia is its contribution to export income. This is something which no critic can take away from the wool industry, no matter how they try. If it were not for the $80Om worth of exports there would be a recession in our major manufacturing industries today and there is nothing we could do about it, except devaluate or credit restrictions.

The increased production has been disposed of and this is the most important difference between the wool industry and the foodstuffs industry. We can sell all the wool we produce, certainly at a price, but it does not necessarily follow that we can sell all the wheat or dairy products we produce, even at a price, because there is a limit to what a person can eat. Statistics relating to standards of living today have shown with respect to elasticities that even if we increased significantly our wool production there would be a market for quality wool at a price. This is a most important point in support of expansion of the wool industry and in support of financial assistance for the industry. We are assisting an industry whose product can be sold on the world market. If these criteria are adopted the arguments against assisting the industry fall to the ground.

Australian prices are rather mysterious. They defy the laws of logic, as I see them, because if one looks at supply and demand and inflation in other parts of the world there should be a lift in prices in real terms well in advance of what the wool grower is getting today. To me there is no economic logic in the prices they are getting today. Certainly it can be argued that a lot of rubbish or poor quality wool is being sold, but this only cannot camouflage the position in terms of the total clip. There is something mysterious about world wool prices and how they affect Australia. There are some indicators which one can look to for a reason for the fall in the price of wool, but these are only short term indicators.

If we look at the world situation we find that in the last 2 years world production of wool has increased at a greater rate than world consumption. It can be argued therefore that there may be a case for a slight reduction in the price of wool but not to today's level of prices. As I have said, the low price of wool in Australia defies the law of logic. The total level of world production has increased approximately 6,000 million lb of greasy wool. Production is up in Australia, Russia, South Africa and New Zealand. However, production in the United States of America, Argentina and Uruguay is slightly down. But while world production of wool is up, stocks of raw wool have shown a substantial decline.

There has been a substantial decline in the stocks of the New Zealand Wool Commission. These stocks are mainly cross bred wools. As I have said, world consumption is up but consumption has not increased at the same rate as wool production. At least, this has been the case in the last few years. On studying this situation it is apparent that one economic influence which appears to be depressing wool prices is a noticeable slowing down in the rate of expansion of the textile industry in the face of substantial increases in production. This is what the figures show and I suppose it is all we can go on. There is a slowing down in the rate of expansion - not in absolute terms but in relative terms - to the degree that the rate of increase in expansion of the textile industry is less than the rate of increase in wool production. So, if the statistics are right this is 1 indicator which could suggest a reason for a slight decline in prices.

Another influence which has operated, at least in the last 12 months, has been the uncertainty of the value of currency, particularly currency in Europe. Where one has high interest rates and a level of uncertainty wilh respect to currency the tendency is to dispose of all stocks pretty smartly. It could be that this type of exchange adjustment is having some influence also on wool prices. But there is no evidence to show that this is so - it is only a surmise. There is no reason to suggest that there is any slackening off in the demand for wool in key importing countries. There is no reason to suggest that there is a recess:on in these countries, particularly Japan. In fact, evidence to hand suggests that the Japanese economy is booming. I suppose it could be compared to the Australian economy. Japan is looking more and more to exports of textiles to earn export income just as Australia is looking more and more to wool exports to gain export income. There are satisfactory economic conditions in Japan and Germany and also, to a degree, in the United States. The value of raw wool exports from Australia in 1966-67 was $869m; in 1967-68, $762m; and in 1968-69, approximately $850m. Those figures illustrate the importance of wool exports.

One matter I want to refer to which concerns me and which I hope worries the Minister for Primary Industry is the attitude of the tin ted States to Australia's primary producers. We were informed in the House today by the Minister for Primary Industry that there is a ban on the export of mutton to Canada. I do not know to what degree the Canadians are following the practice of the United States in this matter. It would seem that America is adopting a hardening attitude on all fronts against imports not only from Australia but from other countries. We could be in an unknown area here which could have serious consequences for Australia. Australia's best customer for wool is Japan. If anything happens to the export of Japanese textiles not only will Japan suffer but so too will Australia. We know that America is the only country that places a tax on imports of Australian wool. I lived in America for several years and I know the force of the farm lobby in Congress. I know how important and how powerful it is against imports. This lobby is working all the time on behalf of vested interests in America to try to minimise the level of primary products into that country. We see these pressures working constantly in the field of beef. We now see them in respect of mutton. We have seen this policy implemented in the form of a tax on wool.

From reading it would now seem there is a hardening attitude by America towards the importation of textiles from Japan. I can see a dangerous situation here because 30% of our total exports of wool go to Japan. Australia relies on Japan as its main customer. If there is a hardening of attitude by the American Government towards Japan on wool textiles, Australia also will suffer. It would teem therefore that 2 main points arise from what I have said about the world scene and the Australian scene. The first point is that we can sell all the wool we produce provided we improve quality. Secondly, we can sell this wool at a price. I have made a comparison with foodstuffs, particularly wheat and dairy products. There is quite a different set of circumstances for those who argue that we should have tremendous stocks of wool on hand. We cannot sell this wool so I do not think this is a realistic argument. I just do not believe this argument is realistic unless it is related to certain prices. There is an increasing demand in the world for wool.

I turn to the local scene. Of course reference has been made in this Bill to the Australian Wool Industry Conference. The basic difference between the Government's policy and the policy of the Australian Labor Party on the AWIC is an important one. We on this side of the House, along with many influential sections of the wool industry, believe that the AWIC would be a much better organisation if it were elected democratically by the wool growers, in the same way as the Parliament is elected by the people, rather than being appointed in the way it is. I have not moved any amendments to this Bill to that effect because it is such an important decision and there would be no sense in moving amendments out of context.

In the last few years, because of the deteriorating conditions of the wool industry, all types of proposals have been put up. I do not suppose there is another industry in Australia in which there is greater division of opinion and a greater lot of urgers, pressure groups and experts, lt does not matter what one does in the wool industry. The next day there always seems lo be a tremendous argument from somewhere against it. lt is an amazing thing. We seem to be able to argue rationally in other industries, whether it be the beef, dairy or honey industries, lt does not matter what one puts forward in the wool industry or how much support there is for it, the next day there will be an equal amount of opposition from all over the country from wool growers and wool brokers. It is a hotch-potch of a shemozzle to try to bring forward any scheme with any degree of unanimity. I must admit that I have never struck anything like it before l became involved with the wool industry.

Mr Anthony - Even in your own Party?

Dr PATTERSON - 1 will not comment on that. At one time a price reserve scheme was put up. After a lot of deliberation a committee was appointed by the Australian Wool Board to inquire into this matter. Lt met frequently and came out in support of the reserve price scheme. The Minister then went to the Government and the Government of course, in characteristic fashion, decided not to act on the recommendations . of the Committee, lt said it would do 2 things, lt said it would appoint an interdepartmental committee. This is what I call the 'favourite stalling tactic' of the Government. It said that when the inter-departmental committee had made its deliberations it would put the matter to a referendum. I have little faith in referendums.

Mr Anthony - What are you saying?

Dr PATTERSON - I am talking about the reserve price scheme.

Mr King - The honourable member wanted a referendum on the lifting of the embargo on the export of merino rams.

Dr PATTERSON - Yes. I wanted one on that matter because that is a practical matter. The wool grower can work out whether he wants the rams to go or not, but we have all the pressure groups under the sun opposing the reserve price scheme. The whole matter became a pantomine. Sir William Gunn was stamping around the country hotly pursued by his opponents. Every move he made was countermanded. This was at a time when he was standing for a plebiscite in Maranoa. The whole thing was a farce. 1 think that if the wool grower had sat down and had carefully and rationally digested the elements on the reserve price scheme in 1965 he would have agreed to it. It is one of the worst things that has happened in this nation that the wool industry did not - I suppose it is all right to say this with the advantage of hindsight - agree by a majority to the reserve price scheme. Much progress would have been made in relation to quality, core testing and pre-sale sampling if the scheme had been accepted but it was not accepted.

The Opposition has been considering this matter for a long time and finalised its policy today. It is a flexible policy in the sense that it recognises that dynamic changes have taken place in the wool industry. Our present policy is to establish a statutory authority to acquire, appraise and market the Australian wool clip on behalf of the wool growers. That was the decision taken today. At the same time we propose a reconstruction scheme to assist in the problems of production and the streamlining of selling methods. We also have under consideration at this time a proposal for tariff compensation which recognises the direct and indirect disability being imposed on the wool industry by high tariffs on manufacturing industry. It recognises that something has to be done to an export industry which is being penalised. The last plank of our policy was a fully elected AWIC. The statutory authority will be responsible for the acquisition, appraisal, marketing and distribution of the Australian wool clip and would be conducted on sound business principles.

Mr Kelly - This has nothing to do with the Bill.

Dr PATTERSON - Yes, it does, because the Bill seeks an amendment to the wool Industry Act. The authority would be conducted on the sound business principles applicable to co-operatives. The authority would arrange for the acquisition and for the appraisal of the wool clip to be made in decentralised modern wool marketing complexes. In the interim period, wool would be appraised and catalogued by competent appraisers under the jurisdiction of the authority, in the short term, with the ready progression to pre-sale testing by objective measurement and equivalent scientific techniques designed to improve, standardise and streamline the preparation and sale of the clip. Inbuilt in the statutory authority is the minimum or reserve price plan. The only difference between this scheme and the reserve price scheme is one of degree. In the scheme that has been approved by my Party there will be provision, if necessary, for auction, private treaty, tender and for bilateral agreements between Australia and some other country, for example, Japan.

Mr Anthony - How is it all to be financed?

Dr PATTERSON - I will tell the Minister that. Financing will be basically the same as for the reserve price scheme. A revolving fund will be financed in the end by the wool grower but in the interim period by the Commonwealth. It could be argued that there should be no Commonwealth finance backing it and that the authority should operate under a reserve price scheme until the industry itself can finance the authority. This would take 5, 6 or 7 years. My Party believes that the urgency is such that it is essential that a statutory authority be appointed for acquisition purposes as soon .as possible so that it can commence operations for the acquisition and marketing of wool. Wool that was not sold because it did not attract the reserve price would be taken over by the authority at flexible prices. In some circum stances it would be equal to the reserve price: in other circumstances it would be a percentage of the reserve price. So it is flexible in that respect. The capital fund would be guaranteed initially by the Commonwealth Government by loan until all the authority's funds were fully subscribed. It would then have to be repaid. All profits after working expenditures and the provision for normal reserves would be returned to wool growers each year. That is the basis of the proposal. It would be a statutory authority to acquire, to appraise, to market and to distribute the wool clip, a single marketing authority incorporating the basic elements of the reserve price scheme which was rejected by referendum. That is the basis of it.

Mr Anthony - To be approved by referendum?

Dr PATTERSON - Not as far as the Opposition is concerned. The Government, if it believes this scheme is good, should have implemented the scheme in 1965. If it had done this the wool industry would have been in a far superior position today. As far as I and my Party are concerned it was made clear in the policy speech in 1 966 that the scheme would be implemented without delay because the tremendous power in this country of the wool brokers and the textile industry is such that there seems to be unlimited money to oppose anything that anyone puts forward by way of statutory authority or anything which would weaken the control which the wool selling brokers and a section of the textile industry have over the wool producers.

Debate interrupted.

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