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Tuesday, 17 October 1972
Page: 1572

The PRESIDENT - I draw to the attention of honourable senators that the second reading speech of the Minister for Air is, in this instan'ce. 5 foolscap pages in length. Is leave granted? There being no objection, leave is granted. (The second reading speech of the Minister for Air read as follows) -

The purpose of this Bill is to provide parliamentary authority for the extension of the wool deficiency payments scheme from 1st July 1972 until 30th June 1973. One 20th June 1972 the Minister for Primary Industry (Mr Sinclair) announced that the Government had decided to continue for a further 12 months the positive programme of support for wool growers which operated during the 1971-72 wool selling season. To recapitulate briefly, the scheme which was introduced in 1971 was designed to supplement wool growers market returns from shorn wool for a period of one year to a level equivalent to an average of 79.37 cents per kilogram for the whole Australian wool clip. Some lowgrade, low-value wools constituting about 10 per cent of the clip were excluded from the scheme as were woolled sheepskins. Deficiency payments already made to woolgrowers in respect of the 1971-72 wool selling season amount to just over $50m with a further amount of approximately $1.2m to be paid early in September in respect to wool sold in price averaging plan pool 4.

During the latter portion of the 1971-72 wool selling season the wool market rose to levels at which no deficiency payments were attracted. Nevertheless, the fact that the scheme boosted wool growers returns during the first half of the season by over $50m is positive evidence that the deficiency payments were of very real benefit to wool growers in a time of desperate need. The scheme itself guaranteed a reasonable return to wool growers for a product sold almost exclusively abroad at a time when there was a marked reduction in buyer interest. It enabled many growers to survive. The deficiency payments scheme was part of the extensive programme of Government support which has led to the renewal of confidence in the future of the wool industry. When the scheme was introduced in 1971 it was to have operated for one year only. In moving for the second reading of the Bill last year I stated that the deficiency payments scheme should be viewed in the context of a total approach to the urgent problems affecting wool growers. Its purpose was to assist in preserving the wool industry's viability and to provide a breathing space so that necessary adjustments in the industry could take place with a minimum of economic and social disruption.

The 1971-72 wool selling season was the first full year of the operation of the Australian Wool Commission. The presence of the Commission, as a strong seller in the auction market operating above its minimum reserve, resulted in the acquisition of stocks of some 930,000 bales of wool by December 1971. Throughout this period the deficiency payments scheme guaranteed reasonable returns to wool growers while the Commission ensured that the clip was not sold at give away prices. At the same time steps were taken to accelerate the application of pre-sale objective measurement techniques and the sale of wool by sample. The recovery of the market this calendar year has justified the confidence of the Government in the industry. The measures now before the Senate demonstrate its continued confidence while marketing changes are being implemented. In the meanwhile the extension of the deficiency payment scheme for a further 12 months will protect the industry against extreme downward price movements while marketing reforms are being introduced.

The scheme is to operate on exactly the same lines as in 1971-72. A notional price scheduled for all the wool types which constitute the Australian wool clip is being prepared to give an average price of 79.37 cents per kilogram greasy over the whole season for the full clip. This schedule will have regard to the average greasy wool prices achieved during the 1971-72 wool selling season. At the end of each auction week the Australian Wool Commission or its successor will calculate the percentage difference between the actual proceeds and the proceeds based on the notional price schedule. This percentage will be applied to the gross value of eligible wool sold by each producer to determine the deficiency payment to which the grower is entitled. The scheme will cover wool sold and delivered by a grower up to 30th June 1973. Wool sold at that date but not delivered will not be eligible for a deficiency payment nor will wool delivered for sale but not sold. Procedures for transmitting deficiency payments to growers will also be the same as those applying for the 1971-72 wool selling season. A new category of persons registered under the Act is provided in the Bill. This category is the merchant who does not purchase wool direct from the grower, but who sells it on commission on behalf of the grower. Such persons who are classified for the purposes of the scheme as registered commission agents will need to apply for registration. The registration of other persons effected under the provisions of the Wool (Deficiency Payments) Act 1971 will continue in force for 1972-73.

The question of deficiency payments in respect of woolled sheepskins has been again examined. After a thorough review of the situation, it has been concluded that during the operation of the scheme in 1971-72 the trade in woolled sheepskins had not suffered adversely by the operation of the Deficiency Payments Scheme. It is likely that when the deficiency rate is of the order of 20 per cent, which was the case during the first half of the 1971-72 wool selling season, there will be some incentive for growers to shear sheep before slaughter. During 1971-72 the number of shorn pelts which could not be used profitably by the sheep skin industry increased markedly. This may have been due as much to the level of wool prices as to the operation of the scheme. When wool prices are at a level which attracts deficiency payments there is an incentive for wool growers to move from sheep to some other more profitable farm enterprises and there is a consequent rise in the number of sheep slaughtered. In 1971-72, despite the increase in shorn pelts, the number of skins with more than 2 inches of wool was only marginally down on the previous year. At this time there is no justification therefore in establishing a complex and costly scheme for the assessment of a deficiency payment on woolled sheepskins.

The Government will, however, continue to watch the situation and, should it become apparent that the woolled skin trade is being disadvantaged by the scheme, consideration will be given to what measures may be appropriate to correct the situation. Wool prices at the opening sales of the 1972-73 wool selling season have been higher than the closing levels of the 1971-72 season. It is expected that they will continue above the level at which deficiency payments will occur and the budget provision has been determined accordingly. The Act provides, however, for the appropriation of whatever funds should be necessary for the operation of the scheme in the event that the market falls below expectations. The extension of the deficiency payments scheme for a further 12 months will provide wool growers with a sense of security and should enhance confidence in the future of the industry. It will mean that those who are wool growers can confidently programme knowing again this year the minimum return which they can expect. The measures are indeed a further positive demonstration of the Government's continuing confidence in the future of the wool industry. I commend the Bill.

Debate (on motion by Senator O'Byrne) adjourned.

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