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Thursday, 11 May 2000
Page: 16261


Mr O'CONNOR (10:19 AM) —The Primary Industries (Excise) Levies Amendment Bill 2000 that we are debating here today repeals a sunset clause in the legislation that imposes a levy on transactions involving sheep, lambs and goats. This levy raises some $16 million annually and is used in marketing, promotion and research and development to improve animal health in the sheepmeats industry as well as in other industries that are the subject of this legislation. The sunset clause would prevent the Commonwealth collecting these levies beyond 30 June 2000. It was inserted in the legislation following a report by the Senate Rural and Regional Affairs and Transport Legislation Committee in 1997, which investigated the Live-stock Transactions Levy Bill. The Senate found at that time, and reported, that there was considerable division between wool and sheepmeat producers about the value of this levy, and it recommended a sunset clause to ensure that the matter, over time, remained under review. That review has taken place and a report submitted to the government by the Sheepmeat Council. It is on the basis of that report, I understand, that the government has bought this particular amendment to the House today.

The report recommends that the current levy arrangements be continued beyond the sunset clause period of 30 June 2000. That recommendation has not been opposed by the Wool Council. The opposition will not be opposing the bill's passage through the House or the Senate. We think it is particularly important that these levy funds are raised and that they are devoted in a comprehensive and wise way to the marketing and promotion of sheepmeat products and, of course, to the output of the goat industry. It is also important that research and development be continued because there is considerable potential for growth in the industries that are covered by this legislation. Of course, the animal health issue is very important to all livestock industries. A part of these levy proceeds will be devoted to that particular task in these industries.

The sheepmeats industry in Australia has gone through rather difficult times in the past couple of years but I am pleased to note in the Outlook 2000 report on the industry that prices are expected to increase in the short term. Over the medium term, the real saleyard lamb price is projected to increase by around five per cent. This is primarily due to the strong demand that will be exerted for the product in one of our more substantial markets, the United States of America. Because of this strong demand, overall demand for lamb will grow faster than the supply and, over that short- and medium-term outlook, there are projected to be increases in price. The sheepmeats industry is a very important industry to rural Australia. Lamb exports are expected to be in the region of 95,000 tonnes in 2000-01, and that also represents an increase of about five per cent.

The strong international demand for product from this industry will be generated from a couple of sources. There is declining lamb production in the EC. Also, in New Zealand production is expected to be reduced as many farmers move into other areas of agricultural production—dairying and farm forestry, for example. These particular situations, combined with the strong demand that is expected to continue in the United States, will provide some reasonably strong demand over time for producers in this industry.

Of course, we know the recent history of the United States as far as this industry is concerned. One can only put a very large question mark beside the trading policies of the United States. We had some very strong statements by the President of the United States before the last WTO round about the importance of liberalising trade, and particularly agricultural trade. When it came to the crunch, in an industry which in the United States is not a very large industry, the United States did not put into action what it was quick to put into words. The result of that is well known to producers: they suffered constraints on their access to this very important market. This issue of market access is absolutely important, not only in this particular market, but in dairying and beef as well. Australian producers produce in excess of domestic demand and they rely very heavily for their incomes on the commodity prices that they receive in the international marketplace, and it is very important for them that those marketplaces are opened up, that they do have fair and reasonable access to them so that they can continue their long-term planning on-farm and their long-term planning to expand in particular markets.

The rise in lamb and mutton consumption in the United States is a direct result of the good work that was done by the Australian industry in promoting the product. Of course American producers benefited greatly from the efforts of Australian producers in encouraging further development of that market. Yet in the grand sweep of trading arrangements it was our producers that were penalised for the good work that they had done. The good work that they were able to do in the American market was a direct result of the output of the research and development effort and the marketing and promotion effort which are the subject of this legislation which we are debating here today.

I will now turn my comments to the other part of this industry. The wool industry is one of the great traditional industries in the rural sector. I wish to make a few comments in the context of this debate about this industry. It is very pleasing to see the lift in demand that has occurred in recent times. The Eastern Market indicator is up to around 740c, I understand, and there is strong demand being exerted in the international marketplace for the product. There is a stronger demand from wool processors in all of the major regions, with significant demand being generated again in China and Western Europe. That is a very positive sign for the Australian industry.

We still have a stockpile of wool—and it is not for me to go back over the history of that particular saga. Suffice to say that, if the original timetable that had been put in place had been adhered to and the industry adjustment made around that particular original decision, and the government had not been spooked by political considerations into tampering with that timetable, that stockpile would not be in existence and, of course, we would not have the rather divisive debate we are seeing in the wool industry today about what ought to be done with it.

I would like to comment on the recent controversy that occurred around the proposed appointment of Victorian ex-Premier Jeff Kennett to head the new wool body, AWS. I was surprised—along with, I guess, many members opposite and certainly many ministers in the cabinet—that the wool industry came up with this particular nomination. Maybe it had a little to do with internal politics in the wool industry that, from the various sections of the industry, there was no common agreement on someone to head this body coming out of one of the particular sections of the industry, so the industry turned its nomination to the Victorian ex-Premier. We were not happy with that particular nomination. As far as the opposition were concerned, we thought it was ill-advised and we understood the position that the minister found himself in. Having made a commitment to the industry that the government would remove itself from the affairs of the wool industry, he found himself in the situation where the industry itself had put forward a nomination which was really not acceptable, as it turned out, to the government or to the opposition. Nor, as I understand it, was it acceptable to large sections of the wool industry, but they were not prepared to publicly state that.

We knew very well that, when this particular appointment was put to the cabinet, it would have some deep opposition from the Treasurer and others, whose animosity to the Victorian ex-Premier is well known. But I hope that, at the end of the day, those particular considerations did not play the primary part in the eventual decision that was made. I hope that the eventual decision was made on the basis of the skills and qualities required of the person to lead this very important organisation at this stage in the history of this industry. I do believe that, at the end of the day, the government made the right decision on this appointment. Given the political pressures internally and externally upon it—on one of those rare occasions that I do give kudos to the minister—I think on this occasion the minister and the government made the right decision. The industry is going through a very important period of structural change. I think, as we look at this particular industry, members opposite as well as members on this side of the House who have had an acquaintance with this industry over a long period of time want to see the wool industry re-establish itself as a pre-eminent industry in Australian agriculture. We all want that to happen.

This particular industry has been done to death as far as reports go. Over the last decade we have had three major reports into the industry: the Vines report in 1991, the Garnaut report in 1993 and the McLachlan report last year. So we have had enough reports on the industry. If the industry is serious about grasping its own destiny and if it is serious about restoring its economic position, then it must take the window of opportunity that has been presented to it by the McLachlan report, because it does offer some real hope for significant change in the industry. I will briefly go to the report, as I think it is worth canvassing some of the objectives and observations that were made in that particular report. I will canvass only three of them. The McLachlan report made a very strong statement about the need for there to be a fundamental cultural and attitudinal shift among wool growers.

When we come down to the nitty-gritty of structural change and further reform, it is very important for wool growers to appreciate the need for change and the need to refocus and redirect their energies into particular areas that are going to ensure the long-term survival of their industry and of as many producers as possible in it. That report also said that the wool industry would depend for its future survival on substantial innovation—innovation on farm, innovation in the processing sector and innovation in the transport and handling tasks—and that this concept was critical to achieving the sorts of efficiencies that were necessary along the production chain to ensure that the wool industry was able over time to contain and perhaps reduce its costs and to compete against intense competition that was coming in the international marketplace, primarily from synthetic and other natural fibres.

The report also made an interesting comment and recommendation about government intervention. It said that government intervention in the commercial marketplace should only be in response to a demonstrated market failure. This particular point of view has been grasped by many in the industry who have long regarded the activities of government in their industry as not working towards the long-term interests of producers. It is fair to say that some of the decisions that have been taken in the past by governments of all political persuasions have not worked over time to the advantage of the industry. Of course there are some great challenges that face the industry in the cyclical demand that occurs for its products and in the deep structural changes taking place that affect the consumption of those products. I am referring here to changes in household expenditure on clothing and other items. There is also increased competition for the consumer dollar, and consumer attitudes towards the particular products need to be encouraged in a more positive way.

I think the key issues for the industry in the future are going to be its ability to innovate on farm and off farm, certainly in the processing chain; its ability to contain its production costs over time—because the fibre does face significant competition from other fibres including artificially produced fibres—and of course the quality assurance of wool products. This is something that farmers themselves have to address because, as I recall, the McLachlan report indicated that significant losses were occurring because not enough attention was being paid to the quality of the wool coming off farm. It put those in the region of $100 million, if my memory serves me well. That is a significant leakage of income because of quality factors. We also need an efficient market intelligence system to ensure that the production responses of producers are in tune with the demands of the marketplace and that we are able to get this industry back to the position that it occupied some time ago.

This is an important piece of legislation because it continues with the framework for the collection of a levy in the sheepmeats area, the lamb producing area and goat production. These areas do offer producers opportunities to diversify and to specialise. Producers can do that only off the back of real research and development and the real development of their marketplace, and of course that is encouraged and funded by the levy that we are debating here today. We in the opposition feel that due process has been undertaken in this regard. When the particular sunset clause was put in the legislation, it was put there for a purpose: to promote a review. That review has been undertaken; there has been consultation with all elements of the industry. We are satisfied that adequate consultation has taken place. As an opposition, we are convinced of the importance of this particular levy and of the $16 million that it raises for the industries that are the subject of the bill. The opposition will support the passage of the legislation through the House and the Senate.