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Wool recovery a matter of balance: Kerin

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The Minister for Primary Industries & Energy, John Kerin, told the wool industry today that it is confronted with a series of balancing acts:

"The elimination of the debt vs the level of tax we can reasonably expect growers to be able to afford; the use of the stockpile as an asset to reduce the debt vs its potential to adversely affect market prices for wool; the immediate sale of non-wool assets of the AWC vs the realities of the current property market - all these are factors," Mr Kerin said.

Mr Kerin was addressing the annual conference of the Wool Council of Australia, the woolgrowers' representative body. He said that one crucial part of the balance - the wool tax rate - had been set at 15% to maintain the principle that the

industry retain responsibilty for and be involved in the management of the stockpile and the debt.

"A 12% tax would not service the debt without the $250m contribution in each of the next two years,” Mr Kerin said.

"More importantly, after the first two years it is likely the tax rate would have to rise above 12% to service and reduce the debt. This could only be avoided if more wool were to be sold from the stockpile than is currently implied by the debt -

schedule - but this would have a downward effect on the wool price, lower grower incomes and, by implication, raise the necessary tax rate still further.

"Finally, on current estimates, any wool tax under 15% incurs additional risk for both wool growers and the Government in the event of a market downturn. Such a downturn would require compensation by either increasing the wool tax or the sale of more wool from the stockpile - both would reduce returns to woolgrowers," Mr Kerin said.

Mr Kerin said that although the 15% wool tax from July 1 will mean a significant number of specialist woolgrowers will return negative incomes for 1991/92, the 12% tax would have had the same effect.

"The effect of the different tax rate on farm cash operating surplus is in the order of hundreds of dollars, not thousands.

"The hard reality is that it is neither feasible nor sensible to preserve each and every person in the sheep industry who was there at the 870

"A wool tax level that is sustainable over time is the only responsible approach for Government and industry to adopt."

For more information contact: Simon Grose 06 2777 520