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Wednesday, 1 December 1971
Page: 3945


Dr PATTERSON (Dawson) - The objective of the Appropriation Bill (No. 3) 1971-72 is to make provision for a loan of $30m to the Australian Wool Commission to allow it to continue to carry out its functions under the Australian Wool Commission Act. The principal objective of the Bill is to reduce the variation in auction prices which has been so pronounced in recent years in the hope that some stability will be reached in the wool industry and, at the same time, to stop wool being sold at disastrously low prices. The Commission bought a significant number of bales of wool during the 1970-71 season. In that period the Commission also resold some 73,000 bales of its stocks. At the commencement of the 1971-72 season stock in hand amounted to approximately 430,000 bales.

As we know, events have taken place this year which have had a drastic effect on the wool industry and. of course, on other sections of the economy. The most significant effect this year without doubt has been the decision of the United States Government with respect to economic conditions within the United States.I refer to the decision of the United States to impose a surcharge of 10 per cent on imports and the consequential effects on international currency.It is true that these events could not have been predicted. That decision has had a substantial effect on the quantity of wool that has been purchased and the enthusiasm of wool buyers. As a result the Wool Commission, operating within the provisions of the Australian Wool Commission Act, increased significantly its purchases of the wool offered for sale.

At the time when the Treasurer (Mr Snedden) made his second reading speech in introducing the Appropriation Bill (No. 3) the Commission's stocks were in excess of 700,000 bales of wool, which is a very significant amount. Up to the present time the Commission has had a total working capital of$86m of which$22m is provided under parliamentary appropriation. An amount of$12m was provided in the last financial year and$10m has been provided in this financial year. Approximately$64m has been made available by the banking sector. We have been told that $30m will have to be repaid by April next year. This money is not an interest free loan; it is interest bearing loan. The Commission was faced with the problem that if it continued to purchase wool it would run out of money. It is obvious to most honourable members who have studied this legislation and who have studied the conditions of wool selling over the last 2 seasons that if the Commission failed to buy more wool because of a lack of money there would be a significant collapse in wool prices. In fact there would be a disaster because the buyers themselves would make certain that the price would drop further. Chaos would have been created in the industry if the Wool Commission had suddenly stopped buying wool.

The Government, I assume, had very little alternative. It had to accept the fact that the Wool Commission must continue to buy wool in the short term until more drastic marketing operations are introduced in terms of reform or simply not support the Commission any longer. As I have already said this would have been disastrous for the wool industry and it would have been a retrograde step in the Australian economy because although the wool growers are protected by the Wool (Deficiency Payments) Act the failure of the Commission to buy wool would have cost the taxpayers of Australia a lot more than the proposed $30m loan.It is quite certain that if the Commission had stopped buying the fall in the price of wool would have been significantly greater than $30m in total value. It would probably have been double that amount. The fall would have been accelerated by buyer resistance and other measures. Certainly one can say with some degree of certainty that the $30m is really an investment because it has saved the taxpayers' money. Without this loan possibly $60m would be needed for deficiency payments which are grants and not loans. I think that the economic logic is there. Thatis certainly my analysis of it, anyhow.

The Treasurer's warning is very interesting. As one who had a lot to do with Cabinet submissions, decisions and interpretations some years ago I would think from reading between the lines of the second reading speech of the Treasurer that this warning was in fact a Cabinet decision because it is not often that one sees in a second reading speech this type of wording which is pretty blunt both to the industry and to everybody else concerned. The Treasurer said:

Looking further ahead, to 1972-73 and subsequent years, it is clear that the level of support provided to the wool industry this year, through deficiency payments and the Commission's reserve price operations, cannot be continued.

This is the Government speaking. I would think that that is probably what Cabinet decided, almost in that language. Certainly the Treasury takes the view that no industry can expect an open-ended commitment on the part of the Government and the taxpayer. The Australian Labor Party, too, takes that view. Our policy is quite clear on this matter. We would not agree to any stabilisation scheme which had an openended commitment. The Government has been able to get away with it. I say quite bluntly here that no Labor government would agree to an open-ended proposition whereby the sky was the limit: There hasto be a potential liability in terms of a restriction on the total amount of money available to the industry. Every (stabilisation scheme and every deficiency payments scheme up until the time of the (introduction of this one has had a total money liability or a liability which could be tied to a particular amount, whether it be determined by production as is the case with a quota system in some industries or whether it be a total monetary figure. For example, in regard to the wheat industry or the cotton industry you say to the grower: If you produce above this figure you do so at your own risk and the amount received per pound or whatever it is will be reduced'. It is clear that the Government is convinced that this is not a solution to the Wool Commission's problems. The Labor Party was convinced in April last year. We were ridiculed in this House because we put forward schemes for the acquisition of wool and a statutory marketing authority but it is becoming very clear now that this is in fact what the industry wants.

I.   propose an amendment to the motion that the Bill be now read a second time' to test the sincerity of the Government in this matter. I move:

That all words after 'That' be omitted with a view to inserting the following words in place thereof: whilst not declining to give the Bill a second reading the House is of the opinion that complementary legislation should be introduced without delay to establish a single statutory marketing authority to acquire, appraise and market the entire wool clip and that this authority should encompass the functional responsibilities of the Australian Wool Board and the Australian Wool Commission'.

This motion repeats what we have been saying since April last year. Time and again in this Parliament when we have put this matter to a vote the members of the Australian Country Party in particular have voted against it. I have little doubt that the Country Party will again follow that course of action and vote against this amendment despite the fact that this is what the wool industry wants. This is what the industry has told the Government that it wants. 1 have no doubt that some of the members of the Country Party who will get up to speak on this Bill will do exactly as they did in regard to the Bill which imposed the excise duty on wine; they will argue one way and vote the other. But we will wait to see what happens:

I want to say a few words in support of the amendment. I think it is fair to say. judging from experience in recent years, that the only way to explain the present organisation of the wool industry in Australia is to say that it is inefficient. There can be no double meaning to that word. Too many people in the wool industry today have lived on the old sayings and the old formulations of tradition, resisting the dynamic changes in economic policy both in Australia and overseas. For that reason. I say that the present system of producing wool after it is shorn, selling it and shipping it is archaic and that it has to be changed as quickly as possible. I want to explain why I believe that the Australian Wool Board and the Australian Wool Commission should be brought under the one head. First of all. the function of the International Wool Secretariat is to promote wool throughout the world. It has little powers other than that. Tie function of the Australian Wool Board is to promote wool in Australia and also throughout the world, lt has some powers with respect lo research and to investigations. We know that the Australian Wool Commission has powers with respect to the purchase and sate of the Australian clip. So I think it is important today that we should stop the present fragmentation of the wool industry. We have to bring it together under one strong, commercially viable, managerial head.

The first thing we have to do is to establish a statutory marketing authority for the wool industry along the lines which I have suggested and which the industry now wants. One might say that means that we should abolish the Wool Board and the Wool Commission. It does not mean it in that sense. It simply means that we have to encompass the functional responsibilities of those 2 bodies within a statutory marketing authority. I believe that this is a constructive policy and one which is needed. What is the opposition to a statutory marketing authority for the wool industry? It is that such a move is a socialistic measure, in the same way as all stabilisation schemes in Australia are socialistic measures. I suppose that the most socialistic enterprise in Australia today is the sugar industry. Probably not one decision can be taken in that industry unless it is supported, recommended or agreed to by either a State or a Federal government.

The principal opposition to a statutory marketing authority for the wool industry would come from Government supporters. I would presume that a large section of the Liberal Party would be opposed .to the orderly marketing of wool because, after all. it would mean the end of the broker. lt would mean also the end, to a large degree, of the selling functions of the large pastoral houses, lt would reduce, to a significant degree, the operations of the private banking sector in relation to the wool growers. I also know that the most powerful opposition would come from the vested interests - the wool brokers - and this. I believe, is a tragedy for Australia. 1 think that throughout Australia this is the section which must really be blamed for stopping the implementation of the reserve price scheme approximately 7 years ago. If that scheme had been introduced 7 years ago, at the present time we would have objective measurement to a far greater degree than wc have. We would have selling by sample, by core testing and so on. But unfortunately, because of the tremendous lobbying that occurred in the wool industry the weol grower, who, after all. is an ordinary person, was confused and hevoted against the proposal. That was :i tragedy for the wool industry. Rut, of course, it is do good looking backwards: one has to look forwards.

The other major opponent to the setting up of a statutory marketing authority in the wool industry would be the international wool buyers. We know from experience that Japan does not like this type of authority. Wc know the part that Japan played in the negotiations concerning the

International Sugar Agreement. Japan would like to see completely world free flowing commodities because it is a strong, almost unilateral single buyer and it can exert tremendous influence on the price of a commodity in a particular country. We have seen the way in which the Japanese operated in the early days with respect to the policy relating to the export of iron ore deposits from Western Australia. So we have opposition to the setting up of a statutory marketing authority for the wool industry. What I would like to hear tonight is what the members of the Country Party think of the proposal, because- this is important. If the members of the Country Party realise, as I am sure a lot of them do, the urgency for completely reorganising the marketing system for wool, then they have to put pressure on the rest of the Liberal-Country Party regime to get the scheme introduced into the Parliament and passed as soon as possible. As I have said previously, and I repeat it, one of the most depressing aspects of politics is to sec people going around the country stating what they believe and then refusing to back up those statements in the Parliament.

I am not one of those people who believe that a statutory marketing authority will significantly increase prices in the wool industry unless, of course, collusion can be proved. I make that qualification. If there is, in fact, significant collusion in wool buying today, that is to say, if the Japanese are significantly entering into gentlemen's agreements, for example, then a statutory authority would have a chance to increase prices significantly. But just because there is a strong single buyer it does not necessarily mean that there will be a significant increase in the price of wool in the short term. The great benefits of a statutory marketing authority and of a strong single buyer are, first of all, significant cost savings, and I do not think that anybody will argue about that. There will be significant cost savings because one only has to look, for example, at the difference in the selling charges between the private sale of wool and the sale of wool through the auction system. There is a significant difference, and there will be a significant saving in costs with a single buyer simply because the operations of a large number of middle mcn will be eliminated.

I do not want to be optimistic and say that a statutory marketing authority for the wool industry will increase significantly the price of wool immediately because 1 do not think it will. I think it will do so in the long term, because in the long term I believe that a strong single marketing authority will bc able to negotiate bilateral agreements with the European Economic Community countries, with Japan, wilh China and with Russia- with the Communist bloc. 1 think that perhaps the future of wool lies in the export of textiles from Japan to the United States of America and the export of greasy wool from Australia to the United States of America. If we can sell wool in the same way as we sell other major commodities, particularly if the quality of wool can be improved and if we can sell by sample or by some other objective measurement, we will have a chance to increase significantly the price of wool and the return to wool growers.

Another important factor is that I believe there will be considerable savings in that a strong single buyer under an authority will be able to exercise a powerful voice with respect to shipping and also in the calling of lenders, as has been done in other industries with the same type of management. A better price may be obtained for items such as pesticides, materials and wool bales, to name but a few. We must recognise that there are dangers. We ail know that tremendous debts are owed to the private banks, the pastoral houses and the finance companies. What will these institutions do if a statutory marketing authority is implemented? They would be within their legal rights in applying greater pressure than they arc now doing and in foreclosing. This would cause panic selling of properties. This happened once in the depression years and the government of the day stepped in with special moratorium legislation in the Federal Parliament and with mirror legislation in the States, and immediately, through this specific legislation, it stopped these panic moves. This could also be done at this time, if it were thought that, say. a trustee company or somebody else was putting pressure on and demanding its pound of flesh immediately because such action could cause a race throughout the economy or a panic in selling properties. Machinery is available to stop any panic moves in the event of a statutory marketing authority being implemented.

I think it is also necessary for me to say a few words about synthetics, lt is no good our running away from the future. The great question is: What is the future of wool? Has it a future? Will it degenerate into an exclusive and high priced commodity in the same category and classification as the fillet steak from a beef carcass, for which there is only a limited demand, or will it again become viable in the future? Who knows? I believe that we must examine - the International Wool Secretariat in particular must give more attention to this - the marriage of wool with synthetics. If years ago we had recognised the efficiency of and the great threat presented by synthetics and had worked in with the chemical companies, instead of some people in the wool industry standing on their great high horse and continually preaching that there was nothing to surpass wool in the same manner as did the dairying industry in respect of its products, the wool industry would not be in anything like the mess it is in today. In other words, there must be a marriage of wool with synthetics; there must be an active liaison between the 2. Today, there is continuous active competition between them. I believe we should try to achieve an active liaison between and an active mixing of synthetics and wool. If this is not done it is certain that in real terms, the polyesters, the nylons and the acrylics will reduce more and more in price and this in turn, will reduce further the price of wool. In other words, the ceiling price for wool will be fixed by the price of synthetics.


Mr King - What do you mean by real terms?


Dr PATTERSON - In money terms.


Mr King - Well, explain it.


Dr PATTERSON - By real terms, I mean that the increases in costs of production and changes in money values must be taken into account. For example, in the real relationship between the price of acrylics and price of wool, the gap will get smaller and smaller and this will force down the price of wool further and further in relation to the price of acrylics. In other words, the price of acrylics could go up but that industry will become more and more efficient. When 1 look at the capital investment of the chemical companies in the world, their efficiency in management and their technology, it seems to me quite clear that they will become more and more efficient than the wool industry unless the wool industry changes its entire marketing pattern. That is only a supposition which I put forward; nobody knows what will happen. I put forward my belief that we have to marry wool with synthetics. 1 know this will be resisted by a large section of the wool industry which will still claim that we must keep wool away from synthetics.


Mr Grassby - 1 do not think the grower would mind if he got a good return.


Dr PATTERSON - Yes but there would still be the diehards who would stick to the old school of thought that wool must be kept away from synthetics and must compete with them. I think to do this would be a mistake. The last point I want to make concerns the location of wool. One of the great problems of the wool industry today is attracting new users of wool. Can honourable members imagine the International Wool Secretariat, for example, going to Boston, in the United States of America, and saying to a manufacturer: What about giving wool a try?' The merchant who owns this business says: 'All right, I will give it a try. Where do I get the wool?' The IWS says: 'Get hold of a wool buyer, go to Australia and pick up some wool.' What does the merchant say? He says: 'Like hell 1 will. 1 can ring Dupont down the road and get exactly what I want in synthetics. It will be delivered the next day'. The time it would lake to come to Australia, get the wool and finally produce a cloth would be at least 9 months. The merchant wants to have woo! on hand in a certain quantity in the warehouses so that he can ring up and order it. Thai is the way marketing is done today, not the archaic way we do it in Australia. The whole objective of the amendment again is to change drastically our method of marketing, to bring the wool to the buyer, the user or the manufacturer so that he will have it close to him. All these things have to be considered and I am sure they are being considered because the wool industry is certainly not sleeping on this matter. Something positive has to be done about this operation. I have moved the amendment and I hope that the Government will support it.







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