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Wednesday, 4 November 1992
Page: 2648


Mr LLOYD (Deputy Leader of the National Party of Australia) (11.25 p.m.) —The Wheat Marketing Amendment Bill is the most significant legislation in relation to this great Australian industry since 1989, and I believe it will be until 1999, when some of the provisions of this legislation will be up for review or will be at the end of their period of application.

  The legislation confirms the Australian Wheat Board's export monopoly or single desk seller status at least until 1999. There is still no sunset provision for that power. The Bill overrides the phase-out of the borrowing guarantee of the current legislation, which was to come down to 80 per cent by the 1994 harvest and then cease. The current legislation has no sunset provision for the Wheat Board's export power, so theoretically that matter does not arise. The reality is that over many years there have been five-year legislative schemes for the wheat industry. Therefore, for the sake of a feeling of security and confirmation for the wheat industry, it is wise and proper that that continuing power be confirmed.

  There is one problem with regard to that. The Minister for Primary Industries and Energy (Mr Crean) in his second reading speech indicated a proviso that if the GATT Round were successful, or if progress were made following a successful GATT Round, that matter would be reviewed. This means that in general this legislation is better than the 1989 legislation, which was to run until the 1994 harvest. There certainly is a need for such legislation because the grain trade war between the European Community and the United States is into one of its very severe phases again.

  One can look back to those other horror years of 1986 and 1990 when the export subsidies between those two countries in their chase for markets brought ruinous prices to Australian wheat growers who were caught, unfairly, in the middle of that war. Because this is better legislation, I commend the Government and the Grains Council of Australia, as the representative of the wheat industry, for achieving that better position. I do not expect it from the Government, but it is interesting that neither of those groups has in any way given any recognition to the key role that the coalition parties have played in obtaining this legislation. In my view it is clear that the very solid and stable policy position of the coalition parties is the major reason for this legislation now. To explain this, I refer to the 1989 legislation.

  The scheme at that time had a guaranteed minimum price arrangement which had cost the Government, in provisions of support, over $200m during the first of those trade wars in 1986. The government of the day did not replace that GMP—in the sense that it was seen to be no longer sustainable—with the second option of the wheat industry, that is, an underwriting arrangement, but went straight to a borrowing guarantee arrangement. At that time, in draft legislation prepared by the Labor Government, not only was the domestic power of the Wheat Board to be removed; the export power of the Wheat Board was also to be removed. At that time it was the continued support of the coalition parties for the export power of the Wheat Board that made the change in the Labor Party's attitude in legislation.

  At that time also the wheat industry fund was established to provide capital, or to build up a capital base, for the industry against a time when it may not have a borrowing guarantee or any other form of government backing—and that was to be the case by the 1994 harvest—to provide capital for the trading arm of the Wheat Board following the deregulation of the domestic wheat market for human consumption purposes and also for joint ventures and value adding arrangements for the Wheat Board and the wheat industry.

   At that time, after discussion with the Grains Council of Australia, we said that our policy would be not only the maintenance of the Australian Wheat Board's export power but also, if one likes, the second best option of the industry with regard to some form of security or underwriting for the industry—and that was underwriting at the 95 per cent rate which was determined at harvest time each year. That was again confirmed for the 1990 election and once again confirmed recently by the coalition.

  I would remind people of the difference between a borrowing guarantee and an underwriting. They have the same starting point; that is, a harvest price is determined by the Wheat Board and ABARE, with the concurrence of the Minister, and that is basically a net price to farmers. The borrowing guarantee is then the aggregated estimated net pool return on the total crop. So an estimate is made of the size of the crop together with the price, and then we have a total figure. That means that if the crop is larger, obviously the value of the borrowing guarantee falls in relation to what is guaranteed per tonne. Because the Wheat Board can never trigger any form of direct government backup assistance, the actual percentage borrowed by the Wheat Board is considerably lower. By the time we get down to 80 per cent—as it was going to be with the current legislation—we can question whether it has any real value.

  With the 95 per cent underwriting, we start off with the same figure. But it is a price per tonne underwriting, which means that it is underwritten irrespective of the size of the crop; the Wheat Board can better borrow for a higher harvest payment; the wheat grower can better deal with his bank manager; and, in times of a dramatic fall in price, such as that which would occur with a world wheat war, after that price has been declared, the liability of the Government may be incurred—that is, the support of the Government may be needed to maintain that underwriting. On the calculations we have made with the Wheat Board, that would have been the case in that terrible year of 1990 when it would have required a government advance of about $40m.

  Since that 1989 legislation and the difficult times with the international wheat wars, the Grains Council put two proposals to the Government to try to improve the situation: a base price proposal, and a GMP proposal—that is, it attempted to negotiate some better stability for wheat growers. The Government rejected these proposals, and the Grains Council then attempted to obtain some answers from the Government ahead of the forthcoming election as to what its attitude would be post-1994.

  The Grains Council also indicated that it would prefer to have legislation beyond 1994 in place before this election because of the uncertainty that it believed could prevail in the situation afterwards, the delays that would or could occur with any legislation which would bring it very close to the 1994 deadline, and the need to provide some reassurance to the core markets for Australian wheat which take up to about 70 per cent of our wheat and which provide the premium price; in other words, these markets buy at the ordinary rate and are not affected to the same degree by the EEP or EEC discounted prices.

  When the Grains Council tried to obtain the Government's confirmation of what its policy would be, it could not obtain any confirmation whatsoever. There followed Grains 2000—the tripartite discussion group or committee made up of the Wheat Board, the Grains Council and representatives of the Department of Primary Industries and Energy. Out of that came the Newco proposal to give the export monopoly to a private organisation, to increase the wheat industry fund contributions because the capital would have to be built up more rapidly, and to obtain some other special concessions with regard to taxation, et cetera.

  The Grains Council, as the wheat growers' representative body, then embarked upon a series of meetings around Australia. Out of those meetings there appeared to be misrepresentation of the coalition's policy. As a result of those misrepresentations it became necessary for me to restate the coalition policy in stronger terms. That better understanding by wheat growers of the policy and their greater recognition that there was a better alternative, in spite of the fact that we had been regularly saying it for some time and including it in our comparison documents between Fightback! on the one hand and Government policy on the other, I believe encouraged the rejection by the industry of the Newco proposal. It said to the Grains Council of Australia, `Go back to the Government and negotiate a better arrangement'. The Grains Council did so, and it did obtain a better arrangement. I commend the Government and the Grains Council for that achievement.

  But there is only one reason why that was possible. Throughout it all, since 1989, the coalition held firm on the two major elements of policy: the retention of the Wheat Board's export monopoly and an underwriting arrangement which is still better than the Government's improved position, which forms part of this legislation, of a constant 85 per cent borrowing guarantee through to the year 1999. Obviously the deteriorating international situation has added some urgency to the legislation, and it has also provided another element for such legislation.

  This legislation does buy time for the industry until 1999. By that time the wheat industry fund will have built up to between $400m to $500m, providing an adequate base for the industry, if at that time there are changes to the marketing arrangements. Therefore, one would see that industry fund as a transitional arrangement.

  I know of concern in parts of the wheat industry, in particular in Western Australia, where it queries on the one hand the levy and whether or not it will increase—the Minister has indicated the procedure that is necessary before that can occur—and on the other hand its use for certain value adding activities. In Queensland there is concern, but for a different reason, and that is because the capital provided for the trading activities of the Wheat Board is claimed by Queensland industry representatives to provide unfair competition against their own organisation, Grainco. On my understanding, there is overall support for that wheat industry fund, but there is certainly concern that it should not increase beyond the 2 per cent, that it should be closely monitored and that it be recognised as a transitional levy.

  For some time the Wheat Board has indicated that there is a need for greater flexibility if it is to achieve what it and the wheat industry want to achieve with regard to sensible joint ventures and value adding. That has been the case for some time. Whether or not there is a need for a separate board, time will tell. That is something that I will closely monitor because I question whether there is such a need for a separate subsidiary company. But we are not trying to impose any sort of opposition to that element of the legislation, other than to monitor it from our point of view and the industry's point of view.

  Therefore, the coalition parties do support this legislation. We recognise that it does come in time for the Wheat Board and the wheat industry to provide those guarantees for future contractual arrangements and harvests beyond the present one. As far as the coalition is concerned, the only change to the legislation between now and the review that obviously will occur prior to 1999 will be a change to bring in our underwriting commitment for the 1994 and subsequent harvests.