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Wednesday, 11 November 1998
Page: 86

Mr VAILE (Trade) (12:26 PM) —I move:

That the bill be now read a second time.

The wool industry is facing some very difficult decisions about its future. In spite of all the work put in by the government, and particularly the efforts of my predecessor John Anderson—as well as the efforts of the industry's own leaders—the wool industry remains deeply affected by the collapse in the market for wool. This collapse is in the wake of the Asian economic crisis and poor consumer confidence in the key European and Japanese markets.

The government fully appreciates the reasons for the wool industry's call for assistance to alleviate whatever pressures there are on the wool market that are in its scope to control. The government's decision to freeze stockpile sales through to 30 June 1999 was a response to this request from the industry, and followed a long period of intense consultation on the future directions of the industry.

The decision reflects the desire of the government to contribute to the alleviation of the market situation at a time when the fresh wool clip is entering the market, and when privately held stocks are also at high levels. My intention as I take up my new responsibilities as Minister for Agriculture, Fisheries and Forestry is to continue the government effort directed at removing the obstacles to full commercial management of the stockpile in the interests of its owners.

This bill is my first step in this process. The purpose of this bill is twofold. It will freeze sales from the Wool International stockpile and, more importantly, end the debate about the management of the stockpile by starting a process of taking responsibility for its management out of the hands of the Wool International Board—which is constrained by statutory obligations—and placing it under the control of a new private sector entity in which the directors will be responsible to the shareholders who own the stockpile.

The freeze will allow the industry some breathing space—an opportunity to focus on the real issues, such as: how to increase demand for their product, how to increase farm productivity and how to improve the quality of our wool to better meet customer requirements. It is both possible and prudent to suspend stockpile sales and transfer Wool International's business to the private sector at this time because of the now low debt load carried by Wool International and the greatly reduced size of the stockpile.

By way of background to this bill, it may be useful to consider some of the events leading to the government's decision. Last year the government passed the Wool International Amendment Act 1997 which provided for the liquidation of Wool International once its key functions of selling down the stockpile and retiring the associated debt had been completed.

Under the current legislative framework, the stockpile disposal, and consequent liquidation of Wool International, was to have been completed by the end of 2000. The target date in the act for retirement of the debt was 31 December 1998. In March this year, the government responded to calls from the wool industry to provide some relief from the exceptional combination of events facing the wool industry, by extending the target date for Wool International debt retirement by up to six months to 30 June 1999. This meant some of the pressure on Wool International to maintain sale rates at a higher level than would be commercially prudent was reduced significantly.

However, market conditions deteriorated further and, in light of the very difficult circumstances faced by growers as the new season wool began to come onto the market, the government decided on 4 August 1998 to freeze sales from the stockpile until 30 June 1999. The Board of Wool International initially complied with the government's decision, but had to resume sales when the calling of the election prevented legislation from being passed in the short term. Following the government's election victory, and its restatement of the freeze decision, the board of Wool International has again suspended sales. If passed, this bill will now formally freeze all sales from the stockpile until 30 June 1999.

As a point of clarification, the freeze is not intended to stop Wool International from honouring existing contracts. To do so would add further unwanted uncertainty to the troubled wool market, as well as providing Wool International with greater difficulties in maintaining its customer base for when it resumes sales.

With regard to the proposed path to privatisation of the management of the stockpile, this bill allows Wool International to provide information and support for the process, and to commit funds to it. The government has asked the Office of Asset Sales and IT Outsourcing to examine the most efficient and effective method of transferring stockpile responsibilities to Wool International equity holders, while keeping costs to a prudent minimum. The Office of Asset Sales will, of course, engage professional business and legal advisers to assist in its examination of the process. The government's role will be purely to hand over the business of Wool International to the new commercial entity, and the government will not be involved in shaping its commercial activities. That will be the responsibility of the board of the new commercial entity, who will be expected to present a business plan to their stakeholders in line with normal commercial practice.

At this point, I would like to pass on my thanks to the board and staff of Wool International, who have carried out their legislated duties in a thoroughly professional and com mendable way, in sometimes difficult circumstances. I can assure honourable members that, in developing the details of the proposed privatisation, the government will seek to ensure that the employees and staff of Wool International will not be disadvantaged. I commend the bill to honourable members and the House. I present the explanatory memorandum to the bill.

Debate (on motion by Mr O'Connor) adjourned.