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Thursday, 22 October 1970

Mr MacKELLAR (Warringah) - In speaking to the estimates for the Department of Shipping and Transport, I would like to look mainly at freight costs and more particularly at freight costs as they affect the total cost of production of the primary producers of this country. I will not attempt to look at the position of the manufacturing industries and the effect of freight costs on their costs of production, considerable though they may be. But because I believe that freight charges play such a part in the ever-increasing problems faced by primary producers - these primary producers already being affected by slackening world demand, over-production in some cases, inflated home prices for goods and services, and always subject to the vagaries of climate - in the time available I wish to examine freight cost effects on this at present disadvantaged sector of our community more closely. lt is hardly necessary to point out that, despite our mineral boom and the growth of the manufacturing sector of the economy, approximately half of our total export income is still derived from the sale overseas of our primary produce, lt also bears repeating that the wool industry still contributes over $700m annually to the economy. It seems a strange paradox that many of the people who contribute so much to national wellbeing should at the moment not be sharing that wellbeing. One of the factors contributing greatly to the primary producer's progressive loss of parity with other self-employed sectors ot the community is the effect of costs. These costs in many cases are forced on the primary producer from souces over which he has little control. Such things as wages and the prices of manufactured articles which he must use if he is to continue in production come to mind. An important area of concern over which he has little or no control are freight costs.

It is very difficult to assess the extent of freight costs on total agricultural costs because of the lack of authoritative data relating to production costs of the various agricultural commodities. However, if we look at some of our main agricultural products, we can see a startling picture emerging. Let us look firstly at wool. The Minister for Shipping and Transport (Mr Sinclair) speaking earlier this year said:

There can be no doubt of the critical significance of external transport costs to the wool industry.

These are of the order of SI 50m a year or about $25 to $30 per bale, according to destination.

He said also:

Conventional costs associated with the handling and transport of wool overseas represent not less than 20 per cent of the averaged realised price for wool.

Dr JohnSkinner, Manager of the International Wool Secretariat's Wool Handling Services Department, in January of this year quoted a similar figure to that of the Minister when he assessed the average cost of handling and transporting a bale of wool from the farm in Australia to the overseas mill in the United Kingdom or northern Europe at about $28 a bale. Both Dr Skinner and the Minister made their assessments before the new wool shipping freight charges were announced. The effect of these is, of course, to accentuate the problem.

But there are several interesting aspects of the statement. Dr Skinner looked at the various stages in the wool journey and assessed the position for a single bale of wool as follows: Approximately $6 from farm to broker's door, approximately $7 in the store, including the broker's commission and the buyer's commission, approximately $4.50 from broker's store into ship, approximately $9 for delivery by ship to overseas port, and approximately $1.50 from the ship to the United Kingdom mill. This shows that a significant proportion of the total handling and transport costs occur on land, and the major part is at the Australian end. Add to this the fact that shipping costs have risen, and include the fact that for insurance purposes wool tops in containers are rated as deck cargo and are therefore at higher than ordinary rates. At the same time the average price of wool has fallen, to an extremely low level at the moment, and the proportion of freight costs to average realised price now rises to around 30 per cent or above. However, this is not the end of the story because not only does the producer have to pay handling and freight costs on his produce, but also he has to pay handling and freight costs on items such as drenches, dips, machinery parts and a host of other production factors necessary for him to produce his goods. If these costs are added into the total, handling and transport costs - both coming and going, as it were - assume even more significance.

The position is similar for other rural products. With respect to wheat, for instance, the transport costs expressed as a percentage of gross value of production in 1966-67 were assessed at an average of 11.1 per cent over all States. The figure would obviously vary within and between States but again a significant percentage of total costs are consumed in freight charges. The figures that I have just mentioned do not take into account farm to silo freight costs. 1 have not been able to obtain transport costs for other products but if we look at marketing costs - which include freight, cost of containers, commission and other charges involved in marketing - figures compiled from the Commonwealth Bureau of Census and Statistics publications, Value of Production Bulletin and Primary Industries Bulletin show not only fluctuations from season to season but also a general upward trend. I realise, of course, that freight rates are not controlled by the Commonwealth Government, except those of Commonwealth Railways and the Australian National Shipping Line, whilst the State governments control the main domestic carriers of Australian primary produce, the State railways.

The activities of individual road transport operators are also of great importance. To illustrate this point, and once again referring to wool, we find the situation occurring where a road transport quote for a bale of wool from Cowra to Sydney, which is a distance of just over 200 miles, is $3.78. This amount includes $1.43 for road tax. Rail rates from Cowra to Sydney are also $3.78 a bale but it costs an extra 50c a bale to get the wool to the railhead. In other words, the total charge is $4.28 a bale. Poignancy is given to these figures when one finds that the quote for each bale of wool transported to Melbourne from Cowra by road, which is a distance of about 450 miles, is $2.50, or roughly half as much for twice the distance. This is not an unusual case. The cost per bale by rail from Binalong to Sydney, which is again around 200 miles, is $4.18 plus 50c for cartage to the railhead. This makes a total of 84.68. The quote per bale for road haulage from Binalong to Melbourne, which is about 360 miles, is $2.68.

I note also that the road maintenance tax collected in New South Wales in 1968 totalled $12.6m. It cost $1.2m to collect this tax. The State co-ordination tax in New South Wales in 1965 brought in $4.4m but to collect this tax, cost SI. 4m which is roughly 30 per cent of the total tax collected. It is obvious that in a country as large as Australia, with the sparse population density in country areas, worthwhile and sustained attention must be given to lowering the present freight costs it primary producers are to survive. For this reason ( am particularly pleased that the Bureau of Transport Economics has been established. The main functions of this organisation are outlined as being to study and report on the cost of transport operations in Australia, to suggest measures which will reduce transport costs and to develop proposals for providing a reliable, safe, fast national transport system for primary producers, manufacturers, exporters, workers and passengers. I am glad to note that emphasis is placed on Commonwealth-State co-operation. It seems to me that it would be extremely regrettable if the inquiry, research, recommendations and their implementation were in any way hindered by parochialism or narrow-minded thinking. Not only must this important work be supported and expedited; its success is essential and would provide an example of co-operative federalism in its best form.

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