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Tuesday, 22 May 1973
Page: 2443


Mr WHAN (Eden) (Monaro) - I thank the honourable member for New England (Mr Sinclair) for the nice things he said about me. In this friendly frame of mind I feel I should thank - and I would be most ungracious if I did not take this opportunity to thank - the honourable member for Wimmera (Mr King), because it may not be known that he brought the power of his realm to bear on Eden-Monaro in the intersts of the Labor Party. Members of this House may be unaware that the honourable member for Wimmera has released a Press statement in Eden-Monaro which has given me the opportunity to point to the evils of Yennora, to this insidious Dalgety-inspired Australian Wool Board nightmare which, of course, is the main thing attacking the only natural wool handling centre in Australia - Goulburn. I am very grateful to the honourable member for Wimmera for giving me this platform to reinforce once again the claims of Goulburn as a decentralised wool handling centre.

The Bill we now have under consideration sets out the arrangements for financing wool research, wool promotion and the administrative costs of the Australian Wool Corporation. The honourable member for Wannon (Mr Malcolm Fraser) and the President of the Australian Woolgrowers and Graziers Council, Mr Lee Steere, have criticised the level of wool tax. The current wool tax is exactly the same as that established by the previous Government at the beginning of the 1970-73 triennium. In 1970 the tax was set at 2 per cent of the gross value of all wool shorn. The current tax is the same 2 per cent. During the 1971-72 season, an additional .45 per cent was charged to cover the cost of the cost of the administration of the Australian Wool

Commission. This was subsequently reduced to .4 per cent, the same as that charge now to be levied under the current Bill. Because wool prices fell to very low levels the 2 per cent tax was reduced to 1 per cent for the 1971-72 and 1972-73 seasons. This reduction was partially offset by an increased government contribution. Uncertainties in the flow of research funds during the period of low prices have created serious difficulties for organisations involved in wool research. This coupled with the need to examine carefully the expenditure, of money on wool promotion is the reason - the stated reason - why the Government has restricted the present arrangements to one year.

It would appear that the honourable member for Wannon and others, including his grazier supporters such as Mr Barston in Victoria, have failed to read the second reading speech of the Minister for Northern Development CDr Patterson). In this speech it is clearly stated that the Government is examining ways of developing both the research and promotion programs on a longer term basis. The honourable member for Wannon has little regard for the facts. They tend to spoil his image of the devil socialist Government. Contrary to his claim, the Minister for Primary Industry (Senator Wriedt) did consult the members of the Australian Wool Industry Conference executive before drafting the present Bill. Industry leaders may find it less embarrassing and more effective if they check the facts with the real Government instead of following the hallucinations of a superseded squire.

In regard to the method adopted for financing research, it should be pointed out that the Commonwealth Scientific and Industrial Research Organisation and other research bodies find the present procedures quite unsatisfactory. Funds dependant on market price movements soon fall out of phase with the requirements of continuing research. For most projects, 3 years is far too short a time. The stages in effective research can be enumerated as the statement of the broad area for research, investment in capital equipment, assembling staff, detailed research planning, generation of data, analysis of that data, publication, and the development of the applications of this research.

Universities can rarely reach the publication stage in this particular series of research events. Often they can complete only the analysis and sometimes only succeed in completing the data collection phase. The position for universities has been aggravated in the past under the wool industry fund because the Wool Board research committees have displayed very little appreciation or consideration for the problems associated with organising physical research in particular through universities. The current shortage of wool technologists can be traced back to the withdrawal of Wool Board support for training technologists at the University of New South Wales. A 3-year funding period hardly ever allows research groups such as the CSIRO to develop the applied aspects of their work and it is essential, in my view, to extend the funding period to at least 5 years if such applied research is to be undertaken and the final fruits of research are to be gleaned for the industry's benefit.

On balance it would appear now to be better to fund research on a continuing and assured basis from consolidated revenue and to transfer the tax revenue either into consolidated revenue or into promotion. It is the view of many supporters of the Government that the $29.4m that is proposed to be spent on wool promotion should be subjected to detailed examination. Much has been made of the idea that detailed expenditure statements of the International Wool Secretariat should remain confidential. This claim does not impress me. A similar plea for confidentiality was made for withholding the costs and benefits of Yennora and the price averaging plan. Both projects could not be justified in economic terms and the cloak of secrecy was invoked to cover the extent to which vested interests profited from both these schemes.

On other occasions such as the reserve price debate, confidentiality was invoked to cover a complete absence of research or objective argument to support aspects of the case made at that time by the Wool Board. In the present case, this Government has the responsibility to ensure that ยง29. 4m of industry and taxpayers' money is properly spent. There is a great deal of circumstantial evidence that it is not. Most good research workers employed by the IWS fail to publish after they are employed. The main economists in the IWS have displayed a dismal understanding of work carried out in Australia in their economic fields, and it is personally known to me that they cao read. Productive research is outgoing. It requires the stimulus of a regular exchange of ideas via publication and discussion. The lack of this outgoing approach in both theIWS and the ancestors of the present Wool Corporation should be a cause for great concern among research workers.

The current Bill will provide$1.8m for the administration of the Wool Corporation. This could be a significant year for the Corporation. We await with interest the next wool marketing report in what has now become an endless saga of reports.I note with interest the support offered to the World Corporation by the honourable member for Wannon. Does he really support the concept embodied in Yennora that runs against the logical development of decentralised wool handling, a concept that not only is uneconomic but would eliminate selling centreslike Portland? Objective measurement and sale by sample are pointing directly to decentralised wool handling as the most economic way in which wool can be handled in the new marketing system. Consequently, such a system would enhance a port such as Portland. The honourable member for Wannon supports the Wool Corporation in its centralising policy which is typified by Yennora. Does the honourable member for Wannon and his fellow socialist haters support the policy of the Wool Corporation in directing all of its wool testing business to the Australian Wool Testing Authority at the expense of the other 2 testing houses? This is an area in which competition is absolutely essential if standards of testing are to be maintained.

Yet, during the last 12 months, the Australian Wool Corporation has sent 28,500 bales out of a total of 31,000 bales to the Australian Wool Testing Authority. None at all went to the new firm Austcare because it may introduce a competitive element into the business and so threaten the livelihood of the Australian Wool Testing Authority. Is it just a coincidence that the Chairman of the Australian Wool Corporation is also the Chairman of the AWTA and that Mr Neville is also on both groups? Why does the honourable member for Wannon so strongly support this exclusive Government contract in regard to wool testing and so violently fight a simple equalisation for Trans-Australia Airlines?

The honourable member for Wannon claims that I am concerned about the report on wool marketing to be produced by the Wool Corporation. He is right. Look at the record. A reserve price scheme recommended by the AWIC was badly researched by the Wool Board and beaten as a consequence at the referendum. The abolition of small lots was justified in what I view as a dishonest research report which freely acknowledged the vested interests of the selling brokers.

I would like to quote from page 2 of the report on wool marketing presented to the Australian Wool Industry Conference on 31 October 1967. The report states:

.   . the Board considered that an increasein the minimum lot size would lead to significant savings in brokers' and buyers' costs. It therefore recommends that one, 2 and 3 bale lots be eliminated.

At the same time, research conducted by the Bureau of Agricultural Economics clearly demonstrated that the abolition of small lots would cost growers more than it saved brokers and buyers. Yet this became the main plank in the Wool Board's subsequent marketing policy. These developments led to the present price averaging plan in which the Government pays a subsidy to offset selling brokers costs. The Corporation has had a major problem in trying to rid itself of this inspired marketing idea. A pattern has developed. The Wool Board and the Wool Commission -the same men, different names - constantly have failed to deliver credible posicies.It became necessary for the previous Government to set up crash committees to save face -the Crawford Committee, the Objective Measurement Committee and the Randall Committee -each as a consequence of the failure of the Wool Corporation or the Wool Board or the Wool Commission to deliver the goods.

This is now our Government; it is the Opposition's Corporation. Is it any wonder that I am afraid the report that emerges from this Corporation will be inept. I will be the first to praise the Corporation if that report is soundly based, on sound research principles. What makes it even worse for this Government is that both Sir John Crawford and Sir Richard Randall, who have been able to salvage something in the past, are now busy doing other things. In my view wool marketing, which will be the great issue for the Wool Corporation in the next few months, needs only one objective, and that is to sell wool at the best possible price for the grower.

In considering the factors involved in developing an efficient wool marketing system, the Wool Corporation would need to examine the scope for developing new marketing techniques, the supervision of standards, the price formation mechanism, price equalisation, new handling procedures and the level of processing which it is prepared to be involved in. I believe it is vital to separate the functions of research, supervision of standards and marketing. I hope the new scheme incorporates this separation of functions. Research in wool marketing requires a completely different environment from that required to operate a commercial system. Research must be carried out in an environment in which innovation blossoms. To carry out a systematic marketing program it is necessary that all members of the staff follow a certain pre-defined set of laws and rules about the practices adopted by the organisation. These 2 functions are contradictory. On the one hand the research worker needs freedom to change his mind and on the other hand, in order to run a bureaucracy or an efficient commercial organisation, it is necessary to have rules which all members of that organisation understand and respect.

There needs to be continuity of practice on the one hand and discontinuity of practice on the other. To put these 2 together, as has been done in the past, in the Wool Corporation is to make a grave error. So, the research function and the commercial functions of this new marketing body should be separated in the Act. It is also clear, of course, that the rule making function of any marketing organisation needs also to be separated from its commercial operations. How can an organisation which has a vested interest in the outcome of the rules make the rules for the whole industry? Therefore, I believe it is necessary to separate out from the new marketing organisation these 3 separate functions of research, rule making and the commercial operation in the market. In addition, I believe it is important that the Wool Corporation should act as a commercial marketing organisation and that it should not adopt the practice that has been adopted in the past of going overseas for advice alone and functioning only as a greasy wool marketing operation. It is in the interests of Australia that the new wool marketing body should market at all levels in the conversion system - greasy wool, tops, yarn, fabric and the employment of designers to ensure that we have some influence on the total world demand for wool.

I believe that it is absolutely essential that the new wool marketing organisation should be organised on a vertical basis in economic terms rather than a purely horizontal basis which deals exclusively in the marketing of greasy wool. Of course, the development of objective measurement and sale by description should be encouraged. It is my firm belief that if these developments are encouraged we will be leading towards a decentralised wool handling system in Australia in which wool is handled very close to the point of production and sold by sample. Probably computer bidding will take place at points around the world. It should also be clear now to most people who have studied the detail of the new technical developments in wool marketing that we are on the threshold of selling wool by description alone, which will give us more freedom in regard to the handling and transport of wool. But in order to realise this freedom it is essential that the price formation mechanism be changed from the present progressive bidding system to sealed bidding which allows impersonal bidding on a computer.

Sealed bidding, coupled with sale by description alone, will give the wool market of Australia a completely different complexion. The role that containers have played in the past will be shown to be very restrictive in this new marketing operation. I believe it is important that the wool industry and this Government face up to a potential point of conflict in the transfer of wool from the grower to the overseas consumer. There are many aspects which I believe ought to be incorporated in the new wool marketing plan. In particular, I believe it is important to separate the marketing function and the insurance function. We have often had a great deal of confusion in the past because we have confused the role that, for example, a floor price and a flexible reserve price played in the market with the price formation function. In fact, these are insurance devices put into the market in order to equalise the flow of income to growers. The floor price and the flexible reserve price were carefully examined and set out in the Crawford Committee's report which formed the basis for the Wool Commission. The use of both of these devices coupled together will allow the new wool marketing organsation to bring into the market an element of insurance which has to. date been missing.

I suspect that the present Wool Commission has been very tentative indeed in its use of the flexible reserve price. The theory of this device is that the reserve should always be held on an upward market just below the market price so that when the market peaks the Corporation purchases wool at the time when the price falls. The fact that the Corporation is there at the peak with its reserve enables it to hold prices up and prevent the sudden and disastrous decline in wool prices that has become a characteristic of the wool industry in the past. The flexible reserve price should have been used, in my view, to a greater extent in the past season than it appeared to be used. On the downward trend, the Wool Corporation has control over the rate at which the price declines by virtue of its use of the flexible reserve. When the price reaches the floor price the Corporation moves in to purchase. On the subject of the floor price, I believe that there ought to be, in settling this floor price, two separate components, namely, a commercial component which is the responsibility of the new Wool Corporation and based on commercial decisions and expectations alone and, if necessary, a welfare component which should be the responsibility of this place. A welfare component in a commercial operation is a matter of political judgment which should be made in the political environment. I commend the Bill to the House.







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