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Wednesday, 20 March 1985
Page: 552


Mr BRAITHWAITE(10.52) —Before I speak directly to the Sugar Agreement Bill, I wish to make some comments on the speech of the honourable member for Herbert (Mr Lindsay). I welcome his suggestion that a bipartisan approach be taken at both the State and the Federal level to solve the sugar industry's problems. I hope that theme will continue throughout this debate, because never has there been such a need for a joint State and Federal approach to the problems of such an important industry. I also place my record on the table. I asked the honourable member for Herbert about his lifetime involvement in the sugar industry because his involvement is different from mine only in terms of the number of years each of us has lived. I was born on a cane farm. I owned a cane farm. In retrospect, probably I was wise to have sold it at the time I did. Having been involved in the rural industry up to the age of 20, I moved into tax accounting and handled the affairs of many clients involved in the cane farming industry. I was also the auditor for five of the co-operative sugar mills in my area. I am not saying that the record of the honourable member for Herbert is not as great as he said it was; I am just stating my record. I also wish to say at the outset that I do not intend to deal in my speech with material that will be dealt with by other members. I believe that there are too many principles involved in this legislation for me to have recorded in Hansard statements which may be repetitious in certain respects.

This legislation now before the Parliament provides the first opportunity for this House to have a full-blooded debate on the sugar industry and on the crisis in which it now finds itself. This is in spite of notices of motion that I frequently presented to the Thirty-third Parliament requesting such a debate. As I recall, this is the first measure relating to the sugar industry to be introduced by this Government in its over 24 months in office. I regret the absence of the Minister for Primary Industry (Mr Kerin) from this House during this part of the debate because this is probably the most important debate that this House has faced. Refusal to bring on for debate such an important matter has meant that for two years the sugar industry has been subject to delays. Positive help and direction two years ago could have led to vital reconstruction, whereas only confusion and despair prevail today.

I attended three of the four sugar industry annual conferences held in the past two weeks; that is, the conferences of the Proprietary Sugar Millers Association Pty Ltd, the Queensland Cane Growers Council and the Co-operative Sugar Mills Association. Also, with the Opposition spokesman for primary industry, the honourable member for Gwydir (Mr Hunt), I had discussions with all three groups as well as with the Australian Sugar Producers Association Ltd, the Queensland Sugar Board and CSR Ltd refiners. I realise there is no room now for political point scoring if the sugar industry is to survive. On that point, I agree wholeheartedly with the honourable member for Herbert.

The present Bill is welcomed by the Opposition. It is a machinery Bill to renew the Queensland-Commonwealth Sugar Agreement, with some variations. The first proposed variation is to index prices at six-monthly intervals to movements in the consumer price index, in place of the previous 12-monthly review. It is claimed that the formula will bring domestic price movements more directly in line with world price movements. If this is the situation I must question the Government and the Bureau of Agricultural Economics bringing the world price to the lowest common denominator and not to a more realistic price, a price which covers at least the cost of production. The CPI figure used to be the discounted figure after allowing for Medicare? If it is to be the Medicare-fiddle CPI figure the sugar industry is being short paid once again.

The Agreement extends the prohibition on the import of sugar to the end of the Agreement on 30 June 1989. However, I believe caution must be exercised in interpreting the Minister's remarks that the Government does not intend at this stage to remove the import embargo on sugar. Perhaps we should ask the Minister to wait and see what his reaction is after that date. This brings out the whole question of tariffs and the protection of Australian manufacturing industry. It is claimed that in the current trade and pricing environment for Australia's primary industries the embargo is a direct subsidy paid by Australian consumers against the low world price. Looked at in the light of today's prices, perhaps that is correct, but the industry claims that over the past 10 years, when the world cycle consistently put world prices above the domestic price, the sugar industry has in fact subsidised the Australian consumer to the extent of a figure in excess of $320m.


Mr Hunt —That should not be forgotten.


Mr BRAITHWAITE —That is right. Honourable members should bear in mind that that $320m does not reflect the real price increases that have been sustained, with the impact of inflation over those 10 years and today's devalued dollar. So the subsidy would be a great deal more than that figure in today's terms.


Mr Blunt —It would be $408m in real terms.


Mr BRAITHWAITE —Yes, it would be $408m. The Government should also look at the Industries Assistance Commission report on assistance to Australian agriculture. That report puts the myth of protection in its proper perspective. It indicates that assistance to sugar growing in 1970-71 was 38 per cent. Within two years assistance decreased to 13 per cent, and a further two years later was minus 19 per cent. By 1980-81 it stood at minus 13 per cent. So much for the subsidisation of the industry! In overall terms primary industry in Australia has an effective protection rate of 8 per cent. In 1970 it was 28 per cent. Today, manufacturing industry has an effective protection rate of 24 per cent. This is only 12 per cent lower than the 1970 figure of 36 per cent. Figures suggest that it costs Australians approximately $23,000 for each worker in the motor car manufacturing industry to protect that industry's inefficiency. For the same reason, each Australian-produced car costs $3,000 to $4,000 more than its overseas counterpart.


Mr Hunt —I wish this was being broadcast.


Mr BRAITHWAITE —I will try again tomorrow. The National Farmers Federation recently calculated that it was costing each farm in Australia $16,000 annually to protect inefficient secondary industries and to absorb government sponsored charges and taxes. In fact, I understand that the Government has adjourned its proposed summit on farm costs to examine the NFF findings. All of this bears out the fact that primary industries-in this instance cane farmers-are paying subsidies and not receiving them. So let us not talk about the great subsidy the embargo on imported sugar provides without looking at the matter over a ten-year cycle. Let us take into account the costs to primary industry, in this case the sugar industry, in giving protection to secondary industry.

Let us also remember that the prices set under the formula for domestic sugar are gross prices. Inevitably, the Australian industry must meet the market and the influence of competition from alternative sweeteners on the market. The formula prices are often discounted to meet and retain a particular market. In all, the Agreement ensures that the Australian consumer will have available a guaranteed supply of sugar in a natural form and of the highest quality which will meet the most stringent of world health regulations, and consumers will be assured that it has been produced using the most efficient method and at the least cost. Can the Australian consumer say that about any other Australian manufactured product? I say the answer to that is no.

In spite of all this, the IAC report which basically contained the recommendations of the armchair economists of the BAE has concluded that the industry would become more efficient if it were deregulated. Two years ago, on the presentation of the report, the Government, through the Prime Minister (Mr Hawke) and the Minister for Primary Industry, disclaimed the report as being impractical and said that it would not be implemented. We in the Opposition agreed with that point of view. However, by denying any worthwhile assistance to the sugar industry, the Government has encouraged the industry to conduct its own review. It may be said that it has set the industry up to be its own executioner. There is no doubt that the Government is insisting on the deregulation suggested by the IAC report, although the BAE economists acknowledged-they did this at many meetings in my electorate-that this report was an economic survey that did not take into account the industrial and social implications of its recommendations. I reiterate that no consideration whatsoever was given to the industrial and social implications of the recommendations in the IAC report.

Why are these consequences, both industrial and social, so important? Firstly, apart from the 6,600 farming families directly involved in the growing of sugar cane, a further 20,000 jobs are fully involved in the sugar process. They are the jobs of the cane harvester contractors, the mill workers, the sugar transport workers, the shippers, the refiners and so on. However, the industry supports an estimated 100,000 other jobs. The people who hold these jobs and their families comprise the bulk of the population of many Queensland and northern New South Wales towns. Many of these were mentioned by the honourable member for Herbert. Many towns within my own electorate of Dawson, which produces over 40 per cent of Australia's production, will be in a similar situation. The bigger cities also rely very heavily on sugar.

Let no one doubt that there will be many economic, industrial and social consequences if the industry is forced to deregulate in isolation from the costs of the greater regulation of labour resources in other Australian industries. I say earnestly to the Minister that the industry will and perhaps should deregulate, but only at the same pace as this Government is prepared to deregulate the centralised wage system in this country and at the same rate as it withdraws protection from all other Australian industries. I repeat that the Prime Minister and the Minister for Primary Industry must recommend the deregulation of the most regulated resource in the cane farming system today; that is, labour.

The sugar industry does not want to be the first fatality of deregulation as it was chosen to be the pioneer of the domestic pricing formula to relate Australian prices more closely to international prices. The industry cannot completely deregulate in the present climate and achieve savings which allow it to produce sugar at world prices when every other nation in the world heavily subsidises its domestic production and puts a lesser percentage of its production on the world market. That is why it is laughable to have the Prime Minister tell the industry that Government support will be withheld until Australia can produce sugar at a cost less than the sale price on the world market. It just is not on if the sugar industry deregulates in isolation and has to bear the cost of government charges built into fuel, fertiliser, chemicals, labour costs and taxes.

I am suggesting that some deregulation can be brought about in both the growing and the manufacturing sectors. In fact, the following question was posed in recent talks we had with the industry: If a person were to commence a sugar industry in 1985, would the industry be built around the present regulations that have developed within the industry since early in the century? The short answer would be that it would be crazy for any person to start a sugar industry at the moment with world prices being under the costs of production, even on the historic value of capitalisation of the assets. The Ord River is a good example of this exercise. One could not even commence an industry based just on the domestic Australian market in today's situation without subsidies being involved.

The present regulations were set in place when the Australian industry supplied most of its product to the Australian market and only 10 to 20 per cent to the world market. Today the figures are reversed, with about 20 per cent going to the domestic market and 80 per cent to the export market. The figure of 80 per cent for Australia's production which goes to the export trade compares unfavourably with the export production of other major exporters and competitors. South Africa exports only 38 per cent; Brazil, 31 per cent; and the European Economic Community, 27 per cent. Cuba's exports are geared mainly to the supply of the Union of Soviet Socialist Republics market. Therefore, Australia is the most vulnerable of all the nations. It supplies more of its production to the world market than do its competitors, it has the least support of all for the high domestic market, it is unsubsidised in comparison with the highly corrupt practices of other nations and it has to meet high government charges and do all its own research and development, except for $500,000 paid by the Commonwealth Scientific and Industrial Research Organisation to the Sugar Research Institute at Mackay.

There is room to remove some of these regulations. I have been advised that if double harvesting shifts were allowed and mills worked seven days a week without penalty rates, this would provide great savings within each mill area. If the prosperity bonus awarded to the industry three years ago could be removed from the award because of the crisis, the costs would be lessened. If cane transport systems could be integrated to better effect, savings would result. If rezoning of assignments between mills were agreed to, obviously savings would eventuate. I know of some amalgamation talks already going on between various milling authorities, brought about by this crisis, which could assist materially the economics of those mills. The Central Cane Prices Board has to be examined as to its effectiveness, and perhaps deregulation here would assist the cane growing sector. It has been suggested that division of an assignment for sale to several purchasers or the substitution of cane lands bordering urban development would assist in maintaining production levels and in keeping unit costs of growing cane down. Where farmers have available cleared land, roaming on that land should be encouraged in order to provide alternative crop potential and better economic utilisation of the land. I am sure that both growers and millers alike would see the wisdom of deregulating the labour market itself.

Yes, the industry can deregulate in some ways and would, I believe, completely deregulate in parallel with deregulation in, and a quitting of protection to, all Australian industry. What is of concern is that the Federal Government, in the delay of two years caused by its procrastination and various changes in attitude, and in view of a further expected delay of 18 months before the review committee can partially report, will force deregulation on the sugar industry through bankruptcy and liquidation to remove 30 per cent of the present participants, as I understand has been suggested by the BAE. I warn the Minister that this is just not on. The economic upheaval would be minor compared to the social and industrial consequences of letting this industry go to the wall.

As I said, two years have passed without any action or indication except such expressions from this Government as 'we can't give handouts to the rich and to the millers' or 'the industry has to prove its viability at the current ruling world prices'. The industry prayerfully looks at the sugar summit between the Premier and the Prime Minister for some help, some solution, some resolution. So do all of us who represent sugar seats. I have written to all parties to the summit with certain proposals which I do not consider all-inclusive but which will make a summit worthwhile if goodwill is to exist and if a bipartisan approach can be taken to the problems. The worst result will be if the summit is prepared to talk in negatives without exploring the positives.

I feel that the points I have made have the support of various sectors of the industry, accountants and advisers to the industry and the people heavily involved in it. Firstly, I believe that a price support scheme for growers will achieve the priority of offsetting the $16,000 penalty mentioned by the NFF and enable farmers to keep up production. Mills will be guaranteed a full crop, and it is important to millers to maintain throughput and keep down unit costs of standing charges. I believe also that the Government, in setting a precedent in giving assistance to the Broken Hill Proprietary Co. Ltd steel division, should have no reluctance to assist CSR and other millers to remain viable. The funds required would be by way of low interest loans while the industry is able to deregulate to the extent necessary to become more economic or until better overseas prices return. Secondly, the deregulation that can take place should be implemented, but the major hurdle of labour costs and penalties should also be resolved. I mean that with all the sincerity I can muster.

Thirdly, I recommend that the banking and financial authorities be approached to provide moratoriums on interest and redemptions of loans to refinance present obligations where a farmer, except for such costs, is a reliable and viable farmer. The achievement of this requires the goodwill of government and financiers. After all, some farmers acting on the example of and with the encouragement of the industry, governments and advisers, went into an expansion from which level prices have since deteriorated and costs escalated. I believe that the fourth point is the most important. It requires of both governments a greater funding for rural reconstruction and a freeing of guidelines to allow for refinancing or restructuring of debts and for low interest loans to purchasers to buy all or part assignments at a price that allows a non-viable grower to get out in dignity and a purchaser to acquire a farm in confidence. I envisage a situation similar to that of 20 or 30 years ago with the reconstruction of the dairy industry in Queensland.

I apply myself to the fifth point. The Minister has said that his Government is ever ready to assist in research and development that allows the industry to reduce costs and to diversify. Last month, I was able to see a series of trials within my own area on about 500 hectares of cane farming land used between rotations for soya bean and maize. I believe that this should be encouraged but that it should be encouraged with research grants and not at the cost of the private companies presently carrying out these projects.

Similarly, there is a growing interest in the production of ethanol from cane or sugar but the results of any research into the viability of ethanol as an alternative cannot be proved until the Federal Government is prepared to grant an exemption from excise or charges for Australian produced ethanol. The exemption from fuel excise alone means a saving of 9.6c per litre and could be the breaking point between viability and non-viability. It is my understanding that no other nation imposes such levies on domestically produced ethanol and, if the levy could be extended for a period over which equipment and machinery for distillation purposes could be depreciated, the industry would be encouraged to get the answers to questions of cost, technology, waste disposal, the market, the capital and funding required, and the division of proceeds between miller and grower.

I have been told that a 10 per cent addition to fuel in Queensland alone would absorb 12.5 per cent of the current Queensland crop. There are two steps here: Firstly, the exemption; and secondly, the final research so that if it is feasible it can go ahead. As natural oil diminishes and as Australia's requirements for external oil increase fuel prices will inflate at well above consumer price index rates, which will mean that ethanol production will become increasingly more viable. However, the time to determine its viability is right now. The Sugar Research Institute has researched the project. CSR provides power alcohol from its factory at Sarina. I understand that wonderful place, Bundaberg, distils rum, representing a yearly income of $60m in excise to the Commonwealth. The technology is known and these developments should be encouraged.

On the sixth point, a proper income support scheme should be available to all farmers so they do not have to tread the tortuous path of applying for unemployment benefit or household support. The present antiquated system is heartbreaking and soul destroying for those who are now in the centre of the rural poor. The seventh point is the reintroduction of the income equalisation deposit schemes which provided an incentive through taxation and not through interest collection. I believe the best stabilisation plan is that which can be tailored to the requirements of the individual. Having re-established the machinery for effective IEDs, the need at any future time to provide industry income support should be limited. (Extension of time granted)

I thank the House. Lastly, I suggest that the Prime Minister remove the current taxation anomaly under the averaging scheme whereby cane farmers, and in fact all primary producers who are in destitute situations earning less than the tax zero ceiling of $4,595, can be assessed and made to pay tax out of their meagre earnings. I appeal to the Prime Minister, with his sense of fair play and equity, to stop this obviously inequitable treatment of Australian farmers. There is no artificiality in the world situation on sugar sales. World prices are low. Our sugar stocks are at an all time high. Australia's production is highly directed to the low world sugar market. This is the reality and we have to react in Australia so as to meet those world conditions. If Australia can through such processes survive on these prices, in the future when the pendulum swings again in our favour Australia's position will be strengthened. What is needed is a combination of industry self-help, industrial deregulation and government assistance in the short term until the wheel turns. Then the industry, the workers and the Government will be the beneficiaries in the revival of this great industry.