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Wednesday, 2 April 1941

Senator LECKIE (Victoria) (Assistant Minister) . - I move -

That the bill be now read a second time.

The bill provides for an amendment of the Raw Cotton Bounty Act of 1940 which has become necessary because of serious disturbances in world raw cotton markets, and their effect on the incomes of producers of raw cotton in Queensland. The bill will ensure an average net return to producers in respect of the 1941 and 1942 crops of 12£d. per lb. of raw cotton after taking into account their profits from oil and cattle fodder made from cotton seed. This amount is equivalent to 4.3d. per lb. of seed cotton for cotton-growers which Parliament and the Government intended, when the Raw Cotton Bounty Act 1940 was enacted.

The following review of changed circumstances overseas will, it is hoped, make it clear to honorable senators that immediate action is essential to protect the position of cotton-growers. For six years, the Commonwealth's policy has been to allow cotton spinners to obtain Australian or foreign raw cotton at Australian import parity, duty-free prices. In order that Australian cotton-growers should receive remunerative returns, they have been paid, through the Queensland Cotton Board as the producer of raw cotton, rates of bounty which fluctuate exactly in accordance with variations in the spot price of American middling raw cotton at Liverpool at the end of each week of the Queensland production. The present basic bounty is 4$d. per lb. on a basic Liverpool price of 6d. per lb. As the actual Liverpool price is more or less than 6d., the actual bounty is that much less or more than 4$d., with a maximum bounty of 5^-d. per lb. Until some time after the war started this system, worked to the complete satisfaction of cotton-growers and spinners in Australia because the normal relationship between the Liverpool price and cotton values in other world markets was always maintained. .For example, the Liverpool price averaged about -Jd. per lb. more than American prices. In the Raw Cotton Bounty Act of 1940 the former basic bounty was increased from 4Jd. to 4$d. per lb., the extra £d. being partly given to prevent the then slightly abnormal excess of the Liverpool price over American prices from injuring our cotton producers' returns.

Recent announcements in the press disclose that the Liverpool Cotton Exchange will cease to exist as from the 31st March, 1941. It has been expected for some time that the Liverpool Cotton Exchange would close and this eventuality is provided for in the present act. Had the disturbance of the market, with its effect on the Liverpool price, been the only factor affecting the bounty, the closing of the Liverpool Exchange and the consequent reliance on the New York Cotton Exchange for the basis of the bounty payments would not have rendered this amendment necessary. A more serious position has, however, developed owing to extreme price-cutting by Brazil and market weaknesses arising from the record excess carry-over of 15,000,000 bales of the United States of America. This carry-over has been financed by the

Government of the United States of America at more than present market values.

The present price in New York is approximately 2d. per lb. sterling less than the Liverpool price, with a strong tendency to decrease. In view of the fact that the price of Brazilian cotton is approximately 20 per cent, lower than American cotton, it will form the basis for determining the Australian import parity price. Consequently the price received by the growers will be so low that their returns will not yield them a profit; hence the necessity for the provision in the bill which will ensure them a return of 12$d. per lb. of raw cotton. It will be seen that the effect of present world prices will be to reduce the net return to Queensland growers on their seed cotton below the 4.3d. per lb. expected by Parliament when the 1940 act was passed ; how much below will be dependent upon the influence of the excess American carry-over of cotton and the surplus Brazilian cotton available and its influence on an already depressed market-

Australia's raw cotton position is seriously weak. Our consumption is now over 70,000 bales per annum, but Queensland's crop this year is expected to be only 15,000 bales. Maintenance of the 15,000 bales production for 1941 requires immediate action to ensure the reasonable net return of 4.3d. per lb. of seed cotton. Such a. return, guaranteed in advance, will be vital if our production for 1942 is to expand greatly, as is essential for our fighting service requirements alone, should war break out in the Pacific.

The bill will enable the Queensland Cotton Board to receive bounty for each week's production on a. basis to be determined by the Minister, as provided for in the present act. during each wenk; then, shortly after the end of the season, the Cotton Board will receive an interim payment in a lump sum, bringing the net return for all cotton as close as possible to 32-Jd. per lb. Later, when the exact figures are available, the final payment of bounty necessary to ensure a net return of 12-Jd. per lb. will be known and will be paid.

In an attempt to reduce the possible extra bounty cost of £50,000 under this bill, the Minister proposes to arrange that all spinners shall promptly confer with the Queensland Cotton Board with the object of buying the 1941 Queensland crop at more than present import parity prices, and thus reduce the Commonwealth's bounty liability by the total value of such increase. Unless some such agreement is made, the extra bounty cost for the anticipated 1941 crop will be approximately £50,000.

I believe that the Senate will appreciate the seriousness of the unexpected war-time emergency which now confronts our cotton-growers, and will therefore cordially support this bill, which will relieve the situation to the satisfaction of the industry. The necessity for the measure has been brought about by circumstances over which we have no control, and I urge honorable senators to give the bill a speedy passage.

Debate (on motion by Senator Collings) adjourned.

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