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Thursday, 18 September 1958
Page: 1379

Mr McMAHON (Lowe) (Minister for Primary Industry) . - by leave - I move -

That the bill be now read a second time.

This bill contains the framework of a stabilization scheme for the Australian wheat industry for a third five-year period. In 1948 the Commonwealth and the States, with the approval of the industry at a ballot of growers, passed legislation to provide for the first five years' stabilization plan. In 1954 the current plan, which is due to terminate with the marketing of the 1957-58 wheat crop, was submitted to growers at a poll and approved by them. The complementary Commonwealth-State legislation necessary to make the plan effective was then passed.

The proposed plan provided for in the bill is in essentials in line with the existing one. It has been negotiated with all State Ministers of Agriculture in the Australian

Agricultural Council and with the Select Committee of the Australian Wheatgrowers Federation representing the wheat-growing industry. While it does not fully meet the requests of the industry on all points, it goes a long way towards doing so.

The great value to the industry of the stabilization scheme now proposed is that it will ensure to wheat-growers generally for five years ahead, a guaranteed minimum price for up to about 160,000,000 bushels each year, commencing with the 1958-59 crop year. The Commonwealth guarantee will apply on up to 100,000,000 bushels of wheat exported, and the State legislation will provide for a home-consumption price for wheat sold in Australia for human consumption and as stock feed for the dairy, pig and poultry industries. In a normal year, about 60,000,000 bushels of wheat are sold within Australia for these purposes. A guarantee of security of this nature so far ahead would be of inestimable value at any time, but never more valuable to the industry than now, when huge wheat stocks are on hand in the world. It is reliably estimated that when the harvesting of the 1958 Northern Hemisphere wheat crops is complete, the total wheat stocks held in various countries will represent the equivalent of world requirements for well over two years ahead.

If it were not for the operation of the stabilization plan and' the existence of an orderly marketing authority in the form of the Australian Wheat Board, which goes hand in hand with the plan, the outlook of our wheat-growers and their families, and also of the many other people who are dependent upon the wheat industry to varying degrees, would be vastly different from what it is to-day, notwithstanding other developments not directly linked with stabilization but nevertheless important to it.

I want to emphasize various actions of the Government designed to promote sales of Australian wheat and1 flour on overseas markets, and to maintain a healthy export trade in these products - a trade so important to the welfare of the Australian economy. The Government has been active in negotiating for assured overseas markets for wheat and flour. Worthwhile agreements have already been concluded with the United Kingdom, Japan, Malaya and Ceylon, and further possibilities arc being examined. The agreement with the United Kingdom provides in effect a guaranteed market each year for 28,000,000 bushels of wheat as wheat and flour. The agreement with Japan protects the opportunity for Australia to supply at least 7,500,000 bushels annually to that country. Malaya has agreed to assure Australia the opportunity to supply at least 80,000 tons of flour, and 14,000 tons of wheat in each year of the agreement. Ceylon has agreed to purchase 11,000 tons of Australian flour in the remaining months of 1958, and 100,000 tons of Australian flour in each of the years 1959 and 1960. I mention that one ton of flour equals a little more than 50 bushels of wheat and that one ton of wheat equals about 37} bushels. With the world wheat marketing situation as it is, and with the future of the International Wheat Agreement fluid at this stage, these bilateral arrangements assume enormous importance to us as a nation.

In addition to the agreements I have mentioned to protect the markets for Australian wheat and flour, every opportunity has been taken at international meetings to fight for the principles of fair and non-discriminatory trade. As efficient and relatively low cost producers, Australian wheat growers must benefit if unfair subsidies and non-commercial transactions can be eliminated from the world trade in wheat, or even substantially reduced.

With the knowledge that in the present highly competitive world marketing conditions each product must help to sell itself on its own merits, the Government has given special attention to the problem of wheat quality. Legislation passed by this Parliament some time ago provided for the establishment of a central Wheat Industry Research Council and1 for research committees in each of the wheat growing States. Wheat research activities in Australia are being intensified with the aid of finance contributed partly by the Government and partly by the industry itself. In addition, voluntary wheat production and wheat marketing committees were set up some time ago to examine the wheat quality and type requirements of the domestic and overseas markets and the production potential of the Australian wheat growing areas to meet those requirements. A comprehensive report of the results of these investigations is expected to be available shortly.

I trust that honorable members will forgive me for mentioning these matters which are, in fact, supplementary to stabilization rather than actually part of a stabilization plan. No stabilization plan could function successfully for very long unless it was supported by a satisfactory product and efficient marketing and sales promotion methods.

This bill repeals the Wheat Industry Stabilization Act of 1954. It is thought better to have a new act to implement the new plan rather than to make a large number of amendments to the earlier legislation. This will enable the plan to be outlined in a self-contained act and to be more easily understood. May I now outline the main features of the plan on which the Commonwealth and State governments and the Australian Wheat Growers Federation have agreed? They are -

1.   Period of the plan: The plan will oper ate for five years. It will commence with the 1958-59 wheat crop and will end with the marketing of the 1962-63 crop.

2.   Commonwealth guarantee: The Com monwealth will guarantee a return of 14s. 6d. per bushel to growers on up to 100,000,000 bushels of wheat exported from the crop in the first year of the plan. The guaranteed return of 14s. 6d. is based on the findings of the recent survey of the economic structure of the wheat industry conducted by the Bureau of Agricultural Economics. It will be adjusted in each of the following years of the plan on up to 100,000,000 bushels, in accordance with the movements in costs based on a cost index established from the survey. The first two five-years' wheat stabilization plans each guaranteed a similar quantity of 100,000,000 bushels.

3.   Australian Wheat Broad: The Aus tralian Wheat Board will be maintained as the sole constituted authority' for the marketing of wheat within Australia and for the marketing of wheat and flour for export from Australia for the period of the plan.

4.   Stabilization Fund - Export tax: A tax will be collected on wheat exported which will be equivalent to the excess of the returns from export sales over the guaranteed return. However, the maximum rate of export tax will be ls. 6d. per bushel.

Size of the fund: The ceiling of the stabilization fund is estimated at £20,000,000. Any excess beyond this figure will be returned to growers on the " first-in-first-out " principle.

Balance in present Wheat Stabilization Fund: The balance remaining in the fund at the termination of the present plan will be carried forward to the new plan as the nucleus of a new stabilization fund.

Use of the Stabilization Fund: When the average export realizations fall below the guaranteed return, the deficiency will be made up, first by drawing upon the stabilization fund, in respect of up to 100,000j000 bushels of wheat from each crop. When the fund is exhausted, the Commonwealth will meet its obligations under the guarantee.

5.   Home-consumption price: The home- consumption base price for 1958-59, the first year of the plan, has been established as 14s. 6d. per bushel, bulk basis, f.o.r. ports. There is provision in the plan for annual adjustments in the following years.

6.   Freight on wheat to Tasmania: Provi sion is made for a loading on the price of all wheat sold for consumption in Australia to the extent necessary to cover the cost of transporting the wheat from the mainland to Tasmania in each season of the plan.

7.   Premium on Western Australian wheat: A premium will be paid from export realizations on wheat grown in Western Australia and exported from that State, in recognition of the natural freight advantage enjoyed by Western Australia owing to its proximity to the principal overseas markets for wheat. The premium will be 3d. per bushel.

8.   Legislation: The proposals require the passing of complementary Commonwealth and State legislation before the plan can operate.

These are the main features of the new plan. They follow closely those of the current stabilization scheme.

As I mentioned earlier, the wishes of the Australian Wheat Growers Federation have been substantially met in the new plan proposals. Following its original offer to the industry of a new stabilized plan, the Australian Agricultural Council, at the request of the federation, gave further consideration to two items related to the guaranteed return and the home-consumption price. The first item was the use in the costs of production formula of a yield divisor of 15.5 bushels per acre. The federation considered that 14.8 bushels should be substituted. The federation's second request was that a higher margin of profit should be included in the base home-consumption price to increase it above 14s. 6d. per bushel. The Australian Agricultural Council did not agree to either request.

At the request of "the .Australian Agricultural Council and the Australian Wheat Growers Federation, an industry survey was carried out by the Division of Agricultural Economics. This survey revealed fundamental changes in the structure of the wheat-growing industry in recent years. Smaller and more selective acreages, the use of modern machinery and equipment, the increased application of fertilizers, the use of ley farming practices and wider rotations have been responsible for improved production results. The Agricultural Council considered that to take an average yield for the next five years below 15.5 bushels per acre would be unrealistic.

The cost of production formula has been liberalized in some important respects for the purposes of the new plan. The industry now receives the benefit of fair market values for land, improvements and stock which results in a substantially higher allowance to the farmer for interest on the total capital value of his property. Previously, only security value was allowed for. In respect of depreciation, as in the previous formula the rather generous assumption is made that farmers regularly replace their depreciable assets over time according to the rates of depreciation allowed. All such assumed additions to assets are valued at currently ruling prices. In practice, farmers frequently extend the life of such items as fences, buildings and dams considerably through continuing repairs and maintenance which are themselves allowed as annual costs. Thirdly, the owner-operator allowance has been raised to £1,040 per annum for 1958-59 and will be subject to adjustments beyond that date in accordance with arbitration wage decisions. Again, the labour of the farmer's family is costed at award rates whether or not they were in fact paid at such rates. Having regard to these and other items, I think it can fairly be said that the guaranteed return is a reasonably generous one.

The Australian Agricultural Council declined to agree to the federation's request for the inclusion of a higher profit margin in the home-consumption price. The council did agree, however, that it would examine the federation's proposal again before the 1959-60 wheat season commences.

The Select Committee of the Australian Wheat Growers Federation has since accepted in its entirety the new stabilization plan provided in the bill. When advising its acceptance of the plan, the committee indicated that the federation did not require a ballot of growers, and requested that all governments should proceed to legislate for the plan as soon as possible. The State Ministers for Agriculture were unanimous in the view that wheat-growers in their respective States were so anxious for stabilization to continue that there would be no point in conducting a poll.

It is with this background of full support from all Australian governments and the wheat industry leaders that this bill is presented to the House. It will preserve an efficient marketing organization and give the wheat-growers of Australia confidence that they will get a fair return for the wheat they grow in the next five years. I commend the bill to honorable members.

Debate (on motion by Mr. Calwell) adjourned.

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