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Thursday, 28 October 1993
Page: 2713


Senator PANIZZA (11.38 a.m.) —As I rise to speak on a wool matter, probably for the fifth time in the last three years, I must start off by declaring my interest as a woolgrower. The wool legislation is the fifth major package of legislation that has been in front of the parliament in the last three years. I know it is easy to say `I told you so', but I did say on those five occasions that we were not going down the right track.

  I have just listened to Senator Woodley's contribution to the wool debate. Even though I agreed with most of what he had to say, because it is evidently the way we have to go following the Garnaut report—which I support, if not fully—I believe that he is attempting to go back to something we had in the past. What has been wrong with the situation we have had in the last five years, since that disaster of May 1988 when the decision was taken by the Wool Council to increase the reserve price from 690c to 870c? That was probably the most disastrous decision the wool industry in Australia has made. Unfortunately, it was supported by the minister at the time, Mr Kerin. I note that Mr Kerin spoke on the matter in the House of Representatives but he did not quietly back down or admit the mistake he had made.

  To return to the point, Senator Woodley's amendments tend to do what we did before—leave a back door open for escape. Let us this time fix the situation forever and not leave a back door. If there is a back door for escape, world traders in wool will be waiting for us to open that back door and we will be off again. I believe we have got to stick fully with what Garnaut has said.

  You do not need me to tell you, Mr Acting Deputy President, that Australian woolgrowers are in an extreme situation, especially where there is no other industry they can turn to. There are not many woolgrowing areas of Australia where something else cannot be done, but there are some, such as the Murchison among the pastoral areas of Western Australia, where one cannot hope to run cattle. In certain rainfall areas of Victoria, as in South Australia and some of the medium rainfall areas of Western Australia, one just cannot run cattle and it is too wet for grains except maybe coarse grains.

  For the farmers who cannot do anything else, the situation is very bad. There are farmers having either to move off the property or to find something else to do, hoping the wool industry will come back. The wool industry will come back. It has come back every time. With the right sort of legislation, the right sort of scheme, we will be able to do it.

  At present we have a stockpile of some four million bales and a debt of roughly $2 billion. What has been driving the price down in these last few months is that we have annual repayments to reduce the debt. That may have seemed in order when we last debated here, but I certainly questioned whether it would work. As we approach that repayment schedule, the pressure is on. The buyers know that we have to sell more assets. Assets can be sold only once. We can sell more wool that is growing on the sheep's back—that keeps coming in, even if it gets less and less—but once the assets have been sold, they are gone for good. The government did alleviate that one payment last year. I thank the government for its consideration in doing that; otherwise wool would have been driven further into the ground.

  We have to get away from that situation. The situation has been helped by the Australian wool production. I think Senator Woodley got his figures wrong there. We are down now to 690 million kilograms of production, and that has helped. We would have had to meet a debt rescheduling payment of $600 million this year—$200 million for interest and $400 million—which we would not have been in the position to do without driving wool production down.

  The government could have imposed up to 15 per cent tax if we had stayed in that situation. It is presently at 12 per cent. We had a special one-off 13 per cent a couple of years ago and we have 12 per cent at present, but the government could go to 15 and then really drive wool through the ground.

  The Garnaut report recommends reducing the bodies to one called AWRAP for promotion, research and development, and another one—Wool International—to take over management of the stockpile. It has already been pointed out that, when the stockpile is removed, that will go private. The shares will be issued according to tax paid by growers between now and 1996 or 1997, or whatever it is. I believe that is a top idea because they are the ones who have to meet the payments and take care of the stockpile. It is fair that they will be issued the shares, because the ones who built up the stockpile between 1988 and 1990 were fringe woolgrowers who came in from the cattle industry and other industries to get on board something that had a fixed price, a bottom price. Now a lot of them have gone.

  I have no fears. There are a lot of fears being expressed around the country about Wool International but, as Senator Tambling pointed out, if the stockpile is in manageable proportions by then it can be privatised straight away. I am not one of those who believe that in two years time we will not be able to supply all the wool needed. Colleagues such as Mr Sinclair propose that; I normally do not disagree with what he has to say but this time I do. If we cannot supply it because of that fixed schedule of reduction, what a good problem to have. That is something we have to stick to. As I said, we cannot have a back door.

  We have a fixed schedule of reduction by the number of bales. It is 27,000 to 29,000 per month between July 1994 and December 1994, plus or minus five per cent. Of course, they can sell more than that after 1 January 1995, but Wool International has to buy back what is coming off the sheep's back. That has got a side benefit that I have not heard mentioned yet: it freshens up the stockpile. A lot of the stockpile is deteriorating; it has been in store a long time and the steel bands are rusting and staining. If Russia comes in and wants a million bales, it can be bought fresh off the sheep's back. It does help to freshen that up, because I believe that is a problem.

  There are a few things I would like to address quickly. Firstly, we will be helped by increasing our price if we can get the balance between what is going on in the market and the demand. Australia sold 890 million kilograms last year. We have been helped by the fact that Argentina has dropped production from 200 million kilograms to 90 million kilograms annually and South Africa has dropped from 100 to 65. We have been helped in all those areas, and I believe we should stick to this. Some of my colleagues believe we should have a minimum reduction schedule and not a fixed one. We cannot get away from that. I am on record as saying that, and I want to put it on record again.

  I wish to express the worries of the wool industry about the ever rising costs. We did get extra costs put on us in the last budget sitting which, unfortunately, we have to accept. Shearing costs have to be looked at. This year, shearing costs are generally 40 per cent of the clip. I have declared my interest; I am a woolgrower, but in my family I have very little to do with the industry. One thing I do is write out the cheque at the end of shearing. I see the cheques that come in; I bank them when the proceeds of the wool clip come in. I know that 40 per cent is eaten up by that alone, whereas in New Zealand the costs are 33 per cent less. In Australia it costs roughly $3 a head to shear a sheep on full contract; in New Zealand it costs 60 cents. That is for shearing only. The cost is double that. So it can be done in New Zealand for $1.20. There is a vast difference between the two, and we have to look at a way to get that down, but not by cutting shearers' rates. The one lot in Australia who earn their money are the shearers. There are other ways, such as addressing the costs of transport and so on.

  I do not want to delay the Senate. I fully support the position taken by the government and I fully support Garnaut. Let me stress again that we should not leave the back door open this time. Let us stay with it, and we will have a good industry again.