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Address to the National Rural Resources Press Club,



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ADDRESS TO THE NATIONAL RURAL AND RESOURCES PRESS CLUB

LADIES AND GENTLEMEN,

I AM PLEASED TO HAVE BEEN INVITED TO ADDRESS THE NATIONAL RURAL PRESS CLUB ESPECIALLY AS IT GIVES ME THE OPPORTUNITY TO ANNOUNCE A PACKAGE OF MEASURES AIMED AT INJECTING CONFIDENCE BACK INTO THE WOOL INDUSTRY. ΓΓ IS A PACKAGE DESIGNED TO SECURE A STRONG AND VIABLE FUTURE FOR THE WOOL

INDUSTRY.

HISTORICALLY WOOL HAS BEEN ONE OF OUR GREAT INDUSTRIES AND FOR MANY YEARS IT WAS OUR PREDOMINANT EXPORT - IT IS STILL OUR MOST SIGNIFICANT RURAL EXPORT. AS YOU WOULD ALL BE AWARE THE INDUSTRY HAS WEATHERED MANY UPS AND DOWNS IN THE LAST 20 YEARS; THE CRASH OF 1970, WHEN IT WAS THOUGHT THERE WAS LITTLE

FUTURE IN WOOL; THE INTRODUCTION OF THE RESERVE PRICE SCHEME;

THEN THE BOOM OF LATE 1980; THE CRASH OF 1991, A STOCKPILE WORTH BILLIONS, AND THE END OF THE SCHEME. MANY THOUGHT AT THE ΉΜΕ THE WOOL INDUSTRY WAS FINISHED.

BUT THE REALITY IS THAT WOOL DOES HAVE A GREAT FUTURE IN THIS COUNTRY. IT WILL ONLY HAVE THAT FUTURE HOWEVER IF WE DO MORE

WITH IT THAN JUST TRADE THE COMMODITY. THERE HAS TO BE A MARKET AND DEMAND DRIVEN APPROACH TO THE SELLING OF OUR WOOL - NOT JUST A SUPPLY APPROACH.

THERE ARE NOW SOME GOOD SIGNS POINTING TO A LASTING AND SUSTAINABLE RECOVERY FOR THE INDUSTRY. THE BASIC DEMAND FOR HIGH QUALITY WOOLLEN FIBRE IS STILL STRONG AND WOOL IS ABLE TO CONTINUE TO COMMAND A PREMIUM OVER OTHER FIBRES AUCTION

PRICES THIS YEAR HAVE BEEN GENERALLY HIGHER, OUR TRADE CLEARANCE RATE IS UP, WOOL PRODUCTION IS DOWN SIGNIFICANTLY AND THE STOCKPILE IS BEING SOLD MUCH MORE QUICKLY THAN

BY

THE MINISTER FOR PRIMARY INDUSTRIES AND ENERGY SIMON CREAN.

25 JUNE 1992

ANYONE PREDICTED. IN FACT WE EXPECT TO EXPORT NEARLY AS MUCH WOOL IN 1991/92 AS WE DID IN THE RECORD YEAR OF 1986/87.

THE GOVERNMENT'S DECISION IN THE ONE NATION STATEMENT TO GRANT FLEXIBILITY TO THE AUSTRALIAN WOOL REALISATION

COMMISSION (AWRC) THROUGH A CUMULATIVE DEBT REPAYMENT SCHEDULE AND TO ALLOW A REBATE OF SURPLUS FUNDS TO GROWERS RECOGNISED THE IMPORTANCE OF THE FUTURE OF THE INDUSTRY. THE OPENING LIABILITY OF THE WOOL STOCKPILE IS NOW BEING EFFECTIVELY TURNED INTO A SUBSTANTIAL ASSET WHICH CAN UNDERPIN AND SUSTAIN A SENSIBLE PRICE ON WORLD MARKETS. AND

THAT, I BELIEVE IS FUNDAMENTAL TO ENSURING CERTAINTY,

CONTINUITY AND SECURITY TO THE GROWERS IN THE INDUSTRY.

OVER THE PAST FEW MONTHS I HAVE HELD WIDE RANGING DISCUSSIONS WITH THE WOOL COUNCIL, THE AUSTRALIAN WOOL CORPORATION (AWC) AND THE AWRC. I HAVE ALSO LISTENED TO THE VIEWS PUT TO ME BY RANK AND FILE WOOL GROWERS IN MANY PARTS OF THE COUNTRY.

THE DECISIONS I HAVE TAKEN ARE CONSISTENT WITH WHAT I HAVE

BEEN ARGUING SINCE TAKING ON THIS PORTFOLIO - WE MUST REBUILD THE CAPITAL BASE ACKNOWLEDGING THE PARTICULAR CIRCUMSTANCES OF THE INDUSTRY AND SECURE THE FUTURE BY DEVELOPING A VISION FOR THE INDUSTRY. THE KEY ELEMENTS IN THE WOOL PACKAGE ARE:

• A REDUCTION IN THE EFFECTIVE RATE OF WOOL TAX FOR 1992-93 FROM 12% TO 8.5%;

• THE ESTABLISHMENT OF A WOOL PROCESSING TASK FORCE;

• A COMMITMENT TO INCREASED PROMOTION AND MARKETING FOR WOOL INCLUDING AN INCREASE IN THE PORTION OF WOOL TAX FOR PROMOTION TO 3.5% IN 1992-93; AND

• A REVIEW OF THE ACCOUNTABILITY PROCEDURES INCLUDING THE AGMS, INFORMATION FLOWS, GROWER PARTICIPATION AND

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THE LINKAGES BETWEEN WOOL PROMOTION, MARKETING AND RESEARCH ACTIVITIES.

BOOST FOR GROWERS

THE REDUCTION IN THE EFFECTIVE LEVEL OF THE WOOL TAX FROM 12% TO 8.5% IS CRITICAL TO REBUILDING THE CAPITAL BASE AND SECURING THE FUTURE FOR THE WOOL INDUSTRY. CURRENT ESTIMATES FROM ABARE SHOW THAT THIS REDUCTION IN THE EFFECTIVE TAX RATE WILL

RAISE FARM CASH INCOME FOR THE AVERAGE GROWER BY $2,300. FARM

CASH INCOME FOR WOOL GROWERS IS EXPECTED TO INCREASE FROM

AN AVERAGE OF $18,100 PER FARM IN 1991-92 TO $25,700 IN 1992-93.

THE EFFECTIVE WOOL TAX OF 8.5% INCLUDES A NET 4.5% TAX TO THE AWRC FOR DEBT MANAGEMENT PURPOSES, A 3.5% TAX TO THE AWC FOR PROMOTION AND MARKETING AND A 0.5% TAX TO THE WOOL R &D CORPORATION FOR RESEARCH AND DEVELOPMENT.

THE CURRENT REDUCTION IN THE EFFECTIVE RATE IS A PRODUCT OF

THE STRONGER THAN EXPECTED DEMAND AND LOWER LEVELS OF SUPPLY, AND HENCE THE BETTER THAN EXPECTED PERFORMANCE BY THE AWRC OVER THE PAST YEAR. THIS REBATE THEREFORE IS ON THE BASIS OF PERFORMANCE IN THE PAST 12 MONTHS NOT GUESSWORK.

THE GOVERNMENT STANDS BY ITS DECISION TO LEAVE THE PRESCRIBED RATE AT 12% AND, AS THE WOOL COUNCIL HAS ACKNOWLEDGED IN THE PAST, THE EFFECTIVE RATE OF TAX WILL BE DECIDED ANNUALLY

LARGELY ON THE BASIS OF AWRC PERFORMANCE DURING THE PREVIOUS FINANCIAL YEAR.

IN THE EVENT OF ADVERSE CIRCUMSTANCES IT MAY BE NECESSARY TO INCREASE THE EFFECTIVE RATE OF TAX IN FUTURE YEARS - THIS IS ACCEPTED BY THE WOOL COUNCIL. HOWEVER, ON THE BASIS OF CURRENT MARKET ASSUMPTIONS THERE IS A 90% CHANCE THAT THE

EFFECTIVE RATE FOR THE AWRC WILL NOT NEED TO BE INCREASED

ABOVE 4.5% IN THE FUTURE. THIS IS A LOW LEVEL OF RISK AND ONE I AM SURE MOST WOOL GROWERS WOULD BE HAPPY TO ACCEPT.

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DAVID CLARKE AND THE AWRC BOARD DESERVE TO BE

CONGRATULATED FOR THEIR PERFORMANCE IN THE FIRST YEAR. THEY

HAVE SERVED THE INTERESTS OF THE INDUSTRY AND THE NATION WELL.

CAPITAL REBUILDING AT THE GRASS ROOTS LEVEL MUST OCCUR - WITHOUT IT THE BASIC INFRASTRUCTURE THAT UNDERPINS THE WOOL INDUSTRY WILL DETERIORATE AND RESTRICT THE CAPACITY OF

GROWERS TO PRODUCE A WORLD BEST PRODUCT. I BELIEVE THE CASH

STIMULUS THAT TODAY’S DECISION PROVIDES WILL PLAY AN IMPORTANT PART IN GENERATING THIS CAPITAL REBUILDING AND ALSO ADD TO THE GROWING CLIMATE OF OPTIMISM.

BUT SECURING THE BASE ALONE IS NOT ENOUGH IF THE INDUSTRY IS TO PROSPER. FORTUITOUSLY, HOWEVER, THERE IS NOW A GREAT OPPORTUNITY TO DIVERSIFY AND GROW THIS INDUSTRY INVOLVING A

NEW TRADE DEVELOPMENT DIMENSION.

WOOT. PROCESSING

THE GOVERNMENT'S ONE NATION STATEMENT IN FEBRUARY PROVIDED ADDITIONAL INCENTIVES FOR THE DEVELOPMENT OF FURTHER

PROCESSING IN THIS COUNTRY - NOT ONLY THE DEPRECIATION ALLOWANCE WHICH WILL ADVANTAGE THOSE LONGER TERM INVESTMENTS, BUT ALSO THE DEVELOPMENT ALLOWANCE WHICH PROVIDES AN ADDITIONAL INCENTIVE FOR INVESTMENTS OVER $50

MILLION, AS WELL AS THE ADDITIONAL FUNDING PROVIDED TO THE TEXTILE, CLOTHING AND FOOTWEAR DEVELOPMENT AUTHORITY (TCFDA) FOR RESTRUCTURING THE TEXTILE INDUSTRY. FURTHER EARLY STAGE PROCESSING, PARTICULARLY EXPANDED TOPS MAKING, WILL

FORM AN IMPORTANT PART OF THAT RESTRUCTURING.

THERE IS GROWING COMMERCIAL INTEREST IN AUSTRALIA BECOMING

THE SUPPLIER OF TOPS TO THE ASIAN MARKET, IN PARTICULAR CHINA.

AS WELL AS BECOMING THE SUPPLIER OF QUALITY AUSTRALIAN TOPS TO THE EUROPEAN MARKET.

REALISING THESE COMMERCIAL OPPORTUNITIES INVOLVES A SENSIBLE

EXTENSION AND EXPANSION OF OUR ACTIVITY IN THE WOOL CHAIN. A

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DIVERSIFICATION BASED ON TECHNOLOGY AND ON ABILITY TO BETTER HANDLE SENSITIVE ENVIRONMENTAL ISSUES. AS THE STAGES BEYOND

TOPS INCREASINGLY BECOMES TECHNOLOGY DRIVEN IT WILL POSITION US WELL FOR FUTURE DIVERSIFICATION AND PROVIDE NEW DIRECTION TO OUR RESEARCH EFFORT.

BUT FULLY REALISING THE OPPORTUNITIES REQUIRES US TO BRING THE

NECESSARY LINKAGES TOGETHER AND TO DEVELOP A STRATEGIC

DIRECTION. ACCORDINGLY, I HAVE ESTABLISHED A WOOL PROCESSING TASKFORCE UNDER THE CHAIRMANSHIP OF MR KEITH LAWSON. HE IS WELL KNOWN WITH AN EXTENSIVE BACKGROUND IN PRIMARY INDUSTRIES AND AGRICULTURE, AND IS CURRENTLY CHAIRMAN OF

ELDERS LIMITED ADVISORY BOARD AND AUSTRALIAN MEAT HOLDINGS PTY LTD.

THIS GROUP WILL COMPRISE REPRESENTATION FROM GROWERS,

INTERNATIONAL AND DOMESTIC PROCESSORS, UNIONS, MARKETING AND RESEARCH.

THE TASKFORCE WILL FOCUS ON INCREASING THE AMOUNT OF THE AUSTRALIAN WOOL CLIP THAT IS PROCESSED IN AUSTRALIA. TO DO THIS IT WILL LOOK AT INNOVATIVE WAYS TO ENHANCE THE EFFICIENCY AND COMPETITIVENESS OF THE WOOL INDUSTRY, AT ALL LEVELS, LEADING

TO THE DEVELOPMENT OF COMPLEMENTARY TRADE POLICIES AT BOTH

THE BILATERAL AND MULTILATERAL LEVELS.

THE TASKFORCE WILL ALSO LOOK AT EXISTING AND PROSPECTIVE DEVELOPMENTS IN RELATION TO FURTHER PROCESSING OF AUSTRALIAN WOOL - INCLUDING INITIATIVES BEING TAKEN THROUGH

THE TCFDA, THE AWC AND INDIVIDUAL COMPANIES.

THE TIME HAS COME TO DEVELOP THE LINKAGES BETWEEN PRODUCTION, PROCESSING, MARKETING, AND INDUSTRY RESEARCH

AND DEVELOPMENT. THESE LINKAGES IN THE CHAIN ARE ESSENTIAL TO SECURING A STRONG FUTURE.

I AM PARTICULARLY PLEASED THAT THE RECENTLY ANNOUNCED TCFDA GUIDELINES INCLUDE ENCOURAGEMENT TO AUSTRALIAN

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GROWERS TO TAKE EQUITY IN TOPS MAKING ACTIVITIES. I BELIEVE THIS TO BE AN IMPORTANT MEANS OF HELPING SECURE THE LINKAGES.

WOOL MARKETING AND PROMOTION

PROMOTION IS FUNDAMENTAL TO THE FUTURE OF THE WOOL INDUSTRY. I HAVE STRONGLY SUPPORTED THE NEED FOR A BETTER

PROMOTION EFFORT AND I AM IMPRESSED BY THE NEW DIRECTION

COMING FROM BOTH THE AWC AND A LEANER INTERNATIONAL WOOL SECRETARIAT (TWS). I SEE IT AS ESSENTIAL TO ADEQUATELY FUND THE FUTURE PROMOTION EFFORT.

MY DECISION TO INCREASE THE RATE OF WOOL TAX FOR MARKETING

AND PROMOTION FROM 2.5% TO 3.5% IS BASED ON THIS, BUT HAS ALSO BEEN TAKEN IN THE LIGHT OF TWO MAJOR CONSIDERATIONS.

FIRSTLY. THERE IS SIGNIFICANT DIVISION WITHIN THE INDUSTRY AS TO THE APPROPRIATE LEVEL OF FUNDING FOR THE AWC AS SHOWN BY THE OUTCOMES OF THE ANNUAL GENERAL MEETING OF THE AWC. NO

CLEAR MESSAGE CAME FORWARD TO ME FROM THAT FORUM. THE ONLY MOTION TO RECEIVE A MAJORITY VOTE WAS THE WOOL COUNCIL'S MOTION WHICH SOUGHT A LEVEL OF FUNDING OF $104M FOR

THE AWC. THE AWCS OWN MOTION FOR A 4% TAX RECEIVED A LOWER LEVEL OF SUPPORT - HOWEVER IT WAS PASSED BY THE AGM ON THE

BASIS OF THE VOTING REQUIREMENTS. REQUIREMENTS WHICH I BELIEVE MUST BE CHANGED.

SECONDLY. SINCE THE AGM, CIRCUMSTANCES IN THE WOOL MARKET HAVE CHANGED. THE ADVICE TO ME FROM BOTH MY DEPARTMENT AND

THE AWC NOW INDICATES THAT A 3.5% TAX WOULD ALMOST DELIVER THE NECESSARY FUNDING TO THE AWC. NAMELY $103 MILLION FOR THE COMING YEAR. THE AWCS REAL CONCERN IS THAT THEY MAY NEED TO SEEK GROWER AGREEMENT TO A HIGHER RATE IN FUTURE YEARS ON THE BASIS OF THEIR FORWARD PROJECTIONS.

THE POINT SHOULD ALSO BE MADE THAT THOSE PROJECTIONS UPON WHICH I HAVE BASED MY DECISION DO NOT INCLUDE ANY CONSIDERATION FOR THE EFFORTS BEING MADE BY THE

INTERNATIONAL WOOL SECRETARIAT (IWS) TO RECOVER COSTS AND

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FRANCHISE THE WOOLMARK, OR FOR ANY SALES TO THE COMMONWEALTH INDEPENDENT STATES (CIS). ANY MOVEMENT ON EITHER OF THOSE FRONTS WILL CLEARLY STRENGTHEN THE FINANCIAL

POSITION OF THE AWC.

AGAINST THAT, I HAVE CONSIDERED THE PLIGHT OF OUR WOOL

GROWERS TODAY. THERE IS LITTLE POINT IN FUNDING A PROMOTION

STRATEGY IF THE VERY PRODUCERS WHO DEPEND ON THAT PROMOTION ARE NOT THERE IN FUTURE YEARS. I DO NOT RESILE FROM THE IMPORTANCE OF PROMOTION FUNDING. I HAVE MADE IT CLEAR TO THE CORPORATION THAT I AM PREPARED TO CONSIDER INCREASING

THE PROMOTION LEVY IN THE FUTURE IF A VALID CASE CAN BE MADE.

TO GRASP THE POTENTIAL OF THE WOOL INDUSTRY ALL FACETS OF THE

INDUSTRY MUST BECOME INNOVATIVE AND STRIVE FOR WORLD BEST STANDARDS. THE HISTORY OF THE INDUSTRY SHOWS THAT CONSUMERS WANT A QUALITY PRODUCT AND THEY WILL PAY A PREMIUM FOR IT.

IT IS MY VIEW THAT THIS NEED FOR INNOVATION AND QUALITY MANAGEMENT CAN BE BETTER ACHIEVED BY DIRECT LINKAGES BETWEEN THE MARKETING AND RESEARCH AND DEVELOPMENT ARMS OF THE INDUSTRY. ACCORDINGLY I INTEND, IN CONSULTATION WITH

THE INDUSTRY, TO HAVE THIS ISSUE FULLY EXAMINED IN THE COMING MONTHS. IF A STRONG CASE IS MADE FOR DIRECT LINKAGES BETWEEN RESEARCH AND DEVELOPMENT AND MARKETING THEN I WILL CONSIDER CHANGING THE CURRENT ARRANGEMENTS.

IN MAKING THIS POINT I SHOULD STRESS THAT THIS IS AN ORGANISATIONAL ISSUE WHICH DOES NOT REFLECT ON THE EFFORTS OF EITHER THE AWC AND AWRDC. OVER THE PAST YEAR I HAVE APPRECIATED THE WORK OF BOTH BODIES AND WANT TO PUBLICLY PAY

TRIBUTE TO MAC DRYSDALE AND JOHN LANDY AND THEIR RESPECTIVE BOARDS.

GROWER PARTICIPATION

THE FINAL COMPONENT OF THIS PACKAGE FOCUSES ON IMPROVING THE

ACCOUNTABILITY OF INDUSTRY BODIES TO THEIR CONSTITUENTS.

CLEARLY THERE HAS BEEN A GREAT DEAL OF PUBLIC CONCERN AND

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COMMENT ON THE OPERATIONS OF THE AGM'S FOR THE AWC AND AUSTRALIAN WOOL RESEARCH & DEVELOPMENT CORPORATION (AWRDC).

IF THE WOOL INDUSTRY IS TO ACHIEVE ITS POTENTIAL THE OPERATIONS

OF THE AWRC AND AWRDC MUST REFLECT THE LONGER TERM NEEDS

OF THE INDUSTRY. THIS MUST INCLUDE PROCESSES WHICH DELIVER MORE DIRECT ACCOUNTABILITY TO THEIR CONSTITUENTS.

I HAVE ALREADY MOVED TO SIMPLIFY AND IMPROVE A NUMBER OF OPERATIONAL ASPECTS OF THE AGM PROCEDURES. MODIFICATIONS TO THE LEGISLATION HAVE BEEN MADE TO SIMPLIFY THE

ADMINISTRATION OF THE REGISTER OF WOOL TAX PAYERS. GROWERS

REGISTRATION AND ENTITLEMENTS WILL BE SPECIFIED IN A THREE

YEAR ROLLING REGISTER UPDATED EACH YEAR IF THEY WISH. AS WELL AMENDMENTS HAVE BEEN MADE WHICH WILL INCREASE ACCOUNTABILITY OF THE AWC TO GROWERS BY ALLOWING MOTIONS ON GENERAL BUSINESS MATTERS WITHIN THE AWCS RESPONSIBILITIES TO BE CONSIDERED.

IN MY DISCUSSIONS WITH THE AWC CHAIRMAN, MAC DRYSDALE, I HAVE INDICATED THAT WE WILL BE INTRODUCING FURTHER CHANGES TO THE

REGULATIONS TO IMPROVE THE ACCOUNTABILITY OF AGM'S TO WOOL GROWERS.

AS A FIRST STEP THIS WILL INVOLVE MOVING FROM A ONE THIRD TO A SIMPLE MAJORITY FOR RESOLUTIONS PROPOSED BY THE CORPORATION.

THE AWC AND MY DEPARTMENT IN CONSULTATION WITH THE

INDUSTRY ARE LOOKING AT WAYS OF IMPROVING INFORMATION FLOWS TO GROWERS AND THEIR PARTICIPATION IN INDUSTRY ISSUES. GROWERS MUST INVOLVE THEMSELVES DIRECTLY IN THE CONSULTATIVE PROCESSES THROUGH THEIR OWN REPRESENTATIVE GROUPS. BUT THEY MUST ALSO RECOGNISE THE IMPORTANCE OF OTHER

PLAYERS IN THE SECTOR. I BELIEVE THAT INDUSTRY DEVELOPMENT WILL BE IMPEDED IF THOSE PROCESSES DO NOT ALLOW FOR THE DIRECT

INVOLVEMENT OF THE PROCESSING, MANUFACTURING AND RETAILING SECTORS IN CONSIDERATION OF INDUSTRY ISSUES.

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THE WOOL COUNCIL HAS PLAYED AN IMPORTANT PART IN INDUSTRY POLICY IN THE TIME I HAVE BEEN MINISTER - THEIR INPUT AS THE PEAK GROWER BODY HAS BEEN BOTH CONSTRUCTIVE AND BALANCED. I

HAVE ENCOURAGED THE WOOL COUNCIL CHAIRMAN, ALAN BOWMAN,

TO FURTHER DEVELOP GROWER PARTICIPATION IN THE REPRESENTATIVE PROCESSES OF THE WOOL COUNCIL.

THE DECISIONS MADE IN THIS PACKAGE HAVE NOT BEEN TAKEN

LIGHTLY OR IN ISOLATION - THEY HAVE INVOLVED EXTENSIVE CONSULTATION. THE DECISIONS INVOLVE REBUILDING THE BASE FOR OUR GROWERS, DEVELOPING THE POTENTIAL OF OUR PROCESSING SECTOR AND BUILDING ON A TRADE DEVELOPMENT STRATEGY FOR THIS INDUSTRY.

I BELIEVE THE OPPORTUNITY IS THERE. BUT WE HAVE TO GRASP IT. THIS PACKAGE WILL UNDERPIN A RENEWED AND REFOCUSSED EFFORT BUT

IT WILL REQUIRE THE CO-OPERATION OF ALL PARTS OF THE INDUSTRY. IF WE SUCCEED THE INDUSTRY WILL NOT ONLY HAVE HAD A PROUD PAST BUT IT WILL HAVE A GREAT FUTURE.

THANK YOU.

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