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Thursday, 14 October 1971
Page: 2396


Mr TURNER (Bradfield) - My friend the honourable member for EdenMonaro (Mr Allan Fraser) has put forward what appears to be a very just and cogent argument, but I shall have occasion to indicate a basic fallacy in it. He is perfectly right in saying that what has greatly affected, precipitated, emphasised, if you like, the problem of the rural industries is the increase in costs and the decline in the value of money within the Australian economy. This is all perfectly true, and if it were the only factor with which we were concerned, his argument might stand. But the fact is that what has really brought about more difficulties for the rural indus tries generally, and for the wool industry in particular, has been technological change, and in its proper place in the course of my speech I shall be referring in some detail to the effect of technological change upon the wool industry. This totally destroys the strength of the honourable member's argument. Let me proceed, and in due course return to this subject because it is obviously vital.

We are dealing now with the Wool (Deficiency Payments) Bill, but in the course of this debate there has been considerable comment on another aspect of the Government's rural policy, and that is the aspect of rural reconstruction. Indeed, the 2 are closely related because if you spend money on the one you may not have it available for the other, and you may have to make a choice as to where the amount of money that is available can be spent to the best advantage. Let me say, as other honourable members have done in the course of this debate, first of all something about reconstruction. The Government has allocated $100m for this purpose, but this is for all rural industries, and wool is but one. Firstly, if I may remind honourable members, one-half of this sum was provided for the reconstruction of the debt structure of farms which, if assisted in this way, will in the opinion of the administrators become viable. It is a matter of nursing back to financial health farms that are potentially viable. The other half of the $100m is to be used to assist in the consolidation of uneconomic farm properties because they are too small. This is what has been called farm build-up. It is a matter of a property owner buying up adjoining land to make the larger property viable.

This, 1 believe, has been a far too niggardly proposal because the $100m - it is small enough in itself in relationship to the problem to be solved - is to be spent over a period of 4 years. A large part of it is to be provided by way of loan and will come back to the Treasury. When one considers that the national farm income was more than SI, 000m in 1969-70, it is obvious that the amount proposed to be expended on rural reconstruction is very small indeed. It is only about 2.5 per cent of farm income. It is also extremely niggardly to expect a man who has to go off the land, to start a new life on $1,000, because this again is part of the scheme. Technically it is a loan but in fact it is designed to enable a man to leave the land if he cannot profitably carry on his farm. At last we have had something better from the Government - and I am still speaking about reconstruction. The Minister for Labour and National Service (Mr Lynch) has adumbrated a scheme for retraining those people who are forced to leave their properties. It provided for a living allowance of $46 a week, free training and the payment of a subsidy to employers for those men who have to learn while employed on the job. Of course, this is designed to meet only the needs of those who must leave the land.

I suggest that more is required in the reconstruction aspect of the scheme to make viable those farms or stations which can be made so. I believe that more should be provided to assist the older people who cannot be expected to be retrained for another job because, in effect, they are being compulsorily retired at an early age. These then are deficiencies in the reconstruction part of the scheme and it is because I believe that money would be better spent on that aspect of the rural problem than on the one that is directly before us, that I have made some reference to the reconstruction scheme.

I now pass on to the Bill before the House, the Wool (Deficiency Payments) Bill. How much will be required for the purposes of this Bill? Each lc per lb of the price of wool supported by the Treasury will cost taxpayers approximately $20m. So if the price is 29c per lb and the Treasury guarantees 30c it will cost the Treasury $20m, and so on. In the Bill provision is made for supporting the price up to 36c per lb. In the last season and in the current season when prices have plummeted, I understand that the lowest price received was about 27.5c and the highest price was 33c. At the moment I think it is something like 29c. If the average price obtained for wool sold during the current season were 27.5c the cost to the Treasury would be about $I70m. If the price returned to 33c, the upper limit of the last 2 seasons, it would cost the Treasury $60m. If it sold between those prices - say, 29c - it would cost the Treasury $140m. Nobody knows how much it

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will cost because nobody knows what the average price will be for the current season, but I suggest it could be anything between $50m and $200m. This, it is said, is for one year but there are those on the opposite side of the House who advocate that it should continue indefinitely.

What are the prospects? I will not draw about me the mantle of a prophet. The Minister for Primary Industry (Mr Sinclair) told us recently that the stagnation in the textile industry generally shows signs of lifting. It may. We hope it will. But a pessimistic view was put by Emeritus Professor T. G. Hunter, until recently Professor of Chemical Engineering at Sydney University, at the Australian Institute of Political Science Spring Forum 'The Crisis in Wool' held at Goulburn in October 1970. The honourable member for Wakefield (Mr Kelly) was present and spoke, and I was also present. It is suggested that there should be an authoritative survey, that somebody should look into the future with a more discerning eye than anybody has been able to do up to the present time. Coming back now to the matter I first raised in connection with the speech of the honourable member for Eden-Monaro, let me read the relevant parts of Professor Hunter's paper at the conference to which I referred. He said:

Having studied the production of natural materials in competition with synthetics and substitutes and examined the history, economic history, chemistry and chemical engineering of all such materials, I am certain that wool cannot survive the competition of synthetics.

He speaks as an expert with considerable knowledge. He goes on to say:

Eighty natural dye-stuffs have been replaced by synthetic dyes . . . whilst many natural perfumes and flavourings have been synthetised Polyurethane plastics have largely taken the place of sponges and synthetic camphor has replaced the natural product.

I might add what he does not add, that some people are concerned about synthetic meat as well. He continues:

Costs are ... of primary importance, but reliable costs for synthetic fibres have never been published - the . . . manufacturers . . . being particularly cautious and unrevealing

He goes on:

However, we can use one measure of economic activity for which data can be obtained to compare the man-made fibre and wool-growing industries. This measure is termed the Capital Ratio and is defined as the ratio of capital invested (in U.S. dollars) to the production capacity in pounds per annum. That is to say that the Capital Ratio is obtained by dividing the capital invested in millions of U.S. dollars by the production capacity in millions of pounds per annum.

He then sets out a sum with which I will not trouble the House, and continues:

This technique shows that the capital investment required by wool-growing is from 7.0 to 10.0 dollars per annual pound, depending upon the situation of the property in the 3 wool-growing zones of Australia, whilst the capital investment required for the manufacture of the 3 major classes of non-cellulosic synthetic fibres is from 0.7 to 1.0 both in Australian dollars per annual pound. In other words, it requires in aggregate about 7 to 14 times the capital to be invested in wool-growing than that invested in the manufacture of synthetic fibres in order to produce the same quantity of clean fibre.

This is the nub of the matter. It requires 7 to 14 times the capital to produce a pound of wool as it does to produce a pound of synthetic fibre. He continues:

Wool-growing, with up to 14 times the investment required, cannot compete in costs with synthetics and therefore the wool industry of Australia cannot survive the onslaught.

He concludes:

Since wool growing is at least 10 times more expensive than synthetic fibre manufacture in initial investment, this cost difference must be reflected in the production cost of natural and synthetic fibres. This conclusion represents the end of the wool industry in Australia, as no competition between wool and synthetic fibres can exist at this cost differential. Wool growing as an income producer will slowly disappear.

Of course, he does not deal with differences in kind or quality. Wool may have certain qualities that synthetic fibres do not have - maybe cannot have - and wool may, up to a point, survive. But at least, with all the qualifications that one may think attach to the statement of Professor Hunter, one must have grave doubts as to the future of the wool industry. This is where I cannot agree with the honourable member for Eden-Monaro. It is not just a question of increased costs and compensating for this by means of a subsidy. We may be dealing with an industry which to all intents and purposes cannot survive or cannot survive in anything like the form in which it has existed in the past. One does not know the prospects but one has to be highly dubious about them. At any rate, it will cost a lot of taxpayers' money to shore up a great and valuable industry which has this dubious future. It will affect directly up to perhaps a quarter of a million rural producers and, indirectly, perhaps, one million people, lt is tremen dously important, not only in economic terms in connection with balance of payments but also in social terms from the point of view of human welfare and the suffering of individuals.

What is to be done? We have the deficiency payment concept. Should this be for all people, rich and poor? Many honourable members have spoken about this. One is, of course, on the horns of a dilemma. The Minister for Primary Industry has said that half of all wool growers have had only $2,000 of income left after servicing their debts, so a tremendous number of them are in a very difficult financial position. Nevertheless, there may well be - no doubt there are - some who are wealthier. We are on the horns of a dilemma because if we subsidise them all, some people who do not need the subsidy will receive it. If we subsidise only the poorer producers, then we encourage them to stay on the land whereas in their own interests as well as in the country's interest they should leave it. So we are in this dilemma. We will be giving too much to everybody, some because they do not need it; others because we encourage them to stay in an agonising economic death. There is no justice in doing the one and there is no kindness in doing the other.

There are some fundamental criticisms of the scheme, lt is said to be designed to give a breathing space - at the price of millions of dollars for each breath - so that we can see over another 12 months what is likely to be the fate of the industry. I hope that this is how we shall regard it, but in about 12 months we may well have an election. I know that many promises are made at election time. I know that there is a competition in promises. So I fear the scheme may continue. I am not without sympathy for the idea of a statutory authority that sells wool by sample through core testing, that parcels the wool into appropriate lots that are suitable to buyers, that holds supplies maybe in stores overseas so that the product can be supplied as expeditiously as artificial fibres can be provided overseas, and that gives technical advice, perhaps even financial support, to users of wool.

I can see great merit in an organisation that can go out and sell. Perhaps it will not do so well in the sophisticated countries of western Europe and North America, but it may do better in countries like China and those in eastern Europe. But I fear that this may become like so many of the marketing schemes related to rural products with which we have become familiar in the past, in the extent to which the growers are paid from the proceeds of the sale of the product and in the extent to which they are paid by subsidy from the public purse. This distinction can be completely blurred. This is what I fear about a statutory authority. Indeed, for that matter, I would not like to see Economic Wool Producers Ltd prevented from carrying out this experiment.

So I cannot give unqualified support to the idea of the Commission. I can see enormous merit in it but I have one fear about it. May I refer in the few minutes that I have left to a myth that has seriously been propagated and believed by many people. The myth is that you can bolster up the price of wool if you can establish a selling monopoly and that if one board can have in its hands the whole wool clip it can hold the buyers to ransom and say: 'We have a monopoly of this product and you will have to pay for it at our price'. I hope that those who propagate this myth will realise that they are doing a great disservice to those whom they are professing to help. It is quite obvious that the wool industry does not have a monopoly. Indeed, its troubles are due to the fact that it is in the severest competition with synthetic fibres. It has no monopoly, and any attempt to rig the market in some way for monopoly selling to raise the price is foredoomed to failure. Indeed, if it holds wool off the market it will only the more quickly induce consumers to switch over to synthetics.

Again, I greatly regret the lack of foresight on the part of the Government - for that matter, the Parliament - in regard to decentralisation. Nothing can be done by the penny package sort of decentralisation that has been advocated here for so long. Quite obviously, any decentralisation, to work, must involve the establishment of cities that can quickly grow from at least half a million population and upwards. Because we have not done this we have no decentralisation at all. The time that such a policy can be carried out is when people are footloose. Because of the present position in the rural industries there will be a certain number of people who are footloose, who have to change to something else and who do not mind whether they settle here, there or somewhere else. If the places were there for them to settle we would have some chance of getting them into new cities. The same applies to migrants. I greatly regret that these 2 sets of footloose people - the migrants who come here and those who are going to be displaced from the land - have not been settled in such a manner.







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