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Thursday, 14 October 1971
Page: 2412


Mr IRWIN (Mitchell) - I rise to speak to the Wool (Deficiency Payments) Bill 1971. Assistance to the wool industry, provided it is intended to assist in restructuring rather than to avoid it, is probably justified but the financial plans must be definitive and positively directed to long term adjustment and benefit. However, the operations of the Australian Wool Commission and the provision of a wool subsidy are completely incompatible. We are now paying subsidies based on the unrealistic reserve prices of the Commission and on a commodity much of which we still own. In effect we are taking to profit funds not yet earned and distributing them as dividends. This is economic madness. The subsidy is for 1 year and the Minister for Primary Industry (Mr Sinclair) hopefully states that this will provide time to promote adjustment with a minimum of economic and social disruption. The. Commonwealth rural reconstruction provisions have in no way come to grips with the problem and we can only assume that the Government either does not understand the complexities of the problem or is ignorantly believing that changes will occur thus making reconstruction unnecessary. Reconstruction will scarcely be understood within 1 year. It will be a continuing development over 10 years if the right action is taken.

In 1960 the Dairy Industry Committee of Inquiry recommended measures to reconstruct the dairy industry in order to remove the growing weight of support payments. Ten years later agreement on methods for adjusting the dairy industry and its production has not been reached and the subsidies continue at close to peak levels. The Wool Commission by endeavouring to force prices is adversely influencing demand and has amassed a stockpile of over 600,000 bales. The Commission is therefore depressing prices while on the other hand the subsidy is designed to increase the price to growers. Prices are unlikely to improve in real market terms so that in a year's time the position of wool will have deteriorated further unless the needs of the trade are admitted. In effect, the Wool Commission's activities are creating a situation which will cause indefinite continuation of the subsidy. The Minister states that the Commonwealth and the States are deeply involved in rural reconstruction, making the deficiency payments legislation a most appropriate measure. Assistance for a year would be accepted if this were so, but it is not. The question is whether these subtantial support schemes are economically justifiable on the grounds that they form part of a fully researched and well directed restructuring plan. Patently this is not so. The subsidy provisions stand in isolation as welfare measures which will' discourage the forms of rural adjustment proven to be necessary.

The limitations of the Commonwealth legislation on reconstruction are now well known. In effect, the Government has provided an institutional framework for the provision of some relief to some farmers and has laid down guidelines for limiting the number and class of persons to be helped. For the Minister to suggest that such progress will be made in 1 year so as to make the continuation of the wool subsidy unnecessary is on these grounds alone unrealistic. The wool price subsidy can be justified on economic and welfare grounds only if the collateral provisions to promote restructuring are substantially more far reaching and effective than the current reluctant attempt to admit the need. If the problems of individual welfare and political considerations are to determine eco.omic policies for rural industry the result will be chaos, increasing charges on the taxpayer and a progressive loss of export market outlets.

On the basis of the present wool market and on the assumption that Commission reserve prices are held at the June 1971 level, the subsidy will cost about SI 20m, not S60m as provided in the Budget. Additionally, by June 1972 the Commission will have in its stocks not less than l.S million bales costing at least Si 25m. On much of this stock the subsidy will have been paid. If rural industries are to survive, policies must be promoted to eradicate protection and to improve productivity. In 1969-70 support payments to rural industries totalled $138m or 12.9 per cent of farm income. In 1970-71 they amounted to $2 10m or 25.9 per cent of farm income and, on the assumption that farm income in 1971-72 will be maintained at $8 10m, the support payments provided for in the Budget at a cost of $275m will approximate 33.9 per cent of farm income. However, as the wool subsidy will approximate SI 20m and not the estimated $60m, support payments in 1971-72 are likely to approximate 41 per cent of farm income. This completely unjustifiable trend will continue if current protectionist policies are not amended to meet economic reality.

My following comments deal more specifically with the wool deficiency payments legislation and the ' Minister's second reading speech. It is estimated that over half the work force is wholly or partly dependent on rural industry thus making unavoidable rational steps to ensure a sound long term economic base for rural production. The Minister is still obviously working on the assumption that wool prices will improve with the currency situation determined and other factors bearing on the price of wool clarified. Trade and economic indicators do not justify this opinion. The basis of entitlement to deficiency payments on privately sold wool is inequitable in relation to auction sold wool. Freight and selling costs amount to about 6c a lb or 13.2c per kilogram. As the Bill admits the right of subsidy on private sales there is no justification for prescribing a penalty basis. The Minister naively states that this should have the effect of encouraging merchants to increase the prices they are prepared to pay to growers, which in turn should reinforce the auction floor prices. This statement reveals complete ignorance of the industry and the market situation.

Farm prices equate equitably to auction prices less freight and selling costs, and the buyers will not pay prices higher than the competitive market situation and supply and demand factors permit. To suggest that, by penalising the private seller, buyers will have to pay higher prices is ludicrous. This is yet another means for making wool hard to buy. The buyers have stated that even if acquisition were introduced the alternative method of buying by private treaty should be retained. The Bill seeks to make private selling less attractive and is once more affronting buyer opinion. We should recall that if there were no buyers there could be no sellers. It is about time we woke up to this. It would seem that the unrealistic prices at which the Commission purchases wool will be regarded as sale prices for the purpose of determining the percentage addition to grower proceeds. Those wools supported by the Commission will therefore receive the percentage subsidy on prices having no relationship to real market values. When these wools are eventually sold a loss will result, so the taxpayer is carrying the double burden of an unduly high subsidy and Commission losses.

The Minister's reference to sheepskins avoids the main point. If, as is provided, wool on skins does not receive the subsidy, sheep will be shorn before they are sold to the butchers for slaughter. The volume of woolly skins available from butchers for export will be almost nil. In fact, the growers will retain the wool and the position as stated by the Minister will not arise. The substantial export income from sheepskins, purchased particularly by France, will disappear. The various companies and persons required to make returns to the Commission to establish the authority for the subsidy payment will not be recompensed. This is iniquitous, as substantial cost will be involved to make the calculations necessary and to submit the necessary documentation to the Commission. Again, the Government seems anxious to drive the buyers away from Australian wool.

In saying that the combined effort of the Commission's marketing activities and (he deficiency payments scheme will be to lift wool growers' returns by some $100m over last year's market place realisations, the Minister has admitted that. the Commission in itself is providing a subsidy element. This is clearly outside the legal scope of the provisions of the Australian Wool Commission Act 1970. Certain clauses. of the Wool (Deficiency Payment) Bill raise pertinent questions which the Minister should be required to answer. In relation to section 4(1) I ask: Does the definition of approved auction' exclude the forms of auction conducted outside the members of the National Council of Wool Selling Brokers which have become an accepted and effective method of disposition particu Early in Melbourne and Fremantle? In relation to clause 4(1) again I ask: What authority will determine 'an appropriate deduction in respect of the cost of the scouring and other processing'? Is it reasonable that such a vital consideration should be left undefined for determination by an unstated authority?

The market value of the wool on an Australian auction floor basis presumably includes the prices paid by the Commission. As the prices paid by the Commission are clearly not representing the market value, is it intended that the Commission purchases shall be regarded as sales, having regard to the fact that ultimate sale to the trade will result in a loss to the Commission? Clause 9 (3) does not make sense. Why, in the circumstances quoted, should the deficiency payments be regarded as other than proceeds of wool? Is it intended to free the subsidy from all or any liens over the proceeds of sale of wool, thus invalidating legal charges of banks and financing institutions over the total of wool proceeds? I turn now to clause 10 (3). Yet again the non-auction transaction is penalised in that the cost of appraisal by the Commission, which is a condition of eligibility for the subsidy, is to be charged to the applicant. As the principle of nonauction transactions has been admitted, for what reasons does the Bill so inequitably penalise them?

Clause 12 (3) is an extraordinary provision. It allows the Minister on his own initiative to vary notional prices and therefore the basis of the subsidy percentage at any time. Is such a provision justified in the light of the Minister's statement that the Bill seeks to maintain equity among all growers? Let me refer to clause 19 (3). It seems extraordinary that the Secretary of the Wool Commission should be given arbitrary powers to determine a payment. Should not such a disbursement .of public funds be assured by reference to the Commission itself? Clause 33 contains a most iniquitous provision, as it provides authority for officers of the Commission to enter the office of any person or company registered under the Act and to have access to all trading records. What do honourable members think of that? Clause 33 (2) is particularly obnoxious, as it provides that where an authorised person has reason to believe that relevant books and documents of importance to the provisions of the Act are held on certain premises, he can require to be given access to them under warrant issued by a justice of the peace. This means that any buyer of wool--


Mr Clyde Cameron (HINDMARSH, SOUTH AUSTRALIA) - Mr Deputy Speaker, a point of order. I draw your attention to the fact that the honourable gentleman, who is reading his paper, is not pronouncing the words properly. No-one can hear what he is saying. Would it be possible for the paper, which was written by the wool brokers, simply to be incorporated in Hansard?







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