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Thursday, 7 October 1971
Page: 2030


Mr SINCLAIR (New England) (Minister for Primary Industry) - I move:

That the Bill be now read a second time.

The purpose of this Bill is to provide parliamentary approval for a scheme of deficiency payments to give wool growers an assured return during the 1971-72 season and to appropriate funds accordingly. The broad details of the scheme were provided in my statement to the House on 20th August 1971. This is not a short Bill and in order that members may be aware of its provisions it will be necessary to recapitulate on the earlier statement. It is common knowledge that wool growers' incomes have fallen markedly. Gross returns from wool declined from $839m in 1968-69 to $547m in 1970-71. During 1970-71 more than half of all wool growers were estimated to have less than $2,000 on which to live after servicing their debts. For a significant section of the Australian community this situation will be reflected in reduced standards of living; indeed it has been estimated that approximately 1 million persons are wholly or partly dependent upon the wool industry for their living.

In these circumstances the Government decided to supplement market returns on wool for a period of 1 year. This will provide a much needed breathing space to enable adjustments to take place with a minimum of economic and social disruption. In addition the scheme will allow some payment of unsecured debts in the rural communities which are so dependent upon servicing the wool industry. During the course of the year it is anticipated that there will be a settlement of the international currency situation and other factors bearing on the price of wool, so that the market outlook will be seen with more clarity. So that there would again be no confusion I shall set out the method for the determination of entitlement for deficiency payments. There will be a notional price schedule for all wool types constituting the Australian clip which would give an average price as near as possible to 79.37c per kilo greasy over the whole season for the full clip. This price is the metric equivalent of 36c per lb.

Certain inferior wool types, making up about 10 per cent of the clip will not receive deficiency payments. At the end of each auction week the Australian Wool Commission will calculate the difference between total proceeds realised for eligible wools offered at all selling centres at which the Commission operated in that week, and the total proceeds which would have resulted if the notional prices had been received for the same wool types. This difference will be calculated as a percentage and applied to the gross value of the eligible woo] sold by a producer to determine the amount of the deficiency payment for each grower. For all wool sold during a week the same deficiency percentage will apply but the actual amount of deficiency payment received by each grower will depend on the market price of his wool.

The scheme will cover wool sold and delivered by a producer in the period 2nd July 1971 to 30th June 1972. Wool which was delivered to brokers but not sold on 2nd July 1971 will be eligible for a deficiency payment when it is sold. Unsold wool on hand at close of business on 30th June 1972 will not be eligible. Wool purchased outside the auction system before 2nd July 1971, to be paid for before that date but not delivered until after that date, will not be eligible for a deficiency payment. However, where there was an agreement made before shearing to sell wool but payment did not become due until after 2nd July 1971 the wool will be eligible for a deficiency payment when it is delivered and full payment is made. For private sales made in the period 2nd July to 31st August 1971 the deficiency rate will be that established by the first week of auctions.

For wool sold at auction brokers will forward to the Australian Wool Commission a list of their clients who sold wool at auction showing the amount of deficiency money payable. This will be calculated on the deficiency percentage for the auction week and applied to the sale value of the eligible wool sold on behalf of each client. The excluded wools will be identified during the normal pre-sale appraisement by the Australian Wool Commission. Before the prompt date the Commission, acting as an agent of the Commonwealth will make the payment to the broker for disbursement to his individual clients. Eligible wool owned by a producer which has been included in a price averaging plan pool during the period of this Act, that is pools 3 and 4, shall receive a deficiency payment. There will be a common deficiency percentage applied to the pool proceeds for each lot of wool sold from a pool, based on the average deficiency payments on wool sold from the pool. There is also provision in the Bill that the Commission may make interim deficiency payments on wool in a PAP pool.

Merchants willing to make deficiency payments will be registered. A first sale to a merchant will attract a payment on the basis of the price in the wool shed on the property. At the time of sale the merchant and grower will sign a document attesting the sale. Registered merchants will claim on the Commission for a deficiency payment and then transmit it to the grower. In the case of an unregistered merchant, when the wool is delivered for resale either to a registered dealer, or at auction through a registered broker, the documents will accompany the wool and will be retained by the registered dealer or broker who will make the claim on the Commission and subsequently pass the deficiency payment directly to the producer. The whole of the Government's deficiency payments scheme and the market support by the Commission is based on the auction system. The calculation of deficiency payments for private sales on an 'on farm' basis as against deficiency payments calculated on a gross value basis for wool sold at auction, should have the effect of encouraging merchants to increase the prices they are prepared to pay to growers which in turn will reinforce the auction floor prices.

For privately sold wool it would not be practicable to have a Commission appraisement to determine for each sale the amount of inferior wool excluded from deficiency payments. Much of this wool loses its identity before it reaches a capital city. The only practicable means of estimating the amount of such excluded wools is by taking account of the average price paid to a producer by a wool merchant. The proportion of the sale proceeds on which the deficiency payment will be calculated for private sales will be progressively reduced as the average price falls below the market price for eligible wools. When the price of any private sale falls below the average market price of wools excluded from deficiency payments it will be regarded as containing only excluded wools and there will be no deficiency payment. The adjustment to take account of excluded wools will be made in accordance with a conversion table contained in the Second Schedule to the Bill which is calculated to have the same average effect as if the wool were appraised by the Commission. Provision is made to vary the conversion table by regulation to take account of changes in the market price on which the table is based.

Where wool is exported by a producer, sold by tender or used by the producer in manufacture, the value for such wool for the calculation of deficiency payment will be the current market value as determined by the Commission on an Australian auction floor basis and the inferior wools will be excluded on the basis of the appraisement. I referred earlier to the inferior wool types which make up approximately 10 per cent of the clip. The aim in excluding these wools was to withdraw support from wools which do not bear the full cost of the disproportionately high sales and handling costs they involve. The Government considered that it would be undesirable to encourage delivery of such wools by increasing their value through the mechanism of deficiency payments.

It will be seen from the First Schedule to the Bill that the excluded wools are primarily locks, crutchings and similar wools which are common to the whole clip and the incidence should be equitable as between growers. Honourable members will note that some change has been made in the wools to be excluded, from the list tabled in the House on 20th August 1971, to ensure that in the present apparent over-supply situation of wool, all growers would share in the exclusion. These wools are easily identifiable by growers and are difficult to mix with eligible wool without being readily detected. Growers who fail to class out these types of wool will be penalised either by having their wool reclassed at their expense or by the lower price received.

In general, the intention is that the deficiency payment will be paid along with the proceeds of the wool and there will be the same legal rights in the deficiency payment as in the sale proceeds unless there is a separate agreement between a producer and a creditor covering the direction of a deficiency payment. Accordingly it is necessary for the legislation to provide who is to get the payment and what are the rights of persons for the payments. This is set out in clause 9 of the Bill. In my earlier statement reference was made to the exclusion of wool on sheepskins from deficiency payments. In this situation the scheme may provide some inducement for shearing of sheep before slaughter. Such a practice could interfere with the local fellmongering of skins and Australia's overseas trade in sheepskins. Accordingly the Bill provides that wool received from butchers, who purchased the sheep for slaughter, will not be eligible for a deficiency payment. This whole matter will be kept under review.

The payments mechanism will depend upon the active co-operation of persons carrying on business as brokers, registered classing houses, wool merchants and agents who export wool, or who sell wool by tender on behalf of producers. Such persons will be registered on application to the Department of Primary Industry and will undertake certain responsibilities in the documentation of sales, the provision of information and calculations relating to deficiency payments and the passing on of such payments from the Commission to eligible producers. It is not intended that such persons will be paid for their services as all sectors of the wool industry will benefit directly or indirectly from the scheme. However, the wool industry has in recent years become increasingly geared to computers in the calculation of accounts and where the Government is satisfied that a significant cost has been incurred in reprogramming these facilities for the purpose of the scheme it may make some reimbursement. The Government will also meet the costs incurred by the Commission in the administration of the scheme.

The Bill contains the necessary provisions to protect public moneys by way of penalties for fraudulent activities and the recovery of moneys. The measures provided in this Bill give effect to a scheme which is as fair to all growers as can be devised, having in mind the objective of lifting the average price of the Australian clip of wool and the need to preserve equity between growers. At the same time the Government has been mindful to ensure that as far as practicable, the position of the various persons who service the industry has been protected. Coming at a time when the Commonwealth and the States are deeply involved in rural reconstruction this is a most appropriate measure. While substantial restructuring and readjustments in the industry are inevitable the scheme now before the House will provide some cushioning of these effects and will be a steadying influence on those lenders who are concerned to realise on their security. It will allow necessary changes to take place in a more orderly manner.

The Government recognises that the present crisis in the wool industry calls for a number of measures which in aggregate represent a concerted approach to the urgent problems affecting woolgrowers. The deficiency payments scheme should be viewed in the context of this total approach. While marketing, research into industry problems and farm reconstruction are being pursued with all urgency, these are essentially longer term in their effects. Immediate assistance is clearly needed in the present situation. The combined effect of the Commission's marketing activities and the deficiency payments scheme will be to lift woolgrowers' returns by some $100m over last year's market place realisations. This will go far towards preserving the wool industry's viability and the beneficial effects will be widely felt throughout the whole Australian community of people, particularly in the rural areas. I commend the bill to honourable members.

Debate (on motion by Dr Patterson) adjourned.







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