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Thursday, 4 June 1970

Mr GRASSBY (Riverina) - Mr Speaker,the honourable member for Hume-

Mr SPEAKER -Order! Does the honourable member claim to have been misrepresented?

Mr GRASSBY - Yes, Mr Speaker, grossly misrepresented. The honourable member for Hume said in the course of his remarks that I had encouraged wheat selling on the black market or outside the legal system - outside the Australian Wheat Board. I want to say that this is a most grave charge. If one sells wheat outside the law he is liable to a fine or to a gaol sentence, or both. I have never at any time, publicly or privately, suggested to any persons at any place at any time they should sell wheat in contravention of orderly marketing and of the law. The only thing 1 have ever said on this subject is that people have been forced by Government policy to do this.

Mr MAISEY(Moore) £8.19] - The Bill before the House is intended to amend the Wheat Industry Stabilisation Act in 2 respects; firstly, by throwing a cloak of legality over a scheme already in operation to restrict deliveries to the Australian Wheat Board and secondly, by giving legality to a discretionary power already being exercised by the Board in respect of the price of wheat used within Australia for other than home consumption purposes. The Parliament quite recently dealt with a Bill to enable the Commonwealth to meet its obligations under a Commonwealth guarantee of repayment of certain borrowings by the Australian Wheat Board from the Reserve Bank of Australia in respect of wheat from the 1968-69 crop. As that Bill as well as the Bill presently before the House form part of measures to deal with the present plight of the wheat industry and as both can fairly be described as measures designed to alleviate past ministerial mistakes, it is a great pity that they could not have been debated together. This would have permitted a total examination in depth of those mistakes and perhaps some more effective and lasting relief could have been afforded to this important baste industry.

For the Minister for primary Industry (Mr Anthony) to describe the present proposal of restricted deliveries to (he Australian Wheat Board as 'positive remedial action', and this reaction as 'courageous and responsible' is an assessment of the present crisis which must surely go down in the varied and changing history of this industry as the greatest piece of selfdeception ever perpetrated. The injustices and anomalies flowing from the quota p.'an call for a greater sacrifice from the traditional wheat grower than from the speculator - a greater sacrifice from the grower who over the years has maintained steady and stable production consistent with sound soil conservation practices and has given a handsome premium to tax dodgers, speculators and disenchanted graziers who, while refusing to have anything to do with wool marketing reform, climbed on the wheat industry bandwagon of organised marketing and stabilisation to the extent that that vehicle is now broken and hopelessly bogged down with unmarketable production.

The need for the Bill to extend the repayment period of loans to the Wheat Board for the purpose of paying a first advance of 110c per bushel on the 1968-69 harvest was a direct result of paying this first advance on a crop of more than SOO million bushels, associated with a downturn in international trade in wheat following the drastic increase in the minimum price of wheat under the International Grains Arrangement. To increase the base price of wheat by the equivalent of US19c per bushel in the light of the then global stock position and crop prospects was an act of irresponsibility equalled only by the refusal of the governments, Federal and State, to come to grips with the crisis now facing the industry. To attempt to sidestep this problem by inviting industrial organisations to deal with it when they have neither the skilled personnel nor the legislative authority to do so is an attitude of weakness inconsistent with every principle of responsible government. The Government, under the former Minister for Primary Industry, Charles Adermann, earned for itself the greatest respect for its willingness at all times to consult with the industry on all matters affecting it and gave the views of the industrial organisations the most careful consideration. Never before has a government said to the industry: 'You provide the answer to a problem of this magnitude and take the responsibility, and we shall legislate'. I make that statement against the background of 15 years association with wheat industry organisation at a national level and 20 years at a State level.

Let me pause briefly here to furnish the House with details of world wheat stocks and crop prospects for 1967 and 1968 - the time of negotiation of the price structure of the International Grains Arrangement. Wheat stocks in the principal exporting countries at 1st July 1967 were 1,353,600,000 bushels or 36,840,000 metric tons. At 1st July 1968 they were 1,656,000,000 bushels or 42,592,000 metric tons. Stocks of wheat in the. United States at 1st July 1969 were up to 30% on the previous season. They were up by 23% in Canada, and were 16% above the previous record in that country in 1967. Australia's wheat stocks were also more than 2i times higher than last year's level and nearly twice the figure in 1967. Argentina's wheat stocks were lower by 30%. The estimate of the 1967-68 season's wheat production in the world as at 31st March 1968 was 10,575 million bushels. This excluded production in the Soviet Union and China. World production in 1966-67 was 6,990 million bushels, again excluding China and the Union of Soviet Socialist Republics.

The drastic increase of US 19c per bushel under the International Grains Arrangement, which became operative on 1st July 1968, against the background of these known stockpiles of unsold wheat and bumper crop prospects, produced a wave of resentment in consuming countries which reverberated around the world. It also afforded an opportunity for countries with exportable wheat surpluses, not signatories to the International Grains Arrangement or bound by its much higher minimum price provisions, to invade the markets of the traditional exporters at prices below the International Grains Arrangement but above what they would have been able to command prior to the new Arrangement coming into force. It also undoubtedly prejudiced the goodwill of traditional exporters and added to the inducement of importers to become, as far as possible if not entirely, self-sufficient in wheat, no matter at what cost. Is it any wonder that end of season stocks in the 5 major exporting countries or areas - the United States of America, Canada, Australia, Argentina and the European Economic Community - which had fallen under the old International Wheat Agreement price structure from 60 million tons in 1958-59 to about 33 million tons in 1965-66 climbed back again to 62 million tons in 1968-69? These 5 exporters were in fact holding stocks at the end of last season well above the level of the year's world trade in wheat.

Now let us look a little closer home. Let us look at what happened in Australia. Exports of wheat and flour from Australia for the 1966-67 season amounted to 312.4 million bushels. Exports for the season 1967- 68 amounted to only 206.3 million bushels out of a total for marketing of 327.7 million bushels. Export sales for the 1968-69 season showed an improvement on the previous year amounting to about 242 million bushels but still 70 million bushels below the 1966-67 figure. The improved 1968-69 figure reflected the vigorous and aggressive sales tactics being employed by the marketing officers of the Australian Wheat Board and it is not hard to understand their feelings of frustration when, on his return from North America and Canada in early April 1969, the Prime Minister (Mr Gorton) said that those 2 countries had dropped their prices below the minimum under the International Grains Arrangement. He modestly admitted that Australia may be interpreting freight differentials in a way lo give it a more competitive price advantage over other exporters.

In the middle of April 1969 the Minister for Trade and Industry (Mr McEwen) staled, in answer to a question asked in the House, that he did not intend to have Australia even suspected of breaking the rules. In July 1969 he announced that the Wheal Board hud agreed to abate its competitive activities in the international grain market in the interests of the United States and Canada increasing their sales, ls it any wonder that the Australian Wheal Board failed to sell sufficient wheat from the 1968- 69 harvest lo liquidate the overdraft raised from the Rural Credits Department of the Reserve Bank in the time limit imposed on the loan?

During 1968 the problem of negotiating a new and continuing stabilisation and marketing plan was superimposed on the difficul ties being encountered at an international level with the negotiations for a new and continuing International Wheat Agreement. Under the pressure of rising prices and wages behind the protection of a high tariff wall, wheat growers' costs were calculated to have increased by approximately 22c per bushel during the 5 years of the concluding plan. This resulted in heavy calls on the Treasury for price support and embarrassed the Government at 1st December each year by directing the attention of taxpayers and other exporting industries, notably wool, to the degree of failure on the part of the Minister to check inflationary pressure and to protect the legitimate interests of exporting industry. As the internal cost structure rose so did the measure of price support to the wheat industry increase. At the same time costs in the woof industry increased at a similar rate but the price of wool failed lo increase to a commensurate extent and it is not surprising that wherever possible wool growers turned their attention to wheat production and new farmers devoted the whole of their attention to wheat and ignored other cereals and wool.

As the quantity of wheat delivered to the Australian Wheat Board increased so did the relativity of the quantity guaranteed under the stabilisation plan diminish. Thus the Government was confronted with a (wo-headed monster by the Australian Wheatgrowers Federation when discussions began in earnest at the beginning of 1968 for the new and continuing stabilisation plan. The Federation asked for a more realistic and upward revision of a number of important elements in the industry's cost regimen as welt as an increase in the quantity of the export guarantee to restore the relativity of this most important element of previous plans, lt came as no surprise that the Government started to look around for a way out of this dilemma, and even less surprise that when the trap was finally sei the Federation - with ali the gullibility in the world - walked straight into it. As was the usual custom prior to the renewal of stabilisation plans, Cabinet had authorised the Minister for Primary Industry to direct the Bureau of Agricultural Economics to conduct a survey of the industry's costs. Using the information from this survey and absurdly high valuations of the farms surveyed provided by the Commonwealth Bank valuers, discussions began with the Federation for a new base price.

The Federation, at the same time, assisted by its economic adviser, had been examining items in the former cost regimen and made representations to the Minister for a review of these items. And so again. Mr Speaker, the stage was set to say to the Federation: 'Well, let us take the figures derived from the BAE survey the capital valuations of the farms as supplied by the Commonwealth Bank valuers, your ideas as to what should constitute such imputed items as owners-operators' allowance and deductions for sideline income, together with what you believe should be the yield divisor, and let the Bureau of Agricultural Economics bring up a cost of production price'. The price projected exceeded $2 per bushel, a price the industry had never received, one which no government could ever be expected to cover, even to the tune of 150 million bushels - '.et alone the 200 million bushels the Federation was seeking - and a figure which, if it was a true cost, must have meant that every wheat grower should have been bankrupt.

The absurdity of the situation thus created knocked the wind out of the Federation, and while it was gasping for breath the Government delivered the king hit by discarding the whole concept of a stabilisation plan based on a cost of production figure, and offered the Federation - on a take it or leave it basis - a plan based on 170c for home consumption wheat and 145c for up to 200 million bushels of exports. The substitute proposal also contained modified provisions for annual movements on the basis of a restricted cost regimen. No useful purpose will be served by traversing the course of the negotiations which followed this offer by the Government, nor anything gained by reviewing the unedifying performance of the Federation at this time. Suffice it to say that the Federation later asked the Minister, and received his acquiescence, to a face saving proposal that it should design a cost formula which added up to 170c. but only on the strict understanding that neither the Minister nor the Department had anything to do with the idea that the cost of producing a bushel of wheat was 170c.

Obviously the Minister could not agree that it cost 170c to produce a bushel of wheat as the industry, again, had never received this return and yet it had expanded production to the present unmanageable proportions. Furthermore, the Minister could never afford to acknowledge that he had offered the industry a guaranteed return for the 200 million bushels of export wheat at a price which was 25c per bushel below what he agreed was the cost of production. In the meantime negotiations at an international level had proceeded to the point where agreement, subject to normal ratification, had been reached on a base price for wheat which was then calculated to return approximately 140c per bushel f.o.b. Australian ports, or about 5c per bushel below the export guaranteed price of the 200 million bushels covered by the Government offer to the Federation With the export minimum price for Australian wheat artificially set at a level which destroyed its competitive position in world markets, with the home consumption price arbitrarily raised to a record high level and well out of line with the price of other cereal grains, and with enormous carryover stocks on hand and a record acreage being cropped, the Government, with the concurrence of the Federation, had again set the stage for the present farce.

It was painfully apparent by the second half of 1968 that the industry was heading for real trouble, if not for complete disaster, and grain handling authorities were joining the ranks of the difficult people who had the temerity to question the wisdom of what the growers' experts were recommending. They were asking how they were expected to provide storage for the big harvest forecast when their storages were full of unsold wheat. It was interesting at this time to note that of the 10 growers' representatives sitting around the Australian Wheat Board, 6 were directors of State handling organisations and 1 a chairman of directors, and at that time president of the Federation. It is not hard to understand how the proposal to deal with the mounting crisis offered 100% protection to only one group - the State handling authorities. These 10 grower members of the Board were also the most influential people at the State industrial organisational level and in most instances were serving a number of masters, with the grower in the paddock running a very bad last. This was the situation when the Minister invited the Australian Wheatgrowers Federation to submit a proposal to cope with the pending crisis. After some preliminary discussion the Federation finally got down to the business of meeting the Minister's request, and what is now known as the Quota Delivery Plan emerged from the annual meeting of the Federation held in Perth at the middle of March 1969.

The official reports of the Federation meeting, as well as the statements subsequently issued by the Minister as part of his acceptance of the Federation plan, reveal quite clearly that the proposal was to restrict deliveries and first advance payments on the basis of the average deliveries to the Australian Wheat Board for the years 1963 to 1968 inclusive, rounded to the next million bushels, but to reduce the average entitlement of the Slates of Western Australia. Victoria and South Australia in order that an above-average entitlement could be given to New South Wales and Queensland because of the ability of these latter 2 States to produce what has been described as a readily marketable type of wheat. Quite obviously, if one or more States were to receive more than their contribution to the 5-year average figure, some States must receive less, in the case of Western Australia, ils contribution to the accepted 5-year average figure of almost 357 million bushels was 91.15 million bushels. Yet, to make possible the over-entitlement to New South Wales and Queensland, Western Australia had to accept a base quota delivery an. I first advance payment figure of only 86 million bushels, a loss to Western Australia of over $5. 5m of first advance money in the first year.

The rank injustice of this proposal becomes immediately apparent when it is recognised that the distribution of a quota within a State is the prerogative of that Stale. If New Sou, h Wales has an ability to produce a readily marketable type of wheat in a part of that Stale then it could allocate as much of its fair Stale entitlement lo growers in thai area as if .saw fit. 'I he same thing is true of Queensland. But it is completely unjust and inequitable to reduce the 5-year entitlement earned by a grower in Western Australia in order that a grower in one part of New South Wales can receive his full 5-year average entitlement and another grower in New South Wales can receive above his 5-vear entitlement as well as a quality premium on his wheat. This grave injustice i.s further aggravated when it is recognised that the better quality wheat grown in New South Wales and Queensland is due entirely lo the type of soil and climatic conditions under which it is grown and in no way reflects a greater efficiency on the part of the grower. In other words, it is a geographic advantage which is being recognised.

But the Federation steadfastly turned its back on the geographic advantage of Western Australia in respect of its proximity to major markets, particularly China, lt is common knowledge that the Chinese would load most of their ships at Western Australian ports if the Wheat Board would permit them to do so. There are always spec iiic clauses included in every contract made with the Chinese which limit their Western Australian loadings to a fraction of what the Chinese desire. The rank injustice of this quota plan as between State and State as well as between grower and grower within a State could be discussed ad infinitum. The introduction of the quota plan in Western Australia called for a reduction straight across the board of 1 7 In of a grower's deliveries in the first year of its operation and a further reduction of 20Co on this year's production. The Minister, of course, has foreshadowed another further drastic reduction ne\t year. "I here i.s no equality of sacrifice in this over-simplified method of reducing production between the grower of, say, 10,000 bushels and the grower of 100.000 bushels. The latter will carry on with a minimum of sacrifice and adjustment but the former will in almost every instance have his economic viability destroyed. In any case, he i.s nos the person responsible for creating the present position of over-production.

The inequity of this over-simplified rule of thumb method of dispensing justice is further highlighted when an examination i.s made of the schedule of deliveries to the Wheat Board since its inception. New South Wales did not deliver over 100 million bushels to the Board prior to 1963-64. the first year on which the 5-year average is calculated. Of all the States which have contributed most to the present cri- is New South Wales is by far the biggest offender. Yet it not only receives a quota based on the best years of its performance out of which this over-production crisis grew, hut it demands and receives a share from he 1 less fortunate Slates as well. An examination of he delivery history of individual growers within a State will reveal the same anomaly. The crisis of over production began after 1°.63. yet it is the hig growers who created this crisis who are now receiving the lion's share of a State entitlement. If the quota plan is to prevail then common justice demands that the principle of a minimum wage accorded the worker should be extended to the wheat grower. If the criteria for a right to stay in the wheat industry is simply to be who can produce a bushel of wheat at the lowest cost, then let us go straight out for collective farms on the Russian pattern or communes on the Chinese pattern or huge state farms and be done once and for all with this hypocrisy of pretence for the rights of the common man. For my part let me conclude by stating now in the clearest and most categorical terms that 1 am not prepared to sacrifice one traditional family farm or farmer to make a Roman holiday for a person who speculates in wheat growing during this time of over production.

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