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Friday, 13 August 1926

Senator PEARCE (Western Australia) (Vice-President of the Executive Council) .- I move-

That the bill be now read a second time.

In this measure it is proposed to grant bounties to the extent of £900,000 for five years on seed cotton and cotton yarn produced in Australia, of which amount £600,000 will be expended in respect of seed cotton and £300,000 in respect of manufactured cotton yarn. Half of the raw material used in the manufacture of the cotton yarn must be of Australian production. The bounty is proposed principally with the object of stimulating cotton growing as a basis for the establishment of secondary industries in Australia. It is interesting to study the history of this industry. Cotton was grown rather extensively in Australia many years ago. During the American Civil War no less than 14,000 acres of land were under cotton cultivation in Queensland, but after the termination of that war, when the United States of America re-entered the field of cotton production, there was a slump in prices, and cotton growing as an industry ceased in Australia. Efforts were made some little time ago to resuscitate the industry. It was found necessary at the outset to provide means for -

(a)   treating the seed cotton- that is, ginning it into lint;

(b)   marketing the lint cotton ;

(c)   financing the growers.

The Governments of the cotton-growing States accordingly instituted a system of guaranteed prices, under which, at the commencement . of each season, they guaranteed to pay to the grower a fixed price for his seed cotton, that price varying with the quality of the cotton produced, and the grading being done by Government graders. The British Australian Cotton Association Limited - the B.A.C.A. - came into existence a few years ago, installed ginneries, and created an organization for marketing. Sof'ar the transactions have invariably resulted in a loss, and the guaranteed price has, in actual practice, been equivalent to a bounty. The guarantee system expired on the 30th June last. Dissatisfaction with Government control was expressed by various agricultural bodies in Queensland, and those bodies, supported by the British Australian Cotton Association Limited, made representations to the Commonwealth Government urging -

(a)   the abolition of the existing system of guaranteed prices, and the substitution of a Commonwealth bounty in lieu thereof;

(b)   the de-control of the cotton industry - that is, that the industry be allowed to arrange its own grading, ginning, and marketing.

In regard to the payment of a bounty, a deputation, on the 20th May, 1925, representative of the various cotton-growing and ginning interests, waited on the Prime Minister and requested the payment of a bounty of l½d. a lb., for ten years. The following is a brief survey of the results of the trading transactions of the Queensland Government under the guarantee system, compiled from information which has been furnished in the annual reports of the Queensland AuditorGeneral : -


The estimated loss of £110,000 for the season will probably prove to be fairly accurate.

Senator Payne - (Have the losses been proportionately greater in the last year or two?

Senator PEARCE - If the honorable senator looks at the first table of figures that I gave he will see that the loss has varied. The greatest was in 1920-21, when it was over 2d. per lb., and the smallest was in 1922-23, when it was 8523d. per lb. Last year the estimated loss was 1.5788d. per lb.

Senator J B Hayes - Is there any evidence that the industry will ever be self-supporting?

Senator PEARCE - Yes; I shall try to show that as I proceed. The estimated loss to the Commonwealth on the guaranteed price for the last financial year is £55,000, and this, added to the Queensland's Government's contribution of half the loss, gives the total of £110,000. The average loss on the guaranteed price is a fraction over1½d. per lb. The guaranteed price fixed by the Queensland Government for the first three seasons - 1919-20, 1920-21, and 1921-22- was 5½d. per lb. For the 1922-23 and 1923-24 seasons the cotton was graded according to quality, the price ranging from 2d. to 5½d.per lb. of seed cotton. Ninety-seven per cent. of the 1922-23 crop brought the top price, 5½d., whilst, in 1923-24, 93 per cent. of the total crop realized the second top price, 5d. For the 1924-25 season a uniform guaranteed price was adopted throughout Australia. This ranged according to grade from 2½d. to 5¼d. per lb. For 1925-26 classification by colour, cleanliness, and general quality, and also length of staple, is being introduced. Previously it was not deemed advisable to classify by staple, owing to the lack of graders sufficiently trained for stapling purposes, and the fact that seed capable of producing long-staple cotton was not available. Three lengths of staple have now been introduced -1 inch and under, 1 inch to l1/8 inches, and 11/8 inches and over. Cotton is sold at its lint cotton value, for which there exist universal world standards. The Tariff Board recommended that, subject to certain conditions, for a period of ten years a bounty be paid on all seed cotton other than that graded into grades " D " or "XXX," the rate of bounty for the first six years to be 2d. per lb., and for the seventh, eighth, ninth, and tenth years to be l¾d., l½d., l¼d., and1d. per lb. respectively. I direct attention to the fact that when the Tariff Board made that recommendation it had not linked the payment of a bounty on seed cotton with the payment of a bounty on cotton yarn, with specific conditions covering the use of Australian-grown cotton. But the Government has now associated cotton growing with the development of cotton manufacture.

I now come to the rate of bounty to be paid. The present average price for American middling cotton lint on the world's market is approximately 9.99d. per lb. for spot, and as it. takes about 3 lb. of seed cotton to make 1 lb. of cotton lint, it will be seen that the world's average parity price for middling seed cotton is approximately 3.33d. per lb. On this basis, the payment of 2d. per lb., as recommended by the Tariff Board, would represent approximately 60 per cent. of the present world's parity. Furthermore, with increasing forced production, the payment of a bounty of 2d. per lb. would involve an expenditure of probably from £1,000,000 to £1,500,000 for the six-year period. Even with cotton production stationary at 16,000,000 lb. of seed cotton per annum, the bounty expenditure at l½d. per lb. will be approximately £500,000. The Tariff Board'sreport, to which I particularly invite the attention of Senator J. B. Hayes, states -

It is quite obvious that cotton-growing on a large scale with hired labour is notan economical proposition, and that profitable cottongrowing must be confined, so far as Australia is concerned, to the farmer who is growing other staple primary products, and plants cotton as a side line on areas of from 10 to 2!) acres, which he can handle up to the picking stage with' the assistance of his family and the lower-paid employees engaged on the other work on the farm.

Senator Payne - Has that been the custom up to the present time in Queensland ?

Senator PEARCE - It was not at first, but within the last two years that practice has increased, and it is now almost the general custom. Of that the concluding portion of the Tariff Board's report gives confirmation : -

This view is supported by the fact that, at present, although 40,000 acres are under cotton in Queensland, the average acreage per farmer U approximately 5 acres.

That is the position to-day. The present Commonwealth production of about 16,000,000 lb. of seed cotton per annum is only .0012 of the world's present crop. In the Australian- Cotton- Grower, Farmer, and Dairyman, published in Brisbane, of the 30th J une last, appears a contribution by Mr. J. D. Young, who has written many useful articles on this industry. Ho states -

The granting of a bounty on seed cotton production by the Federal Government to replace the State guarantee that has been in operation tor the past six years marks a definite step forward in the establishment of the cotton industry in this country, and is a recognition of the principle that the whole industry can only )>'- developed as a national one by protecting and fostering both the growing and manufacturing sec. tiona of the trade. It is now clearly apparent to all cotton -growers here that under our high standard of living, and consequently high cost of production, we cannot grow cotton to sell op. the overseas market in competition with cotton-growing countries possessing an abundance of cheap black labour. . . . Cottongrowing can, however, become one of this country's most important primary industries if the new material produced is manufactured in the country, thus making the whole industry selfcontained and national in its aspect, and creating a home market for the cotton -grower. The safe thing for a country like Australia to do is to foster the cotton-manufacturing industry in conjunction with the growing of the crop, and to "consume in Australian mills the cotton produced here.

Then he goes on to show why that is an important factor -

The cotton-grower is vitally interested in establishing a local market for his cotton - it affects him in this way: The freight on cotton lint to Liverpool is Id. per lb.-

He means freight and all charges - so that a textile mill here, other things being equal, has the advantage of the double freight, the raw material going to England and the manufactured goods coming to Australia.

Colonel Evans was sent to Australia by the British Empire Cotton Corporation for the express purpose of supplying information to Governments here, and providing expert advice, on the growing of cotton. I had many conversations with him, because I was the member of the Government administering the Commonwealth guarantees. His summing up of the position regarding the cotton industry in Australia was this: - Whilst it is a fact that we are in competition with cheap ' coloured-labour countries in this project, experience has shown that Australia is remarkably adapted for producing a longstaple high-grade cotton, and, as in other cases, the best place in the cotton market is at the top. In the production of highgrade long-staple cotton there is not the same competition that there is in the lower-grade and short-staple article. The aim of Colonel Evans while he was here was to educate the growers in Queensland to produce a high-grade longstaple cotton. Much testing of differentvarieties took place, and it was found as the result of experience that by using Durango seed Queensland growers were able to- produce this high-quality cotton, which brought 2d. per lb., lint price, over American middling in the world's markets. The higher grades brought even more than that, and the prices are such that, if we can produce for the bulk of our crop, cotton of that class, there is a prospect of being able to compete successfully in the world's markets under Australian labour conditions. But, unfortunately, only a certain percentage of a crop consists of high-grade cotton; a considerable proportion of it is low-grade short-staple cotton. There is a market for this, however, for the manufacture of cotton yarn, and if we encouraged that manufacture in Australia, and consumed locally the lower-grade short-staple product, we could sell the high-grade longstaple cotton profitably in the markets of the world. That could be done without excessive protection, because the cotton manufacturer would otherwise have to import from overseas low-grade and shortstaple cotton. By producing it in. Australia, the freight on that cotton would be saved, and that would represent a substantial protection to the locally-grown article. The total Australian crop, estimated at 9,500,000 lb. of seed cotton, is equivalent to 3,150,000 lb. of cotton lint. Last year, 1924-25, the production was practically 17,000,000 lb., equal to about 5,600,000 lb. of cotton lint. At present there are established in the Commonwealth various spinning mills, capable of utilizing 1,500,000 lb. of cotton lint annually, or about half of this year's estimated seed cotton production. That is a most interesting feature of the industry. As will have been seen from the figures submitted, the resuscitation of the cotton-growing industry in Queensland has resulted in a steady increase in production. Commencing with the year 1920-21, when the production amounted to nearly 1,000,000 lb., the figures have increased as follows: -


The industry, aided by the Government to the extent of 1.619d. per lb., increased nearly 400 per cent, in four years in competition with the world. That is important when considering the amount of the bounty. With a guaranteed price a little over what is now proposed in the way of a bounty, and without any assistance at all to the cotton yarn industry, the production in Australia increased, in four years, from nearly 1,000,000 lb. per annum to nearly 17,000,000 lb. per annum; The assistance that the growers have already received from the States and the Commonwealth has averaged 1.619d. per lb. The proposals now submitted will be more advantageous to them. The Government has come to the conclusion that the basis of any economic proposals to develop the cotton-growing industry must be the production of raw material for manufacturing development here, rather than that it should be regarded as an export industry which would have to compete with the very cheap labour engaged in cotton growing in other parts of the world.

The question of a bounty ou cotton yarn also was investigated by the Tariff Board, which has furnished two reports. The board recommended the payment, under certain conditions, of a flat-rate bounty of 6d. per lb., on cotton yarn spun in Australia, if 50 per cent, of locally-grown cotton were used. The Government, having very exhaustively considered the matter, does not agree to a flat-rate bounty of 6d. per lb., for the reason that a flatrate bounty fails to take into consideration that the cost of manufacturing cotton yarn of differing counts or degrees of fineness shows very wide variation. For instance, it is possible in a given time to

Spin about 30 times as much weight of yarn of No. 1 count as of No. 30 count. That being so, if a flat rate were adopted, the amount of bounty would be about 30 times as much on the coarser yarns as it would be on the finer yarns, although the amount of labour expended would vary almost in the same ratio up to this point.

Senator Duncan - The Tariff Board seems to have overlooked that point.

Senator PEARCE - If cotton textiles of all descriptions were woven from cotton yarn of a uniform size or thickness, a flat rate would be applicable; but in actual weaving practice, counts ranging from No. 1 up to at least 100, and varying from the string-like lower counts in coarse yarns to the very finest and thinnest counts utilized in the very best quality and finest cotton goods and textiles, are. used. In the trade the fineness of cotton yarn is indicated by counts, commencing with No. 1, which measures 840 yards to the 1 lb. of finished yarn. An additional length of 840 yards of yarn of consequently diminished thickness is added for every further count; so that 1 lb. of No. 5 count would have a length of 840 yards multiplied by five, or 4,200 yards; No. 10 would be double the length of No. 5, and consequently, of only half the thickness; No. 20 would give nearly 10 miles to the 1 lb. ; No. 30 would give a length of 30 times 840 yards, and so' on. In low counts, or coarse yarns, that yield is higher per lb. of " cotton spun, or the waste is lower, than in the fine counts, in which the waste is high. The finer the yarn produced, the heavier the waste of cotton. The finest yarns are spun from Sea Island and . Egyptian cotton; medium counts from Brazilian, Peruvian, and South African cotton ; and the coarse counts from Indian cotton. Compared with these, Australian cotton, which averages from lj to li inches in staple, should produce a medium count. The wages cost per lb. is proportionately small for the coarser counts. One employee might turn out about 33 lbs. per week on each spindle he attends; but for the finer yarn the output of the same spindle, from this very large quantity, might be only 1 lb. or % lb. a week. The wages cost per lb. would, of course, vary correspondingly. Thus, it will be seen that the cost of raw material, as well as the manufacturing costs, increases according to the fineness of the count of cotton yarn. A flat rate, which fails to discriminate between the varying grades of cotton yarn, cannot effectively and economically develop the industry. In fact, a flat rate would be ridiculous, for it would encourage manufacturers to confine their attention to the coarser counts, and discourage any attempt to spin the finer ones. Even the applicants themselves have admitted the defects of the board's proposal. The question is mainly one of quality, and this is a phase of the matter which, apparently, was not considered by the Tariff Board. Investigation has shown clearly that the cost of producing cotton yarn increases with the fineness of the count, and, after very careful and detailed consideration, it is on that basis that the Government proposes that the bounty shall be granted.

The value of the importations into the Commonwealth of cotton and manufactures of cottonaverages more than £13,000,000 per annum, whilst the importations of cotton yarns, mercerized and " n.e.i. " have increased from £310,738 in 1921-22 to £495,010 in 1925-26. The comparative import figures for cotton yarns are -


It is proposed to continue the bounty on yarn for five years, or until the deferred duty operates, in order to give stability to the industry. The establishment and equipment of factories will take at least twelve months. The graduated bounty proposed on yarn approximates the deferred duties of 20 per cent., 25 per cent., and 35 per cent., passed by this Parliament. A duty of 5 per cent. on foreign yarn is already in operation; that also should, to some extent, ease foreign competition. To spin the cotton grown by 6,000 mixed farmers would provide fulltime employment for 2,000 spinners. The bounty paid on seed cotton will probably be 40 per cent. of its value, whilst the bounty paid on yarn, probably 5d. per lb. on the average, will be about 22½ per cnt. of the value of the finished product.

I submit this bill with confidence. It may be argued that the Government proposes to bounty-feed an industry which cannot live; but having given several years' study to this industry, during which I have acquired some knowledge of it, and having met men who are expert in its various phases - we have some experts in Austrialia to-day; entomologists who are studying the diseases of the cotton plant, plant breeders who are investigating the most suitable plant for our climate, as well as men who have brought the industry to a successful issue in other countries, among whom is Colonel Evans - I am satisfied that it can be successfully established in Australia. These authorities are convinced that, given scientific assistance in the direction of the breeding of plants, the treatment of the insect pests that affect the plants, and production generally, there is every hope of this industry being successfully established in the Commonwealth. In considering this bill, honorable senators should not lose sight of the important part which cotton plays in the manufacture of munitions, and, consequently, might play in the defence of Australia. To have the cotton industry established in the Commonwealth would be a very valuable asset in the event of war.

SenatorFoll. - What is proposed in connexion with ratoon cotton?

Senator PEARCE - That will be determined by regulation and by the growers themselves.

Senator Kingsmill - Does this bill apply only to Australia, or to its territories as well?

Senator PEARCE - It does not apply to the territories, with the exception of the Northern Territory. In the other territories under the control of the Commonwealth cheap coloured labour is available. The Senate may be interested to know that the cotton industry has been successfully established in Papua, and is being established in New Guinea.

Senator McLachlan - What return per acre do the farmers get from their cotton?

Senator PEARCE - The best evidence of their success is that they are increasing the area under production.

Senator H Hays - Cotton growing is not their main industry?

Senator PEARCE - No; but associated with dairying it is a valuable side line.

Senator H Hays - Does Australia comprise much land suitable for cottongrowing ?

Senator PEARCE - Colonel Evans says that Australia possesses millions of acres of land suitable for the growing of cotton. Cotton is a drought-resisting plant, and the verdict of Colonel Evans is that both the climate and the land of the Northern Territory are suitable for its production. Already several farmers are growing it there, and are doing very well. They are extending the area under cultivation.

Senator H Hays - The crop is not harvested by machinery.

Senator PEARCE - No; it is all hand picked. I understand that experiments are now being made in the United States of America to produce a mechanical cotton picker, but at present the work is all done by hand. The boll from which the cotton is produced does not ripen evenly, and for that reason it must be hand picked. The cotton industry is, therefore, suitable for men with families who can assist in the picking. The Government feels justified in granting this assistance to an industry which will tend to the development of the northern portions of Australia by a white population.

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