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Wheat Marketing Legislation Amendment Bill 1998



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Bills Digest No.220  1997-98

 

Wheat Marketing Legislation Amendment Bill 1998

Warning:

This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Contents

 

Passage History

Wheat Marketing Legislation Amendment Bill 1998

Date Introduced: 14 May 1998

House: House of Representatives

Portfolio: Primary Industries and Energy

Commencement: The amendments to the Wheat Marketing Act 1989 ( items 1-21 ) and repeal of section 18 of the Wheat Marketing Amendment Act 1997 ( item 22 ) commence on 1 July 1999. The remaining provisions commence 28 days after this Bill receives Royal Assent.

Introduction

On 26 June 1997 the Government introduced legislation which continued the major changes to Australia's wheat marketing arrangements first given effect to in the Wheat Marketing Act 1984 and continued under legislation passed in 1989 and 1992. That legislation, the Wheat Marketing Amendment Act 1997 , followed the announcement on 17 April 1997 by the Minister for Primary Industries and Energy of a new commercial structure for wheat marketing in Australia.

The key element of the new arrangement is the Government's intention that by 1 July 1999, its only involvement in the wheat industry will be in relation to the export monopoly which is to be conferred on an independent grower-owned company.

The Wheat Marketing Amendment Act 1997 was the first part of a two stage process. Major features of that Act included:

• retention of the Australian Wheat Board (AWB) functions of controlling the export of wheat from Australia and th e marketing overseas of Australian wheat

• repeal of AWB powers to: buy wheat in Australia or overseas; import wheat into Australia; and to sell or dispose of wheat, or arrange to sell or dispose of wheat, in Australia

• terminate on 30 June 1999 the Wheat Industry Fund (WIF) component of the levy on wheat sales and amounts of that levy payable by the Commonwealth to the AWB

• establishment of three wholly owned subsidiaries of the AWB to which the AWB's wheat marketing and financing functions are being transferred

• 'nominated company A' the most important of the subsidiaries was created and given the power to subscribe for, acquire and hold shares in nominated companies B and C. (Also, nominated company A can enter into arrangements with one of its wholly-owned subsidiaries (other than nominated company B) to perform its functions.)

• directorships of nominated company A or one of its wholly-owned subsidiaries require the approval of the Minister

• the constitutions of nominated companies cannot be changed without approval of the Minister.

The Bill represents the second stage of the process. Once this process is complete, Australia's legislative arrangements for wheat marketing will, with the major exception of the continuation of an export monopoly, bear li ttle, if any resemblance to the provisions which have characterised the wheat industry for many decades. Consequently this Digest, as that for the Wheat Marketing Amendment Bill 1997, contains an extended discussion on the history of wheat marketing arrangements(1) and comment on some current industry issues.

Purpose

The major provisions of the Bill provide for:

• the establishment of the Wheat Export Authority (WEA) on 1 July 1999 which replaces the AWB and will have the functions of controlling the export of wheat from Australian and monitoring nominated comp any B's performance in relation to the export of wheat

• provide for B class shares in nominated company A to be issued to WIF equity holders and for such shares to be issued at the rate of one B class share for each WIF unit;

• provide nominated company B with power to export wheat without WEA authority until 1 July 2004

• exempt nominated company B from Part IV of the Trade Practices Act 1974

• require the AWB immediately before 1 July 1999 to divest itself of all assets, liabilities, rights of employees that could have been transferred

• on 1 July 1999 vest in nominated company A, AWB money in the WIF, an investment of the WIF and any other asset that was acquired using WIF money.

 

Background

Early Federal Government Intervention in the Wheat Industry

Wartime Arrangements

The Federal Government's first involvement in Australia's wheat industry occurred during World War I when temporary war-time measures were instituted. These included establishment of the Australian Wheat Board in 1915. Similar measures were implemented during World War II.

The war-time measures were attractive to producers because they were freed from the dominance of wheat merchants. Several Government inquiries in the early part of this century refer to the existence and impact of price and shipping cartels whose collusive actions depressed prices and controlled transport. This exploitation of farmers was facilitated partly by difficulties experienced with storage and transport arrangements during a period of rapid expansion and technological advancement.

The Depression Years

The Great Depression severely impacted on Australia's external trading position. In 1930, the Commonwealth Government sought to overcome these economic difficulties through an expansion in primary production, esp ecially wheat-growing. Early in 1930 Australian wheat growers were urged to grow more wheat. The appeal was instigated and supported at the highest levels of Government. This was the first time that political factors interfered with farmers production decisions.

The 'grow more wheat' campaign was accompanied by obvious patriotic overtones and included the particularly attractive offer of a price guarantee of 4 shillings per bushel. Political leaders were unable to keep their end of the bargain with the Senate rejecting Australia's first Wheat Marketing Bill on July 4, 1930.

During 1930, however, world wheat prices declined significantly and, with most producers in the eastern States already in a financially weakened condition, the industry entered a severe economic slump. Several other legislative initiatives providing for assistance to the wheat industry were attempted during 1930 and 1931. The role and powers of the States were significant issues in the failure of most of these proposals.

Although one measure, providing a price guarantee of 3 shillings per bushel, was actually enacted, it was 'still-born' because no funds for the bounty were available.

Wheat-growers finally received their first Federal assistance following passage of the Wheat Bounty (No. 2) Act was assented to on November 25, 1931. This provided a bounty of 4 1/2 pence per bushel on all wheat marketed in 1931/32. Further bounty and debt relief measures were provided by the Commonwealth Government during the 1930s. The States also became financially involved with direct and indirect measures to assist wheat-growers.

Wheat Marketing Legislation

Major long-standing features

The comprehensive marketing arrangements which have been a feature of the Australian wheat industry for most of the post-war period were first brought together in the Wheat Industry Stabilisation Act 1948 which was assented to late in that year. The Act embodied four main features arising from concepts of price stabilisation and orderly marketing (that is the removal of competition between producers in the output market) - guaranteed prices, a home consumption price, the Australian Wheat Board and stabilisation arrangements. These remained fundamental objectives of most subsequent legislation.

The 1948 Act provided for measures contained therein to last five years and this pattern has been repeated in each subsequent Act. In all, eight fairly similar wheat marketing plans, as they were often referred to, were enacted from World War II to 1984. E ach was enacted in time to give continuity of the major provisions and hence there was never any real prospect of alternative arrangements operating in that period. All plans shared some common features such as granting the AWB sole receival and marketing powers for virtually all wheat grown in Australia; discriminatory pricing of wheat sold domestically; pooling of sales revenue and marketing costs and assistance provisions which transfer some (if not all) of the risk of adverse (downward) price movements to the Government.

Change in the wheat industry

The momentum for major changes to wheat marketing arrangements appears to have been well established prior to the 1984 legislation with several important High Court rulings in the late 1970s; a highly criti cal report in 1979 from the Senate Standing Committee on Finance and Government Operations questioning the AWB's competence and accountability; adverse reports by the Auditor General's Office; a 1981 report which was highly scathing of grain handling in NSW; and, the Industries Assistance Commission's (IAC) 1978 and 1983 reports on the wheat industry.

1984

The Wheat Marketing Act 1984 was the first of three wheat marketing plans instituted under the previous Labor Government. It was developed at a time of great financial pressures in the industry following, firstly, a severe drought over much of Eastern Australia in 1982 which caused production to plummet and the importation of wheat into Victoria from Western Australia, and secondly, in the following season, heavy rains at harvest time in many areas causing a marked deterioration in crop quality.

Key changes introduced in 1984 were:

• a system of permits issued by the AWB for wheat used for stockfeed, where producers and consumers could trade directly bu t under guidelines and regulations

• alterations to the Guaranteed Minimum Price arrangements which sent increased market 'signals' to producers

• five separate categories of wheat for which prices were underwritten (as against one previously) to reduce cross subsidisation

• prior to the next wheat package there were two other very important reports which served as catalysts for debate concerning the wheat industry.

Royal Commission Into Grain Storage, Handling and Transport

In response to the rural rece ssion of the mid 1980s, the Government presented its Economic and Rural Policy Statement in April 1986. One of the measures proposed therein was a Royal Commission into grain storage, handling and transport. On the basis of an agreement between the Commonwealth and State Governments, the Royal Commission, chaired by Mr Jim McColl, commenced in late 1986 and continued through 1987. This landmark inquiry was required to advise on the most efficient and cost-effective integrated grain distribution system for Australia's future needs and to make recommendations about implementing such a system.

The inquiry focused on the legislative and administrative arrangements within which grain distribution services were being provided. It found that, for the most part, the system of grain distribution did not meet the criteria of economic efficiency, cost effectiveness and integration. A quantitative evaluation suggested that cost savings of approximately $10 per tonne could be achieved nationally by adopting a system which provided for the greatest choice and flexibility in all aspects of the grain distribution system.

The Royal Commission's key recommendations were:

• marketing authorities to deal with a deregulated distribution system and being specifically required to minimise storage, handling and transport costs

• removal of the requirement that marketing authorities grant sole receival rights to State agencies for storage and handling, thereby allowing them to utilise those agencies providing services at least cost

• removal of all restrictions and impediments to the transport of grain by road

• dissagregation of port service and sea transport costs with charges to growers and other users to reflect actual port costs. ie reforms to allow charges for port and shipping services to more closely reflect actual costs incurred.

1988 IAC wheat industry report

In February 1988, the IAC completed its third review of the wheat industry.(2) The focus of its investigations was on whether future assistance should be provided to the wheat industry and, if so, the nature, duration and extent of such assistance .

The IAC made sixteen specific recommendations as well as commenting on other matters associated with Australia's wheat marketing arrangements. It outlined a preferred course of action

…designed to improve the wheat industry's competitiveness by removing those regulations which impede growers and buyers of Australian wheat from responding flexibly to market developments.(3)

The IAC's major recommendations were:

• limiting the AWB's power to control exports to prescribed markets

• extending the grower-t o-buyer and permit arrangements to export sales

• extending permit arrangements to cover all domestic sales and with no restraints on reselling in the domestic market

• removing the AWB's obligation to supply the domestic market

• discontinuation of the administrative domestic pricing mechanism

• discontinuation of underwriting provisions

• advance payments to be a declared proportion of the season's expected market returns with the option of negotiable certificates in lieu

• as far as practicable, indi vidual payments to growers reflect actual market returns and associated costs.

1989

Debate during 1988-89 over the future of wheat marketing was possibly the most controversial in fifty years and generated considerable hostility both within industry ranks and between the industry and the Government. The resultant legislative package probably contained the most significant changes ever made to Australian wheat marketing arrangements and included:

• deregulation the domestic wheat market through the removal of the AWB's compulsory acquisition powers and termination of administered domestic pricing arrangements

• introduction of a fixed government guarantee on AWB borrowings in relation to pool wheat for advance payments, payments in lieu of final payments and operational expenses associated with sales where the AWB's borrowing liability exceeds money available for repayment of the borrowing

• removal of the requirement that there be a majority of growers among Board members

• establishment of a Wheat Industry Fund (WIF), funded principally from a minimum 2 per cent grower levy, to generate a capital base for financing the AWB's marketing activities

• the AWB objective of maximising net returns to producers by minimising storage, handling and transport costs with costs to be passed back to individual growers wherever possible.

In addition, the AWB was permitted to trade in grains other than wheat, the composition of the Board changed from primarily growers to commercial expertise and there was no sunset provis ion on the life of the AWB.

1992

Amendments in 1992 extended until 31 June 1999 the Commonwealth guarantee of AWB borrowings at a rate of 85% of estimated net pool returns; continued accumulation of the WIF; and established an AWB subsidiary for the prov ision of grains based value adding services.

From 1992 to 1997

Moves towards a substantially new structure for the AWB had their origins in 1989 when the Grains Council of Australia (GCA) initiated the Grains 2000 project. This was in recognition of the need for strategic planning for the future of the grains industry. One of the main events early in this process was the Grains 2000 Conference in 1991. To the extent that the status of a conference is reflected in the line up of speakers, then this one rated very highly. It was opened by Prime Minister Hawke and addressed by three Ministers as well as the Head of the EU Delegation in Australia, a senior representative from the US Department of Agriculture and the Secretary of the Treasury. In addition a significant body of commissioned supporting research was presented and provided a basis for debate.

At the conference it was recognised that the AWB would need much greater flexibility to be successful in the medium to longer term given the changes occurring both internationally and domestically. Subsequently in late 1993 the grains industry established the National Grain Marketing Strategic Planning Unit (NGMSPU). Membership of this body comprised the GCA, the AWB, the Australian Grain Marketing Federation, the Bulk Handling Authorities of Australia, Australian Flour Millers, the National Agricultural Commodities Marketing Association, Australian Maltsters and Brewers, the Department of Primary Industries and Energy, and the Grains Research and Development Corporation (GRDC).

The NGMSPU process included the Milling Wheat project which had as one of its major components consideration of the AWB's structure. In February 1994, consultants Booz Allen and Hamilton began a ten-month study, funded by the GRDC, designed to culminate in a strategic plan for the Australian milling wheat industry. Their report was published in January 1995. Later that year the GCA issued a discussion paper and instigated an extensive schedule of grower meetings in September/October that year. The main options canvassed during these consultations were re-regulation, deregulation, maintaining the current structure, corporatisation with retention of single desk and privatisation with retention of the single desk.

The GCA subsequently identified as key objectives for any AWB restructure:

• retention of single desk selling for exports

• grower control / ownership

• an adequate capital base to maintain the existing level of harvest payments

• increased commercial flexibility

• industry self determination.

It also expressed support for a structure based on a statutory authority and a wholly owned subsidiary company. The next part of the process was the establishment of a GCA/AWB/DPIE working group which was given six months to recommend on:

• initial and future requirements of the subsidiary

• future of WIF/revolvement/potential conversion of WIF to shares

• the extent to which a statutory authority can raise finance for harvest payments

• structural options for the subsidiary

• the implementation and trialing of enhanced business rules and a tender system for pool sales on the domest ic market.

The Working Group appointed independent financial and legal advisers, Bankers Trust and Mallesons Stephen Jacques to provide advice on the appropriate corporate and financial structure for the AWB in line with the objectives listed above. Other possible corporate/financial models, including the dual class and grower corporate models were later added to the advisers' brief.

After much deliberation and newspaper headlines using terms such as 'impasse' and 'crisis' the working party finally agreed to recommend the grower corporate model to the Minister for Primary Industries and Energy and this was essentially the structure announced by the Minister on 17 April. Finalisation of a preferred option by the working party proved an extremely difficult task. This was due in part to differences between the AWB and the GCA but also to lack of unanimity amongst the GCA's state affiliates. The most vocal internal GCA critics has been the Western Australian Farmers Federation (WAFF) who have identified eight areas of concern with the proposed AWB structure.

WAFF considered in particular that under the proposed structure they would disadvantaged by the weighting of A Class shares which was based largely on the 'one grower, one vote' system. WAFF's view is based on the fact that, on average, WA growers produce considerably more wheat than growers in other States. Indeed, such is the strength of the WAFF's dissatisfaction that in August it resolved to terminate its membership of the GCA effective 31 March 1988. This outcome would now appear unlikely given a reported substantial compromise within the GCA whereby shares will now be allocated on a delivery basis.(4)

1997

On 26 June 1997 the Government introduced the Wheat Marketing Amendment Bill 1997. The Bill repres ented the first of a two stage process of providing the framework for the restructure of Australia's wheat marketing arrangements. The main features of the Bill were:

1. Retention of AWB functions of controlling the export of wheat from Australia and the marketing overseas of Australian wheat.

2. Repeal of AWB powers to: buy wheat in Australia or overseas; import wheat into Australia; and to sell or dispose of wheat, o r arrange to sell or dispose of wheat, in Australia.

3. Establishment of three wholly owned subsidiaries of the AWB to which the AWB's wheat marketing and financing functions are being transferred.

4. 'Nominated company A' is the most important of the subsidiaries being created as it is given the power to subscribe for, acquire and hold shares in nominated companies B and C. Also, nominated company A can enter into arrangements with one of its wholly-owned subsidiaries (other than nominated company B) to perform its functions.

5. The AWB is to be treated as the agent of nominated companies A or B in respect of new season wheat transactions (ie. wheat of a season that began on or after 1 July 1997). The transactions affected include: pooling and related transactions, futures and hedging contracts, investments and operational expenses.

6. Directorships of nominated company A or one of its wholly-owned subsidiaries require the approval of the Minister.

7. The constitutions of nominated companies cannot be c hanged without the approval of the Minister.

8. The AWB to be responsible for the purchase of wheat for pools and payments for wheat in respect of old season wheat (ie. pre - 1 July 1997 season) and nominated company B in respect of new season wheat (ie. 1997 and subsequent seasons).

9. Terminate on 30 June 1999 the Wheat Industry Fund component of the levy on wheat sales and amounts of that levy payable by the Commonwealth to the AWB.

For additional information on the provisions of the Wheat Marketing Am endment Bill 1997 refer to the Digest for that Bill (No. 43 of 1997-98).

The proposed commercial structure for wheat marketing

On 17 April 1997 the Minister for Primary Industries and Energy announced the proposed commercial structure for wheat marketing p ost 1 July 1999. The main features of the commercial structure announced were:

A Corporations Law company under grower ownership and control will commence on 1 July 1999 and be responsible for all commercial aspects of wheat marketing.

The company will operate as one holding company with two subsidiaries, a wheat pooling/export subsidiary and a commercial subsidiary.

Shares in the holding company will be issued in two classes: A-class shares will be issued to all growers and the Wheat Industry Fund (WIF) will be converted to B-class shares.

A-class shares will be issued only to wheat growers. They will be issued at a nominal value, be non-transferable and redeemed as holders leave the industry or fail to qualify as a wheat grower. The will not attract dividends or other returns. A-class shares will confer voting rights to elect the majority of directors of the holding company, and hence control of the holding company.

B-class shares will be issued to WIF equity holders in proportion to their equity in WIF and will provide the company's capital base. As the provider of equity B-class shareholders will have the right to elect a minority of directors. B-class shareholders will receive a commercial rate of return and B-class shares will only be tradeable amongst growers until the outcome of the National Competition Policy (NCP) review of the single export desk.(5)

On 31 March 1998 the Minister for Primary Industries and Energy announced that the Government had endorsed the proposed commercial structure for wheat ma rketing post 1 July 1999. The Minister said:

A-class shares, issued only to growers, will give them the power to elect a majority of the Board of Directors of the new AWB, and enable growers to exercise control directly through this majority.

B-class shares will be issued on the basis of Wheat Industry Fund (WIF) equity, enabling shareholders to initially elect two - ultimately, four - directors of the 13 member Board.(6)

Other contributions to the debate

Although most attention in the debate on the future of wheat marketing arrangements has focussed on the GCA, the AWB and the Working Party there have been contributions from a range of other parties. In October 1995 a group of grain user and private grain trading organisations presented their views on future marketing arrangements for wheat and other grains.(7) The principles they espoused included a fully competitive and deregulated grains market, both domestic and export, and continuation of grower owned organisations but without statutory provisions and on an equal basis with private sector operators. The main features of their plan were immediate privatisation of the AWB's commercial activities; establishment of Australian Grain Industry Corporation to administer export licences (this would be the single desk operation for markets where premiums are obtainable) and quality programs and be responsible for market development and generic promotion.

While there was nothing fundamentally new in the proposal it was advanced in an environment quite different to any previous debate. The main relevant new factors were National Competition Policy; the failure of one of the last bastions of statutory marketi ng - the wool stockpile; the political pressure on the Government arising from the cancellation of the imported grain trials; and, the equivocal analysis used to 'prove' the benefits of the AWB's single desk status.

Others grain industry participant and analysts have called an end to the AWB's export monopoly or at least questioned its value include. Clinton Condon, the previous chairman of the AWB and now chair of private commodity traders Bustan International has said that that the single desk arrangements for wheat should not be confused with the AWB's export monopoly. He believes it is possible to retain the single desk but improve flexibility and retain premiums.(8)

Earlier this year the Managing Director of Clyde Agriculture, one of Australia's largest wheat growers, claimed that if the export monopoly was removed, private grain traders would be able to secure higher prices.(9) Shortly thereafter the head of one of the world's largest commodity traders, Cargill Inc claimed that removal of the AWB's export monopoly would benefit Australian grain growers.(10)

Another regular critic of statutory marketing, particularly the AWB's export monopoly is The Australian Financial Review's Stephen Wyatt(11) while the Centre for International Economics recently criticised 'adherence to outdated cultures such as price pooling and generic promotion' and argued that when account was taken of the effect of the AWB's single desk export power, the 'the relatively small net benefit achieved by the AWB's single desk, in dollars a tonne terms, would be negligible'.(12)

State Legislation

Apart from the relevant Commonwealth legislation, state legislation also impacts on the wheat industry. In the first instance, complementary State legislation exists to transfer certain pow ers to the Commonwealth thereby giving effect to the AWB's powers of pricing and acquisition. With the exception of Queensland, each State's wheat marketing legislation is broadly similar to the Commonwealth's.

State governments are also heavily involved in the transport, storage and handling of wheat. Traditionally the bulk handling authority (BHA) in each state was appointed as the sole authorised receiver to accept wheat and co-ordinate handling and storage on behalf of the AWB in that State. However, an amendment to the Commonwealth's Wheat Marketing Act 1988 allowed the AWB to deal with whomever it chooses in regard to the provision of storage and handling services.

The Australian Wheat Board

The AWB is a statutory marketing authority which has exist ed continuously since 1948. During that period it has become possibly Australia's largest single exporter and one of its largest commercial entities. As mentioned previously, some of its powers arise from complementary legislation passed by the States.

The AWB's principal function is to control the export and overseas marketing of Australian wheat. Its other functions include domestic trading in wheat and to export (but not control) and trade in other grains. The AWB is required to discharge these functions with the objectives of:

• maximising the net returns to wheat growers who use AWB pools by securing, developing and maintaining markets, and, maximising returns to growers

• operating in a commercial manner to provide grain growers, especially wheat gro wers, with a choice of marketing options

• participating in value adding activities for the benefit of grain growers.

Some current issues

Competition policy

The Government has announced that the review of the wheat industry under the National Competition Policy (NCP) Principles agreed between the Commonwealth and State Governments will be conducted in 1999-2000. The timing of the review has drawn criticism from the National Competition Council (NCC), the independent review body whose functions include assessment of governments' progress in competition policy reform. The NCC has urged governments to give priority to reforms likely to deliver greatest gain. In its 1995-96 Annual Report, however, the NCC has cited the Commonwealth's decision to review the Wheat Marketing Act 1989 in 1999-2000, which is near the end of the period for all such reviews, as an example of failure to schedule an early review of important legislation.

The purpose of the review of the wheat legislation will be to determine whether there are net benefits accruing to Australia from the AWB's wheat export monopoly. The overriding principle applying to all legislative reviews is that legislation should not r estrict competition unless it can be demonstrated that the benefits outweigh the costs and the particular policy objectives can only be achieved by restricting competition.

With the commencement of the review still some time off, let alone any findings, members of the Government have clearly signalled what they expect the post-review situation to be. The Deputy Prime Minister is reported as saying the AWB's export monopoly 'should stay beyond the 1999 National Competition Policy review' while the Minister for Primary Industries and Energy has referred to 'the Government's firm commitment to continue the wheat export monopoly'.(13)

While the view has been expressed that, as the AWB's monopoly only applied to exports it should not be subject to review, this may not a correct interpretation of competition policy principles. Given the dominance of exports in the wheat industry, there is a strong correlation between domestic and export prices. Thus the AWB's export monopoly influences domestic market outcomes and should qualify as legislation affecting competition.

World Trade Organisation

Another issue which may arise in the medium to longer term is whether the proposed statutory arrangements comply with changes concerning state trading arrangements, if any, a rising from future World Trade Organisation (WTO) negotiations. While Australia's current statutory marketing arrangements are permitted under the WTO, the United States has signalled that it intends to pursue the issue of state trading arrangements in this forum. While it is believed that these moves are aimed primarily at import organisations, and any developments are a long way off, the possibility that there may be consequences in the long term for the AWB's export monopoly cannot be ruled out.

Main Provisions

The principal effect of clause 5 is to require the Minister to make a determination by 31 March 1999 amending the constitutions of the nominated companies (ie. A-C). As noted in the Explanatory Memorandum to the Bill the amendments will govern, initially, the operations of nominated companies A-C after the relevant stakeholders become shareholders after the transfer time (ie. 1 July 1999).(14)

Clause 6 provides for the cancellation, immediately before the transfer time, of all shares in nominated company A (ie. shares held by the AWB).

Clause 7 provides for B class shares in nominated company A to be issued to WIF equity holders. Shares will be issued at the rate of one B Class share for each WIF unit.

Amendments to the Wheat Marketing Act 1989

Item 4 of the Schedule repeals Parts 2, 3 and 3A and substitutes a new Part 2 ( proposed sections 4-16 ) in the Wheat Marketing Act 1989 (the Principal Act). Parts 2 and 3 of the Principal Act contain provisions dealing with the AWB and Part 3A provision dealing with the companies which took over the commercial activities of the AWB (ie. nominated companies A-C).

Proposed section 4 provides for continued existence of the AWB, after the commencement of the Bill, but to be known as the Wheat Export Authority (WEA).

The proposed functions and powers of the WEA are to:

• control the export of wheat from Australia

• monitor nominated company B's performance in relation to the export of wheat ( proposed section 5 ).

Proposed section 6 provides that the membership of the WEA is to comprise a Chairperson, one member nominated by the Grains Council and one government member. Members will be appointed by the Minister for a specified term up to a maximum of three years and hold office on a part-time basis.

Proposed section 11 provides that money of the WEA may only be spent in certain circumstances, including:

• on expenses and liabilities incurred by the WEA in the performance of its functions

• payment of remuneration and allowances

• reimbursing the Grains Council for expense s reasonably incurred by it in connection with proposed section 15 meetings.

Ministerial approval will be required for WEA borrowings ( proposed section 12 ).

Proposed section 15 requires the Chairperson of the WEA where the annual report of the WEA has been tabled in Parliament to:

• present the annual report to a meeting of the Gr ains Council within six months of the year to which the report relates

• report to the meeting on the operations of the WEA during the year to which the report relates

• make themselves available to answer questions arising from the annual report.

The abov e requirements will also apply in respect to an interim report of the WEA. In addition to reporting to the Grains Council in respect to annual and interim reports, the WEA must report to:

• other meetings of the Grains Council at least once every six month s on its operations

• may arrange with the Grains Council to report to other meetings of the Grains Council on its operations.

Proposed section 16 deals with WEA operational plans. The proposed section requires the WEA at the start of each financial year to prepare an operational plan for they year and give it to the Minister. The plan must include details of strategies and policies to be followed by the WEA in performing its functions. The Chairperson must keep the Minister informed of changes to the plan and matters that might affect significantly the WEA's ability to perform its functions in accordance with the plan. The Minister is accorded power to give the Chairperson guidelines for determining when a matter/s might affect significantly the WEA's ability to perform its functions in accordance with the plan.

Section 57 of the Principal Act provides the AWB with sole power to authorise wheat exports. The major amendments proposed by Part 4 of the Schedule to the Bill (items 6-21 ) include:

• substitution of references to the AWB with that of the WEA

• provide nominated company B with the power to export wheat without WEA authority until 1 July 2004

• require the WEA prior to authorising a wheat export to consult nominated company B

• prohibit the WEA, prior to 1 July 2004, from authorising a bulk-export without the prior approval of nominated company B

• require that export applications be accompanied by the prescribed fee

• exempting nominated company B from Part IV of the Trade Practices Act 1974 (ie. restrictive trade practices).

A new section 84 is substituted in the Principal Act by item 16 of the Schedule which requires nominated company B to buy all wheat offered to it, which meets the standards required by nominated company B, for inclusion in a pool operated by it. Proposed section 84 also requires that nominated company B pay a reasonable price for such wheat, and that the price be calculated by reference to the net return for the pool in which the particular wheat is included. The requirement that nominated company B purchase all wheat etc., will not apply to any offer made after 1 July 1999.

Amendments to the Wheat Marketing Amendment Act 1997

Section 18 of the Wheat Marketing Amendment Act 1997 ensured that transferred AWB employees to nominated company A retain mobility rights under Part IV of the Public Service Act 1922 (The Public Service Act 1922 confers mobility rights to employees of approved statutory authorities that are staffed outside the Public Service Act 1922 . Item 22 of the Schedule repeals section 18. The rationale given in the Explanatory Memorandum to the Bill for this repeal is that from 1 July 1999 nominated company A will no longer be considered a Commonwealth authority for the purposes of Part IV of the Public Service Act 1922 .

The amendments proposed by item 23 of the Schedule are transitional provisions, the major effects of which are:

• to require the AWB immediately before 1 July 1999 to divest itself of all assets, liabilities, rights of employees that could have been transf erred

• to require the AWB to retain an amount up to $5 million as determined by the Minister

• on 1 July 1999 vest in nominated company A, AWB money in the WIF, an investment of the WIF and any other asset that was acquired using WIF money.

Endnotes

 

1. R ecommended reading for those interested in an extended history and analysis of wheat marketing and related issues: Dunsdorfs, E., The Australian Wheat-growing Industry 1788-1948 , Melbourne, Melbourne University Press, 1956; Stillwell G. and Sydenham D., A Shared Harvest: the Australian Wheat Industry , 1939-1989, Melbourne, MacMillan Educational Australia, 1991 and Watson A.S., Principles of grain marketing: some lessons from Australian experience , ACIAR Technical Reports no. 38, 1996.

2. Industries Assistance Commission, The Wheat Industry , Report No. 411, 25 February 1988.

3. Industries Assistance Commission op. cit , 19.

4. Wheat growers resolve industry split, The Australian Financial Review , 3 September 1997.

5. Anderson announces new commercial structure for wheat marketing, DPIE Press Release 97/37A, 17 April 1997.

6. Anderson announces government support for new commercial Australian Wheat Board, DPIE Press Release 9832A, 31 March 1998.

7. Stockfeed Manufacturers Association of Australia and others, The Australian Wheat Industry: proposals for the future (the commercial alternative) , October 1995.

8. Condon questions monopoly, The Australian Financial Review , 19 February 1996.

9. Monopoly on wheat exports attacked, The Sydney Morning Herald , 6 February.

10. Cargill head boost grain deregulation, The Australian Financial Review , 28 February, 1997.

11. See for example, 'Dinosaurs' continue to stomp on agriculture, The Australian Financial Review , 28 July, 1997.

12. Marketing bodies 'outdated', The Land , 31 July 1997.

13. Anderson announces new commercial structure for wheat marketing, DPIE Press Release 97/37A, 17 April, 1997.

14. Wheat Marketing Legislation Amendment Bill 1998, Explanatory Memorandum , 7.

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